Revenue in the current period is forecast to be flat because the year-ago quarter included the World Cup soccer tournament, which delivered $65.5 million in revenue before expenses. http://reuters.com/newsArticle.jhtml?type=industryNews&storyID=2710986
I think your source is incorrect, Kenn. Here is a quote from Univision's 10-K "On August 9, 2000, the Company acquired the Spanish-language broadcast rights in the U.S. to the 2002 and 2006 FIFA World Cup soccer games and other 2000-2006 FIFA events. The payments remaining at December 31, 2002 totals $92,500,000, due over the remaining term of the agreement. In addition to these payments, and consistent with past coverage of the World Cup games, the Company was responsible for all costs associated with advertising, promotion and broadcast of the World Cup games, as well as the production of certain television programming related to the World Cup games. The costs for the 2002 World Cup games was approximately $55,000,000. The funds for these payments are expected to come from income from operations and/or borrowings from the Company's bank facilities. " http://www.sec.gov/Archives/edgar/data/1017008/000104746903009875/a2103596z10-k.htm Page F-24
(a) I didn't dig as deeply as you, and (b) I wouldn't call that my source so much as one I found quickly. Take any statement in the press with a grain of salt - I found another article with a vastly different estimate, too, and went with this one. I don't know what the numbers are. That being said, does the phrase "The payments remaining at December 31, 2002 totals $92,500,000" perhaps mean they already paid some for 2002 and still owe more for 2003-2006? Just wondering.
You're right. Total costs was at most $92.5 million + $55 million (not $190 million) but I don't think they paid all of the $55 million by year-end. As a general rule, I would consider the company's 10-K the most reliable source of financial information.
Anyhow, costs were $55 million for the 2002 WC while revenues in the second quarter alone were $65.5 million. That's more than $10 million in gross profits!
Univision bid $150 million for the FIFA package of WC 2002, WWC 2003, WC 2006, plus Confed Cups, U-17, and U-20 World Championships in 2001, 2003, and 2005. Even though Univision grossed $65 million at the network level during WC 2002 and only spent $55 million (in rights fee and production costs), when you account for the "opportunity cost" of lost ad revenue from its 11:30pm network news (on the west coast) and its 7am-9am weekday morning program, Univision actually incurred an "opportunity loss" at the network level.
What is your statement based on? Looking at their 10-K, without the WC, sales would have decreased in their television unit for the year. So unless I'm missing something, you're analysis is flat out wrong.
My statement was based on what I heard during the Univision 2002 Q2 earnings conference call in August 2002. Univision EVP of investor relations Andy Hobson was the person conducting the conference call.
I don't recall any mention of the opportunity loss during the conference call. I'll try to see it's still online. However, Univison's 2002 Annual Report mentions the WC2002 as a great and positive event for the company. http://www.univision.net/jsp/en/ir/2002_Annual.pdf Sports Univision Sports produces programs principally centered on soccer, boxing, and daily sports news for Univision Network, TeleFutura, and Galavisión. The high quality of our sports shows is exemplified by our cover-age of the FIFA World Cup soccer competition played in June 2002 in South Korea and Japan. The World Cup was one of the few instances in which Univision broadcast the same event as did English-language television (ABC, ESPN, and ESPN2), giving us the opportunity to prove in a direct comparison the competitive quality of our production. Univision was the only U.S. broadcast company to air all 64 World Cup games live. Univision’s World Cup broadcasts were widely praised for their production values by the U.S. media, including The New York Times, The Washington Post, and the Los Angeles Times. Univision was singled out both for providing commentaries that were more informed, entertaining, and passionate than those of the English-language World Cup broadcasts and for providing superior graphics and picture quality. Univision also was complimented by the press for offering full, live coverage of the post-championship medals ceremonies and festivities, which were not broadcast by the U.S. English-language networks. Nielsen showed that Univision Network, TeleFutura, and Galavisión not only captured 20.6 million U.S. Hispanic viewers for some part of the World Cup coverage but also attracted 15.2 million U.S. non-Hispanic viewers. Univision Network’s average minute audience was an impressive 2.9 million households during our coverage of the final match between Germany and Brazil despite the early kick-off time (4:00 a.m. Pacific, 7:00 a.m. Eastern). Univision will broadcast an extensive array of soccer competitions in 2003, including the FIFA Women’s World Cup, the Copa Oro, the Confederations Cup, and the Liga Mexicana games and playoffs in the summer and winter seasons. Univision also owns the Spanish-language U.S. television broadcast rights to the 2004 Copa América competition and the 2006 FIFA World Cup competition.
When you add the amount of revenue from the 2002 WC that was generated by the local affiliates, Univision pretty much made up for the "opportunity cost" of giving up the 11:30pm network news on the west coast and the 7-9am morning program, both of which make a lot of money for Univision. The challenge for Univision Sports will be in 2006, when the cost of WC 2006, including rights fees and production costs, will exceed $100 million. At the network level, Univision will need to sell 8 sponsorships for at least $12.5 million each just to cover the rights fee. In order to get $12.5 million per sponsorship, Univision will need the economy to rebound. The "opportunity cost" of programming that will be displaced by WC 2006 won't be as great in 2006 as it was in 2002 because WC 2006 will take place late morning and early afternoon US time. The 7-9am morning program will simply air at 4-6am on the west coast and will not be pre-empted as it was in 2002, and both evening and late night network news programs will air at their regularly scheduled time.
No. WWC 2003 costs Univision only a tiny fraction of the $150 million in rights fee. The target audience of WWC 2003, girls 12 and under, usually do NOT watch the Univision networks. They tend to watch Nickelodeon, Cartoon Network, Disney Channel, etc. Mexico is at least 20 years away from being competitive at the WWC. If Mexican immigrants don't tune in, the Univision networks are left with a tiny audience. Mexican immigrants account for at least 70% of Univision's futbol audience. The rights fee should break down to about $45 million for WC 2002, about $95 million for WC 2006, and only $10 million or so for the rest (WWC 2003, Confed Cups, U-17s, U-20s).
About 75% (give or take a few percentage points) of WC 2002 revenue generated by Univision Communications (the corporate parent) come sfrom the Univision NETWORKS at the national level, and the other 25% or so comes from the Univision STATION GROUP at the local level. The Univision NETWORKS at the national level generated more than enough revenue ($64 million)from WC 2002 to cover rights fees and production costs ($55 million total), but did NOT generate enough revenue to cover the OPPORTUNITY COST (estimated by Univision to be around $15 million) of revenue lost by pre-empting the lucrative 11:30pm network news on the west coast and the 7-9am weekday morning program. The Univision STATION GROUP generated about $20 million in revenue from WC 2002 at the local level. Bottom line: Univision made money on WC 2002. Whether it would have made more or less money by running regular programming vs WC 2002 depends on how you account for opportunity costs.