Prisa, out to conquer the world

Article  by  Sandrine MOREL  •  Published 02.11.2010  •  Updated 02.11.2010
The Prisa group's empire was founded on the charisma of a man, Jesús de Polanco. In the wake of his death, Prisa has had to deal with substantial economic difficulties while attempting to preserve its independence. 

Summary

Introduction

Born in Spain from the ashes of Francoism, the Prisa Group, publisher of the famous daily newspaper El País, is intent on conquering the Hispanic world. Present in 22 countries, it is already the premier media group and leader in educational, news and entertainment programming in the Spanish and Portuguese markets. Thanks to the global brands like “El País,” “Los 40 Principales” radio and the Santillana and Alfaguara publishing houses, it reaches more than 43 million people in the world. More recently, its presence in Brazil and Portugal and the dynamic Hispanic market of the United States has given it an Ibero-American dimension and opened a global market to 700 million people.

But this communications giant, hit hard by an economic crisis that has been shrinking its ad revenue, is walking on eggshells. To offset a debt of nearly five billion euros, it finds itself in the position of needing to sell off one if its subsidiaries. This is a difficult move for a group that seems to in full expansion mode. Within a period of several days, it appeared to be seeking 450 million euros of credit as a bridge loan to pay the banks asking for it, while at the same time indicating its interest the Le Monde Group and taking control of an American television channel.

Is the empire built by Jesús de Polanco (1929-2007), taken over by his son Ignacio Polanco, but led by Juan Luis Cebrián, under threat these days? Or on the contrary, is the group refocusing itself, as it claims, on strategic activities with partners of its choice?  
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The founding act: the birth of El País

In the autumn of 2007, the renowned Spanish daily paper El País changed its slogan. The “Diario independiente de la mañana” (“the independent morning newspaper”) became “Diario global en español” (A global Spanish newspaper)”. A mere rhetorical change? For Prisa, the paper’s publisher, it was, on the contrary, a true strategic bet, reinforcing the interactivity between the newspaper and its website and an openness toward modernity and globalism. The company wishes to appeal to everyone, without distinction of age or location. El País no longer sought to be a Spanish newspaper, but rather, a newspaper in Spanish.

This pivot, the first made by the Spanish group since the death of its founder and mentor Jesús de Polanco several months earlier, is perhaps also the kicking-off of a new policy intended to define the “Polanco years.” Because it is difficult to speak of Prisa without discussing the man who for 35 years held the reins of the group with his iron grip, this man whose power was often the subject of controversy and whose fortune was one of the largest in Spain (estimated at 3 billion euros, according to the 2007 Forbes list). The founder of Santillana, the publishing house specialized in legal texts and school manuals that he created in 1958, Jesús de Polanco incorporated the group that created El País in 1972.  “Thanks to the success of Santillana, he was able to breathe life into the financial lungs that allowed journalists in turn to breathe freely,” recalled Prisa’s director-general Juan Luis Cebrián, when Polanco died in 2007. “He believed in the project when nobody else did and when nobody covered capital increases, and as publisher he protected the progressive editorial line of the paper, led the company and bet on its future.” And what a future it was.

The group’s leader and emblem of democratic values that inspired its founders, the center-left newspaper hits the newsstands for the first time on May 4, 1976, five months after Franco’s death. As the Spanish transition process begins, the paper presented itself from the start as an engaged paper in favor of democracy, distinct from the rest of the press – heirs of Francoism.  Its founders shared leadership positions: the journalist Juan Luis Cebrián became the director of the paper, José Ortega Spottorno, president of the Promotora de Informaciones Group, SA (PRISA) until 1984. Jesus de Polanco took the position of Prisa’s director-general, before becoming its president in 1984 until his death in 2007. In four years, the paper carved out a spot as the second most popular general interest paper in Spain, behind La Vanguardia with an average print run of 180,000 copies. But 1981 marked a major turning point in the history of the company: the attempted military coup of February 23, 1981 gave it the opportunity to position itself as the veritable voice for the defense of democracy. That same evening, as the hostage situation was in progress and parliamentarians of Las Cortes were being held by General Tejero, before the king gave his speech condemning the actions of the putschists, El País published a special edition entitled El País con la constitución (El País with the constitution”). The paper entered into history and quickly earned the position of leading Spanish newspaper. In 1982, as the center-left paper openly supported the candidacy of Socialist Felipe Gonzales for the presidency of the government, the average daily print-run was 296,000 copies. The following year, it reached 340,000. In 1991, the Sunday edition of El País even broke the barrier of one million copies. Over the years, the circulation continued to grow, to a regular 440,000 daily copies, with a peak of 469,000 copies in 2004, shortly before the March 11, 2005 terrorist attacks.

But since then, the newspaper, which still reported a circulation of 431,000 daily copies in 2008 according to the OJD (Oficina de Justificación de la Difusión, or circulation audit office), has suffered severely from a crisis that is both structural and cyclical.

Adding to this is the arrival of new left-of-center daily paper Público, created by the competitor group Mediapro. The result: in 2009, its circulation fell to 392,000 copies. And even if it remains far ahead of its main competitor, El Mundo and its 300,000 copies, and continues to earn profit (12 million euros in 2009), the top Spanish daily is worried about its future. The statements of Juan Luis Cebrián at the Cadix journalism congress attest to it: “Newspapers will never again fill a central role in informing public opinion,” he declared during a debate on the future of the press. It was an affirmation of what he had already said shortly before, on the occasion of the Ortega y Gasset Journalism Awards: “The newspaper world as we have known it is coming to an end. It will no longer consist of these kinds of vertically-integrated empires around which all relationships of power socialize”.
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Politics and media: relationships of power

Nicknamed Don Jesus del Gran Poder (Mr. Jesus of Great Power), Jesus de Polanco was considered in his time as one of the most influential Spanish figures. He was criticized on occasion for his friendship with the Spanish Socialist Party (PSOE), to the point that El País was described by its enemies as the “media arm of the PSOE.”  But well before Prisa, Polanco was already suspected of having built his fortune thanks to his political contacts. Within the Francoist administration, the undersecretary of education, Ricardo Díez Hochleitner, oversaw the 1970 educational reform, which allowed Polanco to introduce his school manuals in all Spanish schools. He went on to join the Prisa Group as vice-president of Santillana publishing.

Over the duration of its history, a number of politicians have joined the Prisa Group once their political terms have ended. This was the case for Miguel Gil, former secretary-general in the office of government spokesperson Felipe González, as well as Enrique Balmaseda, former director of the Cinema Institute. And three other former ministers in addition.
 
This porosity between the politicians and the central Spanish media group illustrates the influence that Jesús de Polanco was able to have from the beginning of Prisa’s creation. One could legitimately think that today, having reached a considerable size with nearly 15,000 employees all over the world and sales figures of more than 3.2 billion euros in 2009, Prisa’s influence continues on and extends to the American continent.
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Unión Radio: the consolidation and conquest of Latin America

In 1984, upon the arrival of Jesús de Polanco to the presidency of Prisa, the group makes a change: the publisher decides to carry out an ambitious policy of expansion, which opened the group to both new activities: radio, television and cinema, and to the conquest of the Latin-American market. Prisa then became, in 1985, the majority shareholder of the top Spanish channel, Cadena SER (Sociedad española de radiodifusión) before taking total control in 1991 thanks to the sales of the last stocks held by the Spanish state. Then it looked to buy Antena 3 Radio, majority owned by the Grupo Godó, which threatened the SER leadership. Through a clever policy alliance with shareholders, it managed to take control in 1993, provoking a controversy that resulted in the departure of many journalists from the channel.

The Antena 3 Radio station disappeared, and with it, the only real competition. But some journalists sued for abuse of authority and violation of the monopoly law, such that the Supreme Court nullified the merger in 2000 “because from it came a dominant position in the radio-broadcast market”. But this conviction never lead to any action. On the contrary, Prisa was able to constitute its empire. In 1993, from the merger of the two entities, was born Unión Radio, of which Prisa controled 80% and Grupo Godó 20%. This marked the beginning of an adventure that would become the leading world group of Spanish language radio, today consisting of 1,240 stations present in 17 countries with more than 29 million daily listeners.

In Spain, Unión Radio controls the main radio stations. Cadena SER, the leader in Spain with more than 4.6 million daily listeners (according to EGM, General Media Study), but also the music station Los 40 Principales, the leader as well in its demographic with 3.3 million listeners, Cadena Dial and other stations. All that remained was to make a mark internationally. In 1999, Prisa, signed an agreement with the Colombian Radio station Radio Caracol, the undisputed leader in Colombia and one of the most prestigious radio stations in Latin America. This led to the birth of the Grupo Latino de Radio (GLR), through which Unión Radio operates beyond Spanish territory. In 2001, GLR acquired 50 percent of the Mexican radio company Radiópolis (W Radio,  Bésame, 40 Principales...) the other half of the stocks held by the Mexican communications giant Televisa. The following year, GLR’s growth accelerated after the signing of an alliance with the Colombian group Valores Bavaria to create a Pan-American radio network.

GLR became a holding company in Mexico, Colombia, Bolivia, Costa Rica, Panama, Argentina, Chile and the United States. The Spanish group did not stop there: in 2004, Prisa brought its participation in GLR to 100% and acquired the Argentinian stations Radio Continental and Radio Estéreo. One year later, it was able to break in the U.S. market by operating the station W Radio 690 AM, which broadcasts in Spanish in the Los Angeles area and elsewhere in Southern California, while Carcol Radio broadcasts from Miami. Prisa thus achieved one of its stalwart objectives: reaching the U.S. Hispanic community. In 2008, Unión Radio consolidated its presence in Chile by merging Ibero-Americana Radio Chile, the main radio broadcaster of the country with 140 of its own stations, and Consorcio Radial de Chile (CRC).
 
After having carried out an ambitious policy of acquisition and consolidation of radio stations in Latin American, the group was in need of exterior investment—officially to “encourage the development of radio in Latin America and particularly the expansion plan for the Hispanic market in the United States.” But also, as a way to deal with the reimbursements of it debt,  Unión Radio in April 2008 approved the entry amongst its shareholders of British venture capital fund 3i through a mix of stock purchases and public offering for an amount of 100 million euros.

Its participation reached 8.14% of Unión Radio capital, with a commitment to increase its share to 16.63% by means of a new investment of 125 million euros, which the group is still waiting for.
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Seeking Portuguese-speaking and North American markets

Above and beyond a Hispanic audience, Prisa has more and more frequently affirmed its desire to represent the Ibero-American world overall. To reach this goal, over the last few years, it has been developing its activities by means of the Media Capital Group, the leader in the Portuguese market. In 2005, Prisa first acquired the Vertix Group, which held 33% of Media Capital stocks. Then in 2007, it launched a takeover bid for 73% of the remaining stocks.

The group is present in all media branches. Media Capital Radio operates four of the 10 most listened-to radio stations in Portugal, with a market share that fluctuates around 21%. The group also has the top Portuguese record company, Farol, the cinema distribution business CLMC and the dominant audiovisual production company on the Portuguese market, Plural/NBP. It also owns TVI, the number one television channel with a 35% market share in 2009, and TVI 24, as well as the Internet content group IOL, which generates 80 million page views from 2 million unique users each month. Moreover, its subsidiary Progresa publishes seven specialty revues with Media Capital Edições (MCE) - Lux Maxmen, Revista de Vinhos and Casas de Portugal. But once again, Prisa decided to sell. In October 2009, the Portuguese family business Ongoing Strategy Investments, a group that owns “250 million potential customers in Portuguese-speaking countries,” acquired 35% of Media Capital in a deal that the group described as “strategic, to clear the way for Prisa’s future and intensify its large growth potential,” with associates who provide capital, technology, knowledge and new markets to the group’s units.

This deal, however, was not enough to calm the banks. In accordance with the refinancing agreement signed with Prisa in May 2010, they demanded that the group proceed before July 30, then finally November 30, toward increasing its capital to at least 450 million euros, and sign an agreement for the sale of its share in Media Capital, or else name an investment bank to carry out the public sale of this share.

It seems that the conquest of the Portuguese market, so important to Prisa, is compromised, at least in Portugal. In Brazil, Prisa, by way of the Santillana editorial Group, acquired 100% of the Brazilian school book publisher Moderna in 2001. And in June 2005, it acquired 75% of Editora Objetiva. In fact, in 2008, 23% of the Santillana Group’s sales were from Brazil.

Furthermore, Prisa’s breakthrough in the United States has been confirmed. In October 2009, the Spanish group, already owner of two radio stations (in Miami and Los Angeles), decided to enter the North American radio-TV market, buying 17% of V-me Media, Inc., an audiovisual production and distribution company. Owner of the V-me cable network, the fourth most-watched Spanish-language TV channel in the U.S., its network reached 70% of Hispanic homes in the country. At that time, Prisa announced its intention to increase its share, which is finally set to happen between 2010 and 2011, according to the June 2010 statement given to the Comisión Nacional del Mercado de Valores (CNMV), in which Prisa confirmed its desire to invest 31.5 million to take a 51% stake in the channel.
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Television: from Canal Plus to the farewell of Localia

On the other hand, in the radio and TV domain outside the United States, Prisa is giving up more and more activities. The group entered the sector via subscription TV. Partnering with the French group Canal Plus, in 1989, Prisa created the company Sogecable as a response to a government call for bids to create a cable channel. This was the birth of Canal Plus España. Since then, Sogecable has become the top subscription-television channel in Spain and number three in Europe.

Its history was marked by the creation, in 1999, of the 24-hour news channel CNN+ (Canal Plus Noticias) with the American company Turner Broadcasting Group Time Warner, owner of CNN. In 2003, its satellite package Canal Satélite Digital absorbed its only competitor, the channel package of Telefónica, Vía Digital, under the disapproving but resigned eye of the Telecommunications Market Commission, which said that the presence of two satellite channel packages was not viable in Spain, but also that free competition was endangered by this merger. Powerless, it was present for the birth of Digital+, a package that today counts 150 channels and services, 1.8 million subscriber homes (statistics from late 2009) and a potential audience of nearly 6.5 million viewers.

Sogecable did not stop there; in November 2005, it responded to a new call for bids for the launch of an open television channel. Sogecable created Cuatro, a young and ambitious channel that reached an 8.6% market share three years later, in December 2007, the year in which Prisa launched a takeover bid on 100% of the audiovisual group for a sum of 2 billion euros. Even though Sogecable reported record profits in 2009 with 90 million euros for sales figures of more than 1.5 billion euros, the cost of the takeover bid weighed down the group’s debt – all the more so because what was supposed to be its golden goose (the rights to rebroadcast the Spanish football championships) in 2007 became “la guerra del fútbol,” an interminable legal imbroglio pitting Prisa against its competitor, Mediapro. Sentenced in the end to pay 96 million euros plus interest to Prisa, Mediapro declared the suspension of payment by its production subsidiary in June 2010.

To face its need for liquid assets, in November 2009, Sogecable sold 21% percent of its participation in Digital+ to the Spanish telecommunications group Telefonica. In December 2009, another agreement was signed between Sogecable and Telecinco, the Spanish TV station of the Italian group Mediaset. The surprise was sizeable for this alliance, considered almost unnatural, given how much the groups stand for diametrically opposed values, be it in terms of their political positions, their conceptions of the audiovisual industry, or the quality of their programming.

These differences do not seem to bother either party, and says more about Prisa’s urgent need for income than anything else. The signed agreement anticipated that Telecinco would acquire the totality of La Cuatro. In exchange, it had to take 22% of shares in Digital+ for an amount of roughly 500 million euros while Sogecable obtained 18.3% of the product of the merger. For the Italian company, the objective of this “strategic” investment was to reinforce its position in Spain to become “one of the main communications groups”. This agreement was not good enough for Prisa. And this is why, in March 2010, Digital+ put up for sale one part of the rebroadcasting rights to the 2010 Football Championship, which cost it the trifling sum of 90 million euros. Only Telecino declared its intention to buy a package of eight games.
 

 
Prisa has also tried local television. In 2000, the company created Localia, a network of 80 TV channels in Spain’s largest cities. But in 2009, Localia shut down definitively due to the financial crisis and an advertising crisis “without an improvement in view in the short or medium term.”
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Publishing and education

The Santillana group, which encompasses Prisa’s activities in publishing, education and training, hasn’t avoided financial restructuring either. Present in 22 countries, over the years it had extended its output in academic book publishing (Santillana Educación), university texts (Instituto Universitario de Posgrado-IUP), and general interest publishing with the publishing houses Alfaguara, Taurus, Aguilar, Objetiva and Salamandra, to become the leading publishing and educational group in the Spanish and Portuguese languages in the world, selling more than 125 million books annually.

However, at the end of April 2010, Prisa ceded 25% of the Santillana Group, of which it owns 100%, to the private equity firm DLJ South American Partners for 279 million euros, which put the publishing group’s value at 1.11 billion euros.  The surplus value given to Prisa rose to 213 million euros. The move is part of the plan announced by Prisa to incorporate strategic partners, capital, technology and markets and assumes the entry of a new partner for Santillana to develop its activities in Latin America.

The majority of the funds earned by the sale are to serve to lessen the debt, according to a plan signed with the group’s banks, but they will also allow for new investment, up to 100 million euros, particularly in Brazil and Mexico.
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Press: the conquest of Le Monde

Despite its debts, Prisa is not giving up on conquering certain key markets, or on seizing the opportunities presented to it – such as that of taking over Groupe Le Monde et Partenaires Associés (MPA), which required a minimum of 100 million euros for its recapitalization. In June, the Spanish company, which already holds 15% of the French company, joined the joint bid of the magazine Nouvel Observateur and France Telecom to take over the famous French daily paper, noting that for the creation of El País, Prisa saw Le Monde as a model and reference of a paper “in defense of liberty and democracy.” But to escape the interference of French president Nicolas Sarkozy, who gave his support to the trio’s offer that included Prisa, and to guarantee its independence, the paper instead chose a different offer, from the trio of investors Bergé-Niel-Pigasse. It was a real blow to the group, which intends to assert its rights as a shareholder. Since 1998, Prisa has had agreements with The New York Times, with which it publishes a Spanish-language supplement composed of exclusive content for the New York paper. In addition, the group also partners with The International Tribune (which is run by the New York Times) which includes in its editions printed in Spain an English-language version of the most important content from El País.

The Prisa Group is also present in the Bolivian and Mexican press markets with papers of reference, because the core of Prisa’s trade remains the press. In Spain, as it happens, the company publishes the number two Spanish sports daily, As, which prints 215,000 copies (according to OJD) and the number two financial daily paper Cinco Días (33,000 copies). It also publishes a series of journals through its subsidiary Progresa (Promotora General de Revistas), created in 1987 and currently holder of more than 30 titles on the Spanish market, including Cinemania, Rolling Stone, La Revista 40 and Claves.
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The challenge of Internet

Despite its statements of goodwill, Prisa has trouble finding profitability on the Internet, which still only represents 2% of the company’s ad revenue. It’s impossible, however, to list all the websites that Prisa controls. The Spanish company has long been aware of the revolution that the Internet represents; El País, for example, launched on the web beginning in 1996.

In 2000, faced with the evidence of the massive change that this new medium represented, Prisa created Prisacom, the leading Spanish business for the creation and operation of digital content for news, education and leisure. But how does one make money on the Internet? Between 2002 and 2005, elpais.com tried to make a paywall for the site’s articles that appeared in the paper edition...before abandoning it for a fully free site. In 2007, with the birth of the new El País, the group opened elpais.com’s archives and made more than one million “historical documents” available to the public from the world’s leading Spanish daily. That’s why the group announced, in March 2009, the merger of the editorial staff of El País and that of its online edition.
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Conclusion

For the last two years, Prisa has seemed increasingly focused on finding capital than continuing the drastic expansion that marked the “Polanco years”. And with reason; by the end of 2009, its debt was up to 4.85 billion euros. The financial difficulties of the company are real, even if Prisa refuses to display them in broad daylight. The company even blocked the publication of a Monde Diplomatique advertisement after the publication of an alarmist article. Nonetheless, a major financial restructuring has proved to be vital, even though the Polanco family, majority shareholder since Prisa’s creation through their company Rucandio, lost control of this majority. This possibility is increasingly credible since March 2010, when Prisa announced a milestone agreement with the U.S. investment fund Liberty Acquisition Holdings, which would inject $ 900 million in the Spanish group and thus become the majority shareholder. If this agreement is approved by the shareholders of both companies as well as authorities, the Polanco family involvement would be reduced to around 30% or less. This would be a turning point for the group.

For 35 years, Prisa was embodied by the figure of Jesús de Polanco. Despite the criticisms against him, this Spanish businessman was also a respected and admired personality. His atypical path, ability to create an empire from nothing, hard editorial point of view, democratic values and constant bet on quality media have marked the history of Prisa, which is the story of one independent company. So as not to lose control of his company, Jesús de Polanco had a clause added to his will prohibiting his heirs from selling their Prisa stock for the ten years that would follow his death. The goal was to protect the company from an outside group of stockholders taking control. Finally, the company, choked by its staggering debt, has been forced to mortgage its independence. Only time will tell if it will succeed in maintaining its identity.
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Key Figures

President: Ignacio Polanco
Director-general: Juan Luis Cebrián
Sales figures (2009): 3.2 billion euros (-20%)
The revenues from Prisa are mainly split between sales of ad space (28%), books, (19%), audiovisual (31%). As for the geographic distribution of the sales figures, they remain largely local: Europe (76.9) and America (23.1).
EBITDA: 624 million (-34.2%)
Net profit: 54.4 million euros (-39.2%)
Capital stock: 21.9 million euros
Debts: 4.8 billion euros
Employees: 14,987 worldwide
Shareholding: Rucandio (70%)
The group has been publicly traded on the Spanish stock exchange since 2000.
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Bibliography

Francisco BASTIDA FREIJEDO, Medios de comunicación social y democracia en 25 años de constitución, Revista Española de Derecho Constitucional, Año 24, No. 71, May-August 2004.

Enrique BUSTAMANTE,  "La concentración en la comunicación y la cultura", in BUSTAMANTE, Enrique (ed.), Concentració i internacionalització dels Mitjans de Comunicació. Repercusions socials i culturals, Centre d'Investigació de la Comunicació, Barcelona, 1994.

Jesús CACHO CORTES, El negocio de la libertad. Madrid: Foca, ediciones y distribuciones, SL, 1999.
 
María Cruz SEOANE, Susana SUEIRO, Una historia de El País y del Grupo Prisa. De una aventura incierta a una gran industria cultural. Barcelona: Plaza y Janés, 2004.
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