Televisa helped elect the country’s new president. Now it hears cries for the breakup of its broadcast empire.
FORTUNE — On July 7, nearly 100,000 people forced their way down Reforma, one of Mexico City’s main avenues, gathering in front of the Angel of Independence, a 150-foot-tall monumentin a plaza in the city center. “People, Listen! This is your fight!” they chanted. “Governing a country is not [the same as] making a telenovela,” one of the protest posters announced. Mexico’s election is over, but in the weeks following the July 1 ballot count, demonstrators have takento the streets. They are angry about the victory of Enrique Peña Nieto, a polarizing but telegenic candidate who ran a campaign based on simple slogans such as “You’ll Earn More!”
As the demonstration passed by Museo de Bellas Artes, an iconic museum in downtown Mexico City, Carolina Reyes, a recent college graduate, explained “I think there was fraud in the promotion [of Peña Nieto] in the media.” She had painted the front of a model TV screen to show a modified version of the Televisa logo, re-done in the red, white, and green colors of Peña Nieto’s party, a political machine with a long and checkered history in Mexico. A plastic tyrannosaurus rex toy poked its head out through a rip in the center of the logo, a warning about the return of old, corrupt, political “dinosaurs” to power. “Fraud! Fraud! Fraud!” the crowd around Carolina chanted, as onlookers stopped to use their cell phones to snap photos as she held her TV prop over her head. The protesters, the majority of whom supported Andres Manuel Lopez Obredor (AMLO), a leftist candidate, are frustrated with the influence of Televisa TV , Mexico’s most important media company, in their country’s political discourse. They don’t want to see Televisa write the script for their country’s elections.
Many members of Mexico’s urban, educated, tech savvy youth, who watched and criticized the campaigns via Youtube and Twitter, think that Televisa, a TV conglomerate that produces many of the country’s most popular telenovelas, may be too big for the country’s good.Televisa controls 70% of the broadcast television market, and its broadcasts reach 95% of all homes in Mexico. Unlike cable TV or the Internet — platforms that offer a plethora of options — viewers frustrated with the perceived political slant of news coverage on Mexico’s broadcast TV networks have few alternatives. Especially in Mexico, a country with limited cable and Internet penetration, broadcast TV plays a central role. Right now the country has only two nationally broadcast TV channels. Javier Aparicio, a political economy professor at CIDE, a prestigious research institute in Mexico City, explained that his “main concern is the concentration of the media industry in Mexico.” He added, “Televisa has an important influence in campaigns in national elections.”
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The question for the new generation of political protesters (as well as Televisa shareholders) is what Mexico’s next government will do about Televisa’s dominant position and influence. Public discontent with Televisa’s news broadcasts in the 2012 election cycle could push Mexico’s government to increase competition in TV news by granting another company a license to start a new network. Shannon O’Neil, a Mexico expert from the Council on Foreign Relations, a think-tank, explained that Peña Nieto and his advisors “talked at times on the campaign trail about opening up the concentrated economic sectors in the economy — televised media being one of the most prominent examples.” Peña Nieto has promised to boost competition in many sectors of the economy if the protests and public demonstrations continue. His government may also face pressure to break up Televisa’s hold on the broadcast TV market. If this happens, Televisa could lose a sizable chunk of its share of the $2.8 billion that companies in the country spend on broadcast advertising. Televisa gambled that in helping Peña Nieto win, it could discourage his administration from breaking its hold on the broadcast television sector. “They want to maintain their market share, they don’t want new TV stations approved,” Aparicio explained. Mexico is now waiting to see if Televisa’s bet will pay off.
In supporting Peña Nieto, Televisa has found itself pulled into a critical public debate in Mexico about Peña Nieto’s Institutional Revolutionary Party, or PRI, and its longstanding ties to the country’s business oligopoly, an elite group it helped create. After all, Peña Nieto’s victory marks the return of the PRI, a political organization that earned a reputation for stifling dissent and helping to create monopolies and form Mexico’s modern economy during the second half of the twentieth century. During those years, Emilio Azcarraga, the father of the company’s current CEO never hesitated to explain his close relationship with the ruling party. He once called himself a “soldier of the PRI.”
The historic relationship between Televisa and the PRI has been less relevant since 2000, when after 71 years of running Mexico as a pseudo-autocracy, the PRI was finally voted out of office. By the 2006 election the party had been effectively driven out of the presidential race, and Mexico’s national debate focused on AMLO, the leftist candidate, and Felipe Calderon, the right-of-center politician who was eventually elected as the country’s president. Following the demise of the original PRI regime, Emilio Azcarraga-Jean, Televisa’s current CEO, told a group of senators “democracy is good business.” During the initial post-2000 period of transition, Televisa filmed videos and accepted payments to produce content for a variety of politicians.
But, six years after the PRI’s historic defeat, Televisa executives and PRI leaders rekindled the old relationship. In 2006, while Felipe Calderon settled into office and AMLO marched through the capital to protest the election results, in the hills of Mexico State, the populous region surrounding Mexico City, Peña Nieto, the PRI, and Televisa quietly set the stage for a comeback. Having just been elected as Mexico State’s governor, Peña Nieto, a politician with an actor’s good looks, carefully combed hair, and a flair for populist politics and media promotion, hired Televisa to help him promote his public works projects and paid additional sums to sit for on-air interviews.
Televisa’s coverage of the young governor played a big role in converting him into a viable national candidate. Years before he even declared his intention to run for president, Televisa’s news cameramen followed Peña Nieto recording footage as he built infrastructure and embarked in a highly publicized romance with a popular Televisa soap opera star, Angela Rivera. “In the first years [of his term as governor] you would see Peña Nieto in the nightly news shows [as well as] ads promoting his achievements,” Aparicio explained.
Peña Nieto’s made-for-TV candidacy lost some momentum in 2008 when new laws prohibited candidates and politicians from buying promotional ads. However, a black market soon emerged for off-the-books deals for airtime. Televisa faced a minor public relations disaster in 2009 when a Spanish journalist published emails from Televisa executives he claimed were pushing him to provide favorable coverage of the candidate’s visit to Istanbul, Turkey. The journalist, Jose Silas, claimed that Televisa executives informed him that coverage of the candidate was a “priority” because the broadcaster “has an agreement with them [the PRI] for this type of coverage.”
In the early stages of the campaign, the accusations of a pact between Televisa and the PRI never seriously threatened Peña Nieto’s march towards the presidential office. Although AMLO, some former U.S. diplomats, and journalists from the British newspaper The Guardian all alleged the existence of a formal (and therefore illegal) promotional agreement between Televisa and Peña Nieto, no definitive evidence has been uncovered. “I think Televisa tended to be nice to [Peña Nieto], but was there a contract involved? I don’t know,” Aparicio explained.
By sheer spending power and clever self-promotion, Peña Nieto stayed in the news and in the lead in the presidential race. By some estimates, over the course of his term as governor, Peña Nieto spent US$90 million promoting his achievements in office. Televisa provided broad coverage, even hiring reporters to cover his routine visits to conferences in foreign countries. The network provided national coverage of Peña Nieto’s 2010 wedding, broadcasting footage of the newlywed politician waving to thousands of cheering supporters. The TV company’s producers “want to give the story a happy ending, a telenovela ending,” Rebecca Zavaleta, a 26-year-old anti-Televisa protester, explained.
Mid-way through the campaign, however, the relationship between Televisa and the PRI emerged as an important issue in the election after the station refused to provide a national broadcast of the first debate between the presidential hopefuls. The decision meant that people in some remote parts of the country did not get the chance to see how Peña Nieto fared in the open forum of the debate. Televisa decided not to interrupt its regularly scheduled national programing for the debate. TV Azteca, Mexico’s only other national broadcaster, chose to transmit a soccer game. The decision not to broadcast the debate became a rallying point for a young generation of voters who were already frustrated with an absence of real political discourse in the election. Televisa’s business, they said, was bad for democracy.
In the last two months of the campaign, young voters from a variety of backgrounds who were frustrated with the shortage of substantive debate coalesced into an anti-Peña Nieto/anti-Televisa coalition. On May 11, protesters at one of Mexico City’s elite private universities voiced their discontent, screaming “Get out! Get out! Get out!” after an appearance by the candidate. In the following weeks, the anti-Televisa/anti-Peña movement gathered momentum and even adopted its own Twitter hashtag, “#YoSoy132.”
In the end, the controversy did not ruin Peña Nieto’s presidential bid, but it did cause problems for Televisa. The complaints about Televisa’s monopoly power in the television marketcame at a delicate time, just as Televisa was seeking approval to expand into the country’s telecom sector, an area of the economy that has been dominated by Mexican billionaire Carlos Slim since the 1980s, when hewon control of the state-owned telecom monopoly during a PRI-led push for privatization. Televisa must now convince regulators that a joint venture between it and Iusacell, a company owned by Ricardo Salinas, another TV magnate, would not lead to market collusion. In May, however, both Televisa and TV Azteca, Salinas’s company, acted together in refusing to broadcast a presidential debate on their main channels. They also jointly declined to transmit advertisements for Carlos Slim’s cell phone service. Later that month, as the company waited for approval of its telecom plan and weathered criticism from protestors in Mexico City, Televisa’s New York listed ADR shares fell by almost 16%.
Facing the reputation-damaging protests, Televisa conceded. Reacting to the criticism from the #YoSoy132 movement, Azcarraga-Jean announced via Twitter that Televisa would transmit the second and final presidential debate on a national channel. He even started a hashtag of his own, “#TelevisaListens.” The network also called in young leaders from the #YoSoy132 movement to sit for interviews. Despite Televisa’s apparent change in attitude, the youth movement did not quiet down. At a June 11th anti-Peña Nieto protest in Mexico City, demonstrators plastered the base of the Angel of Independence statue with political posters, one of which said “Peña Nieto: This is the reality of Mexico- Not Televisa. THE PEOPLE HAVE WOKEN UP.”
By the late stage of the campaign, both Peña Nieto and Televisa had withstood the criticism from the #YoSoy132 movement. The week after Televisa’s national broadcast of the second debate Peña Nieto still enjoyed a significant lead in the polls, and Mexico’s antitrust regulator granted the company preliminary approval for Azcarraga-Jean to expand into the telecom sector.
Despite the controversy on the campaign trail, Peña Nieto was poised to win the election. On June 24 I watched the candidate close his campaign at Azteca Stadium, a venue owned by Televisa. “We know how to win elections, and we know how to govern,” Peña Nieto told the crowd, pausing periodically in his speech to hold up a thumbs up sign or raise both arms in gesture of victory. A week later on July 1, despite all the protests during his campaign, Peña Nieto won the election by a 6.6% margin, more than three million votes. On July 1, flanked by a massive banner announcing “Mexico Won,” I watched as Peña Nieto celebrated his victory alongside his wife at PRI’s headquarters. He is scheduled to take office in December.
The political opposition is not yet willing to accept defeat. Leftist candidate AMLO has refused to concede and is seeking to overturn the results of the election. On July 1, in his speech following the initial vote count, AMLO reminded his supporters “you all already know [about] the absence of equity in the media.”
More than a month after the election, AMLO and his supporters continue to accuse the PRI of fraud and condemn Televisa’s role in allegedly manipulating voters. The intense scrutiny of Televisa’s operations by AMLO’s supporters, market regulators, citizen watchdogs, and Carlos Slim’s lawyers is not likely to diminish any time soon. Catalina Reyes, the model -TV-carrying 25-year-old college graduate, whom I met at the July 7th protest of Peña Nieto’s victory, explained that the ongoing protest “is a way for people to show they’re not in agreement.”
Many of the young members of Mexico’s leftist political opposition have now centered on Televisa as their pet-project for political reform. At the protest on June 11, one young woman held up a sign that said “132: Televisa: the rules change — we’re observing you.” On July 2, in the Zocolo, the main public square in Mexico City, protesters unfurled a massive banner that asked “Who’s Watching The Watcher?” Later they posted a Youtube video and promoted it with the hashtag #WeAreWatching. In the wake of the election, the red, white, and green confetti at Peña Nieto’s victory party has been swept up and discarded. But, on July 27, protesters gathered in front of Televisa’s Mexico City offices to call for the creation of a third national broadcast channel. Duncan Wood, a professor from ITAM, a prestigious university in Mexico City, explained that as a result of the demonstrations, “In the future … the role of Televisa in politics is going to come under much closer scrutiny.”
The 2012 election is over, but the spotlight on Televisa has not been turned off. After all, right now in Mexico there are few other channels to watch.
A shorter version of this story originally appeared in the September 24, 2012 issue of Fortune.