HispanicBusiness

Mr. Remek agrees that language is emerging as a factor for the media. "People who are bilingual will pick and choose media programming," he says.

So far, Univision hasn't moved in the bilingual direction – its advertising must appear in Spanish, for example – but the company has taken immediate steps to shore up its share price. In February 2005, the company announced a buy-back program of up to $500 million over five years. "So far, across the media landscape, several companies have tried buy-backs," says Mr. Spring. "They seem to have stemmed the fall in stock price but not really stopped it."

Although Univision is open to be acquired – CFO Andrew Hobson has publicly invited offers – Ms. Backer doesn't see the buy-back as a preparation strategy. "They don't have to buy stock to be acquired because [Chairman] Jerry Perenchio owns most of the voting stock anyway," she observes. "They see this as an opportunity to buy the stock at a discount to where the stock will trade in the future. They expect that with their ratings and revenue gains, the stock will trade higher next year."

Notably, Univision's bittersweet relationship with Mexico's Televisa, its main supplier of telenovelas, took a new twist this year when two Televisa executives resigned from Univision's board and the Mexican company filed a lawsuit charging breach of the programming contract. But Mr. Remek downplays the rift, saying "it's a stormy relationship, but it continues. The future is growth in TV revenues."

Entravision's Fortunes Tied to Univision
Entravision's fortunes depend on those of Univision. Entravision owns or operates 47 Univision affiliate stations in second-tier markets, plus it owns more than 50 radio stations and an extensive billboard inventory. In a recent downgrade of Entravision to "Market Underperform," Mr. Spring notes that the company "is not cheap, and unlikely to escape the negative secular industry trends" in the media business.

In addition, when Univision merged with Hispanic Broadcasting in 2003, federal regulators ordered Univision to reduce its stock holding in Entravision from approximately 30 percent to 15 percent. In July 2005, Univision bought two San Francisco-area radio stations from Entravision in exchange for $90 million in stock. The transaction lowered Univision's holdings to about 20 percent, leaving another 6.2 million shares to sell by March 2006.

"For Entravision it's a big issue," says Mr. Remek. "Univision has so far avoided selling [Entravision] shares in the open market, but there's no guarantee they can accomplish the rest of it that way. That weighs on the share price."

SBS Most Hard Hit
SBS, the smallest of the three publicly traded Spanish-language broadcasters, has suffered the most during 2005. Despite double-digit revenue growth and ownership of top radio stations in New York, Los Angeles, and Miami, its shares have lost almost 40 percent of their value. The highly leveraged company gives Mr. Remek "concerns about cash flow going forward." Mr. Spring sees the stock price languishing, but with little downside risk given the already reduced price.

In December 2004, SBS acquired a station from Viacom in exchange for a 10 percent equity stake in SBS. "I see that as a prelude to further integration between the two," says Mr. Remek. "I think SBS would be an attractive target. The issue would be valuation, and the value has been high."

While 2005 hasn't been kind to media stocks, Mr. Spring sees more trouble ahead. Higher energy costs will cut into discretionary spending. Because Hispanics spend a bigger slice of their income on energy than Anglos, "Hispanic and minority media stocks are most vulnerable to rising energy prices," according to his analysis.

Eventually, Mr. Remek believes online ad spending will be rationalized and investors will adjust their expectations for growth. "Spanish-language media is still a growing pie, and we do anticipate continued growth at rates superior to English-language media," he says, "with the caveat that there will always be more distribution platforms to compete for those ad dollars."