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Case 13
Prisa, a diversified media group
LUIS ÁNGEL GUERRAS MARTÍN
Universidad Rey Juan Carlos
JOSÉ EMILIO NAVAS LÓPEZ
Universidad Complutense de Madrid
Sumario:
13.1. Introduction: the Prisa group
13.2. The Prisa group’s organisation into business units
o 13.2.1. Publishing-education unit: Santillana group
o 13.2.2. Press unit: Prisa news
o 13.2.3. Radio unit: Prisa radio
o 13.2.4. Audiovisual unit: Prisa tv
13.3. The restructuring process
o 13.3.1. Restructuring the business portfolio
o 13.3.2. Financial restructuring and the search for industrial and financial partners
o 13.3.3. Organisational restructuring
13.4. Corporate headquarters
CASE QUESTIONS
SUPPLEMENTARY INFORMATION SOURCES
Case overview
Prisa is a Spanish media group that for many years has been pursuing a diversification strategy by entering new businesses. It has traditionally adopted an internal organisation based on business units, which it has been modifying over time according to changes in the structure of its business portfolio and other conditioning factors both within the environment and internally to the actual group itself.
Case objectives
- Analyse the development directions, as well as their prevailing logic and possible synergies.
- Observe the organisation through strategic business units.
- Analyse the role of the head-office or corporate centre in a diversified firm.
Keywords
Development strategies, synergies, business units, management of diversified firms.
Theoretical references for preparing the case
Guerras Martín, L. A.; Navas López, J. E. (2007), «La Dirección Estratégica de la Empresa. Teoría y Aplicaciones» , Thomson Reuters-Civitas, Cizur Menor, 4th^ edition: chapters 11, 12 y 13.
Navas López, J. E.; Guerras Martín, L. A. (2013), «Fundamentals of Strategic Management» , Thomson Reuters-Civitas, Cizur Menor: chapter 6.
13.1. INTRODUCTION: THE PRISA GROUP
The Prisa Group (Prisa is a Spanish acronym for Promotora de Informaciones, S.A.) is currently Spain’s leading multimedia group, wielding considerable influence over Spanish society through its sundry media outlets. Prisa was founded in 1972 for the purpose of publishing El País newspaper, whose first issue hit the streets on 4 May 1976. The firm’s founder was José Ortega Spottorno, the youngest child of the Spanish philosopher José Ortega y Gasset, and he was involved with the firm as Chairman, Honorary Chairman of El País and member of the board of directors until his death in February 2002. The firm, itself, nonetheless, was managed for the most part of the time by Jesús de Polanco, until his death in 2007, whereupon his son, Ignacio Polanco, became the group’s chairman. In 2012, Juan Luis Cebrián was appointed the new Executive Chairman, replacing Ignacio Polanco, who was named Honorary Chairman.
From the very beginning, El País was a great publishing success, due probably to the favourable expectations created at that moment in Spanish history (just after Franco’s dictatorship) in favour of press freedom, as a reflection of the ideological positioning of the group of founding partners, amongst which there were politicians, intellectuals and journalists with a markedly liberal and democratic outlook. Its founding principles include a pledge to freedom, cultural innovation, tolerance, professional management, financial viability and independence.
2013 2.709.0 - 86.0 - 3.2 n/a
Source: author’s own work based on the Prisa Annual Report (several years)
Following an initial stage of consolidation in Spain, for some years now the Prisa Group has been seeking to become one of the world’s major media corporations, through significant holdings in other media outside Spain. As a result, by 2013 the Group was present in another 22 countries outside Spain (mainly in Latin America), where it generated over a third of its turnover.
13.2. THE PRISA GROUP’S ORGANISATION INTO BUSINESS UNITS
One of the more interesting aspects of the Prisa Group’s strategic performance is the definition of different strategic business units (SBUs), which operate with a certain amount of independence, but which together create major synergies. The growing complexity of the Prisa Group as of the 1990s led to a structure based on four Operating Divisions (Publishing, Radio and Music, Television and Film, and International) and a General Coordinating Management, which was basically the Group’s head-office.
Over the first years of the new millennium, the firm undertook a major restructuring of its businesses that gave rise to eight SBUs:
- El País , which besides the printed newspaper included its internet edition and El País Internacional.
- Spanish Media Unit , which grouped together all the media (press, radio and television) operating in Spain.
- International Media Unit , as in the previous case, but involving the media outside Spain.
- Sogecable was the unit that catered for pay-TV operations (Canal+, Canal Satélite Digital) and film production and distribution (Sogecine).
- Education and Training Unit , formed around the Santillana Group, for book publishing.
- Leisure and Entertainment Unit , focused mainly on issuing music, audiovisual production and the organisation of musical events.
- Prisa.com was created in this restructuring process with a view to developing internet websites and content for the Group’s diverse media.
- Resources was a unit for the provision of in-company services, mainly the management of advertising and printing.
This structure was gradually altered over the following years. A new structure was adopted in 2008 that still remains in place in 2014, and in which four major SBUs are defined that Prisa refers to as «áreas de actividad» (business areas): Publishing-Education, Press, Radio, and Audiovisual. The trend in the relative importance of each one of them is shown in figure 13.2, where there is a noticeable loss of weight of the press area in favour of education, while the operations in radio and audiovisual maintain their relative importance within the group.
Figure 13.2: Income by business units (million euros)
Business unit 2012 2009 2006
Income % Income % Income
Press 315 11.8 416 13.0 565
Radio 342 12.8 377 11.7 376
Education^734 27.5^617 19.2^489
Audiovisual 1,260^ 47.3^ 1,771^ 55.2^ 1,
Others 14 0.6 28 0.9 110
Total 2,665 100.0 3,209 100.0 2,
Source: author’s own work based on the Prisa Annual Report (several years)
Besides their traditional business, in recent years all the SBUs have undergone an intense process of digital transformation, with the aim being for digitally based operations to account for between 15 and 20% of turnover in 2015, when this same figure was only 3% in 2011.
13.2.1. PUBLISHING-EDUCATION UNIT: SANTILLANA GROUP
The origins of this unit are to be found in the Santillana publishing house, founded by Jesús de Polanco in 1958. It subsequently expanded by incorporating new publishers until it achieved its present form. In 2012, Santillana was the leading publisher of textbooks and general publications in Spain and Latin America, and the yardstick in the field of literary
information. The newspaper’s topicality is completed by daily regional inserts, with specific information on each one of Spain’s autonomous communities, plus the weekly supplements El País Semanal, S Moda (Fashion), Guía del Ocio (Leisure), Babelia (Books), El Viajero (Travel), Domingo (Sunday), Negocios (Business), Motor (Cars) and The New York Times. It also publishes a monthly magazine called ICON, dedicated to male readers and the Buenavida magazine, dedicated to wellness.
Considered a publishing success since it first appeared, in 2012 it was still considered the foremost newspaper in Spanish, with an average daily circulation of 304,241 copies (Spain’s Circulation Audit Office - OJD, July 2012 to June 2013), a long way ahead of its immediate rival El Mundo (with almost 120,000 fewer copies), and an average daily readership of 1.8 million (Spain’s audience research agency - EGM, third wave 2013). Besides the printed edition, the internet edition recorded 6.6 million individual users, only behind elmundo.es with 7.2 million (ComScore data, February 2014).
In the 1990s, the unit was expanded to include new periodicals, such as Cinco Días and Diario As. Cinco Días is the oldest financial newspaper and pays particular attention to business, Spanish finance and the global economy, being Spain’s second most widely distributed financial periodical, with an average daily circulation of 30,678 copies (OJD, July 2012 to June 2013), behind Expansión (around 1,500 more), and an average daily readership of 72,000 (EGM, third wave 2013). The sports paper As was bought by Prisa in 1996 and is also the second in Spain, with an average daily circulation of 166,571 copies (OJD July 2012 to June 2013), behind Marca (around 30,000 more), and an average daily readership of 1.35 million (EGM, third wave 2013).
In due course, in 2005 Prisa purchased 15% of the publisher of the French newspaper Le Monde. In addition, it has an interest in the French group Midi Libre, which issues several publications in southern France, amongst which are the newspapers Midi Libre and L’Independant. In 2005, Prisa entered the Portuguese group Media Capital, the publisher of several magazines and newspapers. In Mexico, it publishes the local version of the magazine Rolling Stone, and it has a strong positioning in Bolivia through the publication of the dailies La Razón, El Nuevo Día and Extra.
In July 2011, Prisa and Vocento, as promoting entities along with another 13 groups, announced the creation of a digital pay platform Kiosko y Más, the largest press selection in Spanish, whereby readers could access the information from around 90 publications, including mainstream, financial and sports periodicals.
June 2012 witnessed the launch of El Huffington Post, the Spanish version of the popular news website created in 2005 by Arianna Huffington, which combines original content with a vest network of blogs, the posting of news and mass user involvement, making it a globally recognised brand. The new newspaper is a joint venture owned in equal parts by
Prisa and AOL-The Huffington Post. By December 2012, it exceeded one million users per month.
In January 2014, El País launched Planeta Futuro, a digital section on topics involving sustainable human development as a discussion forum on poverty, health, climate change and education. The project received support from the Bill & Melinda Gates Foundation.
In addition to the activities listed above, the SBU includes a series of specialised periodicals such as Rolling Stone (music), Cinemanía (cinema), Claves de Razón Práctica (opinion), Gentleman (for men), Car, Lux (fashion and beauty), Lux Woman (beauty and fashion for women) and Revista de Vinhos (wine), as well as other corporate magazines. The news websites of Prisa Noticias, El País Sites (including the websites of elpais.com, MeriStation, Guía del Ocio, Rolling Stone and Cinemanía), are global leaders in information in Spanish with 14.7 million single users per month (ComScore data, January 2014).
Also linked to this unit, and still in operation today, is the Escuela de Periodismo (School of Journalism), created in 1986 through an alliance between Prisa and Madrid’s Autónoma University, for the education of future journalists, which has so far been attended by around 1,000 students. Finally, the internet travel website elpaisviajes.com was launched in May 2013, in collaboration with Nautalia, a tourist group with operations in 85 countries.
13.2.3. RADIO UNIT: PRISA RADIO
Radio was the first new media sector through which Prisa began to diversify following the consolidation of El País. It involved the purchase of the broadcaster Sociedad Española de Radiodifusión (SER) in 1985. In due course, in 2006, it joined the Godó Group to create Unión Radio, which was later renamed Prisa Radio. At the beginning of 2014, the shareholding capital of Prisa Radio was distributed between the Prisa Group (73.5%), the Godó Group (18.4%) and the private equity fund 3i, which acquired its interest in 2008 (8.1%).
In 2013, Prisa Radio was the world’s largest Spanish-speaking radio operator with 28 million listeners, over 8 million via the internet, and more than 1,250 of its own, affiliated or associated radio stations in Spain, the USA, Mexico, Colombia, Costa Rica, Panama, Argentina and Chile, and others under franchise in Guatemala, Ecuador, the Dominican Republic and Paraguay.
The radio SBU, in turn, comprised four business areas: Radio, Music, Other Media and Brand Development. The unit was corporately structured around these four areas and its twelve operating countries.
The Radio area was dedicated to the broadcasting of news, music, entertainment and sport, being the undisputed audience leader in Spain, Colombia, Chile and Portugal. The audience
Máxima FM 754 Dance music
M80 Radio 551 Pop music
Radiolé 481 Traditional Spanish music
Source: EGM (third wave, 2013)
The Musica area consisted of Planet Events, responsible for the organisation of major music events, RLM, dedicated to the representation of performers, and Merchandising on Stage, for the management of artists’ copyright.
Other media included 40TV, a music TV channel that emerged as the natural follow-up to the 40 Principales radio station, the Los40.com internet portal, dedicated to music news, Buluba.com, the first free legal website with a catalogue of lyrics for more than 70, songs, and Mymajorcompany.es, for backing innovative projects in different fields of music, entertainment and culture.
Finally, through Brand Development, Prisa has embarked upon new businesses linked to the world of radio, such as 40 Café, as a focal point for cookery, music and radio, with its first establishment opening in 2011 on the Gran Vía in Madrid, Los 40Viajes.com, a travel agency based on an alliance with Nautalia, 40 El Musical, the stage musical that premiered in 2009, The Music Collection, for creating a fashion clothing line in partnership with Adolfo Domínguez, Arte 40, a nationwide competition for young emerging artists, Madrid es Tuyo, a cultural club in Madrid related to art, culture and leisure, and Cadenaserviajes.com, a travel agency for customised holidays headed by the journalist Paco Nadal.
13.2.4. AUDIOVISUAL UNIT: PRISA TV
The origins of this SBU are to be found in the launch of Canal + in 1990, the first pay-TV channel to operate in Spain, as an option to complement the general-interest channels. Its offer was based on exclusive products, financed mainly by the subscription fees paid by viewers. Canal + consolidated its offer around the latest films, major documentaries and bullfighting and sporting events available only to subscribers.
The broadcasting of Canal Satélite Digital began in 1997, whereby Prisa, through its subsidiary Sogecable, embraced the digital TV format that provided access to more than 150 channels, as well as other features, such as the so-called «TV on demand», allowing viewers to choose the programme they want to watch. In 2002, Canal Satélite Digital merged with Vía Digital, belonging to Telefónica, to create a single pay-TV platform in
Spain, Digital +, managed by Sogecable. In 2005, Sogecable launched a new free-to-air TV channel, Cuatro, in order to compete with the general-interest channels.
In 2008, the Prisa Group launched a public takeover bid for 100% of Sogecable’s shares in order to acquire the holding that Telefónica had in it, stemming from the merger that gave rise to Digital +. The outcome of the operation was that Prisa held 100% of the capital of Sogecable, which withdrew from the Ibex-35 on 12 May 2008. Nevertheless, in November 2009, Prisa sold Telefónica 21% of Digital+ for 470 million euros. Thus, Telefónica once again became a major shareholder in the pay-TV business after its departure from Sogecable in the wake of the PTO mentioned above.
In December 2009, Telecinco and Cuatro announced the creation of the largest free-to-air TV broadcaster through the merger of the two companies. Shares in the new Telecinco would be held by Mediaset (41%) and Prisa (18.37%). In this same operation, Telecinco undertook to buy 22% of Digital+.
The Audiovisual SBU is the Group’s most important one in terms of turnover (see figure 13.3) and is organised through Prisa TV, which consists of the brands Canal+ for its operations in Spain, Media Capital in Portugal, where it operates with the TVI channel, the producer Plural Entertainment and the V-me channel.
Canal+ is this unit’s star brand and a pioneer in pay-TV in Spain. In 2012 it had approximately 1,700,000 subscribers. In October 2011 it launched a digital project called Yomvi, which provided access to TV channels through digital media. It had already marketed the iPlus terminal for viewing certain channel in HD and 3D.
For its part, TVI, which began broadcasting in 1993, is now the most viewed TV channel in Portugal. In 2009, it launched TVI24, a 24-hour news channel available on several cable platforms. In 2010, it launched TVI with the aim being to bring Portugal closer to Portuguese-speaking communities all over the world, and in 2012 it opened TVI Ficçao as a new pay-TV channel specialising in drama and series.
Plural Entertainment, created in 2001, is the Group’s audiovisual production company, and it provides content for its channels in Spain and Latin America. Its operations cover all audiovisual genres: drama series, game shows, feature films, cartoons, commercials, video- clips, etc. It is one of the leading producers of audiovisual content in Spanish and Portuguese, with offices in Madrid, Miami, Lisbon and Buenos Aires.
The channel V-me Media Inc was purchased in October 2009, being at the time the fourth largest TV broadcaster in the Spanish-speaking market in the USA. In 2013, Prisa held 42.6% of its stock; it broadcasts free-to-air, via satellite and cable involving several US operators, which means it can reach 76% of the Hispanic households with TV in the US.
13.3. THE RESTRUCTURING PROCESS
the field of education. The reasons given for this decision were that the education business accounted for 87% of the business units’ revenue and the convenience, therefore, of dedicating all efforts to what was considered to be the unit’s core business, that is, everything related to education.
In June 2014, a 56% stake in Canal+ was sold to Telefónica for 750 million euros. This operation meant that Telefónica now held 78% of Canal+, while the rest remained in the hands of Mediaset España, the group that controlled the Telecinco and Cuatro TV channels, among others.
13.3.2. FINANCIAL RESTRUCTURING AND THE SEARCH FOR INDUSTRIAL AND FINANCIAL PARTNERS
In addition to the aforementioned sale operations, Prisa has been forced by its creditor banks to make new divestitures in its search for capital. Thus, in August 2009, Prisa and IBN presented a strategic alliance through the incorporation of PRISA IBN International, a joint venture owned in equal parts for the distribution of audiovisual content in retail outlets, department stores and supermarkets in Spain, Portugal and Latin America, while at the same time expanding Prisa’s operations in the USA. The US partner contributed its customised communication technology at the PoS, while Prisa provided the joint venture with its capacity for producing and issuing news and its experience in radio programming tailored to suit each market. As a result of this agreement, furthermore, Talos Partners, IBN’s financial arm, took an initial holding of 4.5% of Prisa’s stock, for an approximate value of 37 million euros, an investment that could be increased to 5%.
Yet perhaps the most important development took place in March 2010, when Prisa and the US Liberty Acquisition Holdings announced an agreement whereby Prisa would acquire 100% of Liberty through a share swap that would make the owners of Liberty independent shareholders of Prisa. The latter, in turn, would receive a net cash payout of close to 660 million euros. Prisa’s reference shareholder (the Polanco family) retained control over the firm, with a holding of no less than 30%, and their continuity in its management was assured. Liberty Acquisition Holdings is a Special Purpose Acquisition Company (SPAC), a type of firm that brings together a series of financially powerful partners who are looking for investment opportunities.
Another development in 2010 was the sale to Miguel Pais do Amaral of 10% of the firm’s Portuguese subsidiary Media Capital. Finally, in November 2011, and through his company Inmobiliaria Carso, the Mexican business magnate Carlos Slim acquired 3.2% of Prisa’s stock through the purchase of 14.7 million shares, involving an investment of 11.1 million euros.
As regards strictly financial matters, the significant growth in borrowing forced the firm into a process of negotiation and refinancing with its banks. A general meeting in
December 2013 approved an agreement on the restructuring of the debt, with 28 banks and 17 investment funds, in which the maturity date was put back six years and the firm was provided with an additional liquidity facility.
The refinancing was structured into three tranches. The first involved a loan of 353 million euros from the investment funds, and due in two years. The second was another loan, for 647 million and due in five years. The third meant the refinancing of 2.28 billion, with payment deferred until 2019. All these timeframes were linked to the fulfilment of a series of deleveraging milestones that the firm was required to undertake over the following years.
13.3.3. ORGANISATIONAL RESTRUCTURING
This process also involved several organisational changes that affected the head-office and all the business units. As regards head-office, in July 2012 Juan Luis Cebrián was appointed the new Executive Chairman, replacing Ignacio Polanco, who was nominated Honorary Chairman, as well as remaining chairman of Timón, the reference shareholder of Prisa, and of the Santillana Foundation. Ignacio Polanco had managed the firm since the death of Jesús Polanco. To replace Cebrián, Fernando Abril-Martorell was appointed the Group’s new CEO. Manuel Polanco was also appointed new Deputy Chairman.
In February 2014, with a view to reinforcing the Group’s interest in the Americas, the Mexican businessman Roberto Alcántara and the CEO of the US group Digital First Media, John Paton, were made directors of Prisa.
In terms of operations, between 2010 and 2011, and with the aim of achieving greater internal efficiency, the workforce was restructured, affecting around 2,000 employees from across many of the Group’s businesses, as can be seen in figure 13.1. This involved an estimated annual saving on wages of around 65 million euros. Summer 2012 received the announcement of a new short-term redundancy scheme, referred to in Spanish as Expediente de Regulación de Empleo (ERE ), which affected around 200 workers and involved a compensation payout of 52.2 million euros.
The headcount at year-end 2012 was 12,191 employees (see figure 13.1), of whom 54% were men and 46% women, with 52% located in Spain and the rest abroad, and 88% of the workers had open-ended contracts.
13.4. CORPORATE HEADQUARTERS
The Prisa Group’s head-office, or corporate headquarters, has evolved over time since it was first set up, although its mission has always been to coordinate the Group’s operations with a view to generating synergies across the different businesses. Initially, head-office’s operations revolved around the General Management of Coordination which consisted of the General Secretary’s Office, Financial Management, Communication Management, IT
March 2014, these two latter positions were held by the same person, José Luis Sáinz) together with the International Director General of Prisa Radio.
CASE QUESTIONS
- Identify the management development strategy followed by the Prisa Group, its prevailing logic and the types of synergies that may be generated.
- Analyse the definition of the different business units: what have been the core criteria behind their demarcation? How would you assess that demarcation in terms of the diversification strategy adopted?
- Analyse the Prisa Group’s restructuring process and the reasons for its implementation.
- Analyse the role of the Group’s head-office over the course of time. What model for the management of diversified firms does it follow? How would you assess that model in terms of the diversification strategy adopted?
SUPPLEMENTARY INFORMATION SOURCES
- Prisa Group Annual Reports (several years)
Interest websites
- Prisa’s Group: http://www.prisa.es
- Websites of the Group companies: http://www.prisa.es/areas/webs.html
- Oficina de Justificación de la Difusión (OJD): http://www.ojd.es
- Asociación para la Investigación de Medios de Comunicación (Estudio General de Medios, EGM):http://www.aimc.es
- ComScore: http://www.comscore.com
