The Next Act of Univision Story: A Comeback?

Once-dominant network pushes realigned Televisa to cater to U.S. viewer appetites
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Related: Falco on Trump, Univision’s Finances and Digital Moves

Univision is giving Latino viewers dramatically different kinds stories on screen as the company tries to write a different script for itself—a comeback story.

Long the dominant force in Spanish-language programming, and blessed with favorable demographic trends in the U.S., Univision has nonetheless seen its ratings fall precipitously—about 30% from the 2012-13 season. While there are several factors at work, the biggest and most concerning is this one: As tastes have changed among Hispanic viewers in the U.S., the network has failed to keep pace.

Univision CEO Randy Falco, who has overcome his share of obstacles in a four-decade media career, is facing the company’s programming issues head-on. In an interview with B&C, he affirms, “The plan has been put in place.” The network, he said, is starting to air programming that is more relevant to a Hispanic audience that is younger, more educated and more upscale than the housewives it used to target. “So we’re really turning the ship here. It’s not going to be easy to get back to the kinds of levels we once enjoyed but I do believe we’re on the right track.”

One microcosm of Univision’s recent stresses has come over the past week with a carriage-fee battle with Charter Communications that last week resulted in a blackout to the No. 2 U.S. cable operator’s subscribers. A judge’s temporary stay on Feb. 2 restored the programming until Feb 9. Falco will only say, “Hopefully it will get resolved on a timely basis, but we’ll see.”

Change is the operative word at Univision—and as the company takes action, there has already been some short-term improvement in the network’s primetime ratings. But a makeover is made more complicated by Univision’s ties to Televisa, the Mexican media company that owns a 10% stake in Univision that could grow and, under a contractual arrangement, gets paid to provide primetime programming.

“What we’re seeing now is a significant change. There’s still the novelas, but the novelas look different. They’re a different format. They’re shorter, more quick writing,” says Lisa Torres, president multicultural, at Publicis Media.

“We’re already seeing not as many Cinderella stories, and we’re already seeing Univision’s ratings have gone up and they’re back to the No. 1 position,” Torres adds. “That gap between them and Telemundo is not as wide as it used to be but their trajectory is going in the right direction.”

Changing Tastes

Televisa used to be the premiere producer of telenovelas, the ultra-soapy serialized dramas favored by much of the world. But the formula grew stale to many U.S. Hispanic viewers, who are increasingly bilingual and able to watch the sophisticated shows on cable and streaming services in this golden age of TV.

Those viewers can also watch Telemundo. With support from the highest levels of Comcast’s NBCUniversal, Univision’s rival has been creating edgy programming in the U.S., starting with 2011’s genre-busting, high-rated telenovela La Reina del Sur. That saga of a female drug lord featured a type of character never seen on Univision. Last year, that new wave of shows had propelled Telemundo to outright wins some nights in prime time, something that would have been inconceivable not long ago.

Televisa long balked at updating its programming approach, instead pointing a finger at Univision’s marketing for viewership declines. But once ratings started falling in Mexico as well, the supplier was more willing to go back to the drawing board.

“We’ve convinced them that instead of producing first for Mexico and then seeing the United States as a secondary market, they’re not actually producing for the United States as a primary market,” says Falco. “That’s really the biggest strategic shift, which I think is absolutely critical for us in order to be more competitive, not just in the Spanish language world, but also against other English language channels.”

Univision benefits financially from the setup because Televisa fare produced in Mexico is cheaper. Yet some observers question how successful the network can be without catering specifically to U.S. viewers’ tastes—which are increasingly influenced by Netflix’s multibillion-dollar spree of eye candy—even if it tried to follow Telemundo’s programming footprints.

“It’s not a secret that we need to work closely together. They are part of our company and we are obviously a part of theirs,” Univision entertainment president Lourdes Diaz tells B&C in her first interview since joining the company last October. “It is my intent to work very closely with [Televisa] and refresh some of the content out of there to focus on stories that reflect our audience and our Hispanic American experience so that it relates more.”

Diaz says Univision conducted focus groups in multiple cities during the summer and fall with viewers. “They wanted authentic, relatable stories, they want a shorter format, they wanted compelling characters that drive the narrative, they wanted to depict the women in a position of strength, much in the way they see themselves, as opposed to the old country, and to really reflect the U.S. Hispanic experience,” she says.

The network has responded to that research, Diaz says. In the last few months, Univision has premiered Su Nombre Era Dolores, la Jenn que yo Conoci, a bio-pic about the late singer Jenni Rivera, and Vino el Amor, a novella about an immigrant family in Napa Valley and Blue Demon, a series about the famous Mexican wrestler.

“We’re going to have a full slate of other product that’s going to be reflecting the Latinosin our community,” she says.

Refreshing the Pipeline

In some ways, Univision’s bonds to Televisa are tightening.

In January, before President Trump took office, the Federal Communications Commission ruled that Televisa could increase its stake in Univision to 40% of the voting rights and a 49% equity interest.

Falco believes a bigger stake will make Televisa more sensitive to the U.S. audience. “The more they own of Univision, the more they’re going to be interested in making sure we get the right programming because as they own a bigger and bigger piece of Univision, a larger part of their overall market cap is going to come from their holdings at Univision.”

Falco met with then-President-elect Trump, who has been critical of both Univision and Mexico. (The value of the peso has plummeted amid the president’s insistence on building a border wall and making Mexico pay for it.) During the campaign, Trump sued Univision for pulling out of an agreement to televise Trump’s Miss Universe pageant after the candidate criticized Mexicans as rapists (the suit was settled). Trump also threw Univision anchor Jorge Ramos out of a press conference.

“One of the things that I talked to him about and he agreed to was the importance of him engaging with the Hispanic audience,” says Falco. Falco says Trump said he would absolutely appear on the network, sometime after his first 100 days in office.

Amid the furor surrounding Trump’s new immigration policies, Falco has yet to commit to a position. “We want to monitor it a little bit further. We’ll have a position. We just want to see how things shake out a bit,” he says.

Later in January, Univision’s top content executive Isaac Lee was named chief content officer of both Univision and Televisa as part of an effort to strengthen and expand their production and distribution relationship.

Emilio Azcarraga Jean, Televisa’s president, described the aim of the move in a statement at the time. “By unifying our production of content for distribution on multiple platforms in Mexico and the United States, we will take advantage of the unique opportunity that Televisa and Univision have to compete more effectively in an increasingly complex and fragmented industry.”

Beyond Televisa, Univision has also backed several notable originals and co-productions.

Among them are El Chapo, the first Univision Story House and Netflix production slated to air in April, and La Piloto, the first series from W Studios, Univision’s joint venture with Patricio Willis (producer of shows such as, ironically, Telemundo’s La Reina del Sur.) La Piloto is about a woman who dreams of becoming a pilot and gets involved with a questionable boyfriend. “It’s very edgy, very exciting. We’ve not had a woman like that on our air before and I think it’s going to resonate a lot with that demographic we’re going after,” Diaz says.

Univision also recently announced that it is working with Pedro Torres’ Curiosity Media to develop a show based on the life of Latin American musician Luis Miguel.

Other shows Univision is producing will support the network’s new 8 p.m. strategy.

The network’s research found that many viewers live in multigenerational homes where children watch with parents and in-laws are part of the family. “They wanted family hour. They wanted to be part of competition, unscripted formats,” Diaz says.

On Feb. 6, Univision will premiere Pequeños Gigantes USA, a kids talent competition based on a Televisa format. It is hosted by Gisele Blondet, who returns to Univision, and will air Monday through Thursday.

Later in the season, the network plans to air La Reina de la Canción, the search for the next big Mexican regional music star.

As all of these new pieces fall into place, Univision remains the legacy leader and is quick to note it finished the 2015-16 broadcast season as the No. 1 network for U.S. Hispanics for the 24th year in a row. Season to date, it is slightly ahead of Telemundo in broadcast prime among adults 18 to 49.

The race is more of a weekly battle lately, though. Telemundo says it is the only Spanish-language network growing on weekdays in primetime and that its Super Series (the network doesn’t call its shows telenovelas any more) El Chema has it winning the 10 p.m. timeslot both among adults 18-49 and 18-34 in January.

Revenue Holds Steady

Ratings woes haven’t dramatically undermined Univision’s revenue. For the first nine months of 2016, total revenue for Univision’s media networks group was up 4.2% to nearly $2 billion. Ad revenue, adjusted for the timing of a major soccer tournament and for political advertising, was up 2.6% to $1.2 billion.

Those figures reflect a drop off in the third quarter, when adjusted ad revenue was down 4.5% to $401 million.

In the third quarter, Univision had a net loss of $30.5 million, compared to a year-ago profit of $109.8 million. For the first nine months of 2016, Univision reported net income of $110.9 million versus a loss of $53.4 million a year ago.

Justin Nielson, senior research analyst at SNL Kagan notes that Univision’s revenue has remained relatively stable despite its ratings challenges, thanks partly to a strong station group and increasing retransmission payments.

“It still has some very valuable properties and it’s still focused on a demographic that is growing,” Nielson says. “But they’re facing a lot of competition. Comcast NBCU is putting a lot of resources toward Telemundo and beefing up programing there. We’ve seen that in the ratings and we’ve seen it in the sports rights, with FIFA’s World Cup moving to Telemundo.”

Univision’s plan for an initial public offering has been stalled since 2105, when the company was valued at $19 billion. That value had come down and an IPO probably still won’t happen until the incentive auctions are over and Univision’s stations can be valued, Nielson says. The company also has to decide what to do with its struggling radio unit.

Another wrinkle comes from Televisa, which would probably want to increase its stake in Univision at a lower valuation than Univision’s other stakeholders, led by media mogul Haim Saban, would prefer.

Univision has also embarked on binge of buying web properties including The Onion and Gawker Media that has puzzled many outside the company. When it bought Gawker Media (the collection of sites like Deadspin and Gizmodo surrounding the now-shuttered namesake site), it combined its web properties with Fusion Media, now wholly owned after Univision bought out the Walt Disney Co.’s share. About 70 jobs were cut as a result.

“I’m not sure how those digital properties fit into the Univision portfolio of Hispanic-focused media,” says Nielson. “I think everybody’s trying to chase the same millennial demographic and having a hard time trying to do that.”

Nielson does see growth opportunity for Univision—if its streamlines it programming networks and new technology strengths its stations’ ability to reach digital devices.

Media buyer Torres likes the changes Univision and Televisa are making. “I think it’s smart that they would put [Lee] in charge of both,” Torres says. “I think it’s an acknowledgement that the big problem that they’re having ratings-wise is that the product that’s coming out of Televisa was not resonating with this new consumer, or the consumer that they want to attract.”

Torres has seen some of Univision’s upcoming programming. “They’re adding a bunch of biopics into their lineup, which I think is smart,” she says. More competition shows, more reality shows as well.

She says Univision appears to be expanding its focus while not walking away from its heritage, which bodes well for ratings improvement.

“They have just enough to attract a new audience but engrained in what their core audience members want to watch,” she says. “You don’t want to erode your audience to gain new one. That’s not a net benefit. You want to hold your core and add onto it.”

Related: Falco on Trump, Univision’s Finances and Digital Moves

Univision is giving Latino viewers dramatically different kinds stories on screen as the company tries to write a different script for itself—a comeback story.

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