Spanish-language television giant Univision Communications long has towered over its rivals, boosted by a steady stream of over-the-top Cinderella love stories, imported from Mexico, featuring downtrodden damsels and hunky ranch hands.
No mas. Now Univision is the one in a swoon.
The nation’s largest Spanish-language media company ended 2016 in unfamiliar territory, clawing to retain its audience and blunt the gains made by archrival Telemundo in the prime-time ratings race.
New York-based Univision has lost more than 45% of its prime-time audience since 2013. And since July, Telemundo has been scoring more viewers in the sweet spot for advertisers — viewers aged 18 through 49.
Univision’s reversal of fortunes comes at an inopportune time. The company has been preparing for a public offering of its shares to enable its private equity owners, including Los Angeles billionaire Haim Saban, to finally begin to unwind their interest in Univision after a decade of ownership. That IPO run-up has lasted much longer than the investment group anticipated, and some of the private equity firms are itching to get out.
But slumping prime-time ratings, stalled advertising revenue and boardroom tensions was not the story Univision had been hoping to tell Wall Street. Univision reported a net loss of $30.5 million in the third quarter of 2016.
Then came the November election of President-elect Donald Trump, who campaigned on a promise of building a wall along the southern border. His policies ultimately could threaten the pipeline of some of Univision’s most loyal viewers: Mexican immigrants.
All the while, Univision has been grappling with a seismic shift in demographics and changes in TV consumption habits, which have contributed to the lower ratings.
Since the Great Recession, the growth in the U.S. Latino population has come from those born in the country, not abroad. U.S.-born Latinos typically are bilingual or speak mostly English and are inclined to watch TV in English — if they watch at all.
“Univision is experiencing the worst of the revolutionary changes — technological changes and cultural changes — that are reshaping the world of media,” Hector Orci, a longtime advertising executive who specializes in Latino media, said last week. “And Univision has gone astray — they don’t seem to know how to respond.”
The drama unfolding behind the scenes at Univision has been as tumultuous as the stories that play out on the company’s two broadcast TV networks, Univision and UniMas. “People are in crisis mode,” acknowledged one executive.
There have been boardroom clashes as the private equity investors agonize over the ratings declines, according to the executive and three other high-level people familiar with the discussions who were not authorized to speak publicly about them.
Saban and other Univision officials have expressed frustration with Mexico’s entertainment behemoth, Grupo Televisa, which holds a 10% equity stake in Univision and also provides the telenovelas to Univision in exchange for license fees. Univision pays Televisa about $350 million a year for the programming — a sore point given the flops.
Among Univision’s complaints have been Televisa’s over-reliance on well-worn plot lines (innocent girl overcomes adversity), the slow pace of stories, use of the same actors over and over, and rural settings at a time when most U.S. Latinos live in cities.
Univision’s ratings slide has been most pronounced among younger adults.
“Telenovelas have dominated the ratings since Nielsen began tracking ratings,” said Ernest Bromley, a San Antonio marketing consultant. “They have been a staple of Spanish-language television for 50 years. But younger viewers are consuming media in a completely different way.”
Rival Telemundo, which is owned by NBCUniversal, responded to the changes more quickly — in part because Telemundo produces its own scripted shows.
To appeal to U.S. Latinos, Telemundo designed faster-paced telenovelas with topical elements, such as a story of a hard-working undocumented Mexican immigrant in East Los Angeles who lives in fear of being deported or that his son will join a gang.
Telemundo found success with a twist on the telenovela format: narco-dramas. Audiences got hooked on the ripped-from-the-headlines stories of conflicted Robin Hood-like characters — crooks and drug dealers — who also display a generous side. For example, in one popular series, “Señora Acero: La Coyote,” the protagonist is a fearless smuggler (and daughter of a ruthless drug lord) who risks her life to help desperate families enter the U.S. illegally.
“We are seeing made-in-the U.S. telenovelas doing better,” Orci said. “And Telemundo also has been improving the quality of its shows. … Telemundo is in [Spanish-language media] for the long term, so they have been investing in the product. Viewers recognize that Univision’s programming is inferior and not as interesting anymore.”
Univision lacks expansive production facilities in the U.S., making it almost entirely dependent on Televisa for its scripted programming. Three years ago, Univision Chief Executive Randy Falco began complaining about the fading performance of Televisa’s telenovelas, but his concerns were brushed off, according to people involved in the matter. Televisa executives, who serve on Univision’s board, rejected the criticism, saying the tried-and-true formula still was working in Mexico, where the programs are first televised.
“The experience of being a Latino in the U.S. is different than living in Mexico, and you have to really capture that audience,” said Andrew Orci, chief executive of the Orci ad agency in Santa Monica and son of Hector Orci.
Televisa also shied away from narco-novelas because of sensitivity over crime. Televisa enjoys a close relationship with the Mexican government, and it did not want to offend political leaders by producing stories about drug dealers, according to four people familiar with the matter. Crime stories “felt too close to home,” one of them said.
But then Televisa’s ratings in Mexico collapsed. More Mexicans use mobile phones to watch news and entertainment on YouTube and Netflix, providing a competitive threat that Televisa had never experienced. Televisa is one of just two major broadcasters in Mexico.
“The younger audience is not watching TV … they are cutting the cord,” Andrew Orci said.
In the U.S., Latinos spend the most time of any demographic group on smartphones — an average of 14 hours and 31 minutes per week, according to Nielsen.
Telenovelas, whose stories unfold slowly over six months, five nights a week, run counter to video clips and other short bursts of entertainment popular among young audiences. And Televisa’s devices to inject drama into its stories — such as face-slapping — come across to some viewers as silly and dated.
“People don’t slap each other in the face anymore,” said one Univision executive who asked not be identified.
Univision last year experimented by running the Netflix drama “Narcos,” but the program fizzled, perhaps because much of the dialogue was in English — or because people might have already watched the series on Netflix. The ratings scare prompted Televisa and Univision to review their operations.
Both companies are focusing more heavily on digital distribution. Televisa in Mexico is putting emphasis on phone service and has launched its own streaming service, Blim, to compete with Netflix. Univision in the U.S. rolled out a streaming service and has invested heavily in the English-language outlet Fusion, which recently cut about 5% of its staff. Last year, Univision spent $135 million to buy the Gawker websites, including Jezebel and Gizmodo.
For its part, Televisa said it was moving “outside the comfort zone” by developing more contemporary programs. It plans to recruit younger writers and spend an additional $100 million on shows. Televisa will spend about $650 million producing programs this year.
"There is no denying that there is more competition, and it means that we have to work harder to deliver the same ratings points,” said Carlos Madrazo, Televisa’s investor relations officer. “We are taking charge and are committed to turning ratings around."
Univision acknowledged its flagship network is challenged, but said its other TV outlets, including a cable sports channel, have maintained or grown their audiences.
Univision shook up its programming team and is ordering more shows from outside suppliers. Now the company must spend more money to produce shows, including competition and reality shows, as well as biopics. Celebrity stories have performed well. It plans a special about singer Jenni Rivera, who grew up in Long Beach and died in a 2012 plane crash.
“These things don’t change overnight,” Falco, the Univision CEO, told analysts recently. “I think it’ll be within the next several months where we see a turnaround.”
Univision has not publicly commented on the timing of its IPO. But in the meantime, Trump’s election added another wrinkle to the company’s ownership situation.
Saban had lobbied the Federal Communications Commission to allow Televisa to increase its equity stake in Univision beyond a cap placed on foreign companies. That would allow Televisa to buy shares held by the other investors. Televisa would like to own as much as 40% of Univision, but current rules prevent foreign entities from holding more than 25% of a TV broadcasting company.
Trump — who made derogatory comments about Mexicans during the campaign — will pick the next chairman of the FCC, who will likely decide whether Televisa can increase its stake.
“We want Univision to be successful,” Televisa’s Madrazo said. “We need each other, and we are working closely together.”
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