U.S. Spanish-language media giant Univision Communications had both good and bad news to deliver during its fourth-quarter and 2017 year-end earnings report on Thursday. “Univision delivered over $3 billion in revenue, $655 million of net income, and nearly $1.3 billion in EBITDA [earnings before interest, taxes, depreciation, and amortization] in 2017,” said Univision president and CEO Randy Falco. “We continue to reduce our debt and improve our capital structure, highlighted by our $877 million net reduction for the year,” he continued.
Ironically, the company that has railed against the Trump administration and its immigration policies, in particular, will also benefit from the tax cuts introduced by the new tax law, reducing its tax rate to around 24% from an estimated 38%.
However, Univision is expecting ad dollar revenue losses this year due to the current Winter Olympics and the upcoming World Cup soccer tournament’s exclusive Spanish-language coverage on its closest rival, Telemundo — the Spanish-lingo division of NBCUniversal.
In Univision’s earnings call on Thursday, CFO Frank Lopez-Balboa warned of another adverse factor that would impact its 2018 revenues: its longterm programming agreement with leading Mexican broadcaster Televisa is growing slightly more expensive. “The PLA is a unique model within our industry, where Univision pays a percentage of substantially all of our Spanish-language media networks’ revenue to Televisa so that we get exclusive access to thousands of hours of content annually,” Lopez-Balboa explained.
“In 2018, the PLA base rate increases by approximately 4.6 percentage points, from 11.84% to 16.45% of substantially all of our Spanish-language media networks’ revenue by the middle of the year. To give some context, if the full impact of the PLA rate increase were in effect for the full year 2017, it would have equated to approximately $115 million of additional costs,” he said.
“The combination of the PLA rate increase and no major soccer tournaments airing on Univision in 2018, which we expect will impact total advertising revenue, will create tough year-over-year comparisons,” he said.
To offset these “headwinds,” Univision has kickstarted more strategic programming initiatives such as having its Chief Creative Officer Isaac Lee and his team assume oversight on the programming at Televisa since last year; signing a five-series co-production pact with Netflix after their first collaboration, “El Chapo” — co-produced by its premium content production unit Story House Entertainment — performed well on both the network and the streaming giant; and tapping its other content creation facilities such as W Studios and its news, music, and sports programming.
“We are also confident that our digital assets will continue to make our portfolio more dynamic,” said Falco, who reported that Univision reached over 110 million unduplicated media consumers across its portfolio of digital, TV, and radio assets each month in 2017.