The Wall Street Journal: What Univision Wants With Gawker Media

Aug 19, 2016

Spanish-language broadcaster hunts for upper-income millennial males, pursues digital expansion

By Shalini Ramachandran

When most of us think of Univision Communications, the nation’s largest Spanish broadcaster, soapy “telenovelas” and game shows come to mind. Why would that company want to buy Gawker Media, whose flagship gossip and culture website is known for tweaking the media and celebrities and got into legal hot water for publishing wrestler Hulk Hogan’s sex tape? (Univision won a court-administered bankruptcy auction of Gawker on Tuesday.)

The answer may come down to one telling stat: Gawker Media’s bouquet of seven blogs skew toward upper-income, millennial male visitors, a very attractive and hard-to-reach demographic. That could be a valuable audience for Univision, given the steps it’s taken over the past year to transform into a digital and millennial-focused company.

Why is Univision trying to become a digital powerhouse?

Univision’s business consists of the flagship Univision network, other broadcast networks and TV stations, a variety of cable channels and radio stations. Like other TV channel owners, Univision’s core business is contending with a mature U.S. pay-TV business that’s under assault from an array of threats, like cord-cutting and cord-shaving. The Univision broadcast network has suffered steep ratings falloffs (though Univision is quick to point out that some of its smaller networks have grown their audiences).

Now, Univision executives are eyeing an opportunity in digital: to put together a basket of sites that cater to multicultural youth in America, beyond just second-generation Hispanics.

But why Gawker?

Univision executives have said they’ve found that the edgy, newsy and comedic content that speaks to Hispanic millennials also resonates with multicultural youth in America. In May, Univision CEO Randy Falco noted that half of the nation’s 83 million millennials are non-Caucasian. “We already have a very young audience. We want to take advantage of the fact that we already have an inroad into that young audience, and we want to build on that by the digital strategy that we’re employing,” he said at the time.

To that end, Univision has bought 40.5% of The Onion, the comedy news site, and last year acquired The Root, an African American news destination. In April, the company bought out Disney from its prior joint venture Fusion, the news site and cable channel, and it created Fusion Media Group, which now houses sites including The Onion, The Root, Clickhole, and Flama, a digital network catering to second-generation Hispanic audiences. Gawker is likely to end up in that group, which is led by Isaac Lee, Univision’s chief news, entertainment and digital officer.

How big does Univision want its digital business to be?

Univision’s Fusion Media Group and Onion Reach Network reached 65.6 million unique visitors in May, according to comScore stats provided by the company. Mr. Falco has said that his goal is to reach 80 million monthly unique visitors across all Univision platforms, which is the threshold after which he believes the digital business can start operating “very effectively and driving revenue and profitability.” Integrating Gawker could help Univision get to that goal.

Okay, cool. How is Gawker doing as a business?

Despite its legal woes, Gawker has shown some promise as a business. Its revenue has grown steadily in recent years, although Gawker’s outgoing founder Nick Denton said it was not profitable in 2015 due to legal costs.

In 2015, Gawker generated $48.7 million in revenue, jurors in the Hogan case were told. According to an earlier financial disclosure, the company turned an operating profit of $6.5 million on revenue of $44.3 million in 2014. Mr. Denton has said revenue was up 8% year-on-year in the second quarter of this year.

Traffic across Gawker’s seven websites was up 3% on the year in July to 56.1 million unique visitors, according to comScore. It skews toward upper-income millennial males, a coveted demographic. More than 40% of its visitors have a household income of more than $100,000, most are between the ages of 18 and 34, and more than 57% are male.

Meanwhile, Gawker has been building a growing ecommerce business.

What does this mean for Univision’s planned IPO?

Typically, companies that are pursuing an IPO don’t like to rock the boat — so Univision’s decision to acquire a company as controversial as Gawker is an interesting maneuver. Univision was supposed to go public last year but it has delayed the offering amid broader pressure on media stocks due to investor worries about cord-cutting. The company also had $9 billion in debt, net of cash, as of June 30.

It’s possible that Univision won’t stick with the same level of pugilistic posts that Gawker was known for. But Univision executives have noted that they aren’t afraid to embrace that sort of content, given their investment in The Onion.

Source: The Wall Street Journal

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