Univision Chases Millennials (and an IPO) With Deal for The Onion

Univision's Investment in The Onion - H 2016

At first glance, the broadcaster's minority stake (roughly $200 million) in the satirical news site reads as a spoof of legacy media's mad land grab to go digital. But it could be one of the ingredients needed for taking the company public.

This story first appeared in the Feb. 5 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

Some probably laughed at the notion of Univision buying a stake in The Onion, but there are serious business implications behind the Jan. 19 decision by the nation's top Spanish-language broadcaster to partner with a satirical news outlet. The top priority: Impress Wall Street.

Univision has been trying to go public in a splashy stock debut but keeps postponing because the market has been volatile. Media stocks in particular have been slammed since Walt Disney and Viacom warned in 2015 that digital competitors were denting profits.

The media meltdown had serious consequences regarding Univision's bid for a September 2015 IPO. That goal was scrapped, and executives went into damage-control mode by telling potential investors the broadcaster doesn't suffer the maladies that afflict its English-speaking rivals.

"We haven't seen any cord-cutting," CFO Frank Lopez-Balboa told Wall Street analysts. In part because of the popularity of soccer games and cliff-hanger telenovelas, CEO Randy Falco added that 92 percent of Univision viewers had watched primetime programming live during the previous quarter, and "95 percent of our audience is not changing channels during commercials."

Univision also has set out to show investors it's not a stodgy old TV company but an up-and-coming digital firm that appeals to millennials, including English speakers. Before investing in The Onion, the broadcaster purchased The Root, a digital media company targeting African-Americans, and in 2013 it partnered with Disney to create Fusion. Univision now is negotiating to purchase Disney's stake in that English-language multimedia company, which targets millennials.

"I commend them for looking beyond their core audience," says Carl Salas, senior credit officer at Moody's Investors Service. "When you look at an IPO, you want to see a number of growth opportunities, and digital investments have higher-growth revenue streams."

The deal comes at a time when traditional media companies have been chasing a younger audience by making investments in big-name digital brands. NBCUniversal sank $200 million each into BuzzFeed and Vox Media in 2015, and 21st Century Fox and A+E Networks have taken stakes in Vice Media.

The digital push might help Univision's owners finally cash out in an IPO that could value the company at $20 billion. The broadcaster was taken private in 2007 through a $13.7 billion purchase by media mogul Haim Saban along with Madison Dearborn Partners, Providence Equity Partners, Thomas H. Lee Partners, TPG and others.

Univision did not disclose financial terms when announcing its stake in The Onion, but analysts believe it paid $200 million for a 40 percent interest that values the satirical outlet at $500 million. Univision also has an option to acquire all of Chicago-based The Onion, which has 125 employees.

"Univision appears to be a healthy, thriving media company that is willing to take some risks," says Stephen Winzenburg, a communication professor at Grand View University in Des Moines, Iowa. "The buzz of investing in The Onion has brought Univision attention from young adults."

The Onion folded its print publication in 2013, so its audience (11.6 million unique visitors in December, according to comScore) now goes online to read the phony and (hopefully) funny news items for which the publication became famous. Among them: two dozen stories that lampoon GOP presidential candidate Donald Trump, who is suing Univision for $500 million for backing out of broadcasting his Miss Universe Organization pageants. Trump also had Univision's star anchor, Jorge Ramos, kicked out of a press conference.

It also can be argued The Onion meshes with the importance of politics to Univision. The only advertising categories the broadcaster breaks out individually in its earnings reports are "major soccer" and "political advocacy." For its most recent quarter, Univision posted $517.7 million in ad revenue, including $21.9 million from soccer and $7.1 million from politics.

With its stake in The Onion, Univision also gets AVClub.com and ClickHole.com, pop-culture sites that together attracted 8.8 million visitors in December, according to comScore. The investment also includes the celebrity gossip site StarWipe and digital network Onion Studios.

Some observers say The Onion and The Root are evidence of Univision deviating from its mandate, but Univision Digital GM Mark Lopez thinks otherwise. "At a top level, these brands look unrelated," he says. "But we're looking at reaching the next generation of millennial and multicultural consumers, and the only way to do that is digitally."

Alberto Ciurana, then Univision's programming chief, boasted that the network ranked No. 2 among adults 18-34 during May's TV ratings sweep period. "If you think millennials are hard to find, maybe you're not looking in the right place," he said.