Univision Nielsen Rating Scandal and Possible Sale for $20 Billion

Univision

The largest Hispanic media company in the United States, Univision Communications, has had an up and down week with reports coming out that they could sell their company for more than $20 billion, but also that a radio executive in Los Angeles was caught in a scandal involving the Nielsen Rating system. Allegedly a radio-programming executive who worked for the popular radio station KSCA-FM (101.9) in downtown Los Angeles had access to the Nielsen measurement devices called portable people meters. Apparently, the executive had access to a few of the people meters measurement devices, and it had been confirmed that he was terminated from his position at the company.

The information that has been leaked out over the past week has shocked the Los Angeles’ radio community, because it has become apparent that the manipulations of the ratings dates back over a year. That means that other radio stations in the area could be at a significant disadvantage to compete against Univision, because advertisers use those ratings to base their ad rates. Nielsen has said in a statement that it plans to conduct an “impact analysis” to determine the extent of the problems. They also wish to discuss with prominent radio station executives around the Los Angeles area to see how many months they will need to investigate the ratings data to perhaps revise their system.

In addition to the news that Univision had been involved in the Nielson ratings scandal in Los Angeles there are rumors floating around that they could be selling their company for more than $20 billion. People familiar with the company have said that they have already held preliminary talks with both Time Warner Incorporated and the CBS Corporation this week. A conglomerate of wealthy investors containing billionaire Haim Saban controls Univision and originally bought the company back in 2007 for a sum of $13.7 billion including their debt.

Previously the owners were expected to go public with the company and sell shares on the stock market sometime in 2015, which would give an exit plan for the investors. But there is also another company in the mix that could have a say in the company’s future and that is Mexican based Grupo Televisa S.A.B.

Televisa successfully acquired a 35 percent stake in Univision for $1.2 billion in early 2012. According to the agreement, Televisa paid $130 million up front in cash for a 5 percent stake in the company and would lend convertible debt for the remaining 30 percent stake. Televisa also has the ability to purchase an added 5 percent stake during the next 5 years, which would grow its possible ownership in the company to a whopping 40 percent. Currently they hold 38 percent of the possible 40. Televisa consents for Univision to access its content and then rebroadcast it on United States television as well as the Internet for a royalty fee. The U.S. Hispanic TV market has become highly lucrative and is developing further. In the first quarter of 2014, Televisa’s royalty from the company was a record-high $64.8 million, up 13.1% year over year.

There is one minor problem in Televisa’s ability to acquire Univision, which is the Federal Communication Commission regulatory rules which caps broadcasters ownership from foreign investors at 25 percent. The FCC elected to permit exclusions to that limit last fall in a case-by-case situation, but the exact condition for Televisa still remains unclear.

If a larger media programmer were to acquire Univision, it would also boost its bargaining power in theory for the company’s content licensing and distribution terms against other pay-TV operators that are looking to obtain competitors. Earlier in 2014 DirecTV was bought for $48.5 billion by AT&T and Time Warner Cable has a deal in place to be bought by Comcast, who is already the largest cable company in America and owns NBC Universal. That deal is worth $45 billion. Univision CEO Randy Falco has recently warned against the possible dangers of producing giant cable companies that can potentially unsettle programmers, saying that the Comcast agreement “could be bad for competition and most importantly bad for Hispanic audiences,” he said.

Even if Univision Communications were to sell to another company, like Time Warner Incorporated or CBS Corporation, or even if they sell stock in an initial public offering in 2015, Televisa already has a large ownership of the company and will have a huge gain to make a whole lot of money. Hopefully for Univision, the Nielsen ratings scandal will not turn out to be a larger problem than it seems to be, and will not affect the possible sale of its company for upwards of $20 billion.

By B. Taylor Rash

Sources:
LA Times
Zacks
USA Today
Wall Street Journal

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