Following the first full year of operations for Spanish-language streaming service ViX, TelevisaUnivision on Thursday said its streaming business is on track to achieve profitability in the second half of 2024.
Launched in 2022, ViX offers a completely free ad-supported version as well as premium SVOD version. An ad-supported premium subscription tier for ViX is slated for Q2.
Speaking on TelevisaUnivision’s (TU) fourth quarter and full year 2023 earnings call Thursday, CEO Wade Davis said 2023 was a critical year for ViX both in terms of content performance and distribution. The service now has more than 7 million subscribers on the premium ad-free SVOD tier, while monthly active users on the free tier continued to grow. ViX also marked increased engagement. According to Davis, ViX doubled total streamed hours in 2023, while consumption per user grew 20% in Q4 compared to Q3.
Financially, ViX generated $700 million in revenue for the full year 2023 and executives cited high confidence in achieving streaming profitably goals. Across the industry many media companies have turned attention from subscriber growth to profitably, and Davis indicated ViX is moving rapidly.
“When we deliver a profitable streaming service in the second half of 2024 it will have been the fastest horizon to profitably of any major streaming service in history,” he said.
At the end of 2023 Vix had completed about 85% of its distribution footprint in core markets of Mexico and the U.S., including pacts across all major CTV platforms, with a handful of significant partnerships pending. TU in 2023 also launched its FAST channel strategy for ViX, including with OEMs such as Samsung, Roku and Amazon. In addition to providing incremental reach and monetization, Davis said FAST expands the top free portion of its previously described funnel strategy, where offering free content drives consumers at lower subscriber acquisition costs (SAC) to paid the ViX offerings.
Following a soft DTC launch of ViX’s ad-supported premium tier in early Q2, broader availability is expected in early Q3, including with pay TV provider partners. TU expects ViX’s premium ad tier ad tier to expand reach, incremental consumption and ad inventory monetization, as well as increase ARPU across all of its tiers.
Charter deal reflects where the industry is headed
In addition to its streaming business, TelevisaUnivision has linear networks and is taking an approach where it aims to have the two units be complementary, particularly in the content they serve and aim to bundle through pay TV distributors.
The company envisions an ecosystem that involves rebundling streaming services with traditional pay TV packages that helps to both stabilize linear and grow streaming. Davis pointed to an early and expanded carriage renewal with cable operator Charter Communications in January as “reflective of where the pay TV ecosystem is likely to head over time,” where consumers need to see a better value proposition for linear.
Charter is including the ad-supported ViX premium tier in certain Spectrum TV packages at no additional cost to customers. The deal also distributes TU’s linear networks, which will serve as cornerstone of a new lower-cost Spanish-language-only TV package from Charter. It follows an earlier deal between Charter and Disney that saw ad-supported versions of Disney’s DTC apps included in certain pay TV packages alongside carriage of linear networks. As pay TV providers face increased costs and declining subscriber bases, it’s a model Charter plans to pursue in all carriage renewal negotiations.
In looking to meld linear and streaming, Davis on Thursday emphasized that streaming service content can’t be redundant to what consumers are getting through their pay TV package.
Since the launch of ViX, TU has been investing in original linear content, while simultaneously adding programming and live sports unique to the streaming service “that’s completely additive to our linear proposition.”
For TelevisaUnivision the CEO cited benefits of the deal, namely a large potential subscriber base to build up the ViX ad-supported tier, “with essentially zero SAC (subscriber acquisition costs)” or marketing costs, and likely much lower churn as the streaming service is incorporated into a larger bundle.
He also cited benefits for Charter of a Spanish-language only TV package with streaming options, where the operator is aggressively going after underserved customer segments. According to Davis, most Hispanic consumers, which represent a large and growing proportion of the U.S. population and economy, are not already subscribing to cable and satellite services. As they don’t already have pay TV, this type of package has potential to attract new subscribers into the challenged ecosystem, “growing the pie for everyone.”
Asked by an analyst on the call about the total addressable market (TAM) for a Spanish-language only OTT package such as one Charter’s launching, Davis pegged the addressable market opportunity as in the “low single-digit millions” and material for both distributors and TU.
“We think there are a large number of more price sensitive consumers who aren’t interested in any English-language programming, particularly if that means they have to pay for a $100 bundle,”he said. Today those consumers are largely getting Spanish TV free over the air, but Davis said TU and Charter believe they’d prefer the choice, platform convenience and quality a Spanish-focused pay TV package would provide, as relevant products don’t currently exist.
Bundles via mobile and telecom operators are also at play. T-Mobile was a launch partner for ViX in the U.S but its period of exclusivity has ended, and Davis expects to expand U.S. mobile partners very soon. He also noted a big upside in fixed wireless broadband, where many of those same players are pursuing action, including T-Mobile and Verizon in the U.S.
Financials
For Q4 TU reported U.S. revenue declines across advertising and subscription and licensing. The year-over-year decreases were mainly a result of difficult comparisons to 2022, when it benefited from mid-term election political advertising spend and World Cup licensing revenue that wasn’t present in the 2023 quarter. Declines were also attributed to impacts from the sale of certain radio stations.
Quarterly U.S. advertising declined 5% to $467 million, but grew 4% year over year excluding political and advocacy and impact from the divested radio stations. Mexico advertising revenue increased 10% yoy to $393 million in Q4.
Executives emphasized that TU continues to outperform the broader U.S. advertising market and expressed excitement for 2024, with Davis noting only about half of all meaningful U.S. TV advertisers currently advertise in Spanish. It also expects a political ad spend boon from the 2024 election cycle.
Quarterly U.S. subscription and licensing dropped 28% to $328.5 million, while Mexico grew 11% to $122.3 million. For the full year subscription and licensing revenue grew 2% to $1.8 billion. Excluding sublicensing revenue from the 2022 World Cup, total TU subscription and licensing revenue grew 12%, including 8% growth in the U.S. and a 23% yoy bump in Mexico. TU attributed growth in both regions to ViX’s premium tier.
Full year 2023 Adjusted OBIDA decreased 4% to $1.6 billion and operating expenses increased 10% to $3.3 billion, driven by investments in new original premium content, sports rights, marketing and technology.