BCG advises budget cut to Fusion Media Group of up to 35%

As communications giant Univision explores extensive cost cuts, facing mounting debt, and having shelved its plans for an initial public offering, the company has hired consulting firm BCG to find savings. The consultancy has since published a report recommending that Univision should cut as much as a third of the budget for its subsidiary Fusion Media Group.

Univision Communications is an American media company which primarily serves Hispanic and Latino Americans. Since its launch in 1962, the group has grown into a multifaceted media conglomerate, boasting a wide-ranging portfolio of media companies. However, as demographics shift, and digital disruptors such as Netflix eat into the market share of traditional market incumbents, Univision has seen profits fall, and a cumulative debt of $8 billion threaten the future of the group.

In one of the biggest deals during the leveraged-buyout boom, the current investors took the broadcaster private in 2007 for $13.7 billion, saddling the company with billions in debt just before the financial crisis. Now, over a decade later, with prospects looking decreasingly bright, Univision’s owners have come under pressure to turn around the company, after years of failing to find an exit. With the company binning its long-delayed plans to launch an initial public offering (IPO) in early 2018, having registered for an IPO with regulators in 2015, the company also abruptly replaced its Chief Financial Officer, Francisco Lopez-Balboa, a former Goldman Sachs banker who joined in 2015 to take the company public, with longtime Univision executive Peter Lori.

Instead, Univision’s owners are now looking to the consulting industry for external advice, with the primary message being that the group should cut costs, fast. Univision hired Boston Consulting Group (BCG) to review the company’s business. A large part of BCG’s preliminary recommendations, centre around the cutting of the budget of Fusion Media Group (FMG) by as much as 35%, according to the press.

FMG launched in April 2016, after Univision bought out Disney's stake in Fusion, through the Fusion Media Network joint venture between Univision & Disney-ABC. Since its inception, FMG has acquired a multitude of high-profile online media properties, including Gizmodo, The Onion, ClickHole, The A.V. Club and Jezebel, alongside its more traditional broadcasting outlets Fusion and the El Rey Network. The group boasted a strong combined digital reach of around 65.6 million people as of Spring 2016.

Now, however, Univision looks set to reduce the company’s budget by more than a third, as well as making layoffs, on the advice of BCG. While the report stressed that the final amount of budget cuts across Univision could still change, the stringent cuts have reportedly begun to hit FMG’s staff count. Some layoffs have already begun to hit the media company, with the Presidents of both Fusion Media Group and the Fusion cable network among the most high-profile layoffs. Streamlining operations at the Fusion cable channel is a top priority for BCG’s the recommendations.

As reported by the Wall Street Journal, a number of digital staffers at the company have voiced their frustration at the perceived reallocation of funds from an aspect of Univision’s operations that is not struggling, in order to subsidise the rest of its operations.

One source told the press, “They’re deep cuts for a business that isn’t in trouble. It’s taking money out of the digital business, which is roughly running at break-even, to shore up the declining ratings.”

“This is cutting into muscle,” another commented. “These are not operations that are running with a lot of overhead.”

A Univision representative meanwhile contended that the measures were in fact necessary, stating, “We are undergoing a review to ensure that UCI is best positioned to compete in a media industry that is rapidly evolving. This includes looking at all aspects of our business. By taking steps to streamline parts of our operations, we will be better positioned to invest in areas of growth that will best serve our audiences, community and partners into the future.”

BCG was also recently hired by US grocers Whole Foods, following the company’s buyout by web-retailer Amazon. The firm was asked to shave some $300 million off of Whole Foods’ operating costs, while improving customer service in the process.