Listen to: La Cebolla: Peeling Back the Layers on Univision’s Purchase of The Onion, Part Two

This week, join me as I continue my conversation with JJ Shebesta, the former head of The Onion’s video department, as we talk about what’s in store for the legendary satirical newspaper. We dive into whether media and technology companies can co-exist, how staying nimble is key to success in the media world, and why more media companies are becoming one-stop shops for all types of content.

Podcast Transcription

Matt Hansen: Thank you for listening. Welcome to AirQuotes, the podcast about invisible marketing. AirQuotes is the flagship podcast of the Cardwell Beach network. This is our weekly conversation about media, technology, business, publishing, and marketing. My name is Matt Hansen.
Dave Donars: My name is Dave Donars. I’m the chief of research at Cardwell Beach.
Matt: Any thoughts about last week’s episode, this episode or anything whatsoever, email us at or tweet us @cardwellbeach.
Dave: Today, we’re going to discuss Univision’s recent 40% purchase of The Onion for $20 million dollars. With us today, we have JJ Shebesta, who is a long-time friend of mine. Let that just be known first of all, but more importantly, he has real insight into this topic.
JJ Shebesta: My name is JJ Shebesta. I am a writer and director, and I was the creative director for Onion Video up until November of 2014.
Dave: My issue with a media company being bought by a tech company is, buying a media company, or owning a media company or advertising industry, it’s like owning a bar. You get good at it, you get your clients, you get an established thing, and it’s about returnable investment. It’s about something that two, three, four years out, macro things can change within our economy, and there is still going to be a returnable investment coming back into your funnel. If you are good at what you are doing, if you’ve got good staff and good positioning, I think that these are much more solid, and I don’t want to say professional. I don’t want to say upmarket—established. There we go. Words. They mean things. It’s just more of an established industry.
Within those, what’s different about tech is that tech has this conception of 5, 10, and 100X, so if you put $100 into Snapchat five years ago, yes, you should have a 5, 10, or 100X kind of return from that. It’s just not that way in media. For somebody to come in and they value The Onion at 40% interest at 2 billion instead of 200 million. They would be looking for a 10X solution, so they would be looking to get 20 billion dollars out of their 40% interest in The Onion within a short time frame, within about 50 to 60 months. That’s completely unreasonable for a media company, and that’s what we see with…
JJ: What informs those projections? Maybe I can understand those projections working with tech because of lot of times you have a cheap concept that is an innovative idea, and then you can execute it like a Snapchat or anything like that, or Vine, and it blows up. Is that what it is? Like something like that can have much bigger return on investments, whereas there is so much complexity and overhead to media and publishing and there’s a misunderstanding there?
Dave: It’s about kind of Wall Street taken to another degree, which is just that venture requires a quicker return on investment than Wall Street does. They’re looking at a much larger return on investment, and it is a risk/reward scenario. The risk is incredibly high that you get zero investment, but the reward should be high that you get a 10X investment. When you move into categories where the risk is concomitantly lower, the reward is lower, but it’s much more stable. To think of an entity where you grow, then, and pull them out, I think we went through a phase that none of us were totally aware of when it was happening, but from 1993 until about, I’m going to say last year. I’m going to be wrong about this. It’s going to continue for another five years, but whatever.
Let’s just say from 1993 through 2018 or 2020, there was this capability. I truly think it’s already over. I think it’s already done, but there is this part of the universe where two guys in a dorm room with two laptops could write some code down and create a company worth a few billion dollars. That is just no longer possible. I think the complexity of digital has gotten so advanced that there is a merger between digital and the real world where you see things like Lyft, Uber, GM, Google, Tesla and a bunch of people getting into like the driverless car game, which is a merger of digital with the real world.
JJ: Yeah.
Dave: There’s a level of complexity that it just can’t be two guys in a dorm room or two guys in a garage anymore doing this stuff. It’s just an exponentially high level of difficulty than even it was when Apple or other places were forming in garages doing things that technically seemed way out of bounds for what the rest of the world had. You’re dealing with many, many logistical supply chains. You’re dealing with regulatory entities across the planet, and it’s much more difficult, so I think that era is over, but the mentality is not over. The mentality, even without the risk there, still demands that kind of return. I don’t think it has ever gone well. We’ve never seen a non-media entity buy a media company and it turn out well. It has never happened—never in the history of the world. Even when things are incredibly different from each other, like if you look at the original merger of Time and Warner. If you look at those original mergers. If you look at the AOL, which was a tech company buying Time Warner, it’s considered the worst merger in human history. It’s a significant failure when tech moves in to buy a media company. They obviously do it. You see these guys who are very involved in the tech scene, and what they want is the cache that old media affords them. That just simply never works out. It’s not that these guys are dumb, and it’s not that media doesn’t make a lot of money. Some of the wealthiest people on the planet are titans of media, in media alone, not tech, but there is something incongruent about the mentalities. It just does not work. 

Univision was formed in 1966, so it’s been around for 50 years. Before that, it has kind of a convoluted history going back to about 1955, but basically, it was independent television stations for an American Spanish language audience being built and bigged up. Around 2000, they started to move, obviously, into digital, like everyone else on the planet did. Starting in around 2010, they started to do a lot more mergers and partnerships with larger media entities to get out of just the television game. Honestly, if you read the history, and listeners can do this. You just have to read their Wikipedia page. You can see a real intelligence of their leadership. Michael Wolf did a great thing in “The Hollywood Reporter” recently, which we’ll put a link up to, that talks about many of the very, very large, top seven entities are either privately owned, family owned, or the controlling interest is in a very small group of people with it being an actual public company. Univision is a public company, and they have traversed all of this very well because I think they have astute leadership. For 50 years, to maintain themselves as an independent and make money quarter after quarter is significant. You’re talking about 50 years, 4 quarters, so that’s 200 quarters of growth. That’s a difficult thing to maintain.
JJ: Well, I think that’s something that’s interesting where size, strength, sway, and even cachet, to some degree, are not always the best. It’s like the heavier you are, the less responsive you can be, the less creatively scalable you can be. We’ve talked about this, Dave, but I think we’re at a point where it doesn’t really matter if you’re talking about ads, you’re talking about media, or you’re talking about publishing, we’re looking at technology so fundamentally transforming culture, and all these modalities by which we are expressing ourselves or culture expresses itself, it’s going to just grow exponentially. All that is going to keep growing exponentially. It’s not going to be like, “Oh, we invented television.” Everything nuts for a while, then all of a sudden, the industry is going to stabilize with its checks and balances, and you’ll understand the flow of it. That doesn’t exist anymore. Everything is just keep changing at such exponential speeds. It’s the same reason that people can’t really be specialists anymore. You have to be able to be set up to be able to be nimble, to be able to be agile. If you have people who maintain their integrity. try to be creative and careful as they move forward, and don’t all of a sudden try to just swing into what’s the most money we can get or how big can we get as quick as possible. You’re going to weather the storm a lot better. You know what I mean? That kind of ship is going to be able to handle that wave whereas the Titanic is going to be torn to shreds.
Jenna Barrott: You’re listening to Air Quotes, the podcast about invisible marketing from the Cardwell Beach Network. My name is Jenna Barrott, account manager at Cardwell Beach. Did you know that Cardwell Beach is actually a beach in Queensland, Australia? We’re also an award winning agency in the heart of Brooklyn. You can hear previous episodes by searching Cardwell Beach on Stitcher. Thank you for listening.
Dave: You spoke of the need for something to stay agile so that you can adapt to this environment which is exponentially becoming more and more disrupted, which I think is absolutely true. I think it’s very difficult to maintain that ability with the need for very, very large scale in terms of your advertising base.
JJ: To stay competitive in that market?
Dave: Yeah. Michael Wolf’s piece points out that Time Warner as a truly public entity, unlike a lot of their competitors in the media oligarchy, are truly exposed to public whims and Wall Street, and things like that and that Time Warner may not be big enough to have enough advertising base for what goes on. I think that we need to frame this Univision thing in terms of some other things that are happening at the same time. There is cord cutting that is happening. There is a decrease of people who are paying for cable, and the large media entities are suffering because of that if they are tied to selling cable subscriptions, so they are seeing a decrease in their stock. You see this with Disney because ESPN is one of their flagship entities and is making less money because they are seeing a decrease of viewership. You are seeing it with Time Warner.-year-old are seeing it a little bit less with Fox, but it is happening because of Fox News and some of their other entities holding less sway. I think all of this needs to be framed in that world, where Univision is going to be in the same ship. Maybe not because of their Spanish language marker. Maybe they are still a little bit flat, but this is a macro trend that is occurring. People think it is kind of stupid to pay $150 a month for a cable package. There are premium entities that can survive this, I think.
There are a lot that are out there that can survive very well. ESPN1, Comedy Central, HBO and whatever you like. If you love TruTV or if you like DIYTV. There are ways that you can survive. The idea that you would be paying a cable provider this much money for this many channels in an era where it is basically a few hundred channels. Really, the internet offers you tens of thousands of options with channels. I think that they are going to be facing declining viewership, and they are going to be facing declining revenue because of that. They need to get into spaces where that macro trend is not as impactful.
JJ: Well, we’re talking about different systems of disseminating content. Just real quickly, Dave, are you there talking about the cable model, or are you talking about the pay wall model?
Dave: I think I was specifically talking about the cable model, but I think it goes to the pay wall model as well.
JJ: Yeah, because for me it’s very interesting. You have that pay wall model, and you have people who do it successfully. Then you have people who are really struggling with it. The Onion, there were times where in certain markets they even experimented with that, and the experiment did not work. The thing that’s nice about the pay wall model is it is just so clean, and it is just so honest, and I would love for it to shake out in a way, like maybe a new shape to it that is less corrupt and kind of unwieldy as cable. Because when you look at the other models, outside of that, you then become more and more at the mercy of advertisers, and there are some traditional media models where that kind of balance has been kind of established, where you kind of establish, okay, this is where commercials live and this is where content lives. People understand the rhythm of that, and they understand the dynamic of that, so a viewer is not being confused. Then you have modern digital publishing where there you could point out absolutely anyone. You see the energy of the paradigm being shifted, as gross as it is to say that, but it is true. In that situation, you have the kind of shock doctrine scenario of people see that things are off balance, so everyone is going to rush in to try to capitalize on that.
Everyone is going to rush in to try to feast on that, get what they can while something is weak, and I think you absolutely see that in modern day publishing, and it is really, really sad. You see things like the New Republic thing. You can see those things are crossed. Even with Gawker. Not the Hulk Hogan thing now with all that stuff, but the stuff with their editor in chief leaving over something that basically is peddling smut. It’s got that wrapped up in it, but it still ultimately boils down to editorial integrity. You’re looking at editorial integrity being challenged, editorial authority being challenged. You are looking at long-form content being challenged. You are looking at the firewall between ads and content being challenged, and I think the publishing world, more than anyone else is just getting knocked around so hard because of that, that you see the marketing departments of some companies and advertising agencies and stuff like that making huge inroads to not understand what people really want and really kind of corrupting that system. For me, I want to believe in a pay wall system that is honest and that works and that people are educated to the reality of, you get all this re-content, how do you think you’re getting it. Where do you think that money is coming from? People becoming kind of savvy about the danger there within of saying well, “I don’t want to pay anything for this.” Well, then you’re going to have people rushing in to pervert these things that you love and try to manipulate you and fundamentally corrupt the stuff that you love. That is the danger of the publishing industry and why you see people in publishing trying to creatively move into tech, trying to creatively build their own ad agencies, trying to creatively build their own production houses, their own development studios. You have to because you have to build out a more reliable business plan that doesn’t just live and die on ad placement.
Dave: Just to challenge that a little bit, CBS is a very successful entity that has lived without a PayWall model for a very long time, not that I love NCSI, but they are producing a lot of broadcast level content. They’re broadcasting the Superbowl. Right there, that’s a great example of something where…
JJ: Just to inject real quick, I would break it down to three different models: One you have PayWall, pure PayWall. One you have more of a traditional commercial-editorial balance. That’s traditional media. Then you have new media, which is crazy, and that is the world that has gone insane, and it is absolute chaos. I see it as kind of like three different systems where CBS I would put in that middle, kind of more traditional media system.
Dave: As would I, but I think what happened is that digital inventory in terms of ads was doubling at much faster than Moore’s law from 1990 through 2014, so you have almost 25 years, a quarter of a century of it doubling about every 10 months. There were twice as many digital ad placements as there were the previous 10 months. It grew, and it grew, and it grew, and it grew. Around the time that it starts to flatten out, or the curve just starts to decrease, obviously digital inventory is increasing much faster still than traditional television inventory, but 2014 is the year where more money was spent, on the whole, on digital inventory than it was on television. That’s like crossing the Rubicon because that’s a major change. I don’t think television is ever going to regain the power that it previously had. Again, I keep harping on Michael Wolf, I don’t know way. I’m so sorry, but Michael Wolf has said that television isn’t television anymore. Television is digital. Television, if it was just traditionally what it was in 1980, would not exist as a medium that we would care about anymore today. Here’s the point, is that if inventory is slowing down and will eventually stabilize, which has to occur. There is not an infinite amount that we can…
JJ: Will it? Does it?
Dave: Yeah. Very simply, we break this down into an equation of number of humans on the planet, number of hours that they are awake, number of total content that they can consume. Once you have reached that total capacity, you can’t go beyond it. If every single person on the planet was watching something totally unique and totally new, that something was not scalable to another human being, that’s your ultimate inventory level. It is just an equation. It makes…
JJ: No! You just break into new markets like dolphins, turtles, and stuff like that. You’re thinking too small, Dave.
Matt: Thank you for listening to Air Quotes, the podcast about invisible marketing. We’re brought to you by the Cardwell Beach Network. My name is Matt Hansen, head of content.
JJ: My name is JJ Shebesta. Cardwell Beach snake master.
Dave: My name is Dave Donars, chief research officer of Cardwell Beach. Please check us on Stitcher, iTunes,, and you can always email us at
Matt: Please join us next week for the third part of our conversation with JJ Shebesta. Thanks for listening.

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