CONSTANTLY EVOLVING ANNUAL REPORT 2018 WorldReginfo - c0c83806-c62a-404d-abb3-9b196cc05775 I Contents 02 This is Televisa 04 Letter to Shareholders 08 Financial highlights 10 Cable 12 Sky 14 Content 16 Other businesses 18 Univision 20 Commitment to sustainability 22 Fundación Televisa 24 Management’s discussion and analysis of financial conditions and results of operation 34 Board of Directors 36 Financial statements WorldReginfo - c0c83806-c62a-404d-abb3-9b196cc05775 II Televisa is a leading media company in the Span- platforms in exchange for a royalty payment. In ad- ish-speaking world, an important cable operator in dition, Televisa has equity and warrants which up- Mexico and an operator of a leading direct-to- on their exercise would represent approximately home satellite pay television system in Mexico. 36% on a fully-diluted, as-converted basis of the equity capital in Univision Holdings, Inc., the con- Televisa distributes the content it produces trolling company of Univision. through several broadcast channels in Mexico and in over 75 countries through 26 pay-tv brands, Televisa’s cable business offers integrated ser- television networks, cable operators and over-the- vices, including video, high-speed data and voice top or “OTT” services. services to residential and commercial customers as well as managed services to domestic and in- In the United States, Televisa’s audiovisual content ternational carriers. Televisa owns a majority in- is distributed through Univision Communications terest in Sky, a leading direct-to-home satellite Inc. (“Univision”) the leading media company serv- pay television system and broadband provider in ing the Hispanic market. Univision broadcasts Mexico, operating also in the Dominican Republic Televisa’s audiovisual content through multiple and Central America. Televisa also has interests in magazine publishing and distribution, radio production and broadcast- ing, professional sports and live entertainment, fea- ture-film production and distribution, and gaming. WorldReginfo - c0c83806-c62a-404d-abb3-9b196cc05775 1 Televisa is one of the most important players in the country’s telecom industry. CABLE 34.2% 37.6% Sales contribution OSI* contribution A leading direct-to- home satellite television system and broadband provider. SKY 20.7% 24.0% THIS IS Sales contribution OSI* contribution TELEVISA In 2018, Televisa produced more than 83,000 hours of content for free-to-air and pay-TV. content 37.0% 36.5% Sales contribution OSI* contribution other businesses 8.1% 1.9% Sales contribution OSI* contribution unconsolidated businesses * Operating segment income (OSI) is defined as operating income before corporate expenses, depreciation, and amortization, and other expense, net. For a reconciliation of total operating segment income with consolidated operat- WorldReginfo - c0c83806-c62a-404d-abb3-9b196cc05775 2 ing income, see Note 25 to our year-end consolidated financial statements. The MSOs footprint provides Televisa with the ability to Multiple System leverage an extended telecommunications network. Our Enterprise division offers telecommunications services Operators through a network of more than 43,000 kilometers of (“MSOs”) division which offers video, high-speed fiber. Our network covers most of the important cities data, and voice services to residential and and economic regions in the country, and connects with commercial customers, including small and the United States, enabling us to provide high capacity 90,000 medium sized businesses. connectivity between the United States and Mexico. km of coaxial cable DIVISIONS Enterprise Revenue Generating Units which provides telecommunications services, Video 4,384,247 43,000 including voice, data, managed services, as well Broadband 4,479,017 as integration and cloud services to domestic Voice 2,978,508 km of optic fiber and international carriers and to enterprise, corporate, and government customers in Total RGUs 11,841,772 Mexico and the United States. 7.6 million 58.7% video subscribers interest owned by Televisa Operates in Mexico, Central America and 92 thousand Dominican Republic broadband subscribers ADVERTISING NETWORK SUBSCRIPTION LICENSING & SYNDICATION Televisa operates four broadcast channels—2, Televisa produces and distributes 26 pay-TV Televisa exports its programs and formats to 4, 5, and 9— in Mexico City and complements brands and 74 feeds. In 2018, Televisa television networks around the world. In the its geographic coverage through affiliated produced more than 18,000 hours of United States, Televisa distributes its content stations throughout the country. Televisa also content for pay-TV networks. through Univision under a Programming License sells advertising on its pay-TV networks and Agreement (“PLA”). This year, the PLA resulted in online properties. Contribution to sales: 4.5% royalties to Televisa of U.S.$383.6 million dollars. The royalty rate increased to 16.45% in 2018. Contribution to sales: 19.9% Contribution to sales: 9.9% +46 +75 million pay-TV subscribers countries worldwide GAMING PUBLISHING Casino sites and online DISTRIBUTION lottery business. Distributes publications in Mexico and Latin America. FEATURE FILM DISTRIBUTION PUBLISHING 98 Distributes movies in The leading Spanish-language published titles Mexico and Latin America. magazine publisher. in 2018. RADIO SOCCER Network of owned radio stations, A first division soccer team of complemented by affiliated radio the Mexican league and owner stations owned by third parties. of Mexico’s Azteca stadium. univision Ocesa Televisa holds a 10% direct economic interest in Univision, the leading Spanish-language Entretenimiento media company in the United States and the Televisa holds 40% equity interest in OCESA, number five network regardless of language. a live entertainment company in Mexico, Upon the exercise of the warrants, Televisa Central America and Colombia. The Company would hold approximately 36% of the equity organized 3,109 events in Mexico and capital of Univision on a fully-diluted, as- Colombia in 2018. The most successful tour converted basis. in 2018 was Luis Miguel. WorldReginfo - c0c83806-c62a-404d-abb3-9b196cc05775 3 DEAR FELLOW SHAREHOLDERS As we enter our second year as co-CEOs, we 2018 WAS A YEAR OF TRANSFORMATION look back with satisfaction at the steps that Televisa is uniquely well-positioned to benefit from the our teams took during 2018 to restructure and technological changes that are influencing how people solidify Televisa’s leadership in its three main communicate and how they watch their favorite content. operations: Cable, Sky and Content. We We will continue to build from our position of strength and continue to seek out new ways to capitalize on on the ongoing transformation of our business. the many opportunities in front of us while strengthening our businesses to create long- During 2018, our Consolidated Revenue surpassed the term value for you, our shareholders. $100 billion pesos milestone and our Operating Segment Income reached $41 billion pesos. However, the real story driving Televisa’s transformation is being written within our individual operating units. Bernardo Gómez Alfonso de Angoitia Co-Chief Executive Officer Co-Chief Executive Officer WorldReginfo - c0c83806-c62a-404d-abb3-9b196cc05775 4 We continued to transform While many challenges lie ahead, we have made very good our Content segment progress. The transformation of our Content segment started The competitive environment in the content industry is with the naming of new heads for Televisa Studios, Televisa In- more intense than ever. We compete with global produc- ternational, Televisa Networks and for our Sports Division. ers and distributors of content, some of whom have pro- duction budgets that have grown to be many times larger This was followed by a complete overhaul of our content of- than ours. In addition, viewing choices have increased sub- ferings. The results were very positive: during the fourth stantially. We are competing head on with multiple over- quarter alone, 6.5 million people watched our flagship chan- the-top (OTT) platforms and with online video consump- nel every night, and around 40 percent of the people watch- tion, which continues to expand at a fast pace. Within ing television during prime time watched our content. free-to-air television, competition is also intense, both re- gionally and on a national level. As a result, we have rein- Our serialized dramas and comedies continued to lead in vented ourselves. their market segments. Last year, 27 of the 30 most- watched TV programs in Mexico were produced and broad- cast by Televisa, and our flagship broadcast network brought in more viewers than all competing pay TV net- works combined. In addition to strengthening our in-house content produc- tion, we partnered with leading global content players such as Amazon, Mediapro and Sony. Amazon, for example, built the launch of Amazon Prime in Mexico around two se- ries produced for them by Televisa. At the same time, we consolidated the strength of Televisa News, which today transmits the most watched television newscast in Mexico, delivering more than twice the audi- ence of our closest competitor. Throughout election-season last year we were also audience leaders, posting especially strong ratings during the debates and analysis programs. In sports, we were the choice of Mexican audiences in the 2018 Soccer World Cup, both during the matches as well as during programming surrounding the events. On the digital front