Market has yet to meet demand

Nov 25, 2002  •  Post A Comment

At last spring’s National Cable Show, an audience member asked a panelist to name one type of programming that cable operators would really like to see offered. Without hesitation, the panelist shot back that what he needed most was a wider variety of Spanish-language services.
Hispanic television is poised to explode onto the U.S. marketplace, observers say, fueled by the rapid growth of a Spanish-speaking and bilingual population.
The Census Bureau projects that the U.S. Hispanic population will swell from 33.6 million this year (12 percent of total U.S. population), to nearly 44 million by 2010 (14.5 percent). By 2050, there will be more than 106 million Hispanics in the United States, a full one-quarter of the population. The buying power of Hispanic households will approach $600 billion this year.
Despite the growth in the Hispanic population and its spending, programmers and advertisers have not been quick to jump onto the bandwagon.
“What needs to happen is for the Spanish-language networks to start drawing dollars from the mainstream programmers, but there is no evidence that that is happening in any big way,” said Alissa Goldwasser, an analyst who keeps tabs on the Hispanic television market for William Blair & Co. in Chicago.
Although advertising revenue at U.S.-based broadcast and cable networks has begun to emerge from a two-year slump, ad spending on Spanish-language networks has remained relatively flat. That’s about to change, however, if Ms. Goldwasser’s predictions are borne out.
“Over the long term there is likely to be increasing demand for Spanish-language television,” she said. “Beginning in 2004 or 2005, we see Hispanic media growing its top line in the 13 percent to 15 percent range.”
For Univision Communications, the dominant Spanish-language programmer in the United States, the future may have already begun.
“We attracted 17 new advertisers [this year] that were never before in Spanish-language network television, representing new revenue of approximately $38 million,” said Andrew Hobson, Univision executive VP.
Spreading the wealth
Spanish-language television in the United States has heretofore been the sole arena of a tiny cadre of programmers. Univision rules the broadcast marketplace, with an audience share approaching 80 percent in some time periods. Every one of the top 20 programs in Spanish-speaking U.S. households is a Univision product, including the top-ranked telenovela “Privilegio de Amar” (“The Privilege to Love”) and “Sabado Gigante” (“Giant Saturday”), which just celebrated its 40th year on the air.
Telemundo, now owned by NBC, is making strides, but has a long way to go. Its top-rated shows include the novela “El Clon” (“The Clone”) and the reality show “Protagonistas de le Musica” (“Protagonists of Music”). At best, Telemundo programs finish a poor second to those of Univision. Nonetheless, the company has Univision in its sights.
“We have looked at their vulnerabilities, and we are attacking them,” said James McNamara, Telemundo’s CEO. His strategic weapons include a mixture of comedies and action-adventure shows to counter Univision’s reliance on the traditional prime-time telenovela.
A number of new program services have popped up recently. Univision launched a second broadcast network, TeleFutura, early this year. Carried on about 30 Univision-owned television stations and available to about 75 percent of Hispanic households, TeleFutura programs a variety of sports, movies, talk shows, game shows and telenovelas.
Telemundo’s year-old mun2 network is aimed squarely at young Hispanics-especially those who are bilingual-with a mix of music, entertainment and lifestyle programming. Delivered primarily by cable, mun2 reaches only about 3 million households.
On the broadcast side, TV Azteca, a large Mexican broadcaster and program producer, is slowly assembling a cadre of UHF and low-power TV affiliates to expand its nascent U.S. network Azteca America. The service reaches slightly more than one-third of Hispanic households, but the company is looking to double that percentage by the end of next year. To counter its competitors, Azteca America carries a higher proportion of reality shows and sports.
“We bring more soccer matches than all the other Spanish networks combined, and that is a great advantage for us given that soccer is the most followed sport among U.S. Hispanics,” said Hector Romero, director of finance at Azteca America.
Several smaller networks dot the cable landscape. Galavision, owned by Univision, is the largest, reaching about 24 million cable households with a mixture of sports, music, children’s programming, news, movies and telenovelas. Viacom’s MTV Espanol and VHUno offer music aimed at young adults. Other networks available in various parts of the country include Discovery en Espanol, CNN en Espanol, Fox Sports World Espanol and El Canal del Tiempo (The Weather Channel).
Scripps Networks has announced plans to leverage its expertise in lifestyle programming into a new Spanish-language service next year. Yet unnamed, the channel would incorporate many of the program genres and production values that are common on the company’s domestic networks: HGTV, Food Network and DIY.
“Latino viewers remain largely underserved by the choices of programming currently available to them,” said Kristen Jordan, VP of international operations at Scripps Networks.
`More Spanish Offerings’
Cable operators look upon Spanish-language programming as a way to stem the decline in the growth of digital cable. Fewer than 1 million U.S. Hispanics subscribe to digital cable, in part because there are so few channels available to them.
In Brownsville, Texas, for example, where more than 80 percent of the population is of Hispanic origin, the local cable operator offers 11 Spanish-language channels on expanded basic. The same package offers 58 English-language channels. A Spanish-language digital tier adds another 10 channels.
Univision recently announced a joint venture with Grupo Televisa, another large Mexican media conglomerate, to distribute a suite of Spanish-language networks for digital cable and satellite delivery in the United States.
“Hispanics in the U.S. still don’t have enough choices,” said Ray Rodriguez, Univision president and chief operating officer. “These new channels go a long way in serving this need of our community.”
Another company, OlympuSAT in West Palm Beach, Fla., packages and distributes several digital programming services in Spanish.
Programmers and distributors seeking carriage of Spanish-language services face, however, the same roadblocks that thwart English-language start-ups. It can be a very expensive process.
Telemundo would like to expand carriage of mun2, but Mr. McNamara said the cost is escalating. He cites negotiations in one heavily Hispanic market in which the local cable operator demanded a high fee in exchange for distribution. Even though cable penetration among Hispanic households barely reaches 45 percent, the operator based the carriage fee on its entire cable universe.
“The market requires you to pay for your cable carriage, and we understand that,” Mr. McNamara said. “The operator says, oh yeah, we want the new service, but you have to pay us for all the subscribers. That means you’re paying for the English-language subs that will never watch you.”
Meanwhile, English-language networks are making overtures to Hispanic viewers. ABC’s “George Lopez Show” has been a hit in Latino households and ranked as the 42nd-most-popular show among all households through mid-November. But it is not clear where the viewers are coming from. “We have not seen any decline, and neither has any other Spanish network, during the times that the show appears, so it does not appear to be taking viewers away from the Spanish networks,” Mr. Rodriguez said.
Despite their assimilation into American culture, Hispanic Americans are watching more, not less, Spanish-language television.
“About 55 percent of Hispanics viewed English TV a dec
ade ago,” said Liz Castells-Heard, president of Castells & Asociados, a Los Angeles ad agency. “Today, it’s about 30 [percent] to 35 percent.”
After years of dragging their feet, advertisers are taking notice. McDonald’s now devotes more than one-third of its advertising budget in Southern California to Spanish-language media, Ms. Castells-Heard said. Spending on Hispanic media has tripled as a proportion of total advertising budgets, from 1 percent to 3 percent.