Four years after NBC paid $2.7 billion to acquire Telemundo, some members of the Hispanic media space are suggesting the Spanish-language broadcaster has missed its opportunities.

Despite the backing of a powerful media giant and the fact the network sits at the center of the fastest-growing segment of the U.S. population, many industry insiders say Telemundo has yet to become the network that NBC Universal officials have hoped for.

Much of that view is driven by Telemundo’s perennial second-place rank against Spanish-language broadcasting behemoth Univision Communications. A debate has been brewing over whether Telemundo’s current programming strategy is right for the broadcaster in the long term, and questions have been raised as to whether NBC has fully leveraged its assets to help build up the network.

Some Spanish-language media experts say Telemundo is missing an opportunity to go after a largely underserved audience: Hispanics who speak English and want English-language content geared toward them.

These experts say that as long as Telemundo tries to compete directly with Univision, it will face an uphill battle given Univision’s dominance. Univision controls nearly 75 percent of the predominantly Mexican Spanish-language audience in the United States. Some of Univision’s most popular programs are Spanish-language soap operas, known as telenovelas, which are made in Mexico by outside production companies. Telemundo, which develops its telenovelas in-house, retains around 25 percent of the Spanish-language audience.



Pleased With Progress

For their part, Telemundo officials say they-along with corporate parents NBC Universal and General Electric-are pleased with the network’s progress, and though they acknowledge the ratings gap with Univision, they maintain that Telemundo’s ownership of the shows it airs gives it a clear advantage over Univision and gives Telemundo the opportunity to use its shows to generate other forms of revenue, particularly in the digital arena.

For a time, owning a quarter of the Spanish-language universe was good enough for Telemundo because huge immigration numbers were fueling robust growth of the overall Spanish-language audience in the U.S. Though most observers said it was unlikely that Telemundo would dislodge Univision for the top spot, Telemundo continued to post healthy growth simply because of the growth of the segment as a whole.

However, with other entrants emerging to take pieces of this fast-growing market, Telemundo might have to work harder to sustain that growth.

Already there are signs the network faces challenges in the years ahead. A second channel launched by Univision in 2002, TeleFutura, has Telemundo-and the No. 2 spot-in its sights. What’s more, two Mexican-based broadcasters, Grupo Televisa and TV Azteca, have made it clear they want to raise their profiles in the U.S. Also in the mix are new cable channels such as S%ED;TV, which caters to English-capable Hispanics and could further fragment the Hispanic audience in this country.

Univision remains Telemundo’s biggest challenge today. Univision has seen its advertising revenue growth slow as the company and the market mature, and the broadcaster is embroiled in an ongoing fight with its main supplier of Spanish-language content-Grupo Televisa-over Univision’s payments to Televisa. But Univision continues to dominate, and is showing no signs of losing ground. Univision announced in January that it was exploring a possible sale of the company, which could fetch as much as $13 billion.

Univision officials declined to comment.

“Telemundo is getting its hat handed to it by Univision,” said Alejandro Claiborne, director of planning for MediaCom Latino. Mr. Claiborne questions Telemundo’s decision to spend $120 million to develop original content similar to the telenovelas found on Univision. “Trying to go after an 800-pound gorilla that is Univision isn’t going to work,” he said. Others in the Hispanic media community echoed that sentiment, asserting that Telemundo would do well to avoid directly competing with Univision.

For their part, officials at Telemundo say they like where they are positioned, noting that their suite of programming, ranging from the Spanish-language flagship network to the cable channel mun2, which caters to younger Hispanic audiences who speak mainly English, enables Telemundo to be at the nexus of the so-called Latin explosion taking place in this country.

What’s more, they say the decision to invest in original content is already paying dividends.

“Original content is so powerful because it’s not just for one platform,” said Telemundo President Don Browne, who is marking his one-year anniversary as Telemundo’s top executive. “The primary platform with the greatest cost structure and impact is the broadcast piece, but it doesn’t stop there because we own the content and control the content. We are not creating [content] for another audience and repeating it here.”

Mr. Browne said that by owning the shows it airs, Telemundo was able to quickly become the No. 2 player in international syndication, behind Televisa, selling its shows to countries including Spain and Argentina.

What’s more, owning the content has enabled Telemundo to explore ways to leverage its telenovelas for broadband distribution. In one case, Telemundo created an area on its Web site devoted to Azur, a dog featured in popular telenovela “El Cuerpo del Deseo.”

“As we continue to create our own original programming, we are in the driver’s seat,” said Antoinette Zel, Telemundo’s senior executive VP of network strategy. “There is tremendous freedom to be very creative when you’re not tethered to one supplier.”

Regarding whether Telemundo has the right programming strategy, Ms. Zel said, “The idea that there is this kind of debate and dialogue [shows] how the role of the viewer has been elevated to front and center.”



NBC Supportive

Mr. Browne, Ms. Zel and others at Telemundo said NBC has been nothing but supportive of the network, both externally and internally, providing marketing and programming expertise as well as more obvious synergies, such as Telemundo’s participation in broadcasting certain events during the 2004 Summer Olympics.

How Telemundo is performing financially remains a question. NBCU does not disclose financial results for the network, but company officials maintain publicly that they are pleased with Telemundo’s performance.

“NBC said they expected to take Telemundo’s [cash flow] from $70 million to $250 million, and I believe they are nowhere near that. So they must be somewhat disappointed,” said David Joyce, a media analyst with Miller Tabak in New York.

From a ratings standpoint, the network appears to have benefited from its decision to develop original telenovelas. The network announced earlier this month that for the first quarter it had its best ratings performance ever, landing 789,000 adult viewers 18 to 49 in the Monday-through-Friday prime-time period, up from 687,000 in the previous quarter and 499,000 a year earlier. Univision, by comparison, attracted nearly 2.16 million prime-time viewers 18 to 49 in the same period, down 16 percent from a year ago.

Some Spanish-language media insiders think Telemundo would do well to seize the opportunities that exist in English-based Hispanic-oriented programming, particularly given that statistics show the fastest-growing segment of the Hispanic population is children, most of whom speak English and favor English-language content.

Robert Rose, a former Univision executive who now runs AIM Tell-A-Vision Group, a production company that focuses on English-language content for Hispanics, said that of the 40 million Hispanics in the United States, around 25 million are not being served by traditional Spanish-language programmers because of their preference for English-language programming.

“A vast majority of this audience are not tuning in to novelas,” Mr. Rose s
aid.

MediaCom’s Mr. Claiborne agrees: “We’ve got an audience of English-capable Hispanics watching NBC programming. That’s the target; that’s where the growth is.”

For her part, Ms. Zel, Telemundo’s network strategy executive, recognizes the opportunity to go after English-capable Hispanic viewers, and notes that Telemundo’s cable network mun2 goes after just that audience. But she acknowledges, “The distribution is not what it should be to grab that entire audience.”

However, Ms. Zel said, there is still an opportunity to go after Spanish-language viewers, particularly those of Mexican descent, to whom most telenovelas are geared.

“Fifty-two percent of Hispanics still watch Spanish-language television,” she said. “There is still a lot of growth there.”