Charting New Directions3/13/2005 7:00 PM Eastern
Mention Charter Communications Inc. to people in the television industry these days, and you're likely to conjure up news stories about a challenging financial situation, subscriber losses, lawsuits and the departure of executive leaders. But cognoscenti in the Hispanic TV space are aware that two Charter executives in particular have been keeping their noses to the grindstone to develop a more sophisticated strategy to woo Hispanic consumers – particularly in three key markets: Forth Worth, Texas; Los Angeles and Greenville, S.C.
Tim Kelly is director of marketing, core video at Charter. He joined the company in 2004 from EchoStar Communications Corp., one of the rivals responsible for depleting many cable operators' subscriber counts and an industry pioneer in developing multicultural programming packages. John Figueroa started working for Charter's Western division last year as a consultant, and was then hired as director of sales and multicultural marketing for that region.
They recently revamped Charter's Hispanic package, drastically reducing the entry cost to $24.99, across almost the entire company. But they have yet to roll out a marketing plan and line up all the channels they want in that package. Recently Figueroa and Kelly spoke about their work in progress with Multichannel News special projects editor Janet Stilson. An edited transcript follows:
MCN: Is the Latino population predominately Mexican in your three main Hispanic markets — Greenville, Fort Worth and Los Angeles?
TIM KELLY: Yes and no. Los Angeles is more Mexican; Fort Worth is more Mexican. But when you go to the other markets in the Southeast, we start to get a broader reach as far as Latin America is concerned.
John FIGUEROA: You also have to be aware, [Mexicans in Texas are] going to have a different slant and interest in product [than Mexicans in California] as well.
MCN: How are you addressing that?
FIGUEROA: As it relates to the Western division, we really spoke a great deal to the people in our call centers. It was a matter of polling through the people who are on the frontline with the customer and who understand what the customer is looking for.
MCN: Do you have a lot of sales reps who are Hispanic, who speak Spanish?
FIGUEROA: Oh yes. We have two right now [for the Western division]. One is in Irwindale, Calif., and one is in Vancouver, Wash., and I must say even the one in Vancouver, there were at least 25 people that I met with up there who are not just Mexican but from South America as well. We have a good support group in-house.
KELLY: Interestingly, we found the same techniques being used when we started to look at Fort Worth from a corporate perspective.
We were looking upon the talent pool that we have in our call centers as the information gatherers. And then we also layered on top of that data that we've been gathering on the backend to understand what the DMAs or what ZIP codes look like from a profiling perspective.
All channel lineups aren't going to look the same, and to the point made earlier, just because it might look like a Mexican market, we might not deliver the same programming. It's really going to be a targeted approach rather than a shotgun approach to delivering content.
MCN: When did you really start focusing on the Hispanic market?
KELLY: I'll start from a corporate level, and John will fill in the backend.
It was about June of last year when we heard some rumblings of a package that was built in the Southeast, and a package that was built in the Fort Worth area — that they were really lookalike. This was about the same time that we had just undergone a corporate initiative to standardize pricing and packaging.
Coming from EchoStar, I clearly knew there was an opportunity within the Latino market, and at a $52.99 buy-through, we were being shut out of that market. We weren't even in the game. We were just sitting on the bench at that point.
So I started from a corporate perspective gathering [intelligence] and some demographic profiling from Fort Worth, and I had heard that Eric Brown, [senior vice president of Charter's western division] had hired a consultant [Figueroa]. He was running up and down the West Coast. And very quickly, we started sharing information and landed on the fact that we were both talking about the same thing and basically leveraged each other's abilities, mine at the corporate level and he at the division. And I'll let John finish the rest.
FIGUEROA: Well, basically I felt that the best way to do [the research] was really to go out there and speak to the people [involved in the] call centers, direct sales, the sales managers, getting feedback on pricing, getting feedback on content, getting feedback on how it should be packaged.
Clearly what we did here in the West — what I would recommend for the West — is something that we wanted to create as a model that could be utilized for the rest of the organization, with variations in content as the markets required.
So I made the recommendations on how we should package it to Eric Brown , and basically he took it through corporate to get it approved. [It became clear that] a lot of the channels that the other MSOs had we didn't have available to us. So in order for us to build a tier for the Latin market, we needed to get this programming under contract as quickly as possible.
I evaluated at least 25 channels at a minimum that we did not have, and the process began to get those signed up.
MCN: So where do you stand right now?
KELLY: We originally had about 14 channels under agreements. Not all of those channels are exactly what we want. The 20-plus channels that we're looking at, unfortunately I can't speak to any of those, in terms of which we have signed. But we are prepared to begin releasing information in relatively in short order. [Children-targeted ¡Sorpresa! recently announced it is among the new channels joining the Charter package.]
It's going to be up to the markets and divisions as to when they can launch that content. I'd love to be able to celebrate a Cinco de Mayo launch, but that's quickly approaching.
MCN: So what are you aiming to offer at your new price point, $24.99?
FIGUEROA: A package of limited basic, a digital box, as close to a 22-channel tier of Spanish-language programming as possible — because some will be adding to that as bandwidth is available in some markets. Our goal is to get to at least 22 on that tier at $24.99.
We wanted to create a level of price point that they would not only [embrace], but they will remain and grow. And the other process was to create a name for it which was as simple as Charter Latino. We needed to put Charter's name out front so they could identify with us. We needed to start early to get them to be brand loyal.
MCN: Will you have Hispanic tiers on top of that 24.99?
FIGUEROA: They'll be able to add premiums and such after that. Kelly and I are already talking about where we go from here.
KELLY: Let me add some color here. With regard to the $24.99 package, it's very timely [because of] the latest Dish network rate increase. They have the $24.99 Latino offering and a $29.99 [tier with local broadcast stations]. Well now that package is up to $31.99, and as we're positioning ourselves to add more channels, the $24.99 story with your local channels, with the digital tier, with access to [video on demand] — which satellite can't match — we feel that we're positioned very well from a competitive standpoint.
FIGUEROA: I've talked to customers myself, and one of the things they want to have is more of the local Spanish channels. [Dish Network and DirectTV Inc. aren't] carrying all the local Spanish channels. [They carry Univision and Telemundo stations, but] in major markets like the Miamis of the world, you have a tremendous amount of channel offerings. And they are not carrying all of that. So we do.
MCN: It's no secret that Charter has been losing subscribers, but my suspicion is that it hasn't been Hispanic subscribers, because you're starting from such a low base of at this point in time. Is that a correct assumption?
FIGUEROA: The loss was coming from [Hispanics] to some degree. Keep in mind that we have a Latino segment of the market out here [in California] which is more assimilated, which may be second generation and have the appetite and the income to maintain the expanded basic and our other “Big, Bigger and Biggest” packages.
MCN: There's been quite a bit of change in the executive ranks at Charter. Has that affected your strategy?
FIGUEROA: Not as it relates to the West, I can say that.
KELLY: Not at all from a corporate perspective at any level. We keep our nose down, and we know what we need to do.
MCN: What about bundling? Are you offering or do you plan to offer Hispanic customers any special high-speed data or phone deals?
FIGUEROA: Yes. One of the first rollout tests that we're doing is a bundling of high-speed lite, if you will, or 384 [kilobits per second], under a $50 mark with that Charter Latino package.
In a lot of cases, [Hispanic adults aren't using a computer] themselves, but they know for their children, if they have to be more educated, they need to have a computer in the household. So we feel that we need to provide a package within a price point that they can not only get, but [can maintain].
KELLY: I'll add the corporate perspective. [In studying some research,] we found that the Latino population over-scores heavily on Internet usage. So we are very excited to offer a bundling proposition to the Latino market, and we think it's going to be a growth market for us.
MCN: What about phone service? Any special deals to Mexico City or anything like that?
KELLY: We have plans to look at offering a triple-play bundle of some sort once we have telephone launched in the right markets.
MCN: Do you have any interest in creating local channels for Hispanics?
FIGUEROA: I think that's something that would be very interesting to explore. I think we need to get certain things right before we embark down that course.
MCN: So what do you think is your greatest challenge moving forward?
KELLY: What I've been preaching here from a corporate perspective is that things are going to take time. We accept that it's going to take time, that the competition has been out there for a long time in the market, and we can't expect results over night.
We just need to stay the course and remember what our long-term objectives around this package are, because it's not an overnight win.
FIGUEROA: It's helped us to be late to the dance, if you will, on [creating an Hispanic strategy], because we've seen a lot of things that have gone on out there, some changes that other MSOs have made [such as Cox Communications, Time Warner Cable and Comcast Corp.]. It's great that they went out there and did it. [Although] we will make some preliminary mistakes, clearly.
MCN: What's the most important lessons that you have learned from the people who were more pioneering?
FIGUEROA: Price sensitivity, and how you package. One thing we spoke about internally was some people said, “Why put all 22 channels on one package?” [But we said,] “If we're going to piecemeal it, it reminds me of the mini-pay services. We tried to do that; we beat that horse to glue. It never worked in the business.
So give them the product that they're waiting for and give them the value, and if we need to charge a price point that we know that they can accept, we need to fill it with as much content as reasonably possible.
I think understanding the market, look at what census data shows, look at what the economic ramifications are in your local franchises, and then price accordingly.
KELLY: I'll take another stab at that. I have a little different answer. I would say, understand the customer lifecycle [i.e., business relationship]. If you can proactively engage in customer-reducing-churn activities within the [first] 120-day lifecycle, you'll be in a better position to keep that customer. These are learnings that — I am elated to say — Charter is embracing arms wide-open.