Digital Helps Cable Find an Ethnic Niche6/11/2000 8:00 PM Eastern
As cable operators begin to roll out digital boxes at a more rapid pace, it is imperative that the industry closely examine what this means, both in terms of the financial opportunities presented by a new competitive landscape and its responsibility to the communities in which it operates.
Due to the more limited bandwidth of traditional analog cable, many niche and ethnic audiences have been left underserved by cable programming, and have had little or no reason to invest in a cable subscription.
With the great opportunity of digital cable also comes great responsibility; niche and ethnic programming not only could be added to the offering, but should be offered. Addressing the needs of these underserved audiences makes sense on a number of levels.
Competitively, of course, content is paramount. Cable penetration among ethnic audiences is woefully behind the nationwide average. In many communities with significant ethnic populations, there are more programs available on broadcast than on cable. Cable operators can't afford to ignore any target in which per subscriber valuations are worth $5,000 or more. Clearly, there is a demand.
Direct-broadcast satellite companies have recognized this demand and are capitalizing on it. Now, through digital, cable operators have the capability to meet that demand.
The U.S. Census Bureau projects the Hispanic population to reach 41 million by 2010. After Mexican nationals, Filipinos make up the second largest group of foreign-born Americans.
The Asian-American population, the fastest growing ethnic group in the U.S., is now at 11 million, and projected to grow to 12 million in 2001 and to 17 million by 2010. About 12 to 15 percent, or 31 to 38 million, of Americans speak a language other than English at home and over 26 million people were born outside the country. These populations tend to be passionate about watching television programs produced in their country of origin.
Obviously, there are large and relatively untapped audiences out there. There are people who have never felt the need to subscribe to cable or have become disenchanted with it due to the lack of programming that addresses their interests-or is even broadcast in their first language.
In my own experience, this really hit home with the recent launch of the Filipino Channel by Cox Communications in San Diego. Filipino immigrants comprise 10.4 percent of the population of National City in San Diego County. Surveys conducted by Cox Communications revealed that of those who subscribed to this digital premium ethnic channel, 10 percent had never previously subscribed to basic analog cable service. These examples illustrate the dearth of programming available through traditional cable for various American ethnic subcultures.
Digital cable offers operators the opportunity to provide additional choices for viewers and, in some cases, increase overall subscriber numbers. Would offering a fifth all-news or ninth sports-oriented channel boost sales as dramatically? The cable industry to date has all but ignored these important niche demographics and it has cost operators many subscribers to direct-broadcast satellite.
Current estimates are that 400,000 DBS subscribers actively choose direct-to-home content. How many more subscribers will operators lose before they move? The first frontier for digital was premium multiplexes for movie channels and pay-per-view. Next came the "digi-basic" extensions offering services the customers had been asking for such as Home & Garden Television, Outdoor Life Network, Speedvision and The Golf Channel.
Ethnic programming is the next logical step. Many ethnic audiences are passionate about their television. For example, according to Hispanic & Asian Marketing Communication Research Inc. focus groups conducted in August of 1998, Japanese respondents watch between 5.5 to 13 hours of Japanese TV per week and regularly view Japanese news. In fact, the main reason Japanese Americans watch Japanese TV is to keep in touch with "things Japanese" and to stay up-to-date on happenings in Japan.
Subscribers need a specific reason to expand their cable service to digital. Clearly, programming aimed at specific markets, such as international programming, is an effective sales tool and provides a driver for digital boxes.
SERVING THE COMMUNITY
What makes good business sense for the industry is also a valuable community service. Providing niche channels to various segments of the population enables many people access to information that previously was not readily available.
Because cable is local, the industry must consider its responsibility to its communities. Cable television is no longer simply a luxury. Many people across the country depend on the news and information cable TV provides.
With ethnic populations growing throughout the U. S., it is increasingly becoming a responsibility of the cable industry to provide programming for these groups. Television provides a common bond in many communities and, for many ethnic populations, it is a gateway to the homeland.
Recently, there has been a greater awareness of the need to more accurately reflect our diverse population within the context of individual programs. Broadcast-TV shows have scrambled to diversify their casts in the wake of threatened boycotts of the major networks. However, there's still a need to address these issues in the context of overall cable programming.
The U.S. has long been heralded as the "melting pot of the world," yet the average cable television lineup hardly reflects that. With digital cable, the argument can no longer be made that there simply isn't the bandwidth to provide ethnic programming. The cable industry has a responsibility to provide programming that more accurately reflects that actual U.S. population.
In many communities across the country, ethnic populations are in fact the majority, yet ethnic programming barely registers a blip on the radar screen of cable television. With cable recently being characterized as "insensitive" to diversity issues, the last thing the industry needs is "digital redlining." Here is a chance for operators to demonstrate their community service commitment through the value of diversity.
We are seeing improvement in some areas already. Cable operators are beginning to offer Hispanic programming, but more still needs to be done. The industry owes it to its audiences to provide programming that reflects the diversity that makes each community unique. And the opportunity is there.
Over the past five years, the number of international or ethnic services available to U.S. cable operators has grown substantially with the expansion of services offered by such programmers as Home Box Office, MTV: Music Television, VH1, Discovery Networks U.S. and International Channels Networks, especially in the Spanish-language category. Many of these same channels are also available to viewers through DirecTV Inc. and EchoStar Communications Corp.'s Dish Network, which are coming on strong with their Spanish packages.
The fact that cable is more "local" than DBS gives cable an advantage. Cable operators can chose targeted ethnic programming available through digital cable to more effectively meet the needs of their individual communities. This allows cable operators to capitalize on increasingly valuable subscriber populations as well as address some of the recent criticism of the industry.
Cable can use ethnic programs tied to events in the community to show its civic responsibility. This is an area in which cable operators clearly have an advantage over the DBS companies.
Operators can partner with their programmers to gain visibility within ethnic communities by sponsoring local festivals such as Lunar New Year, Cinco de Mayo or Bastille Day.
Cable operators can't afford to ignore any target, but with satellite providers doing a great job of meeting the needs of these ethnic populations-and with per subscriber valuations near $5,000-this is competition we can't afford to ignore. Cable also has a responsibility to the people in the communities it serves. Because cable is local, it can use ethnic programs tied to events in the community to strengthen its position as the "good corporate citizen." These are challenges that must be met and now, with digital cable, can be met.
Kent Rice is president of International Channel Networks.