Reversal of Fortune

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Marketing professionals are accustomed to impossible deadlines. But when Mauro Panzera was hired in October of 2002 as senior director of multicultural marketing for Comcast Corp.’s cable unit, he faced one of the toughest challenges of his career — helping the MSO entirely revamp its Hispanic strategy in less than seven months.

“It was like [the story of ] Seabiscuit,” he remembers. “Right from the first day, it was a horse race. We only had until May of 2003” to settle on a new strategy, research the market, sign carriage deals for new channels, outline a marketing plan and launch the new packages.

Ultimately, the new strategy would feature low-cost Hispanic programming and additional marketing campaigns, moves that have boosted the number of customers subscribing to Comcast’s Hispanic packages by 80% between May and the end of 2003.

Comcast is on the vanguard of a larger movement among cable operators hoping to boost their Latino sub counts. The industry is just starting to recapture some of the momentum it had lost in the late 1990s, when EchoStar Communications Corp. and DirecTV Inc. lured Hispanic consumers away to direct-broadcast satellite by ramping up their Spanish-language programming content and by offering affordable Hispanic packages.

'CABLE WAS LOSING’

“EchoStar clearly scooped the [Hispanic] market,” notes Schramm Sports & Entertainment president Joe Schramm, who has been working on marketing campaigns for the Hispanic community for 18 years, including several of Comcast’s recent efforts. “When cable began to focus on the Hispanic market, cable was clearly losing the battle, and EchoStar was winning.”

While Comcast’s strategy is rooted in market realities, it also is informed by Panzera’s own background. His insights into the immigrant experience began in his own childhood as the son of Italian immigrants, first growing up in Caracas, Venezuela and then emigrating to the U.S. at the age of 13.

After college, he spent 12 years working all over Latin America and Western Europe for such multinationals as Colgate-Palmolive Co., Best Foods Inc. and Renault-Volvo. That gave him in-depth experience in programming and with “the diversity of 19 different Spanish-speaking countries,” he recalls.

Then, he burnished his domestic resume by moving back to the U.S. to take a job with Comcast, working in the wireless and international development divisions between 1991 and 1999.

“Mauro speaks both Spanish and cable,” quips Burke Berendes, a partner at Condista, a company that distributes 15 Spanish-language channels to the U.S.

Adds Condista partner Jorge Fiterre, “There are not many people who understand both of those worlds.”

While Panzera clearly played a key role in crafting the outlines of Comcast’s new packages and in “shepherding” the new Hispanic strategy to fruition, Panzera stresses that it was “truly a team effort, involving all parts of this company,” from the top levels of management down to customer-service representatives.

During a 40-minute interview, he cites more than a dozen executives who helped carry out the strategy. And he stresses that many areas of the project were outside his direct control.

For example, it was the programming department — not Panzera — that negotiated the actual carriage deals.

“It is really to Mauro’s credit as a manager that he was able to work with so many people to make this happen,” notes Schramm. “It is one thing to have a corporate initiative to pursue the Hispanic market. It’s another thing to have a person who really understands that market like Mauro and who is the kind of manager can get a very large organization to carry out an effective new strategy.”

DEFECTION DILEMMA

When Panzera arrived in October of 2002, Comcast clearly had some problems on its hands. When the MSO acquired the systems of AT&T Broadband, it was faced with cable systems that were hemorrhaging subscribers. In 2002 alone, the old AT&T systems lost 483,000 subscribers — one person from each of these households would be enough to populate the entire city of New Orleans.

The AT&T systems served eight major Hispanic markets. Suddenly, Comcast, which had paid little attention to ethnic programming, had systems that passed 3 million Hispanic homes — 32% of the nation’s total.

Hispanics certainly constituted an important growth opportunity; only 67% of all households subscribed to cable, versus 83% for the nation as a whole, according to Nielsen Media Research. But making big inroads in the community was no easy matter.

For many years, cable operators had offered little Hispanic programming, and when they began adding more channels, they often forced Hispanic consumers to buy to into the highest tiers. In contrast, EchoStar’s Dish Network — which launched a low-cost $19.99 Hispanic package in 1999 — offers three packages, beginning with the Dish Latino package of 31 Hispanic channels, which now costs $24.99.

“Unlike EchoStar, Hispanic cable customers often had to spend $60 or more to get the programming they wanted,” notes Howard Horowitz, president of Horowitz Associates Inc., a market-research and consulting firm that specializes in urban and Hispanic markets.

The new packages that Comcast launched almost a year ago, in nine of the top 10 Hispanic markets — with more rollouts in September — was clearly designed to address those criticisms.

The pricing and lineups for new packages vary from market to market. But in general, Comcast offers a low-priced $19.95 CableLatino tier of Hispanic services. It includes CineLatino, CNN en Español, Discovery en Español, Fox Sports en Español, MTV Español, VH Uno, HTV Musica, Utilísma Satelital, Toon Disney and TVE International, as well as broadcast affiliates of Univision, Telemundo, Telefutura and Azteca America.

WRAPPED A PACKAGE

“Our research showed that Hispanics wanted [a package] with an everyday low price, and we gave it to them,” Panzera says.

In addition, Comcast established a $29.99 CableLatino Optimo package, a full digital basic package of additional video and audio services, and the CableLatino Completo package. It features all the programming in the two lower tiers as well as expanded analog services.

During his years working in Latin America, Panzera had grown to appreciate the diversity of the Hispanic community and the final packages are also designed to allow local systems to customize their offerings. In addition to the Hispanic services in the CableLatino package, Comcast’s programming department also negotiated deals with 15 other services. These deals set rate cards, but the channels would still have to convince local systems to give them carriage.

Panzera says this strategy allows managers to chose specific services from the menu of 15 channels that would be of particular interest to their local audience.

In Southern California, for example, the package reflects the interests of the large Mexican population, with more programming from Mexico.

David Lucoff, regional vice president of Comcast Cable Communications Inc.’s South Florida Region, notes that his system added “TV Chile, TV Columbia, Latin TV, Gol TV, and Grandes Documentales” to the basic CableLatino package, so it could better target Florida’s Hispanic community.

Florida’s Latino population includes large Cuban, Caribbean and South American contingents.

SUB-COUNT ESTIMATES

Localization also played a key role in Comcast’s marketing strategies. While Panzera worked with L.A.-based agency Castells & Asociados to put together a nationwide campaign, he also encouraged local systems to beef up their own marketing.

In the San Francisco Bay Area, for example, Schramm Sports & Entertainment worked with local managers to develop a media campaign for TV, print, outdoor and radio that ran over a nine-week period last year.

To establish closer relationships with the Hispanic community, Schramm and the local sales team also established a presence at street fairs, supermarkets and sporting events, including an exhibition match with the Mexican national soccer team that attracted 35,000 customers.

“The result was a 41% increase in the response rate from the previous campaign,” Schramm says.

Measuring the success of this strategy is difficult. Comcast, like most the other operators and satellite providers, refuses to break out subscriber numbers for their Hispanic tiers.

Industry sources estimate that EchoStar has about 800,000 subscribers to one of its Hispanic tiers, far more than any of the cable operators.

Estimates of subscriber counts to all Comcast CableLatino tiers vary widely from 150,000 to no more then 200,000, with about 100,000 to 110,000 subscribers taking the higher priced Optimo and Completo tiers.

Both EchoStar and Comcast decline to comment on the numbers for their Hispanic packages, or their penetration of the total subscriber base.

But since Dish Network has 9 million total subscribers, it’s safe to say that EchoStar’s Hispanic packages have about a 9% penetration of total subscribers. And Comcast, with just under 21.5 million subscribers at the end of 2003, probably has less than 1% penetration for its still very nascent Latino tiers.

Needless to say, those numbers are not indicative of how many Hispanics are subscribing to Comcast’s larger universe of programming choices.

Despite the small numbers for the Hispanic packages, Comcast executives have cited better Hispanic marketing as one of several explanations for their improved subscriber counts, which grew by 140,000 in 2003.

Lucoff declines to provide exact figures on the effects in South Florida. But he notes that AT&T did little to target Hispanic consumers and contends that the renewed marketing efforts have been a great help in attracting and retaining subs.

Comcast Southern California vice president of sales and marketing Bill Erickson adds that after the relaunch of its Hispanic packages last year, the system “reversed” the subscriber loses suffered in 2002 and “grew out [its] subscriber base in 2003.”

Better marketing and the creation of a Spanish-language portal also helped them boost their high-speed data numbers, he says.

OTHERS FOLLOW

Every subscriber to the Hispanic tier also gets a digital box, which gives them access to pay-per-view offerings, the interactive programming guide and VOD in select markets, Panzera explains.

“It’s an attractive way to introduce them to all of our services,” he says.

That seems to have convinced other cable operators to explore similar strategies. Since Comcast began its Latino initiative, Time Warner Cable has introduced a lower-cost tier in New York City and Cox Communications Inc. recently hired César Cruz as director of multicultural marketing to revamp its strategy.

“I think you will see Charter [Communications Inc.] and Cox moving in the same direction as Comcast,” notes one programmer.

Meanwhile, Comcast continues to refine its strategy. While Panzera declined to comment on Comcast’s plans, if any, to invest in channels targeted to Hispanics, he says the MSO is constantly looking to improve its Latino programming.

Sources outside the company note that Comcast is in the process of hiring a vice president in charge of international programming and that this executive will further tweak the operator’s programming lineup.

Roger Huguet, the chief operating officer of Gol TV, a Hispanic-focused soccer channel on a number of Comcast systems, adds that his network is working with Comcast and other operators on plans to deliver HDTV Spanish-language programming and supply content for VOD services.

“That will allow them to further develop and customize their offerings,” he says. All of this, Comcast executives hope, will make them more competitive in the race to win back the Hispanic community.

<p>Comcast at a Glance</p><p>A thumbnail sketch of the No. 1 U.S. MSO.</p>

Cable Homes Passed

39.8 million

Cable Subscribers

21.47 million

Cable Penetration

53.9%

Subscribers to CineLatino Tiers

150,000-200,000*

High-Speed Internet Subscribers

5.28 million

Phone Subscribers

1.27 million

Average Revenue Per Subscriber

$68.18 per month

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