U.S. Latin Channels Blaze Cable Trail - Multichannel

U.S. Latin Channels Blaze Cable Trail

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There has been a virtual explosion of Hispanic-targeted cable networks in the past year or so, all looking to attract viewers from the nation's largest and fastest-growing minority. Some of these networks are owned by programming giants, like NBC Cable — now the parent of mun2, as well as Telemundo. Others, like the Spanish-language kids network Sorpresa and the Hispanic Information & Telecommunications Network — with a noncommercial, public-TV style format — are independent, and are relative newcomers to the cable arena. Recently, Lynette Pinto, NBC Cable's vice president of marketing, focusing on Telemundo and mun2; Leonard Firestone, chairman and CEO of Firestone Communications, which owns Sorpresa; and Jose Luis Rodriguez, president of HITN-TV, met with Multichannel News senior editor Simon Applebaum and editor at large Linda Moss. They discussed how cable should market to Hispanics; what segment of the Latin audience the networks are targeting; programming strategies and how much crossover appeal such services have. An edited transcript follows.

MCN: The big story from the Hispanic-network upfronts last month was that Jennifer Lopez signed a contract to produce Spanish-language programming for Telemundo, and maybe bilingual programming for mun2. What's the significance of that deal?

Lynette Pinto: It just demonstrates the importance of the Hispanic market. Obviously we've had Hispanic actors, singers, etc., cross over into the general market, and they are now coming back to do things in the U.S. Hispanic market, which I'm very excited about.

MCN: Leonard and Jose, what about you?

Leonard Firestone: It's a great indicator, as Lynette just mentioned, of the interest here in a growing trend to clearly better service this audience. It's fantastic for those of us that are in this kind of business to serve this burgeoning audience. And it's just a great example of the interest there and the market demand.

Jose Rodriguez: It also makes sense. [It's] the beginning, or perhaps a continuation — but I think we will see it more — of U.S.-based content being emphasized.

MCN: When Univision chief operating officer Ray Rodriguez was asked about this at the upfronts, he acknowledged that there is now a move by the Spanish-language networks to do more programming in the U.S. But he also said, 'Let's watch this Jennifer deal. There was a programming partnership announced a couple of years ago with Salma Hayek, the Academy Award-nominated actress from Frida, and nothing came of it …'

Pinto: I would say that when somebody of Jennifer Lopez's caliber says she is going to be producing shows, she plans to do it. And I think Telemundo and NBC also plan to be involved. So now I would take it at their word.

Firestone: Clearly, the interest is there for domestically produced programming. But some of the research that we have gotten, primarily through Howard Horowitz with Horowitz & Associates, reflects the importance of culturally relevant content, as well. And a lot of our programming, all of our programming in fact, except for one show, is coming from Spain, Puerto Rico, Mexico, Argentina.

And the importance is there for kids primarily who we're serving, because their parents want them to stay connected. And some of the programs that are produced out-of-country have that cultural relevance that they're seeking that they can't get here. So we're going to end up blending the two: domestic, culturally relevant programming, along with more of the imported product.

Rodriguez: Regardless of whether it's Jennifer Lopez or it's somebody else, there is a clear need that has been established in the Latino community for culturally relevant content to be produced. And in this case, it is more U.S.-based programming.

Our network provides educational content to Hispanics because Hispanics have demonstrated consistently that education seems to be one of their major concerns. And we try to provide educational content that is relevant to those needs.

We are in the process now of providing content related to how to learn how to use the Internet, how to learn how to use computer programs that people need on a daily basis and basically targeted to the Hispanic women.

MCN: Being noncommercial, how does HITN make itself worthy of placement on a cable system? It's on Time Warner Cable here in New York, but how do you do it elsewhere?

Rodriguez: Well, not only we're on Time Warner, but we're also on the competition. We're on the Dish Network. We reach about 8 million households from Dish. We're worthy of being carried because of the quality of our programming.

Also, we've been around for a while, but we've been recently on a national basis for the last three years. And we believe, based on the response that we're getting from the various operators, that our service is a service that helps make a case for multichannel operators to increase the reach within our community.

MCN: You segued into another question: What kind of job have cable operators done in marketing to the Hispanic market?

Pinto: Cable operators are in the initial stages of targeting Hispanics. Some have been doing it longer than others. But you find varied success across the country. It really does depend on the operator. But it's definitely focused right now, and you will see continued growth, both by satellite and obviously by cable, on this segment of the market.

MCN: And what successful techniques have they employed?

Pinto: It's selecting the right channel lineup. It's promoting on mass media, which can be television, radio, doing direct mail. I mean, it's the tactics that work for all packaged-goods companies that have been in for 20, 25 years. Those are the tactics that tend to be successful.

Firestone: There's another good example here in New York with DTV en Español at Time Warner [Cable], in that they are beginning, you'll find more of the systems beginning not to force the tiered structure onto the consumer. And that's a big shift in that, for a digital network like ours, there was this buy-through that was required, which was really a deterrent for the consumer.

Because at the end of the day, they looked at what that package got them and …

MCN: What was it, to have to buy a Hispanic tier on top of a digital package?

Firestone: Exactly, exactly. It was very costly. And we found, for example, some markets where the consumers, the Hispanic consumers felt like they were being penalized and didn't understand why that this was the case. So you can look to Dish and Dish Latino, which did a very effective job in attracting international consumers, now some of the cable operators are doing the very same thing.

Here in New York, as I mentioned, is a good example. Comcast is rolling out a very similar type of strategy, and Cox is as well. And it's that kind of pricing structure, which is going to make a big difference in the take rates, and they're now beginning to market that service.

Rodriguez: I agree with Leonard that Time Warner should be commended because they have just realized that in order to reach our market that the need to come with a very special package of programming and target our community.

In the past, we have to admit that cable did a really dismal job in providing, or targeting the market, really. And that's changing, obviously, by the announcement that we have seen.

In our case in particular, in New York, it was very interesting for us that Time Warner requested that we provide local productions and that we target specifically segments of the Hispanic communities that have been underserved.

In particular, you know, they were very concerned about the Puerto Rican community, which is very underserved by cable, not only in New York City but in the Tri-State area. And we made a commitment to address the needs of that community without jeopardizing or without, let's say neglecting, other Hispanic communities in the city. So it's a very significant development that we see now from the cable companies.

Firestone: I would just add, and just for your information, that our channel Sorpresa, which is servicing kids 6 to 14, the concept of the network really was developed with Time Warner [vice president] Lynne Costantini. And they had done some research that reflected a hole in their programming line-up to service this particular audience.

And we were having a meeting one day on a couple of other issues and began to think through the feasibility of a network like ours and the rationale behind it and business models. And I give them credit as well for their interest in servicing that audience. And I think it is now a great service for them and others.

MCN: How difficult is it for an independent in this market? We've got two independents at this roundtable.

Firestone: It's a challenge.

Rodriguez: Yes, it's very difficult. We have been fortunate that we finance our operations by other, by the fact that we own frequencies in part of the spectrum, 2.5 [Gigahertz]. But it's considered before wireless cable, we are the largest license holder in that spectrum in the United States with frequencies in 45 markets. Now it's considered broadband and wireless and supposedly really used for 3G, third-generation technologies. So we financed that.

We also, as a nonprofit, get grants. In fact, we're building now a $10 million facility, which is our network operations center, at the Brooklyn Navy Yard, to be able to, with two studios there and our own uplinks, fiber connected to the major points here in New York City like [the] waterfront switching point, and 60 Hudson [the telecommunications center].

But getting financing to do our own productions is very difficult. There is a need for the advertising budgets to maybe target independent voices like ours to make sure that the Hispanic community is offered a wide range of choices out there.

Firestone: It is difficult if we were to have gone about it just as a pure play in this environment to raise capital and build the infrastructure to launch. We didn't go that route.

We bought the assets of HTVN out of bankruptcy, which gave us the infrastructure and hardware to do some things, of course, that you would need to do very affordably. But critical to that was getting the cable operators to assign their contracts to us, which they did. So it was a challenge, certainly.

But we navigated that, I hope, in a very smart way, in that we minimized those upfront costs. Particularly now, what we're finding is that distribution interest is there. Now it's just a question of how much, how many resources do you have to dedicate to the marketing side of the equation? And that's what we're going to focus on.

MCN: What's the cable distribution for mun2, Sorpresa and HITN?

Pinto: We're 5.8 million households.

Firestone: We're nearing a half a million.

Rodriguez: Between both cable and satellite we have the capacity of reaching 8.5 million.

MCN: Do any of you have deals with Comcast Corp.?

Firestone: Yes, we do. We're going to be announcing it and just actually did the deal with them. The press release has not gone out yet, but we do have …

Rodriguez: Not yet.

MCN: And mun2, not yet?

Pinto: I'd have to get back to you.

MCN: The Horowitz study that came out last month is the latest example of something that we've been seeing all along, which is that Latinos, as well as all people of color, are the people most interested in buying and using the services that cable is banking its future on, whether it's HDTV or interactive TV or video-on-demand or home networking. Where do you see all of these opportunities on your radar screen?

Pinto: An area we are focusing on at this moment is VOD in Spanish. We own the No. 1 television station in Puerto Rico, Telemundo channel 2, and also have an extensive library because we've done a lot of production here in the U.S. with Telemundo, and also with mun2, of programming that we will be working with cable operators to make available. So that is a big focus area for us right now.

Firestone: Part of our deal with Comcast is to provide VOD programming. Some programming we inherited from the library at HTVN and want to make available. Other programs certainly will be provided directly from Sorpresa.

But the application that is going to be of most interest is really the educational aspect, and what we were talking about I guess sort of earlier in teaching Spanish, or English, to kids. And that's going to get a lot of attention.

Rodriguez: We entered into a major deal with Goldman Sachs to develop [our] spectrum. As part of the deal, Goldman Sachs is committed to help organizations to look at opportunities and means to try to find innovative ways to finance some of our future growth.

We have already some experience as an Internet provider. We have been providing high-speed Internet and distance learning to schools and libraries in Puerto Rico. So we already have a model not only that incorporates the technology, but also the content for distributing, for distribution.

Video-on-demand — we have been approached by some cable operators. We have not been contacting operators. I think [because of] the fact that we went on a major system, cable operators have been contacting us. And the first question they ask us is, Do we have content for video-on-demand? We have the capability, we have the technical capability to provide it, and we're looking at how we can develop the infrastructure to be able to, the human infrastructure, to provide it. At this point it's an issue of resources. If we get additional financial resources, we should be able to do it very easily.

MCN: What are your hopes or aspirations in terms of national advertising?

Pinto: Mun2 has currently a good lineup of advertisers that obviously, we are looking to expand all the time. The big thing at mun2 is that it really is alone in its space. It is the first and only channel targeting English-speaking Hispanics and others.

And no one else plays in that space today; we are the only one. So it's also new in terms of the traditional Spanish advertisers looking at an English-language service, but also the general-market agencies looking at something that targets Hispanics. So it kind of opens the playing field for us. We're only a year and a half old.

MCN: What about Sorpresa?

Firestone: Well, we're similar, because we're the only one serving this audience. There has already been some good advertiser interest because it's a difficult demo to reach. But what is now being better understood is — and again, some of the recent information highlights this point — that the buying power that is within this demo is significant and can't be ignored.

And so if they can find a vehicle, which they can now through us, to reach these kids, that's advantageous to them.

And then secondly, the Horowitz research also showed that the brand loyalty that a consumer has to an advertiser and a product that does cater to them is really significant.

MCN: That's all true, but only 3.2% of national ad budgets are targeted to Hispanics, according to the Association of Hispanic Ad Agencies. So why the lag here?

Pinto: The good news is we're growing.

MCN: It looks like we're going to have an onslaught of Latino-focused networks in both Spanish and English. ESPN Deportes is coming this fall; Scripps is working on a lifestyle network. Sí TV is going to go for the crossover crowd. How do you stay focused on what you're doing, yet deal with this oncoming competition?

Firestone: Stay true to the mission. And you know, what we're doing is somewhat unique in that we are certainly producing a network domestically. We're getting some of the programming obviously abroad, but it's not a network that is piped in from another country. And as a consequence, we have the ability here to market it in different ways, get celebrities involved and get more of what is relevant domestically for the kids. And that's an important distinction between something that's managed in the U.S. and run in the U.S. than just a satellite feed being piped in.

So that's one distinguishing characteristic. [And] at the moment there's nobody else that has launched or is running a kids' network for Hispanic children and others. So we've got a very good head start in creating some barriers to entry, beginning with our deals with Comcast, Cox, Time Warner and NCTC [National Cable Television Cooperative].

MCN: What about everyone else?

Pinto: Obviously, what NBC has done is target the two distinct segments of the audience – the Spanish-dominant, more recent immigrant segment with Telemundo, and the English, the other 50% of the market that prefers English language or is bilingual, with a separate channel.

So what NBC has done has very effectively covered these segments of the market, while at this point the other 99% are all in the Spanish-language arena. So we believe we have the first advantage with mun2.

Rodriguez: Well, we're going to be continuing to be true to our mission, and that is, as I said before, to advance the socioeconomic aspiration of Hispanics in this country, whether it's in English or Spanish. Of course, right now we believe that the most important vehicle to achieve that is by programming in Spanish.

MCN: Anyone surprised that some of the cable-programming players have not jumped into the market? For example, that Nickelodeon — which did do a daypart in the morning for Telemundo at one point, dubbing Rugrats into Spanish — did not come out with a Nick en Español?

Firestone: I know it was being considered by some of the folks you just mentioned at one time, but other business initiatives put it on the shelf. So there's recognition that there is potential value there. But you know, particularly in this environment, it's a costly thing to do, no matter who you are, to start something from scratch and launch a network.

MCN: What's the challenge for cable operators now?

Pinto: It's effectively marketing to Hispanics. It's building their business by targeting the Hispanic community.

Firestone: It's representing a product that has value that previously wasn't being seen and better communicating what now they have to choose from and the value of it.

Rodriguez: Understanding what our community needs, not making assumptions of the Hispanic market. Traditionally a lot of assumptions have been made about what our market needs, and therefore they believed that the regular fare would do.

Something that's clear about the new choices that are coming out is that there is content available for the Hispanic community that the Hispanic needs at this point. And they should come with the right mix to be able to address that need.

Pinto: And you see cable operators doing that. They are doing research in the market. They're not just putting packages together. Our consumers are very astute and very smart consumers, and they are looking for value.

MCN: Which Hispanic groups are you targeting? It's a very segmented market, with Puerto Ricans, Cubans, Columbians, Mexicans, et cetera.

Pinto: We are targeting a younger demo, an 18-to-34 demo, and have bureaus in all parts of the country in order to encompass all ethnicities. We're not specifically going after people of Mexican, Puerto Rican, etc.

Seventy percent of our programming is produced here in the U.S., so we have bureaus in New York, in Miami and in Los Angeles to address that, and insure that we are providing relevant programming to all U.S. Hispanics.

Firestone: We have a blend. We see a very distinct difference between East Coast Hispanics and West Coast, in a very general way.

MCN: Some major advertisers, like Procter & Gamble and McDonald's, have been long-time advertisers on Spanish-language television. But we've yet to see Apple Computer take an ad; or IBM take an ad, or other companies in technology run spots. What does it take to get the tech advertisers and companies in other categories like wireless involved?

Pinto: Pharmaceuticals are very involved in the market. Wireless on a regional basis is very involved in the market. It's just recognizing the power, the importance and what this market can mean to your business. The packaged-goods advertisers were the first ones in, 20, 25 years ago, and it's been a progression. But we've certainly seen enormous growth in all those categories.

MCN: Are there still some categories or individual companies lagging behind?

Pinto: Some of the high tech have lagged. But they are beginning. Wireless is now in.

Rodriguez: There is a need for education at all levels, the advertising level and the corporations as well. They have to understand this market better and the opportunity that exists. To a certain extent we're pioneers here in providing that kind of service so that these corporations have the opportunities to reach this market more effectively and eventually make money.

MCN: But how can you target all of them?

Firestone: Ultimately, we're going to have two feeds. It is our strategy for servicing both coasts. But additionally, we can turn that into an advantage where if you look at the history of successful cable networks, there's generally a marquee show that attracts a lot of attention, and then they get a lot of sampling on either side of that program.

We feel like we can market particular shows to certain population segments, introduce them to the network, and hopefully then encourage some sampling in other areas. But we stack those programs together, servicing different people, you cume at the end of the day a large audience.

And another interesting aspect that, I guess, mitigates somewhat some of the difficulties found in the cultural differences is that for our audience, as kids, what they're interested in really is entertainment programming. And so you get a lot more latitude in what they'll tolerate and accept as a result if it does stimulate and entertain them.

Rodriguez: We target the whole Hispanic community from the United States. We are a New York-based operation, and the experience we have is that we're getting a lot of calls from California, from the Southwest.

And also very interesting, we're getting calls from places like North Carolina where a lot of Hispanics are moving, and perhaps this might be one of the few services that they have available. We still — we're going to study that, because that's a very interesting development. That reflects the way the census, to a certain extent that it shows that our community's spreading throughout the United States.

Another important thing that we do is we provide English as a second language. And we realize that a large segment of the Spanish community is trying to learn English. Hispanics come to this country to advance themselves economically, but also to be part of the society. And in order to be part of the society you have to learn English. So we're getting a lot of calls for the English-as-a-second-language programming on our channel.

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