Competition Heats Up in Latino TV : U.S. Firm Challenges Top Spanish-Language Broadcaster

Make room, foreign media conglomerates, the first U.S.-owned Spanish-language TV network is about to take to the airwaves.

The $70-million purchase of a New York television station and other developments in the last six months have set the stage for the first serious challenge to the dominance of Mexican-owned Spanish International Network, a programming powerhouse with more than 400 cable and broadcast affiliates reaching up to 80% of the nation’s Spanish-language TV audience.

Reliance Capital Group, part of the New York-based business empire controlled by financier Saul Steinberg, hopes to steal some of SIN’s audience by offering programming specifically produced for the U.S. Latino population. (Steinberg’s empire also includes investments ranging from insurance to air freight.)

Reliance’s strategy is straightforward: Acquire TV stations in key U.S. cities, form a network of these “captive” outlets and as many independents as possible, then produce original programming for the network.

In October, Reliance bought New York’s strongest Spanish-language station, WNJU-TV. A month earlier, it had concluded a $500-million purchase of John Blair & Co., one of the country’s leading advertising sales firms as well as the owner of six Spanish-language stations and a Puerto Rican TV production company.

Reliance may announce its network plans within the next few weeks, company officials say privately. Exactly how much programming it will produce isn’t certain, but company President Henry R. Silverman said he has made a long-term commitment to domestically produce radio and TV programming for the U.S. Latino population.

“We believe that Spanish-language television is the fastest-growing segment of the TV industry, and we are committed to serving it with high-quality programming,” Silverman said.

This pledge also foreshadows a significant change in an industry where most programming still is produced by Latin American companies.

Increased domestic production is likely to upgrade the quality of Spanish-language TV by providing new opportunities for U.S. Latinos to create their own viewing choices, said Richard MacDonald, media analyst for First Boston Corp., the New York investment banking firm that helped package Capital Cities’ takeover of American Broadcasting Cos. this year.

‘Has to Be Indigenous’

“I’m from Canada,” he said. “I know I could not create programs for the Anglo market here. It’s the same situation for the Spanish-language market. I think it has to be indigenous and it has to be done by Hispanic Americans.”

Reliance isn’t the only U.S. company snapping up Spanish-language stations. Last month, an investment group headed by Hallmark Cards added San Francisco’s only Spanish-language TV station to the 10 outlets it bought in July--including KMEX Channel 34 in Los Angeles--from SIN’s U.S. sister corporation for $301 million.

But those acquisitions don’t really change SIN’s relationship as program supplier under contract to the stations, and Hallmark has announced no plans to become a producer of programming for its newly purchased outlets.

Still, industry officials say, this year’s station-buying spree represents clear evidence that U.S. corporations see great potential by reaching the country’s fastest-growing consumer market--the nation’s more than 17 million Latinos.

“I think there is a kind of critical mass that has been reached in the advertising and broadcasting community’s recognition of this audience,” said Richard Mahler, Los Angeles bureau chief of the trade weekly Electronic Media. “I just see more interest than there ever has been before.”

Competition for Viewers

Charles Curran, sales director of John Blair & Co.’s Spanish-language broadcast and advertising division, says the increased interest also means more competition for viewers.

“There is definitely going to be a horse race now,” predicts Curran. “For the first time, SIN is facing strong competition in four of its markets” from Reliance-owned or controlled outlets in Los Angeles, New York, Miami and San Antonio.

For its part, SIN--a wholly owned subsidiary of Televisa, the world’s largest producer of Spanish-language TV programming--says it welcomes the new competition because it promises to expand, rather than divide, the Spanish-language advertising pie.

First Boston’s MacDonald agrees. He predicts that Reliance’s entry will increase the number of Spanish-language programs produced in the United States and thereby heighten the public’s and the advertising industry’s awareness of the Latino market. Although SIN local stations produce significant amounts of programming in the United States, the vast majority of what is broadcast here still comes from Latin America.

But SIN, the 25-year-old network that takes much of the credit for building Spanish-language television in the United States, doesn’t plan to roll over in the face of new competition.

“(Reliance) will need to work 25 years to get where we are now,” quipped Francisco Sadurni, a company spokesman.

Already, SIN has matched Reliance’s expansion moves with some of its own--a far-reaching internal reorganization of the network that promises to increase Televisa’s U.S. presence.

Company officials confirmed recent reports that, beginning next year, SIN will be renamed Univision. It will handle Televisa’s home video and record sales in addition to its network and program distribution functions.

Although telenovelas (the Spanish-language equivalent of soap operas) will continue to be a mainstay of SIN’s viewing menu (an average of nine hours each weekday), the network has fielded new shows to attract younger audiences and male viewers.

Youth-Oriented Videos

“XETU,” a youth-oriented game show, and “Video Exitos” (Video Hits), are among the six new Televisa-produced shows SIN has added to its program roster this year along with an increase in sports programming.

Network officials say the programming changes are not a response to increased competition. They also deny that the new programs signal a shift back a decade or more ago when Televisa supplied virtually all of SIN’s programming from Latin American sources.

Ironically, one of Televisa’s latest expansion schemes appears to have played right into the eager hands of its new competitor.

Its plans to take over “Noticiero SIN,” the only nationally broadcast Spanish-language news show produced in the United States, triggered a walkout of half of its top staffers last month amid charges by politicians and others that the show was becoming a mouthpiece for the Mexican government.

At the heart of the controversy was Jacobo Zabludovsky--Mexico’s elder statesman of news to some, a pro-Mexican-government propagandist to others. Zabludovsky, Televisa had announced in September, was to take charge of melding SIN’s 60-member news division into an international news show called “Orbit,” which will eventually offer its reports to SIN’s U.S. affiliates.

Denies Allegations

Zabludovsky has fervently denied the allegations of political bias, and SIN expressed confidence in his journalistic credentials and his popularity among its viewers. Network officials sent to Miami to help shore up the program said “Noticiero” would continue to maintain its standards despite the staff resignations.

But so far, according to SIN officials, the walkout has delayed “Orbit’s” formation and discouraged the man described as “Mexico’s Walter Cronkite” from taking his job as head of Televisa’s new international news agency.

Televisa also appears to have instigated the last thing it could have wanted--the creation of a rival news show staffed by the very employees it drove away.

After two months of bitter infighting, about 30 former “Noticiero” journalists and technicians announced on Nov. 7 the creation of the Hispanic-American Broadcasting Network. With financial backing from Miami-based Cosmos Communications, HBN expects to have a network news show ready by early next year.

Reliance’s Silverman hasn’t wasted time in letting HBN know his door is open.

“We understand that this group (of former SIN) employees will produce its own news show for sale to (Spanish-language) stations,” he said. “We would be a buyer.”

Company officials boast that it now has the ability to put together at least a bare-bones, full-time network.

Besides the possibility of signing on HBN, Reliance’s own Spanish-language advertising sales and programming arm called NetSpan produces a dozen music specials annually. WNJU also produces its own soaps, as does Blair’s Telemundo studios in Puerto Rico.

In the meantime, the new network plans to fill in the gaps by buying programs from Latin American producers such as Venezuela’s Radio Caracas until it can launch its own domestic production ventures.

It also will attempt to build on its successes at WNJU and KVEA-TV, a Los Angeles area broadcast outlet in which Reliance bought a majority share last November.

Within a span of 11 months, stations officials said, KVEA managed to erode the dominance of KMEX by carving out a 36% share of the local Spanish-language viewing audience, as measured by the Arbitron ratings in October. Reliance turned around the former part-time religious outlet by programming Spanish-dubbed U.S. and European movies against KMEX’s telenovelas.

Fast-Growing Population

Whatever the strategies and counterstrategies, the forces driving the industry’s present consolidation cycle are obvious: A fast-growing national Latino population which pays its way with American dollars.

The U.S. Census Bureau estimates the nation’s Latino population at 17.3 million. Many say the government’s figures are too low because they do not fully account for illegal immigration and say the actual population total is closer to 20 million. Even so, the Census Bureau estimates that the Latino population will grow by 30% by 1990 and double by 2020.

The U.S. Latino market also acts as a two-way magnet, pulling up an increasing investment flow from Latin America.

Carlos Barba, WNJU’s president, said the U.S. Latino market is the fifth largest in population in the Spanish-speaking world, exceeded only by Spain, Argentina, Mexico and Chile.

More importantly, Barba said, average U.S. Latino annual family incomes of $19,300 make this the world’s richest Spanish-language media market, quite a prize for Latin America’s devaluation-strapped TV industries.

The Latino market offers other advantages: “The growth of the (nation’s) Spanish market doesn’t depend on the baby boom,” Barba said. “It depends on the arrival of active consumers who immediately begin to earn and spend money.”

But as an industry, Spanish-language television still is dwarfed by its English counterpart. It also is an industry that until this year has not shown signs of living up to its full potential.

Hispanic Business, a Santa Barbara-based magazine that charts Spanish-language media performance, says the rate of increase for Spanish-language TV advertising expenditures has steadily dropped since 1982.

Turnaround in Advertising

This year, however, the industry shows signs of reversing that trend, according to the magazine’s figures. Hispanic Business estimates that Spanish-language TV ad revenue in 1986 jumped to $184.3 million, a 31% gain over last year. Spanish-language TV sales in 1985, the magazine reports, reached $140.5 million, only a 19% increase.

Despite the encouraging news, the industry also faces several long-term challenges:

First, the steady assimilation of Spanish-speaking immigrants into the English-speaking mainstream. Second, some researchers say, Latinos are beginning to adopt the channel-switching habits of their English-language counterparts, which will make it more difficult for Spanish-language stations to hold onto their traditionally loyal viewers. Third, a lack of quality research on Latino buying habits continues to scare many firms away from investing in Spanish-language TV.

Some station managers say that the Latin American programmers are not responding quickly enough to the changing Latino domestic market by creating new programming alternatives.

“We cannot ignore it,” Barba said. “If you don’t have (an) intelligent product . . . it’s very difficult to develop an audience. Human nature is to discover new things, try new things.”

Latin American producers, he added, haven’t really tried to fill this void either.

“They consider us their most important market, but they export just telenovelas. I would like to see them generate a new kind of product with appeal to children and men. If they don’t do it in the near future, we will have to do it ourselves.”

SPANISH-LANGUAGE TELEVISION ADVERTISING MARKET Expenditures in millions of dollar. Year-to-year increase in percent.

1982 1983 1984 1985 1986 National SIN and $60 $81 $98 $120 $142 its local affiliates +35% +21% +22% +18.3% Independents $9 $11.7 $20 $20.5 $42.3 (Non-SIN stations) +13% +19% +1% +106% Totals for all $69 $92.7 $118 $140.5 $184.3 Spanish-language TV +34.3% +27.3% +19% +31%

Source: Hispanic Business magazine