Another Spanish Net? Crazy Like A Fox

Twenty-six years ago, Rupert Murdoch’s News Corp. rocked the TV broadcasting business with the launch of a “fourth network” to compete with ABC, CBS and NBC. Today, Fox tops them all, attracting more of the viewers that advertisers like most.

News Corp. is now trying to repeat that feat in broadcasting’s parallel universe of Spanish-language TV. This fall, it will take on Univision, Telemundo and a host of smaller networks with MundoFox, a 50-50 joint venture with Colombian broadcaster RCN.

Media agencies, Spanish-language broadcasters, analysts, program producers and even rival networks believe that News Corp. can pull it off if it is smart about the programming and can assemble a solid lineup of affiliates.

Some also say the entry of another well-funded, well-branded broadcast network may boost the entire business, closing the large gap between Spanish-language TV’s share of viewership and its share of the advertising dollars. And the agencies simply hope such a network will give them another advertising option and, perhaps, drive down prices.

“I love having more competition coming to the marketplace,” said Steven Wolfe Pereira, EVP of MediaVest and managing director of MV42/MediaVest Multicultural.

“Our role as a media strategy, planning and buying agency is to add more value and more choices for our clients. So, having more competition from a premier company like News Corp. that is acknowledging the Hispanic market and investing in it by building a network to compete with Univision and [NBCUniversal’s] Telemundo is great.”

David Joyce, media analyst at Miller Tabak, said News Corp. clearly has an opportunity. “There are a lot of smaller networks that have tried to do this, like Azteca America. There is a lot of fragmentation, but it’s possible because, obviously, News Corp. has the financial heft.”

Martin Breidsprecher, CEO of Azteca America, said Fox’s entry could benefit all. “It signals that there is a great appetite for the Hispanic market in the U.S. Right now, we know that U.S. companies are not spending enough to reach Hispanics. This signals that there is money to be made in the U.S. Hispanic market.

“Competition is good. I think it will make us more vigilant and act more quickly.”

After News Corp. announced the initiative last Monday morning (Jan. 23), Hernan Lopez, CEO of Fox International Channels, and other Fox executives at the NATPE conference in Miami spent two days talking privately to broadcasters about affiliating.

Among them was Bert Ellis, president of Titan Broadcast Management, a station group that could lend several stations to the enterprise. Ellis said he was impressed by what he heard.

“The presentation was very, very good,” he said, noting that he had been an early affiliate of the Fox network when he was running Act III Broadcasting in the late 1980s. “They can bring a lot of assets to it …. They will get traction. They will get distribution.”

Another was Barbara Laurence, who owns Spanish-language stations in Las Vegas, San Antonio, Louisville and Denver. With partner Carlos Vasallo and his film and TV libraries, Laurence has developed her own Mexican movie-based programming service for the stations, VasalloVision. But she remains open to MundoFox.

“With the recent U.S. census numbers, it is a terrific time for more options for Hispanic viewers in the U.S. You have so many Hispanics in this country and so few viewing choices. For so many years, there was no alternative to Univision. Telemundo was kept alive by the ad agencies that needed an option other than Univision, which would have been a monopoly.

“If you are an Anglo, you have hundreds of choices. Hispanics are growing and what do they have? Three or four choices, except on pay tiers [cable and satellite], and a lot of homes can’t afford them.”

News Corp.’s interest in the Hispanic market is being driven by the market’s rapid growth. According to the 2010 U.S. census, the Latino population of 50.5 million is twice that of 1990 and 43% greater than it was in 2000.

In recent years, News Corp. has responded with three specialty cable networks in the U.S.: Fox Deportes, a sports channel; Utilisimo, a lifestyle channel; and Nat Geo Mundo.

With MundoFox, News Corp. is doubling down, going for the largest possible audience with programming of the broadest possible appeal.

For its part in the joint venture, News Corp. is providing ad sales, distribution, operations and playout, according to Lopez. RCN will provide much of the programming, including that for primetime.

Lopez is a co-developer of MundoFox and, for now, he is the network’s chief executive and spokesman. But that will soon be changing. He said he expects to hire a CEO for the network within the next few weeks, noting that he has already interviewed a couple of strong candidates.

Lopez would not say what News Corp. is investing in the network, but he said the company is making a long-term commitment and he did not dispute a report in the News Corp.-owned Wall Street Journal that it would lose less than $50 million in its first year of operation.

While RCN is the principal source of programming, it will not be the only one, Lopez said.

Other sources include Fox Deportes; Fox International Channels, which produces programming for some of  News Corp’s 350 channels around the world; Shine Group, a producer of scripted and reality programming (The Biggest Loser, MasterChef and One Born Every Minute); and RCN’s NTN24 cable network. The latter will produce a nightly, one-hour newscast for MundoFox

“Unlike any independent start-up network, we don’t need to set up a whole development department and try to come up with new shows from scratch,” said Lopez. “Most of our shows are already created and the experiment is already proven.”

Lopez said that he recognizes that most Hispanics in the U.S. are of Mexican extraction and that MundoFox must appeal to them. He has no doubt the RCN programming will.

“Colombian programming is well known around the world because of its first-rate writing, its first-rate storytelling,” he said. “It has played very well in Mexico and in the U.S. for decades, so much so that some of the most successful shows aired by Univision were actually done by Televisa based on Colombian scripts.”

Some of the RCN programming has already been seen on Univision and Telefutura, he said. But all the programming that will be scheduled in primetime on MundoFox will be exclusive to the network in the U.S. “RCN is holding back everything that it has produced for Colombia for the last six months and from now on so that we can premier it on MundoFox.”

RCN library content like the popular Betty La Fea (the show that morphed into ABC’s Ugly Betty in the U.S.) will also become exclusive to MundoFox in the U.S. after its existing licensing agreements with other networks expire, Lopez said.

MundoFox will probably also tap News Corp.’s own TV and film libraries, he said. “We’re going to have a conversation with the Twentieth Century Fox studio and select from what has performed the best among Latinos that’s still available. Not all of those programs have Spanish-language rights.”

Broadcasting is central to the MundoFox strategy. “The Spanish-language revenue opportunity is overwhelmingly tilted towards advertising,” said Lopez. “That makes it essential to get broad distribution, which on cable is hard to do.”

In assembling its affiliate lineup, Lopez said, MundoFox prefers full-power stations that completely cover their markets and that are already broadcasting in Spanish, particularly if they are producing local news. “We want to pick the right partner everywhere.”

Lopez said the new network expects to announce charter affiliates covering 40% of Hispanic homes within two months, and hit the 75% mark by the time of the network upfronts in May.

To win affiliates, Lopez said, Fox is offering broadcasters half of the advertising inventory, or six minutes per hour. It’s neither offering nor asking for cash, he added.

Lopez said Fox is seeking “long-term” affiliation agreements, but declined to define what that means. “It’s going to vary,” he said.

The key to MundoFox achieving its coverage goals is finding affiliates in the top 10 Hispanic markets, which account for just over 50% of all Hispanic homes: Los Angeles, New York, Miami, Houston, Chicago, Dallas, San Antonio, San Francisco, Phoenix, and, of all places, Harlingen-Weslaco, Texas.

MundoFox has several places it can go in Los Angeles, which alone has 13.4% of Hispanic homes. According to one source, it is eyeing KWHY, an independent Spanish-language station owned by the Meruelo Group headed by Alex Meruelo.

Ironically, until last year, the station belonged NBCUniversal, the owner of Telemundo, but it was forced to spin off  the station by the FCC at the time of the Comcast takeover to comply with ownership restrictions. NBCU had owned the station under a waiver. Meruelo paid $40 million for it.

MundoFox could also go with Hero Broadcasting’s KBEH in Los Angles, which now airs Viacom’s Spanish-language music video service, tr3s. Principally owned by Robert Behar, Hero also has a station with the same format in Phoenix, KMOH, Hispanic market No. 9.

The No. 2 Hispanic market, New York (9.6%), could prove more difficult. There is no independent Spanish-language station in the market. But there is a station with brokered Korean and Chinese programming, WMBC, and two English-language independents, WSAH and WRNN. However, the transmitters of all three are on the fringes of the market, limiting their over-the-air coverage.

Licensed to Bridgeport, Conn., WSAH is in bankruptcy, but Bert Ellis and his partners have a deal in place to buy it. Based in Westchester County, N.Y., WRNN is owned by Richard French, who just sold his only other station, independent WTVE Philadelphia, for $30.4 million and may be looking for a way out.

In Miami, the third-ranked Hispanic market (5.2%), the only Spanish-language independent is WGEN, owned by Mapale LLC. The station’s main transmitter is in Key West, Fla., but it covers much of the Miami market through a network of low-power repeaters.

If MundoFox is to achieve its distribution goals, it may have to snatch affiliates from other networks like Azteca America. That’s the way the original Fox broadcast network grew.

“It’s going to be hard to convince somebody to switch away from Univision and Telemundo because they have had such a long and intense track record,” Lopez said. “We honestly don’t believe that’s going to happen at launch, but we are certainly going to talk to everybody.”

Azteca America may be vulnerable. Among its key affiliates is Una Vez Mas Holdings, which contributes to the network full-power stations in Dallas (KAZD), San Francisco (KEMO) and Houston (KYAZ) and low-power stations in some 20 other markets. Azteza America’s flagship in Los Angeles, KAZA, may be safe since parent TV Azteca owns 25% of the station. Pappas Telecasting owns the majority stake.

News Corp. could also try to absorb Spanish-language broadcasters that have created programming services for their own stations. In addition to Barbara Laurence (VasalloVision), such broadcasters include Liberman Broadcasting (Estrella TV) and Spanish Broadcasting System (Mega TV).

The agencies and others in the Hispanic media sphere think that it is important for MundoFox to differentiate its programming from Univision and other networks.

“Hispanics are very drawn to experimenting with new things,” said Hector Orci, founder of Orci, an Hispanic ad agency in Los Angeles. “They’re not stuck on anything. If you come up with something new, they’ll try it. And if it’s better than what they’ve got now, they’ll stick with it.”

Jose Velez-Silva, partner and director of client services at ad agency GlobalWorks in New York, concurred. “I don’t know what their lineup will be. If it will be the typical novela lineup, then what’s the point?”

Jonathan Gwyn is founder and CEO of Mi Casa Broadcasting, which produces English-language shows and operates the mostly English Mi Casa multicast subchannel on Spanish Broadcasting System’s KTBU Houston.

Not surprising, Gwyn thinks MundoFox ought to think about airing at least some of its programming in English.

“I don’t know if there’s room for another Spanish-language network, but I think there’s room for another network,” he said. “The English-language Latino is underserved. They’re consuming their media in English.

“Fox has a very good perception in the Latino community. They have good news. They have the Fox Latino website, which is all in English, and, from what I understand, it’s doing very well.”

News Corp. will figure it out, said Luis Torres-Bohl, president of Mexicanal, a network featuring mostly Mexican regional programming that has cobbled together its distribution from cable, satellite and broadcasting. It now airs on 22 multicast subchannels.

“Fox is a very smart company,” he said. “They have had quite a number of successes in television. They are going to come to the conclusion that you can’t be all Columbian or all this or all that. What they are going to try to do is come up with programming that addresses as broad an audience as they possibly can.”

That’s not to say the RCN can’t draw big audiences simply because of its Colombian roots, he added. “Quality programming crosses national as well as ethnic boundaries.”

Miller Tabak’s Joyce said MundoFox could “lift the overall market” by attracting more advertisers and viewers. That, in turn, could narrow the viewership-advertising gap.

Even though Hispanics now account for nearly 17% of the U.S. population, Hispanic media attract only about 4% of the advertising dollars, he said.

“On a purely theoretical basis, that gap between 4% and 17% could mean another $10 billion that should be in this market. However, that should be cut as more people become acculturated. Even so, there should be at least a couple of billion more coming into this market.”

In pitching the network to advertisers and potential affiliates, News Corp. is making heavy use of its bright history in English-language broadcasting.

“You couldn’t have a fourth network,” Lopez said, but “of course, Fox came in and experimented, innovated different shows like Married … With Children that definitely made a mark. They weren’t for everybody at the time, but they definitely got noticed. Then came The Simpsons, X-Files and Ally McBeal, then 24 and Family Guy, then American Idol.

“Throughout all this time, Fox has been pushing and innovating and creating breakthrough television. You know what it’s done. It’s been No. 1 eight seasons in a row.”