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Spinning Gold From Salsa

Cable World, August 8, 2005

By saying bye-bye to buy-throughs, offering more channel choices, and becoming smarter marketers, MSOs are reaping the benefits of the Latino market and gaining on a satellite stronghold.

By Simon Applebaum

In a sense, cable's experience with the Latino market illustrates perfectly the value of lessons learned at CTAM: Know your customer and examine your marketing and pricing strategies.

It's well known that cable operators fell behind DBS by failing to provide Latinos with a digital assortment of Spanish-language channels. While satellite began a Latino digital tier strategy in 1999, cable did the same just two years ago. But give MSOs credit--they've learned from their mistakes and this knowledge has helped make Latino tiers an industry success story.

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Comcast and Cox estimate their national Latino digital subscriber bases have more than doubled in the two years since they've introduced Latino digital tiers. Cox's San Diego system, one of the company's largest, has posted 100% growth in Latino digital customers since 2003, multicultural marketing director Cesar Cruz says. "Nuestros Canales," the Spanish tier created in 2003, has vaulted Bright House Networks' Latino digital subs in Orlando and nearby central Florida communities.

The gains are occurring despite what MSOs acknowledge was a huge mistake early on--insisting Latino subs take most or all of a system's digital lineup to get the Spanish channels. This tactic, known as "buy-through," discouraged many Latinos, especially Spanish-speaking customers. Another turn-off: high monthly prices.

"We had a one-size-fits-all mentality, so that Latinos had to find their channels by getting a lot of English channels along the way," Time Warner Cable chief marketing officer Sam Howe says. "Cable didn't address this because of this one-size rep, which it got away with. Operators got away with adding Latino channels, but not with changing the model."

Great opportunity, poor execution, concludes Tim Kelly, Charter's core video service marketing director. "We made the audience buy at an unreasonable price point," he says.

Buy-through also played into the hands of DirecTV and EchoStar's Latino tiers--Para Todos and Dish Latino, respectively. Operators made tiers "an expensive proposition, which hurt them," says Mark Ryan, senior marketing director for Para Todos.

Upset with consumer resistance, operators switched gears in late 2003. Buy-through was dropped in many markets, and altered in others so that instead of taking all digital services, a customer would get a small, expanded basic or digital tier with Spanish channels.

Comcast multicultural video senior director Mauro Panzera credits the Latino turnaround to eliminating buy-through, plus greater sensitivity in channel selection and pricing. "We're growing subs month after month," he says. "We have choice, we have good brands with high production values, whether U.S.- or Latin American-produced. The challenge is to continue offering better quality and maintain a constant dialogue with our customers."

DirecTV and EchoStar maintain cable hasn't made an appreciable dent in their Latino business. Their tier penetration keeps growing, they say. DirecTV reached 700,000 Para Todos subs five months ago; Ryan predicts Para Todos will break 800,000 subs early this fall, compared with 347,000 subs at the start of 2004.

But cable believes it can nullify satellite's advantage and move ahead by bundling their tiers with video on demand, HDTV and Spanish-language telephony. "That's our phase two, and it's starting already," Howe says.

Comcast launched 100 hours per month of Spanish VOD last October in all systems offering Latino tiers, and Panzera is exploring high-speed access, telephony and other bundle possibilities.

Charter soon will test a combo digital tier/high-speed package in several markets for $49.99 per month, and anticipates having a triple-play bundle-- adding telephony--in trial later this fall at undisclosed locations.

What Charter's Kelly isn't hiding is his bullishness for bundles. "All the research suggests Latinos are a tech-savvy group who want to be first on the block with VOD, DVRs and you name it," he says. "That's what we have to keep in mind."

Corporate Gets Involved

While cable operators refuse to provide specific figures about penetration and sub counts, their actions indicate Latino digital tiers have become a growth business.

Previously, Time Warner corporate let individual systems decide what channels to run on their Latino tiers. In addition, corporate provided only minimal leadership in other areas, including promotion.

Now, with guidance from multicultural marketing expert Maida Chicon, Time Warner consults with affiliates on channel selection and provides marketing materials, including cross-channel spots.

In another move that signals the strength of Latino purchasing power, nine Time Warner systems have launched a Latino digital marketing co-op, pooling funds for TV ads, direct mail and other promotional ventures. The co-op will also develop media plans for Latino campaigns.

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Spinning Gold From Salsa

Cable World, August 8, 2005

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