July 18, 2012
By Jeff Bercovici
Hernan Lopez doesn’t look like a guy who produces telenovelas, the soap operas that dominate the airwaves throughout Latin America. He looks like a guy who stars in them. With his wavy black hair, firm jawline and velvety Argentinean accent, it’s easy to picture him galloping home on a white horse to rescue his childhood sweetheart from losing the family hacienda to a corrupt patrón.
But Lopez has a different quest ahead of him. As CEO of Fox International Channels he’s the point person and prime mover behind News Corp.’s effort to capture an outsize slice of a $1 trillion pie: the surging U.S. Hispanic market. Standing in front of 900 potential advertisers at the Ziegfeld Theatre in Manhattan, as part of the annual upfronts, when TV networks spare no expense to showcase their upcoming offerings, he provides an early glimpse of MundoFox, a national Spanish-language broadcast television channel News Corp. is launching later this month.
“The late Steve Jobs used to say if you asked a focus group to come up with an iPod, they would have told you they were perfectly happy with their Walkmen,” he says. Viewers of the established Spanish-language networks, he says, are like those hypothetical focus groupies: “They think they’re happy with their current choices,” but they’ll soon know better.
Within the first year of its existence, Lopez gushes, MundoFox expects to be distributed on 60 terrestrial stations covering more than 75% of the country’s 10 million-plus Hispanic households. It’ll spend $50 million in the process.
It’s a shrewd bet for a company whose fortunes are built on disrupting the status quo, most famously in 1986, when chief Rupert Murdoch gambled billions that there was room for a fourth major American broadcast network. Obvious as that proposition seems now, plenty of critics predicted disaster for Fox, which has finished the last eight seasons ranked No. 1 among its target audience of adults 18 to 49.
“We think the established Spanish-language networks today are trapped in the same formula that ABC, CBS and NBC were 25 years ago,” says Lopez, over coffee two days before his upfront presentation. “And we’re going to use the exact same strategy to win a significant space.”
News Corp. will have some competition, though. Across the landscape of news and entertainment, there’s scarcely a company that’s not scrambling to launch new offerings targeted at American Hispanics while searching for ways to draw more of them to its existing ones. Riding a wave of ratings success, Univision, the longtime leader in Spanish-language broadcasting, has launched three new networks already this year. In 2013 it will test its audience’s appetite for English-language programming, introducing a 24-hour cable news network in partnership with Disney-owned ABC.
Comcast, the parent of NBC Universal, is backing a new network called El Rey, to be programmed by filmmaker Robert Rodriguez. Meanwhile, its Telemundo network is committing to a big increase in original programming, a bid to differentiate its lineup from the largely imported fare at the other networks, and pooling its resources with NBC News for election coverage. And it’s much the same wherever else you look, from Viacom and Time Warner to Yahoo, AOL and YouTube.
“I think about my time in media,” says Univision CEO Randy Falco, an industry veteran of 37 years. “There’ve been times when things have changed very quickly, but this is probably the fastest I’ve seen.”
It’s no mystery what’s driving all this activity. The growth of the Hispanic population is far and away the most significant demographic trend reshaping America, as the most recent census, conducted in 2010, made clear. There are now 52 million Americans of Latin-American descent. By 2050 that number is projected to reach 133 million, meaning that nearly one in three Americans will be Hispanic. A full 50% of U.S. population growth over the past decade has come from this group, whose annual spending power is already $1 trillion and will climb to $1.5 trillion by 2015, according to Nielsen Media Research. If Hispanic Americans were a nation, it would have the world’s ninth-largest economy.
“The Hispanic market is no longer being viewed as a niche, minority market for a lot of companies,” says Alex Ruelas, cofounder of the Austin-based marketing agency LatinWorks. “It’s becoming a fairly major part of the mainstream, and it’s helping to reshape the overall universe of consumers in a way that’s a bit surprising to people.”
If you’re a big marketer like PepsiCo or Procter & Gamble, you look at the Hispanic market and see an audience that’s not just growing fast but also punching above its weight at the checkout. Despite trailing behind the general market in average household income — a gap that’s closing — Hispanics overindex in product categories from carbonated beverages to apparel to consumer electronics, not to mention diapers, cribs and all other things baby-related. “We really like to shop,” says Telemundo President Emilio Romano.
Such advertising-friendly stats are burnished by a demographic exclamation point: The median age of U.S. Hispanics is 27 — smack in the middle of the media world’s most coveted 18-to-34 age range — compared with 42 for non-Hispanic whites. Marketers pay a premium for young adults for a host of reasons: Their brand preferences are less established; they’re disproportionately likely to be so-called influencers, whose early endorsement can launch a trend; and they’re hard to reach through traditional channels. Own them, as Murdoch and the rest clearly see, and you own the future.
These “New Americans” aren’t just less-wrinkly versions of their parents. While less than a quarter of the total Hispanic population now describes itself as using English as its dominant language, among those born in the U.S. — a designation that belongs to nine out of ten under the age of 18 — that number rises to 40%, with most of the rest describing themselves as bilingual, according to a recent study by Pew.
An increasingly common language means an increasingly common culture; these young Hispanics identify far more with their non-Hispanic peers than their predecessors. “The world is not the way it was for the previous generation,” says Ruelas of LatinWorks. “There’s less distinction between young consumers, regardless of their background, than there would have been in the past.”
All these TV upstarts share a common target: Univision. Founded in 1962 — it encompasses the eponymous flagship, as well as a second broadcast network, Telefutura, and the Galavision cable network — Univision was acquired in 2007 for $13.7 billion by a consortium led by Israeli-American billionaire Haim Saban. For more than 20 years it was the only national Spanish-language broadcaster, and the head start shows: Among bilingual Hispanics 48 of the 50 most popular shows are on Univision, and the network reaches a staggering 97% of Spanish-speaking households.
Thanks to those demographics, even with its dominance, Univision’s median age remains 36, making it increasingly competitive with the major English-language broadcast networks among viewers 18 to 49, and it routinely beats them in this bracket in Los Angeles, Miami and other big Hispanic markets. “I don’t think you can talk about the ‘Big Four’ networks anymore when we beat NBC 195 nights out of the year last year in prime time,” says CEO Falco, who spent three decades at General Electric’s network.
In this contest Univision has a built-in advantage: the telenovela. Like soap operas, novelas air serially with a new episode each day rather than each week. Reruns are all but nonexistent. It all makes for an incredibly sticky viewing experience. As ad-skipping technologies cause marketers to question the value of the 30-second spot, Univision can tell them that 94% of its audience watches shows live. (For the Big Four it’s less than 80%.) “We’re DVR-proof,” boasts Falco.
But they are suspectible to competition. Univision’s share of the Spanish-language market has dropped to 73% from 79% ten years ago. Of course, 73% of an exploding market is nothing to pity, but between the debt from Saban’s takeover and a $600 million settlement with Grupo Televisa, the Mexican studio that provides much of its programming, it’s still losing money—$14.1 million in the most recent quarter.
Falco is adamant that the changing face of the Hispanic market doesn’t mean a flattening of Univision’s trajectory. “The biggest segment of our audience is 18 to 34, and, believe it or not, they still speak Spanish, and they still watch novelas and soccer games and news,” he says.
But he’s also hedging his bets. Besides its three primary outlets, Univision has recently added new niche cable channels devoted to sports and novelas, as well as distribution deals with Microsoft’s Xbox and Hulu. “What I’m concerned about is making sure that every single time somebody who grew up with us goes off to a different platform or a different device,” says Falco, “we’re going to be there with a Univision-branded product of some kind.”
When the new president of ABC News, Ben Sherwood, approached him last year about partnering on an English-language 24-hour news channel, he jumped at the opportunity. The joint venture doesn’t yet have a name or a firm launch date, but with the backing of Disney and Univision, it’s guaranteed instant scale.
Murdoch’s Fox Network established itself a quarter-century ago by steering national TV habits toward the gross and lowbrow (think Married With Children and Cops). Which makes it ironic — albeit in keeping with News Corp.’s contrarian ethos — that Hernan Lopez wants to carve out a niche for MundoFox through higher-quality writing and production. “If you take the average schedule of any channel for Latinos and you throw a dart at it, you’re going to find a telenovela, and that telenovela hasn’t changed much in the last 20 years,” he says.
Lopez spent his first few years at Fox stationed in Miami, far from the company’s traditional power bases of New York, L.A., London and Melbourne. “I don’t know if it’s because we weren’t part of the U.S. team, but we always took it to heart what Fox stood for—the aggressiveness, the innovation, the edge,” says Emiliano Saccone, his longtime colleague and MundoFox’s president.
“Hernan is like a dog with a bone,” adds David Haslingden, who oversees Lopez as head of the Fox Networks Group. (If and when News Corp. divides into two companies, as it recently announced plans to do, Fox Networks will be part of the same spinoff company as the Fox film studio and cable channels; the other company will contain News Corp.’s publishing operations.)
The two have been colleagues since Lopez, who moved to the U.S. from Argentina 15 years ago, was named general manager of Fox’s Latin-American channel in 2000. Though usually in different cities, they talk every day, often multiple times. “I can vividly remember, in probably my second or third conversation with Hernan, him giving me this long spiel about how he felt the U.S. Hispanic market was underserved, was an untapped potential market for us,” Haslingden recalls.
Saccone recalls drawing up a detailed business plan for the network with Lopez and pitching it to Fox brass. That was eight years ago. “It was regarded as just not a large enough opportunity to demand the type of attention and effort that is required to do it well,” says Haslingden.
Where others might have grown discouraged, Lopez bided his time, refining the concept and letting the demographic boom sell the concept for him, gradually enlisting support from key higher-ups like News Corp. COO Chase Carey, who calls the Hispanic market a “massive opportunity,” and Murdoch himself. So thoroughly has the 81-year-old chairman hopped on board that he’s raising his two youngest children to speak Spanish.
The most successful network show created around a Latin principal was George Lopez’s eponymous sitcom, which ran on ABC for five years and is now in reruns on Nickelodeon. Other than that, few outside of Univision have shown much success. The 2010 NBC series Outlaw, which starred Jimmy Smits as a former Supreme Court judge, lasted only eight episodes. The CBS sitcom Rob, which starred comedian Rob Schneider as a man who marries into a huge Mexican-American family, flamed out after just four episodes earlier this year. A highly anticipated new show from Desperate Housewives creator Marc Cherry, Devious Maids, didn’t even make it to the air. Co-produced by Eva Longoria, it was to have starred four Latina actresses, but ABC elected not to pick it up for the upcoming fall season.
Fox has had flops, too. FORBES may rank Jennifer Lopez as the most powerful celebrity in America, but the queen bee of American Idol couldn’t translate that to her reality talent show, Q’Viva. The show aired in Spanish on Univision and then in English on Fox, where it attracted only 1.8 million viewers per episode.
“There’s a misconception that this is an easy-to-reach segment because they have fewer and more contained options to them,” says Monica Gadsby, CEO of SMG Multicultural, part of the Starcom MediaVest Group advertising and marketing agency. “You almost need to think of it as the opposite. The reality is that Hispanic Americans have more options than any other consumer. They have options that make any consumer’s head spin, and what happens at that point is good TV just becomes good TV.”
Filmmaker Robert Rodriguez thinks they need still more. The Texas-born director, who broke out 20 years ago with a low-budget Spanish action film (El Mariachi) and has since segued to big-budget English-language family fare (Spy Kids), says that American Hispanics need media created specifically for them, not imported fare or general market entertainment with token Latin characters.
“I have five children, and even though they’re bilingual, there’s nothing on TV that represents who they are and what they can be inspired by,” he says.
El Rey, which Comcast expects to launch in 2013, is meant to remedy that. The channel hopes to follow in the tracks of successes like AMC and FX, starting out with one or two signature original shows and gradually ramping up from there. Another model Rodriguez has in mind is MTV in the 1980s. “You didn’t just go there for the programming — you went for the philosophy,” he says.
For Comcast-owned Telemundo, the answer is to stick to Spanish while customizing programming to the tastes and expectations of American Hispanics. The only way to do that is to produce it here, says Telemundo’s Romano, rather than relying on a foreign studio, as Univision does with Mexico-based Televisa.
This fall’s lineup will represent a 40% year-over-year increase in original programming, he says. “Most of the new entrants to this business are trying to capture Hispanics in English,” Romano adds. “We think that’s a business case that’s not been proven in the sense that once that barrier of language gets crossed, they’re an elusive target. They can be entertained by anybody.”
Lopez, too, thinks there’s a bigger potential audience for Spanish-language programming — as long as it’s the right programming. He intends to carve out a niche for MundoFox with fare like Kdabra, a supernatural series about teenagers with mysterious powers, and El Capo, a gritty thriller about a Colombian drug lord.
Both are not traditional telenovelas but a hybrid format Lopez calls a teleseries, a new genre calculated to appeal to both men and women by mixing action and romance. Unlike novelas, teleseries air new installments weekly, not daily, and they also feature higher budgets, more scenes shot on location and more naturalistic dialogue. El Capo comes from RCN, MundoFox’s primary production partner. Lopez said MundoFox signed the Colombian studio because of its reputation for making “an American style of series that looks, feels and is perceived by viewers as having the quality of an American series, but in Spanish.”
In his upfront presentation, Lopez screens plenty of clips from his network’s lineup to make his point. But the most effective might be the one he shows from Triunfo del Amor, a series that aired last year on Univision, used as an example of the type of programming MundoFox won’t be doing. The segment’s hammy acting and cheesy music get the desired reaction: knowing laughter. Lopez chuckles along.
Then he goes in for the kill. “Breakthrough TV beats formula TV,” he says. “Fox has a history of making breakthrough television. We’ve done it in English, and we’re going to do it in Spanish.”