SET-TOP BOX MAGIC OPENS DOORS TO HISPANIC HOMES: TIERED PROGRAMMING, MULTIPLE CABLE NETS EXTEND AD OPTIONS

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Victoria varela Hudson remembers when her clients targeting the U.S. Hispanic market had few media options.

She admits she doesn't have to think back too far. In fact, if it's broadcast TV they want, for many there remain two options: Univision, which commands almost 90% of the viewing audience, plus Telemundo.

PROGRAMMING UPSWING

But that could change. With the rise of Spanish-language cable programming, networks and new digital alternatives, the media landscape is changing.

"That's not going to be the case anymore,"says Ms. Varela Hudson, president of Cartel Creativo, a San Antonio-based Hispanic ad shop. "Hispanic cable will offer the most efficient and segmented media. Any marketer is going to have to sit up and take notice."

This comes as the U.S. Hispanic market continues to grow dramatically. About 32.4 million Hispanics live in the U.S., up 6.3% just from 1998, according to researcher Strategy Research. Their annual buying power is estimated at $301 billion, according to the company

Hispanic population and spending increases plus marketers boosting ethnic marketing budgets, are driving the market forward, says Dan Stone, exec VP-operations and business development with TBS International.

"Combine those three, and it's a market we have to address," says Mr. Stone, whose CNN en Espa¤ol cable channel reaches 350,000 U.S. and Puerto Rican households. "This is an active market right now."

For years, the only Hispanic TV options have consisted largely of Univision, Telemundo and smaller local broadcast channels.

CHANGING FACE

That's about to change. In the last year, cable networks and tiered programming options have appeared on set-top boxes across the U.S., giving Hispanics-and the marketers targeting them-more choices. Such networks as Univision's Galavision, MTVS (a product of Viacom's MTV), Gems International Television and even a new 24-hour, Spanish-dubbed animation network debuting this summer from Toon Disney are broadening the available options.

Canales ¤ is another. The new programming lineup packaged by International Channel Networks, a division of AT&T Corp.'s TCI, debuted in August and now is carried in 600,000 U.S. Hispanic homes via 50 TCI and Comcast cable systems nationwide.

With such existing networks as Discovery en Espa¤ol, CNN en Espanol, CBS Telenoticias, Fox Sports World en Espa¤ol and CineLatino, along with eight digital audio channels, the tier is targeting everyone from Spanish-dominant, first-generation Hispanics to acculturated bilingual Hispanics "who want to keep in touch with their roots," says Ms. Varela Hudson, whose agency consulted on the branding and positioning of the new service Canales ¤.

Viewers "want to have more than just two choices," she says. The concept was in development for two years, and arose from two imperatives, says David Jensen, VP at Liberty Media, which partly owns Canales ¤.

Executives realized Latino households-only 40% of which have cable, versus 70% in the general market-were underserved by cable, he says.

Secondly, TCI systems already serve about 40% of U.S. Latino households-meaning the company would not have to install new infrastructure to reach a large segment of the potential audience.

FEW LIMITS

The only limitation was a way to get more content into existing systems and the programming.

"What we lacked were bandwidth and product," Mr. Jensen says.

Executives from Canales ¤ convinced their counterparts from such networks as Discovery Networks, which has four networks in Latin America, and Turner, which has CNN en Espa¤ol, to provide content. As digital technology allows delivery of more programming, executives are hopeful their move is at the cusp of a major trend in U.S. Hispanic TV, Mr. Jensen says.

"If this does well, in a year or two, it would be a natural thing to do another bouquet of services," he says.

MTVS launched last August as part of a "digital suite" that includes seven music and children's programs (MTVS is the only Spanish-language network on the tier). MTV Latin America, an expanded basic-type product beamed throughout Latin America, also is available in certain U.S. markets, says Eric Sherman, director of operations for MTV & VH1 Digital. He wouldn't disclose how many households the networks reach in the U.S.

PUSHING DIGITAL INTO HOMES

If accepted by consumers, these and other brands will "help move digital into the home," he says. Cable industry insiders expect to see a proliferation of networks targeting the segment.

"So many of the key players in the business have very specific Spanish strategies," Mr. Sherman says. "Everyone is making their Hispanic play."

Not all programmers are bullish on the emerging market. Some contest traditional analog capacity will not accommodate any additional networks. Digital, then, would appear the only option. Yet, demand is uncertain so far, says Gary McBride, president-CEO of Gems.

Since its debut in 1993, Gems has focused on analog distribution, supplementing it recently with a move into low-power TV stations to bolster numbers, he says. To date, the network reaches 5.3 million cable subscribers.

Gems marketing executives work closely with cable operators to target U.S. Hispanic households, Mr. McBride says.

NEED FOR AD SUPPORT

In fact, that's the lament of many who watch this industry: acquisition of new subscribers comes only after potential viewers have been convinced of the merits of cable. That takes advertising dollars-something few have been willing to invest, Ms. Varela Hudson says.

But again, for basic cable, the capacity and future is limited. Many cable operators aren't convinced there's room on their basic tiers for more Spanish-language programming, she says. The future, they claim, is in digital or low-power TV.

Advertisers are clamoring for new TV options, says Leila Winick, exec VP-general manager for multicultural media with Western International Media, Los Angeles.

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