Two years ago, Alan Frank sensed an opportunity when an executive approached him about carrying LATV on his multicast channels. Frank is president-CEO of the Post-Newsweek stations, and his outlets in Miami, Houston and San Antonio were in markets with some of the country's largest Hispanic populations. Appealing to them was, fiscally speaking, a near-imperative. Frank saw LATV's music and entertainment programming for young bilingual adults as serving the dual purpose of “reaching new viewers and new advertisers,” he says. Post-Newsweek signed a deal where four of its stations (the above three plus Orlando) became the charter affiliates with the Los Angeles-based LATV. And the deal gave the emerging network a tailwind as it sought to build national distribution solely via multicast.
Last April, LATV launched on nine stations and in less than a year its growth has soared, with commitments to be on 32 by the end of the month. A deal in February with Cox's Fox affiliate in San Francisco gave it an entrée into the eighth-largest Hispanic DMA. And Post-Newsweek has extended its commitment by taking a minority stake, getting ready to launch the network in Jacksonville, and recently hiring a corporate sales executive to sell ad packages across all five of its affiliates.
LATV's rapid growth highlights how multicast is facilitating distribution opportunities for smaller Hispanic-targeted networks. The list includes the newer V-me, LAT TV (separate from LATV) and TuVisión—along with Azteca America and TBN Enlace USA. Even Telemundo has employed multicast to expand into some areas.
“We're all trying to get into as many homes as we can, but we see digital multicast as a way to get into a lot more homes quicker,” said Danny Crowe, LATV's president.
What's emerging is a quid pro quo between stations and the networks, similar to the decades-old broadcast model. LATV, for example, would face an uphill battle securing national distribution via deals with MSOs. But with multicast agreements, it can swiftly gain a footprint across crucial Hispanic markets.
And stations, unsure of how to best use their new multicast real estate, get a shot at gaining a slice of the increasingly lucrative Hispanic ad market. (In 2006—the latest full year available—the Spanish-language TV category grew 13.9% to $4.3 billion, according to TNS Media Intelligence. The measurement firm projects that all Spanish-language media will grow by 7.8% in 2008.) Affiliates get local ad time (five minutes an hour through a 50-50 split, in the case of LATV) and ample opportunities to air local programming, where the revenues are all theirs.
“It's an expedient way for both sides,” said Patricia Torres-Burd, executive VP of programming at LAT TV, a two year-old network now in five markets. “Some station groups have a very clear and defined plan of what they want to do with their multicast channels, but a lot are still deciding. There's a need for content.”
Even without national MSO deals, the Hispanic networks are generally able to get digital cable carriage in local markets through affiliates' retrans deals. And next year's digital transition could eventually lead to multicast channels gaining full distribution in their respective DMAs.
Helped by an agreement with the cable industry that ensures carriage for multicast channels linked with public television stations, V-me launched a year ago this month in markets covering more than 60% of U.S. Hispanic homes (it also has national satellite distribution). The for-profit venture targets a more diverse crowd than LATV with a pre-school block heavy on animation and a mixture of mid- and high-brow programming for adults.
“Nobody wants a steady diet of bread alone,” said Carmen DiRienzo, V-me's president. “There's room to offer a variety to a Spanish audience.”
V-me Media's revenues come principally from PBS-style corporate sponsorships (its affiliates get two minutes an hour to sell), but it also collects fees for distributing programming worldwide and is experimenting with other platforms, including iTunes sales.
Neither LATV nor V-me is making money yet, but both have wealthy backers. Walter Ulloa, the head of Entravision, is the principal stakeholder in LATV, which expects to turn a profit in 2011. “In the multicast arena, it will take a while, but if the programming appeals to people, it's going to get viewership and then the money comes,” said LATV president-COO Howard Bolter.
V-me Media has the backing of two private-equity firms and the parent company of New York's WNET.
LatinAmerica Broadcasting, the parent of LAT TV, has an undisclosed private backer who has invested more than $30 million. Launched in 2006 on low-power stations in five markets—including Houston and Dallas—LAT TV offers family-oriented programming aimed at a wide target that includes Peruvians, Chileans, and others from Central and South America.
A distribution deal with Equity Media Holdings to expand LAT TV by 22 markets fell through last year. Now, as it looks to grow, the network is holding conversations with station groups for multicast distribution and is looking to add up to 10 markets this year.
TuVisión was launched last fall as a replacement when Pappas Telecasting opted to drop the “underperforming” Azteca America from five of its stations. Pappas was expected to launch the network on its station in Los Angeles (the country's largest Hispanic DMA) this year, but a complex negotiation allowed Azteca to remain there. Still, Pappas secured the option to air TuVisión on a multicast feed starting in 2009.
Azteca itself is considering multicast partnerships to expand beyond its 62 markets, depending on what ensues after next year's digital transition.
An early mover in the multicast space was faith-based Trinity Broadcasting Network, which for six years has carried the Spanish-language TBN Enlace USA in 31 of the 33 markets where it owns full-power stations.
Multicast has even proved to be a benefit for NBC Universal's Telemundo. The network reaches nearly all of the top 50 Hispanic markets, but is negotiating for multicast carriage in the few where it doesn't. “It's a great way for us to expand our base,” said Ann Gaulke, senior VP of Telemundo affiliate relations.
Three years ago, Elden Hale Jr., the general manager at the Meredith-owned NBC affiliate WSMV Nashville—the 58th largest Hispanic market—inked a deal to place Telemundo on a multicast feed. “I was seeing the number of Hispanics moving into this area and I thought, what can we do to address this significant need in the marketplace?” says Hale.
What remains unclear, however, is how profitable the new networks will prove to be for station operators. On paper, stations can churn positive cash flow from the outset with no reverse compensation and considerable ad time to sell locally. But viewership is low, and CPMs can be bargain-basement.
Post-Newsweek's Frank says ad sales for LATV have been “minimal,” though the company has a target budget for 2008. But WSMV's Hale says his multicast channel is profitable, with “minimal” expenses and ad sales growing at high single-digit rates. Ad dollars for multicast channels largely come from local advertisers such as attorneys or car dealers. A channel in a top 100 Hispanic market could pull in approximately $500,000 a year.
Station executives say they benefit from LATV accepting ads in English. At Entravision (which has an agreement to carry LATV in 10 markets), president-COO Phil Wilkinson says that helps boost interest among general-market advertisers. “It's easy for them,” he says. “If they're not on Spanish-language TV, there's no issue in creating a Spanish-language ad.”