TELEMUNDO AND ITS NEW MEASURE OF SUCCESS

When General Electric and its NBCU unit picked up the Telemundo Communications Group in 2002, it was clearly investing in a handyman’s special. The broadcast network (and station group) was a very weak No. 2 in the Hispanic TV realm, with a history of past owners that just couldn’t figure out a way to make it thrive.

Telmundo still hasn’t displaced its powerhouse competitor, Univision, in the fight for ratings supremacy. But NBC Universal has increased Telemundo’s lines of business. And, as Telemundo President Don Browne explains in the following interview, the multiple revenue streams have changed the ultimate goal: becoming No. 1 is not the end game any more.

Browne has been instrumental in moving Telemundo from a complete reliance on acquired programming to 1,000 hours of original productions a year, created at the company’s studios in Miami, Colombia and Mexico.

That investment appears to be paying off.

Since Browne moved up from the COO slot to become president in April 2005, ratings keep bumping up. From May to October this year, it delivered ratings growth over the same months of 2006.

Between Nov. 1 and Nov. 18, 2007, Telemundo’s household impressions were up 19 percent, to 532,000 households in the key 18-49 demo, when compared with stats for the full month of November 2006. That’s according to Telemundo’s analysis of NTI data.

The network’s officials also say its share of the Hispanic audience is 21 percent as of October. That's up from 18 percent in April 2006.

There have been occasions when special event programming has lifted Telemundo stations not only ratings victory within the Hispanic universe, but among all stations in certain local markets.

Telemundo’s broadcasting assets include 16 full-power and nine low-power broadcast outlets in the U.S. Plus, it lists 36 network affiliates.

Telemundo also runs a youth-oriented channel called mun2, and recently partnered with Yahoo to beef up its Web business. At present, the combined Yahoo! Telemundo site is attracting 9 million streams a month of both short-form and long-form content.

Browne has leveraged the original productions by building an international syndication business and luring advertisers with integrated product placement deals. Both initiatives have given Telemundo a key differential. Univision is still largely powered by productions from Grupo Televisa in Mexico.

In this interview with TVNEWSDAY Contributing Editor Janet Stilson, Browne talks about why being No. 2 could be a nice place to be, the network’s audience share goals, and where he’s window shopping for new stations.

An edited transcript follows:

What do you consider to be your biggest achievement at Telemundo so far?

Becoming one of the biggest original [Hispanic] content producers in the world and assembling really great talent. Those are the two things that I feel really good about. We’ve reinvented ourselves dramatically and have become a content company, and now I really believe we’re in a position to control our own destiny.

When you say talent, are you talking about managerial people or on-air people?

All of the above. Our on-air people are quite extraordinary, but you don’t get there unless you’re able to recruit great people to produce and manage it. Patricio Wills, who is the president of our studios; Marcos Santana, who is president of Telemundo International; Carlos Bardasano who is heading our programming and entertainment area; Peter Blacker who is running our digital broadband Internet business—these are some of the people that are really quite exceptional and are doing great work.

Five years ago, when we bought the company, Telemundo was a very simple company. We essentially had news, sports and acquired most of its programming from other people. It wasn’t being very competitive at all.

One of the reasons that I agreed to come over and do this to begin with was the fact that [NBC Universal and General Electric] were willing to invest in us so we could become a content company and we could reinvent ourselves and eventually be competitive. And that’s exactly what we’ve done.

Five years ago, we didn’t have a digital business; we didn’t really have a cable business; we didn’t have an international business; we didn’t have studios.

We’ve just opened up our studio in Mexico over the last three weeks, which is extraordinary. We’re producing novelas now in Mexico for the first time. We have studios in Columbia, Miami and LosAngeles, and this is really in a period of four years.

My assumption is that that studio in Mexico is really, really crucial because of the large Mexican population in the States.

Absolutely. Mexico has a tremendous amount of talent, and we are opening up a fresh opportunity for some of the most talented actors, directors, producers, wardrobe people, set designers. We’ve gotten tremendous response.

A year ago, we opened up a state-of-the-art news bureau and corporate headquarters in Mexico. The more news we do out of Mexico, frankly, the better our success is in our news and sports product in the United States.

Does Televisa have a lot of talent locked up in Mexico? Do you have to struggle with getting the people that you’re looking for?

No, we haven’t had to struggle at all, because there has been such a tremendous industry developed by Televisa. There is a tremendous amount of talent. I mean there were really only two opportunities in Mexico [for TV production]—Televisa and TV Azteca. And to have a significant third choice for the acting and producing community is great for Mexicans.

Let’s talk about your television stations. In the mainstream TV station business, usually the revenue ratio between national and local advertising is about 35:65. Is that true for Telemundo ?

Pretty much, 40:60, within that range.

Are there any categories of advertisers that you feel don’t understand what Telemundo has to offer yet?

Yes. I think that’s a universal feeling. This is just a process of continuing to educate the general marketplace. We attract an extraordinarily fast-growing segment of the population that is growing dramatically in its economic buying power.

Which categories of advertisers could benefit from a greater commitment to Telemundo?

A lot of people are beginning to get the picture better. Obviously, automotive has gotten the picture. We’d like to continue to push that category. Pharmaceuticals are starting to embrace our business. I think that has great upside.

The other thing that is really quite extraordinary is that Hispanics are adapting to technology faster than the general population. Staying connected is a very important cultural aspect for the Hispanic community, and I think that the electronic technology category is just wide open for us.

So are you saying that big-box electronics retailers and the telecommunications companies should step up to the plate with larger budgets?

Yes, and I think they are beginning to. Look, for anybody who starts looking at the demographics in this country, it’s very clear: If you want to be successful, this is a segment of the population you need to drive into your stores, into your theaters. The Hispanic population is growing dramatically in economic purchasing power.

Are the politicians getting it? Are you starting to attract ads from them?

We are, but not as aggressively as we should. [With Telemundo’s new public service campaign “Vota Por Tu Futura” (“Vote for Your Future”)], we’re driving voter registration very hard and voter awareness very hard.

Is Telemundo in the market to acquire any more stations? Are there any markets where you feel like you need to have a stronger presence?

Yes. This sounds counterintuitive, but the southeastern United States—and going right up to the Northeast—is explosive, in terms of the growth of the Hispanic population. Those are the areas that we’re looking at. In the West and the Southwest, we’re in pretty good shape. A lot of the [Hispanic population] growth is east of the Mississippi River.

Your October ratings got a tremendous lift from the Mexican National Soccer team games. In some markets you bested all the television stations in the market, not just the Hispanic stations. Are there other sports licenses you would like to acquire that could really be a game changer for you—for example, the World Cup?

Yes, well, the 2012 World Cup is in South Africa, and we bid for that very, very aggressively, with all the weight of NBC Universal behind us and we didn’t prevail. But we certainly went for it very aggressively, and we intend when there are properties like that to rally the entire company behind us.

Another thing I found fascinating about Telemundo’s October ratings was that your station in SanFrancisco, KSTS, grew in prime by an average of 100 percent over October 2006 in the 18-49 demo, and 200 percent among all households. What’s going on there?

We have a very good general manager there, and that’s a good example the NBC station and the Telemundo station working together. We’re seeing these kinds of successes breaking out here and there, particularly west of the Mississippi River. Historically, most of our strength has been on the East Coast and we’re trying to bring our appeal in harmony with both coasts. We’re beginning to see that.

My understanding is that Telemundo has about a 21 share of the Hispanic audience. Is that correct?

That’s right. And the share is growing. In fact, our share has been growing significantly on a year-to-year basis.

What’s driving the company’s growth?

There was an enormous corporate integration that occurred five years ago when GE and NBCU bought Telemundo. In any company, it’s a very disruptive process when you’re integrating two companies and different cultures.

After the first six months, it was clear from NBC and GE’s point of view that the business model that they bought just wasn’t going to work. So we had to literally blow up the business model and create a new one. Now, that business model is fully developed.

That’s why I’m feeling so optimistic because we’ve done so well while we were literally changing the tires at 200 miles per hour. The tires have been changed, if you will; the car is in great shape; and the assembly line is fully developed.

[Telemundo’s spinoff youth channel] mun2 has had dramatic growth, and the thing that’s extraordinary is our international growth. We have become the second-largest producer of Spanish-language content in the world. We sell programming to 55 countries. We’re No. 1 in Spain. We dominate Panama, Columbia, Argentina. Our product is on fire.

The productions we have coming on line over the next two to three months, frankly, are the best we’ve ever done. That’s why we feel so optimistic that whatever we’ve done in this past year is not nearly as good as we’re going to be next year. And the good news is, on a year-to-year basis, even with the trial and error of creating content, we’re up significantly in our core business.

The key here is that we own our content, and we don’t have to negotiate rights. We produce it, we create it and we own it

When do you think you’re going to reach parity with Univision, in terms of audience share, how many more years?

Well, the beauty is we don’t have to. The beauty is—and this is a story that hasn’t been told very well—if we can reach 35 percent share of the core business [Telemundo will be a great success]. We’re so on the cutting edge, just in the way we sell advertising—from the uniqueness of our original content with product integration, and the explosiveness of our digital broadband Internet business.

We’ve got a great partnership with Yahoo. The youth market is very explosive [with the channel mun2]. And there’s no cap on the international [program syndication] potential. We can literally make a network No. 1 in different countries. We’re becoming somewhat of a legend in Spain for major hits that we have.

We’re not relying on one aspect of our business. Do we have to be on parity with Univision? No. We have to be competitive. We have to be more competitive than we are and we will be in the next year or two.

So do you think that you’ll get to the 35 percent in two years?

We’re looking to get to 35 in probably three or four years. We’re looking to get to 30 first, but just being on the way to 35.

If you add the revenue that you get from advertising with the international revenue, are you more than paying for the cost of the programming?

Oh, yes, dramatically so. And there’s another component where we’re basically leading the industry in. It’s the ability to work with advertisers and businesses and agencies to introduce their products on the ground floor in our novelas.

Are you able to do integrated product placement deals in different ways than is currently being done at mainstream networks?

Yes. Basically what we do is, we have pre-upfront meetings where we literally bring in clients and businesses. They meet the writers; they meet the directors; they meet the producers. We’re able to uniquely partner with them before the novela is even created.

We bring [advertiser and agency executives] in as we’re literally creating the architecture for our product. So there’s three things that happen. First of all, you build a common relationship where you can talk about each other’s businesses. You’re able to go one on one and share your business philosophy and literally work together on something in common.

Secondly, it provides unique international exposure for these products. There are certain products that advertisers want to sell to our domestic audience, and there are certain other products that they want to sell internationally. So we were able to digitally introduce the different products that they wanted to sell internationally [into the content]. So you not only, from a sales perspective, get the domestic distribution, but you also get the benefit of product integration internationally. That’s a very unique. I think we’re clearly ahead of the curve there.

How has all of the original content impacted your Web business?

It’s the creative drive behind our success in digital. Peter Blacker is like a kid in a candy store. He came here [from AOL Media Networks] because we produce original content. Our digital business—unlike some others that stay in the red for two or three years—is in the black, and it’s exploding in profitability.

Do you have local Web sites for your stations?

No. I think that’s a real opportunity. I think some of the individual stations are working on that. One of Peter Blacker’s big objectives is to work with the stations, to see if we can create some best practices from what he’s doing [nationally]. That’s clearly an area of great opportunity.

Does the transition to digital pose any in particular challenges for you? Do you think that Hispanics will have digital equipment in as great a number as the general public when the switch to digital is made?

I’m betting that they will. Given the way Hispanics have been over-indexing on technology. That’s something that I’m very encouraged about, but the communication part of this is going to be really important.