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Ownership

Ownership

By the Project for Excellence in Journalism

For the most part, ethnic media grow from the ground up, when a new immigrant population reaches critical mass in a community, resulting in the launch of a publication or a broadcast outlet.

That phenomenon has happened in states welcoming waves of new immigrants, such as North Carolina, which has had its share of Hispanic papers introduced. In October 2006, Greenville got its first Hispanic newspaper, Viva Greenville, a free monthly distributed in Pitt County. Two years before, Charlotte got its second Hispanic newspaper, a free weekly, Que Pasa. Thus, in sheer numbers, the bulk of ethnic media owners remain local. But, in audience and influence, three big owners have emerged.

Univision

After a busy 2006 in Hispanic media ownership, punctuated by the sale of Spanish-language broadcaster Univision, 2007 was quieter. This newfound stability came during a relatively uncertain economic environment and as the industry finally saw the need to build Web holdings.

There was also the fallout from Univision’s sale. With its stock at just over $36 a share, Univision fetched less than what experts predicted, and its new owners inherited a significant amount of debt – $1.4 billion. What was the group’s strategy for its $13 billion investment?

The new owners, a group of private equity firms led by the billionaire investor Haim Saban, spent the beginning of 2007 waiting and planning as the deal was completed.

While most assumed the purchase would safely get past the Federal Communications Commission, questions were raised by some FCC members about Univision’s need to improve its children’s programming (a $24 million fine had to be paid) before they approved the deal in March.

Shortly before that, the new ownership announced it had found the company’s leader in Joseph Uva, an advertising executive. Uva came to Univision from OMD Worldwide, an ad-buy planning agency, where he was CEO. The move made clear that Univision’s new owners saw increasing and maximizing ad sales as critical needs. Investors had pegged this as big concern for Univision, a company that in 2006 captured a 5% share of the national television audience, but only 2.5% of the television ad market. Increasing that percentage would help the company handle its debt load.

Another way the new ownership addressed that debt was through asking cable companies for a retransmission fee of $1 per subscriber. That would put Univision on par with better known mainstream cable companies like Fox News and would generate about $1 billion annually in revenue.1 But negotiations for that increase are likely to be tough. Univision, which first announced this decision in May 2007, had not entered into any contracts as of March 2008.2

The other big challenge for the company is repairing its relationship with Televisa, the Mexican company that produces the overwhelming majority of Univision’s prime-time programming. There are still hard feelings at Televisa, which was outbid for Univision by the Saban group. Televisa is secured by contract to deliver programming to Univision through 2017, but is currently in court in an effort to distribute its programming in the U.S. via the Web.

Telemundo

The ownership of the other big player in Hispanic television, Telemundo, has been stable since NBC purchased the Spanish-language broadcaster in 2001.

At the time it was thought Telemundo stood to gain greatly from NBC’s overall news operation, which included cable news and business news channels. In addition, the money that a behemoth like NBC had at its disposal was thought to have been a big help for the Hispanic broadcaster.

Seven years into the merger, that does not appear to be the case. In 2006, NBC cut the staff of Telemundo significantly, eliminating newscasts in six major cities – Houston, Dallas, Denver, San Antonio, San Jose and Phoenix. Since then, NBC has done little to capitalize on its relationship.

During the immigration debate that raged nationwide in 2007, for example, neither NBC nor MSNBC turned to its Spanish-language partner for reports or perspectives. And as the 2008 presidential race got into full swing early with a flurry of debates, the calls for a forum on Hispanic issues came from Univision, not Telemundo.

Considering how little NBC has done with Telemundo, what might be the company’s long-term goal? Access to Mexico.

For the past few years, NBC has been trying to penetrate the potentially lucrative Mexican television market, using Telemundo as its way in. The move could help Telemundo leverage its programming, much like Univision repackages Televisa programming. At present two television companies – Televisa, a Univision partner, and TV Azteca – control nearly 90% of the broadcast industry in Mexico.3

One big obstacle stands in NBC’s way: In 2007, the Mexican government, after a lengthy deliberation, announced it would not allow any new broadcaster into the country in 2007 or 2008. In June, however, Mexico’s Supreme Court took preliminary votes to open up the auctioning of broadcasting licenses, which eventually could play into NBC’s hands. The question is what are the network’s long-range plans for Telemundo if Mexico is not an option?

Print

The biggest news in the world of Hispanic print media came in May with the ImpreMedia’s purchase of Hoy New York from the Tribune Company for an undisclosed amount. In December, the company bought the Rumbo newspaper chain in Texas in an effort to extend its reach to advertisers in the top 10 U.S. Hispanic markets.

Since its creation in 2004, when La Opinión joined with New York El Diario-La Prensa in New York, ImpreMedia has been busy buying up publications. In 2006, the company bought La Prensa in Central Florida and Vista Magazine in Miami. In 2005, ImpreMedia added El Mensajero in San Francisco and launched the Domingo Network, a free Sunday paper that went to Hispanic households in New York, Los Angeles and Chicago. In 2004, soon after the company was formed, it purchased La Raza in Chicago.

But there were signs in 2007 that the company was beginning to shift some of its focus to the Web. In August, ImpreMedia announced the creation of ImpreMedia Digital, designed to expand its online operations through new material and acquisitions. The company brought in a new CEO, Arturo Duran, formerly president of interactive and business integration at Canwest, the Canadian media company.

ImpreMedia is privately held and there are no hard data on its revenues. The company is still the only U.S.-based Hispanic newspaper chain, and there seems little threat, so far, of competition. It owns two of the biggest papers on the two coasts. Most other Spanish-language papers are smaller in circulation and represent smaller communities.

As the ethnic media continue to grow, different ownership models are emerging – or there are at least a few patterns in how ownership develops. The patterns are best seen and understood by looking at the Hispanic print media, the most developed of the foreign-language ethnic print outlets.

Whether one is better than another is not yet clear and it may be that the “best” model will depend on each outlet’s home, target population and the other outlets in its market. Still, here are three categories of ownership.

Startups

When an immigrant population reaches a critical mass and a new newspaper crops up, it generally takes the form of a weekly or less-than-weekly. Who launches the paper? Historically, someone in the ethnic community who saw a need. Take Philadelphia, where two weeklies – Al Dia, started in 1992 by Hernán Calderon, and El Hispano, founded by Aaron Lopez in 1976 – hit the newsstands with no affiliations to mainstream publications; or Atlanta, where the weekly Mundo Hispanico was founded by Lino Dominguez in 1979.

This type of ownership still is behind launches today, particularly in very small markets.

But over the past decades, as data clearly charted the nation’s exploding Hispanic population, mainstream newspapers began to create their own Hispanic publications.

The more notable cases are well known, such as Tribune Company’s1998 launch of Hoy in Chicago and later rollouts in New York and Los Angeles. But mainstream newspaper owners have launched Hispanic print counterparts in even smaller communities. In 2005, The Register in New Haven, Conn., unveiled Registero, its Spanish-language, print-only weekly, to such success that it expanded its coverage and delivery zone, with new editions in New York.

The results of these launches, however, have been mixed, particularly when they jump into a market with a competing and well-established Spanish-language newspaper on the same publishing schedule.

Established Papers

Established papers are finding they are a desired commodity.

In the past few years, successful Hispanic newspapers, even those that began as independents, have often ended up affiliated with other outlets in one of two ways: local mainstream newspapers buy them to capture at least some of the Hispanic market in their coverage area or ImpreMedia, a young and growing national Hispanic media company, acquires them.

The first outcome is more common. Atlanta’s Mundo Hispanico existed for 25 years before it was acquired by the Journal-Constitution in Atlanta in 2004. That same year, the Washington Post purchased a 13-year-old local Hispanic weekly, El Tiempo Latino.

In both cases, the editorial teams of the Spanish-language papers were left in place. The goal for both the Post and the Journal-Constitution was not to leave a big footprint, but to quietly secure their respective markets.

“El Tiempo Latino is going to remain El Tiempo Latino,” the Post’s executive editor, Len Downie, said when the paper was purchased. “We think [El Tiempo] is good at the journalism they publish.”4

More recently, the rise of ImpreMedia, formed in 2004 when Los Angeles’s La Opinion and New York’s El Diario effectively merged, opened up a new option. The company, active in acquiring Spanish-language papers on both coasts and in Illinois, announced its intention in 2007 to put more money into Web properties.

Quickly Building a Chain from Scratch

While there does not seem to be any one model for success, one tactic does spell trouble – trying to build a large chain of papers all at once.

In recent years, two well-known companies have gone down that road, and their efforts read like cautionary tales.

Rumbo, a chain of four papers, was founded in Texas in 2004. The papers, which were sold in Austin, Houston, San Antonio and the Brownsville area, began with a five-day-a-week publishing schedule. But by 2005, the effort’s main financial backers had pulled out. Another group of investors was found, but in 2006 there were new problems.

The chain suspended its Austin edition and cut back others to three days a week. The chain portrayed the moves as a new strategy “tailored to meet the needs of readers and advertisers,” but the scale-back clearly indicated Rumbo was in trouble.

The Rumbo editions in Houston and San Antonio went to three days a week as well and the company’s founder, Edward Schumacher Matos, announced he was stepping down as chairman and CEO. In January 2007, all of the editions went to weekly publication.

Schumacher Matos said he started the papers from scratch to avoid the bad habits that linger in some Hispanic newsrooms, but that ultimately, “The competition was just dividing up the pie too thinly.”5

Rumbo, it should be noted, is not a failure. It survived and saw big bumps in revenues – 2006 was up 40% over 2005 – but it was not able to realize its grand vision of the simultaneous launch. Still, the chain had enough advertising potential to attract ImpreMedia, which brought Rumbo into its national network of online and print media in December 2007 for an undisclosed sum. So far, the company plans no publication changes.

Hoy, the Tribune Company’s foray into the Spanish-language marketplace, has fared better in many ways, but its future is extremely cloudy.

Tribune created the paper in New York in 1998 to compete with El Diario and in 2003 expanded coverage to Chicago. In 2004, it introduced an edition of Hoy in Los Angeles, selling its stake in Los Angeles’ established Spanish-language paper La Opinión to compete against it.

But a circulation scandal that hit Hoy in 2004 was a major setback for the Spanish-language publication. The Chicago-based Tribune Company admitted in 2004 that it had been inflating circulation levels for Hoy by as much as 50% since 2001.6 In 2006, nine former circulation executives and contractors at Hoy (and fellow Tribune paper Newsday) pleaded guilty to criminal fraud. By the end of 2007, Newsday and Hoy had paid advertisers $83 million in restitution and settled with the U.S. government for $15 million.

The New York edition of Hoy was sold to ImpreMedia in February 2007 for an undisclosed sum and a cloud hangs over the Los Angeles edition as well, as the Tribune Company prepares for the consequences of new leadership under the Chicago billionaire Sam Zell, who purchased the company for $8.2 billion. With the change in ownership, some of Tribune’s assets may be put in play.

While the troubles at Hoy may have much to do with the general funk within the newspaper industry, its turbulent existence shows that walking into a new environment as a big startup is doubly hard with Spanish-language populations.

Why do these bigger startups have a hard time?

It may simply be that their ambitions overshoot reality – the audiences are not yet big enough, rich enough or on advertisers’ wider radar screens. It also might be that the real growth areas for the ethnic press — smaller communities — are not fertile ground for big chains.

There also is the larger, more intangible question of community. As discussed in Content (Content Analysis Section) , these audiences expect their newspapers and stations to serve as community connections. This is a difficult task for a new enterprise – and an especially difficult one for a large-scale, multi-location startup.

Footnotes

1. “Univision’s Uva Eye’s $1 Retransmissions-Consent Fees.” Multichannel News, March 16, 2007.

2. Retransmission fees refer to the fees that Univision can charge cable, satellite and telephone companies for transmitting their content. They represent a new and growing source of revenue for TV broadcasters. According to research firm Veronis Suhler Stevenson, broadcasters earned anywhere between 30 cents to 50 cents per subscriber in 2006.

3. Elisabeth Malkin. “ Mexico’s Newest TV Drama is a Bid to Block a Third Broadcaster,” the New York Times, December 6, 2006: http://www.nytimes.com/2006/12/06/business/worldbusiness/06tele.html.

4. Annys Shin, the Washington Post, March 18, 2004.

5. Mark Fitzgerald. “Reflections on Rumbo,” AdWeek, February 5, 2007: http://www.marketingymedios.com/marketingymedios/noticias/article_display.jsp?vnu_content_id=1003541787.

6. David Folkenflik. “Circulation Fraud at Tribune Papers Triggers Arrests,” npr.org, June 15, 2005: http://www.npr.org/templates/story/story.php?storyId=4704566.