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Red, White & Brown

Call it a war of the worlds. Cable operators and satellite services have stepped up their efforts to pick up new viewers — and subscription payments — from audiences that identify with almost any country other than the United States.

So far, satellite has shown the most expertise in international affairs, offering packages of non-English language programming to Hispanic, Asians and other ethnic and immigrant groups.

But cable has a leg up among African-Americans, who tend to live in larger cities and don’t subscribe to satellite TV as much. And beyond this advantage, cable operators are ramping up services for customers with different cultural backgrounds.

In January, for instance, Cablevision Systems launched iO International, a group of nine in-language packages featuring channels from around the world in such languages as Spanish, Russian, Italian, Chinese, Korean and Hindi.

The goal for cable operators? To counteract the notion that they are an also-ran to satellite services for viewers who look at the world from a different vantage point.

“Our advantage by a long shot is programming and customer service,” said John de Armas, vice president of WorldDirect at DirecTV. “They are still three or four years behind the curve.”

The large cable companies admit they fell behind satellite in the multicultural markets in the early 2000s. “Satellite got first to bat and they did very well,” said Comcast senior director of multicultural marketing Mauro Panzera. “But we now have very compelling offerings.”

Not surprising when one considers what’s at stake. That can be summed up in one figure — 100.7 million people.

That’s the number of Hispanics, African-Americans, Asians, Hawaiians and American Indians in the U.S. in July of 2006, according to a new U.S. Census Bureau study. The figure accounts for one third of the U.S. population, and a market the size of the 11th-largest country in the world.

In recent years, the five largest multiple-system operators have rolled out increasingly competitive Hispanic-targeted packages, as well as Asian and European channels, though those efforts are much more nascent.

Cable executives also tout the advantages of their local footprint, which allows them to focus on specific ethnic groups. In Glendale, Calif., for example, Charter Communications is trying to win fans among a large Armenian population. It’s supplying those viewers with eight channels on basic, expanded basic and digital tiers, featuring news and entertainment in Armenian, Russian and Farsi — a far more robust offering than any of the satellite providers, said director of advanced services Gena Newland.

Operators are also rolling out ethnic-targeted bundles that include low-cost international long-distance plans. Time Warner Cable of New York and New Jersey now offers a number of Hispanic-targeted service bundles that include free long-distance phone calls to Puerto Rico. “We’ve been promoting it each year at the Puerto Rican Day parade [that draws about 1 million people] by giving away free phone cards,” said David Goldberg, the division’s vice president of marketing.

Cable’s ethnic offerings will become even stronger as operators deploy switched digital video technology, which allows them to turn on a given channel only when a viewer requests it, Panzera said. “When that happens, we’ll be able to turbocharge all our offerings.”

One example of that future can be found at Cablevision, which added 60 international channels serving nine language groups early this year, when it made the cable industry’s biggest move to digital switched video.

“Since Jan. 1, 2007, we’ve added six Hispanic channels [to a Spanish language tier of 37 networks] that we’ve very aggressively priced at $4.95 a month and added one channel to the South Asian package,” said Cablevision vice president of product management Theresa Chillianis.

In a business where video is increasingly just one part of a larger competitive landscape, the Bethpage, N.Y.-based cable operator regularly promotes triple-play packages that bundle voice and data with a free 12-month subscription to an international package for a specific ethnic group. Cablevision also offers a $19.95 long-distance package with up to 250 free minutes of international calling.

“The bundle speaks very strongly to these communities,” Chillianis said. “We know, for example, that 70% of our subscribers to the South Asian package are triple-play customers.”

SATELLITE SCORES

Sorting out who is winning the multicultural wars is difficult, given the fact that operators refuse to discuss subscriber counts beyond the usual bromide of being “very happy with the results.”

But virtually all pay TV providers acknowledge that EchoStar Communications’ Dish Network revolutionized multicultural television in 1998 with the launch of a low-cost package of Spanish-language programming. The direct-broadcast satellite platform remains the clear market leader for Hispanic and many types of Asian and European programming, they concede.

EchoStar, which declined to comment, offers more than 125 channels in 25 languages for diverse interests, more than any other provider.

DirecTV also launched ethnic and international channels in the 1990s, but lagged far behind Dish for many years.

“They were actually the first to launch international channels, but for a long time, they were not quite willing to put their brand behind the effort,” said Scott Wheeler, senior vice president of network development at International Networks, which distributes about 24 international channels into the U.S.

In 2003 and 2004, however, DirecTV relaunched its Hispanic package and has since been bulking up its Asian and European content. Currently, the No. 1 U.S. satellite provider offers more than 104 international channels in 18 languages.

“Dish and DirecTV are now really slugging it out to lock up as much exclusive content as they can,” Wheeler said. “They will go as deep into each language group to get as much content as they can.”

DirecTV’s de Armas notes that besides adding new programming, the company has expanded its multicultural team to more than 25 people, strengthened its customer service operations and expanded its dealer networks — factors that played a key role in Dish’s ethnic success. “We’re making sure that their picnic with dealers is over,” de Armas said.

Neither provider releases subscriber counts, but background conversations with programmers indicated that EchoStar remains the leader in the Hispanic space, with its Spanish-language tiers in more than 1 million homes.

But DirecTV is rapidly closing the gap. Between January of 2004, when the No. 1 U.S. satellite provider began its Hispanic push, and August of 2005, subscribers for its Hispanic-targeted tiers jumped from 347,000 to about 850,000. Since then, DirecTV has not disclosed numbers, but programmers say the provider has about 1 million subscribers for its Hispanic packages.

“Our mission is to make sure they will not be the leader for long,” said de Armas.

Competition for viewers in other ethnic groups has also tightened. Dish seems to have maintained a significant lead in the South Asian, Arabic and Italian markets, while DirecTV is the market leader in subs for premium Filipino and Vietnamese programming, according to programmers. Both platforms have fairly even subscriber counts in Chinese and Russian-language audiences.

A SLEEPING GIANT

In contrast, cable lags far behind. The major operators are believed to have fewer than 1 million subscribers combined for their Hispanic packages, programmers said.

“Cable clearly has bandwidth issues” that made it difficult for the platform to match the quantity of ethnic channels available on satellite, said Horowitz Associates vice president of marketing and business development Adriana Waterston. “But once it became clear that ignoring diversity was a losing proposition, cable stood up and started making the necessary changes. It was like waking a sleeping giant. All of a sudden, competition for multicultural audiences became very, very aggressive between cable and satellite.”

Comcast began focusing on the ethnic market soon after acquiring the former AT&T Broadband cable systems, which were in areas with large Hispanic populations. After rolling out a revamped Hispanic tier in 2003, it has added free Spanish-language on-demand service, additional channels, a Spanish-language Web portal and, most recently, Hispanic-targeted triple play bundles.

Viewers already stream about 1 million Spanish language on-demand programs each month, and Comcast is in the process of adding more movies to the 125 hours of Spanish VOD content already available.

The Hispanic-targeted bundles include free calling to Puerto Rico, which has been particularly popular in Comcast’s East Coast markets, as well as discounted long-distance plans to Latin America, Asia and Europe.

Beyond the Hispanic arena, Comcast has inked deals with more than 50 international channels that local systems can deploy. It has also rolled out a subscription-VOD offering of Bollywood movies and music videos. An SVOD offering customized for Filipinos will bow in July.

“We are also looking at bundles for other ethnic groups — Russians, Chinese, Filipino,” Panzera said. Launches are likely later this year or in early 2008.

TELCO ALLIANCES

While cable operators see the bundle as a key competitive advantage, satellite operators are trying to overcome that problem by forming alliances with telcos for triple-play packages.

“We have huge call centers devoted to the Hispanic market with AT&T, Verizon [Communications] and Qwest [Communications International],” noted de Armas. “One of my biggest surprises has been how well we’ve done with the telcos and the bundle offers.”

But it is unclear how well those alliances will fare once the phone companies finish deploying their own video products. Verizon has inked a deal with GlobeCast to supply it with 60 or 70 international channels for its FiOS TV platform, while AT&T is starting to develop its ethnic programming strategy.

While operators have devoted significant resources to packages that target recent immigrants with non-English language fare, much less attention has been given to English language fare for ethnic groups.

“The horrible reality is that African-American viewers remain the most underserved ethnic group in terms of programming,” said Waterston. “There is still this attitude among operators that because we have BET that is all we need.”

The lack of strong African-American programming is particularly worrisome for cable because satellite has been making strong inroads in what has always been a major cable market.

Last year, the annual survey of consumer media usage from Knowledge Networks found that satellite penetration among blacks has increased from 8% in 2002 to 18% in 2006, while cable penetration fell from 70% to 54%.

“This is a very valuable group that has usage rates that are higher than any other group for VOD, [pay-per-view] and premium channels,” said TV One executive vice president of affiliate sales Brad Samuels.

He also noted that better African-American programming can help drive broadband penetration, citing a Horowitz survey showing that African-Americans are the group most likely to upgrade to high-speed Internet service within the next year.

In the Asia space, AZN Television senior vice president Bill Georges complained about the lack of English-language programming targeting Asian Americans on basic tiers.

“They are great potential customers for triple-play packages,” he said, because Asian-Americans “are early adopters of technology and have the highest broadband penetration of any group. It doesn’t make sense to only offer them premium channels.”

Operators also need to take a close look at the diversity within the Hispanic community, Waterston added. While Hispanics have lower penetration rates for broadband and cable than the general market, there are important differences between those who speak mostly Spanish, bilingual Hispanics and those who prefer using English.

A 2006 survey by Horowitz Associates found that Anglophone Hispanics have higher broadband-penetration rates (46%, versus 29% for non-Hispanic whites); very similar penetration for digital cable (30% versus 31%); and spend more for video, voice and data services ($139 per month, versus $127).

MISSED OPPORTUNITY

“Operators are missing a very big opportunity by not more carefully targeting their marketing efforts to bilingual and English-preferred Hispanics,” Waterston argued.

In fact, several operators said their most popular Hispanic packages are not the low-cost, entry-level packages that contain little English-language programming. While Time Warner Cable of New York and New Jersey offers an entry-level Hispanic package for $29.99, marketing chief Goldberg said, “about 75% take the more robust digital packages with more English-language services.”

In the battle to better target ethnic groups, cable operators also hope that their local footprint will allow them to craft more appealing packages.

Gina Newland, Charter’s director of advanced services, West division, notes that the operator targets Southern California’s large Chinese community with 10 premium channels, as well as some Chinese content on expanded basic. “It is more than what is available on satellite,” she said.

The operator also works closely with local community organizations. Recently, for example, Charter forged a major alliance with the Museum of Latin American Art in Long Beach.

“Being a close part of the community is something that really sets us apart from satellite,” Newland said.