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Hooked on Telenovelas
Critics predict telenovelas will come to an end as Latinos become more acculturated. But viewers are still watching, and advertisers are still buying
May 01, 2005
By Luis Clemens
Telenovelas are the cliché of Spanish-language television and often the object of scorn. Ridiculing such an inherently melodramatic genre is easy, but it is harder to dismiss its overriding importance to advertisers, media companies and viewers. The Spanish-language broadcast networks rely heavily on the ad revenue generated by novelas, and the ratings indicate that more people are watching more telenovelas on more networks.
Skeptics, though, abound and doubt the growth will last. "It is a fleeting audience," says Robert Rose, CEO of AIM Tell-A-Vision and executive producer of American Latino TV.
Not surprisingly, Ramón Escobar, Telemundo vice president of programming and production, disagrees and sees "no sign of slowing down" in the size of the Spanish-language audience "in the next 10 to 15 years."
Either way, "[telenovelas] are the cornerstone of Spanish-language broadcast networks," says Debra Nason, vp/managing director of Bromley Interlink, the media research, planning and buying division of Bromley Communications. "Like it or not."
For Telemundo, telenovelas represent 40 percent of the network's advertising sales revenues. Univision declined to disclose the percentage of ad sales that come from telenovelas, but last year it paid $105 million in licensing fees to Grupo Televisa, the main provider of what Univision audiences are watching. That's a bargain, coming as it did at the rate of 15 percent of net time sales fixed in a programming agreement with Televisa that lasts until 2017.
Telemundo and Univision have markedly different approaches to the genre. Telemundo is investing a great deal of money, time and effort in order to produce its novelas in-house, while Univision still imports them from Mexico.
Both strategies — imported versus in-house production — define the competitive landscape of Spanish-language television. The stakes are high. A string of successful telenovelas can lead to promotions in the executive suite, while a string of unsuccessful telenovelas can lead to contracts not being renewed.
RATINGS LEAD TO ALL IN THE FAMILY
There is so much money at stake because the audiences are still huge. "Week in week out without fail, the top 10 programs among Hispanics in Spanish are always the top 10 novela chapters," says Doug Darfield, senior vice president of Hispanic services with Nielsen Media Research, which is owned by Marketing y Medios parent company VNU.
Two recent telenovelas produced by Televisa that ended on Univision in March, Rubí and Amor Real, were the most watched telenovela and the most watched finale ever, respectively (see Los Números, page 39). Both were viewed regularly by nearly 6 million Hispanics, including a large number of young men and women, according to Nielsen Media Research.
"Certain nights this season we were the number one adult 18-to-34 network in the country," says Tom McGarrity, co-president of Univision Network Sales.
Media buyers sometimes struggle to convince clients that men make up a fair share of telenovela viewers. Often, these programs are watched by the entire family. "If the paradigm in a non-Hispanic household in the United States is two people living with five television sets, the paradigm in the Hispanic household is closer to five or six people living with one or two television sets," Darfield says.
When it comes to Spanish-dominant Hispanics, telenovelas are appointment television viewing, with the audience tuning in up to five times a week. Viewers demonstrate a degree of attachment to and passion for the programs that is common, in the general market, only among Trekkies. Doubters should troll the online telenovela forums at Telemundo and Univision Web sites.
"People threw themselves into Amor Real with a great deal of intensity. It generated euphoria," says José Manuel Cortés, editor of the U.S. edition of TV y Novelas magazine, a Televisa publication that covers the TV industry with a focus on telenovelas. "People like to dream."
THE DREAM FACTORY
For such a starry-eyed business, telenovelas have attracted a great deal of academic interest. Ana Bertha Uribe Alvarado, a professor and researcher at the University of Colima in Mexico, wrote an award-winning dissertation about the way Mexican immigrants in the United States view Mexican novelas.
"Turning on the television and watching a telenovela is almost like going to the bathroom," she says. "It is familiar to [immigrants] and connects them to their homeland. By watching telenovelas they feel like they are transported back home to Mexico. The first generation is, inevitably, a loyal audience."
For his part, Professor Robert Huesca of Trinity University in San Antonio attributes the loyalty to the fact that "there is no other place in our television universe where you can replicate the experience you get with a telenovela. ... A telenovela will begin, develop, climax and end."
Beyond the cultural compatibility for first-generation Mexican-Americans, the format itself has a universal appeal. Telenovelas are exported throughout Latin America and around the globe, with devoted audiences in countries as diverse as Bosnia, China and Israel. No other company consistently produces as many popular Spanish-language novelas as the Mexican media giant Televisa, which is known as "La fábrica de los sueños" (The dream factory).
Emilio Azcárraga Milmo, father and predecessor of the current Televisa CEO, Emilio Azcárraga Jean, took a daring leap by airing telenovelas in prime time in the '70s. He followed up with the rabid success of Los Ricos También Lloran (The Wealthy Weep Too), which was syndicated around the world for two decades. Since then, Televisa has produced a large number of popular novelas. In 1992, El Tigre (The Tiger), as Azcárraga Milmo was known, signed the aforementioned 25-year-long programming agreement committing Televisa to provide its telenovelas (and the rest of its shows, as well) to Univision. Televisa owns a 10.9 percent stake in Univision.
Televisa provided 34 percent of Univision's programming and close to 80 percent of its prime-time lineup in 2003, the last year for which this breakdown is publicly available. The agreement "is a great deal for Univision [and] key to Univision's ratings dominance," explains Philip Remek, senior media analyst at Guzman & Co., a Miami-based investment bank. "A majority of Hispanics are familiar with Televisa programming from earlier in their life and are known for being loyal to that programming."
Telemundo's Escobar puts it more bluntly: "[Mexican immigrants] cross the border with a Televisa jersey on their back." Escobar is, of course, speaking figuratively, but what does cross the border is ratings information for the Televisa telenovelas in Mexico. And the most popular telenovelas are practically a guaranteed ratings success on Univision.
Epigmenio Ibarra, founder of Mexico City-based Argos Comunicación, which has an exclusive production agreement with Telemundo, is one of the few telenovela producers to have successfully competed in Mexico against Televisa. He says, "For [Mexican immigrants], watching Televisa is the norm, a custom, a habit. And Univision is Televisa."
A DIFFERENT COLD WAR
That "Univision is Televisa" may come as a surprise to executives at both media giants, because they are in the midst of what one industry source describes as a "cold war." Most stick to off-the-record comments "because all these people scare the shit out of of us," as one insider stated. Investment analyst Remek is one of few to speak openly about the issue.
Guzman & Co. does not own shares of either company. Remek says, "From Televisa's perspective, they are perplexed at why Univision should be so combative. There was a certain lack of sensitivity by Univision not including Televisa or Venevision in the process [of Ray Rodriguez's promotion to COO in February]. Because Perenchio could do it, he did." Univision's Jerry Perenchio could do it because he controls a majority of the company's voting stock but not a majority of the shares.
Remek says neither party will let the dispute "get in the way of business," so matters are at a standstill and, because of the programming agreement with Televisa, Univision and Perenchio remain heavily dependent on their partner south of the border.
Like the Mexican immigrants in a popular song by Los Tigres del Norte, Perenchio seems to be locked into "una jaula de oro, pero una jaula al fin" (a cage of gold, but a cage nonetheless). An unnamed industry executive says, "He is definitely not in control, and that is definitely not a place where Jerry wants to be, the same as any self-respecting billionaire."
IN-HOUSE PRODUCTION VS. IMPORTS
In an apparent attempt to regain control and following an earlier spat with Televisa, Univision experimented with in-house production.
Te Amaré en Silencio was a telenovela that premiered on Univision in December 2003. It was shot in Los Angeles and produced by Paloma Productions, which is owned by a Perenchio holding company. It reportedly cost $6 million and lasted all of two months in prime time before being bumped to a daytime slot. According to a Univision SEC filing, in 2003 Paloma Productions received $1 million upfront to produce the novela and expected to receive an additional $4 million based on ratings performance. But the 2004 SEC 10-K filing revealed Univision's actual payout to Paloma Productions for the novela totaled $2.6 million (including the $1 million from the prior year), far less than initially projected because ratings were weaker than expected.
None of those familiar with the unsuccessful venture who were contacted for this article would comment on the record. A source tried to explain why Te Amaré en Silencio failed, at least, compared to the Televisa-produced telenovelas. "My wife said, 'This is a man's idea of a novela because of the fact this guy gets to run around sleeping with anybody he wants. He's an adulterer. Even though the wife was a psychotic bitch, they were married,' " he recalls, his wife saying. "You laugh, but Televisa would never make that kind of mistake. [Perenchio] just missed that core cultural cue. Everybody learned their lesson, an expensive lesson."
When asked whether Univision plans for more U.S.-produced programming, McGarrity simply says, "I am going to sidestep your question. ... We are going to put the best program into our lineup that's going to attract the biggest audience. ... We're not going to be driven by whether it is a domestic product or a product from one of our partners."
Jorge Jaidar, the Mexico City-based chief operating officer of Azteca America, says, "Having a billion dollars behind you is no guarantee of success when it comes to making novelas." This is equally true of individual billionaires like Jerry Perenchio and of multibillion dollar corporate behemoths such as GE and its NBC Universal division.
The same night Te Amaré en Silencio premiered on Univision, Telemundo launched El Alma Herida, also a U.S.-produced telenovela.
Telemundo's then-president/CEO, James McNamara, told Miami's El Nuevo Herald that "for the first time, the audience can choose between two home-grown telenovelas. This is a crucial moment in the history of Spanish-language television in the United States."
El Alma Herida was the fruit of a strategy pushed by McNamara and embraced by current Telemundo executives to produce programming that is "culturally relevant" to U.S. Hispanics. Escobar sums up the strategy as "be in control of your creative destiny. ... In controlling your own destiny, you are able to tailor and hand-make programs."
Under McNamara, Telemundo lined up a joint venture agreement with Patricio Wills of Colombian production house RTI and exclusive co-production agreements with others, such as Epigmenio Ibarra of Argos. Both men are among the most respected, non-Televisa producers of telenovelas in Latin America. But after two years with Telemundo, neither has yet produced a novela that has come remotely close to beating Univision during prime time.
Wills insists that in-house production is the way to go, although he admits to a sharp learning curve since his move from Colombia to Miami. "We need to consider Hispanics in the U.S. as a community of their own and build a telenovela that reflects their lives," he says.
But AIM Tell-A-Vision's Rose is critical of this approach and says, "I don't think it is a smart business plan if they are doing it strictly for the U.S. Hispanic market. ... First-generation Hispanics are going to prefer a novela from Mexico, not Houston and Miami. Second- and third-generation Hispanics don't watch novelas. Who are they talking about? Culturally relevant novelas is almost an oxymoron."
In a recent research report, Remek described Telemundo's strategy as "a work in progress." In an interview, he says, "Telemundo has very bright, creative people, and they keep trying new things ... but the ratings haven't changed much."
And in the case of one domestically produced novela, La Ley del Silencio, which is still on the air, the ratings are dangerously low. It's a co-production between Telemundo and the Latin American division of London-based Fremantle Media. "If you look at [La Ley del Silencio]," says TV y Novelas editor Cortés, "it has all the ingredients for success, but it gets two, three ratings points."
Escobar says the ability to tinker with scripts and storylines while the novela is still being filmed is one of the great advantages of in-house production. The changes, he says, can range from "minor surgery to plastic surgery or open-heart surgery." In keeping in line with those examples, La Ley del Silencio is ready, from a ratings standpoint, for a heart transplant.
TELEMUNDO STRESSES PRODUCT PLACEMENT
Interestingly, even if the in-house production strategy does not always resonate with viewers, advertising agencies and marketers seem to like it. Telemundo's strategy of producing its own telenovelas has bested Univision in one important area: product placement and product integration. That's an option not open to Univision since the telenovelas it airs are produced elsewhere.
Telenovelas have attracted big-name advertisers. Procter & Gamble, Johnson & Johnson and Sears have advertised on both Univision and Telemundo. However, some of these advertisers have been taking advantage for the last year and a half of Telemundo's ability to do product placement and integration. Steve Mandala, executive vice president of sales for Telemundo, stresses this as "a point of distinction" between the Spanish-language networks. He says, "Novelas produced for U.S. Hispanics offer marketers a possibility to participate strategically in that product."
Marketers and media buyers seem happy with that possibility. "Just last year with Telemundo we had a number of products ... in Amores Descarados," says Bromley's Nason. "The idea [is] to have your products in as many scenes as possible so there is a subtle endorsement of your products to the viewers." She seeks to enhance the 30-second spot in a novela by way of the product placement offered by Telemundo and Azteca América. "Unfortunately, that [option] is still markedly absent in the ones that garner the largest audience share."
Unfortunately for NBC Universal, Telemundo's telenovelas are not must-see television.
The prime-time ratings for the season-to-date illustrate Univision's overwhelming dominance. The Nielsen Hispanic Television Index for the top 50 prime-time programs for Spanish- and English-language broadcast networks leaves no doubt as to which network is more widely watched: The top 27 places on the list belong to Univision. The following spot belongs to Univision-owned TeleFutura. Telemundo has 10 programs on the list, with the highest entry listed at number 31; its highest-ranked telenovela falls at 37.
Given its poor ratings performance, it is fair to consider whether Telemundo will ever manage to successfully compete against the Univision-Televisa programming juggernaut.
"It is hard to gain in the ratings race with Univision," Remek says. "There is really a structural issue. ... It almost doesn't matter what Telemundo does. People tell me, 'They are trying this, trying that,' and I say, 'So what?' "
Escobar is modestly upbeat. "In the long run, we believe that this strategy will work. [It's'] very easy to get spooked in the short term. ... If we are executing well, we can capture a portion of the new audience that comes in the market and continue to chip away."
Chipping away seems like a modest ambition for a company like GE. Ibarra is bolder, perhaps a legacy of his time as a combat cameraman covering civil wars in Central America, where coincidentally, he worked with then-NBC news producer Don Browne, the just-appointed president of Telemundo. "The best news is the integration of Telemundo within NBC. To fight a large adversary, you need an even bigger ally. NBC knows how to do this," Ibarra says. "We will beat them by first being the best and then being first."
GE likes to be first, but more important than being first is making money.
The key question remains whether Telemundo can make money and, specifically, if that's enough money to provide an acceptable return on investment for GE that justifies the network's $2.7 billion price tag.
One rarely mentioned advantage of the in-house production is the overseas syndication of Telemundo's telenovelas. Curiously, some of the telenovelas produced specifically with the U.S. Hispanic viewer in mind are generating respectable ratings in Latin America and Spain. Telemundo will not specify the amount it earns from overseas sales.
But, with Telemundo acknowledging that telenovelas represent 40 percent of ad sales revenue, it is clear the network will sink or swim depending on the success of its in-house strategy. The good news for NBC Universal is that even a modest increase in ratings would represent a large payoff.
LOOKS LIKE NO END IN SIGHT
Leo Perez, chief operating officer of Sí TV, readily acknowledges that providing first-generation Hispanics with telenovelas can be a lucrative business. But he is adamant that the future lies elsewhere and discounts the importance of novelas to second- and third-generation Hispanics who make up his network's target audience. "[We] don't air novelas. They are not relevant" for the 18-to-34 age group, he says.
The presence of English-language networks targeting acculturated Latinos such as Sí TV, AIM Tell-A-Vision, Telemundo-owned Mun2, LATV and others will ensure the availability of programming aimed at second- and third-generation Hispanic viewers.
Rose makes the same argument and says younger audiences have choices. "If [bilingual Hispanics] want fantasy, they can watch a million dollar episode of Law and Order instead of a $100,000 episode of a telenovela," he says.
Those are almost fighting words and proof that telenovelas are the fault line of the Hispanic marketing world. The Spanish versus English debate, foreign versus U.S. born, and first versus second generation hinges on the future of telenovelas.
Ironically, both sides cite Nielsen ratings to marshal support for their distinct viewpoints. However, one issue is not in dispute: First-generation, Spanish-dominant viewers, particularly those from Mexico, love telenovelas.
Determining the size of that audience, then, depends on one crucial and industry-defining figure that is not provided by Nielsen: The annual immigration from Mexico is estimated at 485,000 people, according to a recent Pew Hispanic Center report. The figure is up from 400,000 a year for the period between 1995 and 1999. However, by 2020, second-generation Hispanics will overtake the first generation (21.7 million versus 20.6 million), according to projections by Pew and the Urban Institute in another report. Third generation and beyond will total an additional 18.2 million.
Combine an increasing number of first-generation Hispanics, a stable preference for novelas among Spanish-dominant viewers and a limited number of Spanish-language broadcast networks, and you have the recipe for overall growth in the telenovela audience for the next 15 years.
"We wish we had more variety of program genres," Nason says. "But the novela has been it and is still it."
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