After 11 years of preparation, Lenard Liberman finally launched a national Spanish-language television network.
And he's not overly concerned that the launch of his family's Estrella TV came after two years of an advertising slump that has crippled the entire TV industry.
Liberman is executive vice-president of LBI Media Holdings, a Burbank company that owns 22 radio stations and seven TV stations, including KRCA (Channel 62), the flagship station for the new Estrella network, which officially debuted Sept. 14.
By combining all his television properties, he's suddenly created the third-largest U.S.-based Hispanic network, behind Univision and Telemundo. His goal is to surpass them both in ratings and revenue.
The strategy is to offer counterprogamming: While the other networks offer mostly Spanish-language soaps in prime time, Estrella will focus on game shows, variety programs and talent competitions in the mold of "American Idol."
Liberman said his dream of creating a national network goes back to 1998 when he first purchased KRCA. He originally wanted to buy stations to assemble his network, and in 2006 the company filed papers with the Securities and Exchange Commission for a $350 million public offering. When the credit crunch on Wall Street forced him to shelve that plan, he decided to sign up affiliate stations a much cheaper way to form a network and go for it despite the downturn in advertising revenue.
"If it seems like rough timing, my answer is that if you look at the Hispanic TV network space, there are only two players, Univision and Telemundo," Liberman explained. "It's a great time to be the third player."
In addition to the seven stations owned by LBI, Estrella includes 17 local affiliates owned by other media companies, Tribune Co., Belo Corp. and Hearst Television. The non-LBI stations will get 40 percent of the commercial time on Estrella channels to sell to local advertisers. The 24 stations reach 68 percent the U.S. Hispanic population.
Most of the new network's programming is produced in Burbank at KRCA's studios and was designed to compete with the two dominant networks, Univision Communications Inc.'s Univision and NBC-Universal Inc.'s Telemundo. Univision and Telemundo devote their prime-time slots to telenovelas, or Spanish-language soap operas that appeal mostly to women viewers.
"When we produce a show, it's to compete at a specific time period," Liberman said. "We create all our own shows and it's very competitive programming."
But even beyond its two main competitors, Estrella joins a crowded market. Univision is the giant of the industry, garnering nearly 80 percent of the Hispanic TV ad dollars. But besides Telemundo, there's Telefutura, a youth-oriented network owned by Univision; Mega TV, owned by Miami-based Spanish Broadcasting System; Azteca America, a U.S. extension of Mexican network TV Azteca; L.A.-based music channel LATV; and cable channels Galavision, SiTV and Tr3s.
Liberman is confident that with the right programming, he can draw viewers who are looking for something that's not available elsewhere. He believes that when Hispanics come to the United States, they develop a taste for U.S. formats such as "American Idol" and "Deal or No Deal." At the same time, they retain a nostalgia for familiar entertainers. So Estrella will use the talent competition format and cast it with hosts or guest stars from Latin America.
Julio Rumbaut, a Hispanic market TV consultant in Miami, compares Estrella with Fox TV when the latter became the fourth American network in the 1980s.
The business runs in the family.
Liberman's father, Jose Liberman, 84, started his media ownership career in 1957 with the purchase of XERZ in Mexico. In 1976, he acquired KLVE-FM (107.5), the first Los Angeles FM station to air in Spanish. He later bought other stations but sold the package in 1986 to Heftel Broadcasting (now Univision Radio).
A year later, the two Libermans founded LBI. They own 100 percent of the company. Jose Liberman is chief executive but the son runs the company.
"This is not a startup," Rumbaut said. "They have effective programming that has proven itself in three of the top 10 Hispanic markets Los Angeles, Dallas and Houston. They have a track record of strong ratings and strong ad sales. And they are spending their money on content, not distribution, which works in today's market."
On an operating basis, LBI doesn't face the same financial problems as Univision. That network was purchased in 2007 by a partnership led by L.A. billionaire Haim Saban. The leveraged transaction placed a huge debt burden on the network of nearly $10 billion.
But LBI, Univision and most if not all broadcasters are suffering in the current ad drought.
According to its 2008 annual report, LBI Media had revenue of $117 million and an operating loss of $60.7 million, mostly due to a $91 million write-down in the value of its stations. By comparison, Univision reported revenue of $2 billion with an astounding net loss of $5.1 billion due to a $5.4 billion write-down of its assets in the same year.
Adam Jacobson, senior associate editor at newsletter Hispanic Market Weekly in Coral Gables, Fla., said Liberman hasn't had to spend a lot of money to launch the network due to the TV industry's switch to all-digital broadcasting.
When the change took place in June, it opened up extra channels for local stations. Estrella arranged to get one of those extra local channels in the markets where it wanted to be. And due to rules requiring cable companies to carry all local channels, cable companies have to provide Estrella to their subscribers.
"They were very smart to partner with digital stations and get instant entry to cable," Jacobson said. "The cable operators might put Estrella on channel 112, but they have to carry it."
One of the new network's challenges is whether local TV stations, many with no experience in the Hispanic market, will sell their share of the ad time.
"It's up to the affiliates to bring in the local advertising dollars," said Jacobson, "so the question is how much effort will they give it and what kind of metrics will they have to help them sell?"
Also, Rumbaut pointed out that Estrella TV appeals most to Mexicans, so the network could face a hurdle in Eastern markets such as New York and Miami where Puerto Ricans and Cubans make up most of the Hispanic audience.
Jacobson believes Estrella TV's success to date has resulted from its focus on the Hispanic market's forgotten segment men who don't want to watch telenovelas.
Winter Horton, chief operating officer at Liberman, said men account for 55 percent of the network's audience, a contrast to Univision's female-skewed audience.
The network's most popular fare reflects male tastes. Estudio 2 is a boisterous variety show with several musical groups, stand-up comedians and a talent show judged by the audience. The show averages a 24 percent share of viewers versus Univision's 32 percent and Telemundo's 11 percent during the same time slot, according to Liberman.
With the network now up and running, Liberman can look forward to his next goal, which is surpassing Univision in ratings and revenue. He plans to grow by offering the audience alternatives to the norm and eventually becoming the norm, just as Fox began with the "Simpsons," then went on to hits with "Married With Children" and "Beverly Hills 90210" before launching the phenomenon of "American Idol."
"Our long-term goal is to get into every one of the top 50 Hispanic markets and then not to be cavalier beat Univision," Liberman said. "We are going into this with a lot of optimism."
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