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Laughing All The Way To The Bank

Top-rated local TV comedies help boost ad revs by 19% to a record $220 million this year…and subject viewers to some 20 minutes of commercials per hour.


September 14, 2000
Copyright © 2000 CARIBBEAN BUSINESS. All Rights Reserved.

You get what you pay for

Puerto Rico’s television industry is healthier than ever, with more local programming, and stations ‘stealing’ talent from each other by offering bigger and bigger bucks.

While Puerto Rico television executives and local producers expect a record-breaking year in advertising revenue, island viewers suffer through more commercials in an hour of local programming than those watching major U.S. networks.

By stuffing highly popular shows with between 14 to almost 20 minutes of commercials per hour, local stations expect to drive TV advertising revenue in Puerto Rico up 19% from $185 million in 1999 to about $220 million this year, industry officials said.

That growth rate is much higher than the one expected for the mainland TV network and station advertising market, which is expected to grow 7% in 2000 to about $41.3 billion, according to the Veronis Scuhler Communications Industry Forecast.

"Those are the numbers we have," said Luis Roldan, president of Telemundo, the long-standing leader in local programming. "The revenues may increase even more because of the political campaigns for the elections."

During the first week in August, WKAQ-TV Channel 2 (Telemundo) registered almost 15 minutes of average commercial time per programming hour, and those numbers exclude the time stations spend promoting their own programming. Roldan said Telemundo averages about three to four interruptions with 2.5 to 3 minutes of commercials each in each programming hour.

WAPA-TV Channel 4 (Televicentro) averaged 12.31 minutes of commercial interruptions, while WLII-Channel 11 (Teleonce) included approximately 13.32 minutes of commercials per programming hour, according to AdTrac data provided by Mediafax Inc.

That’s up to four minutes more of commercial interruptions than the average at stateside networks, such as ABC, which ranks highest in commercial interruptions with 12.22 minutes per hour. NBC ranks second with 12.15 minutes, FOX averages 11.50 minutes and CBS is last with 11.19 minutes, according to Mediafax.

"The upward trend in commercial minutes is similar in both Puerto Rico and the U.S. mainland, especially during this election year," Mediafax President Bill McKenna said. "In stateside local markets there are typically five or more local broadcast stations and cable penetration approaches 70% of market households, thereby creating a greater supply of commercial inventory for advertisers."

Television advertising is nothing to scoff at in Puerto Rico, where 99.2% of households (1.2 million) have televisions and 57% of households have more than one working TV set, according to Mediafax. This also helps ratings, because more people are tuned into more sets.

"Television used to be a family phenomenon in which everybody had to watch what the dominant person watched," said McKenna. "Now, everybody can watch their own program, so you end up with more people viewing their own preferences, and that adds to program ratings."

And there’s no doubt that more people are watching television in Puerto Rico. Mediafax numbers show TV viewing has increased by 7% comparing year to date 2000 with 1999.

Deciding whether greater advertising revenue leads to more local programming, or vice versa, is as hard as determining whether the chicken or the egg came first. But industry officials agree advertising income and local programs are closely interrelated.

"The [TV advertising] industry has never been this high," McKenna said. "A decade ago the industry wasn’t even at $100 million. We’re entering the 21st century with a really vibrant TV industry in terms of growth and advertising."

In the money

Because of record-breaking advertising revenues, stations can engage in a tug of war over top-rated artists and can offer bait of more than $1.5 million for a Top 10 program. That’s gravy for local artists and producers, who even after paying their staffs, end up lining their pockets with $500,000 to $800,000 in yearly income, according to industry officials.

Nowadays, a half-hour of TV production time is paid at a rate of between $5,000 to $8,000, and an artist with a five-day, one-hour-long show can make between $50,000 to $80,000 a week, industry officials say. Although program stars won’t say how much they actually make, they acknowledge that they’re making a lot more now.

"Eight years ago, when we did Que es lo Que Pasa Aqui [What’s Going On Here?], I was a producer and in a position to make more money," said Silverio Perez, Teleonce’s highest rated comedy star. "Now, I’m earning four times what I did then and I’m not the program’s producer. There has been a significant change in terms of money paid to artists."

Besides cash, other perks used to steal talent from one station to another is giving artists production rights, meaning they get to produce their own and other shows, significantly boosting their bottom line. More money means more jobs and more opportunities for local people, said Emmanuel "Sunshine" Logroño, who stars in and produces some of Televicentro’s highest-ranked shows.

"I have about 55 people now on my staff," said Logroño, who recently jumped from Telemundo to Televicentro and is producing four other shows at the station, in addition to his own. "In jumping from Telemundo to Televicentro I’m now making four or five times more, because there I was just talent, here I’m an executive producer."

At Telemundo, local production during its regular programming has more than doubled from what it was two years ago. Its regular locally produced programming went from 28.3 hours a week in 1998 to 63.6 hours a week as of July 31, according to data provided by station officials.

"There’s definitely been an increase in program hours for locally produced programs," said Roldan. "Now we’re producing for Saturdays and Sundays, which increases our local programming from five days a week to seven."

Local advertisers, Roldan said, look for local programs because they attract the highest ratings. "I think that’s a pattern that will continue to grow. Other channels have realized that we have a winning formula and have started to produce more local programs."

The past

It wasn’t always so. Since the 1970s, local programming has registered highs and lows, as TV stations passed from local to non-local hands. Parent companies were often more interested in buying cheaper canned films and soap operas than in footing the bill for costly local productions, industry officials said.

"If they could place a poor-quality program from Venezuela that cost them $200 and produced the same ratings as a local production, they did that," Perez said. "That caused a drop in local production at a given time, but it gave TV stations more financial solvency because they were being administered as businesses."

Another factor industry officials say has boosted investment in local production is the higher prices of hit movies, which make it harder for local TV stations to buy them. Plus, their increased availability through cable often makes their purchase less than cost effective.

"Cable is so much more attractive and accessible now that people can watch movies directly on cable and they don’t have to watch them with commercial breaks in local television," said Logroño.

The cable option

Cable has been a wake-up call for local TV stations, and also for advertisers. It’s been a few years since local ads began their insertion into cable, but it’s this year that Adelphia Media Services will reach about $10 million in revenue thanks to local ad insertions. That compares to about $3.5 million in 1997, according to Gabriel Palerm, Adelphia Media Services general manager.

"Many advertisers, as well as viewers, are tired of the repetitiveness and the quality of local television," said Palerm, who also is regional director of sales and marketing for Adelphia Communications Inc. (formerly Cable TV of Greater San Juan). "There’s too much violence, high sexual content, and it’s not appropriate for children. Meanwhile, cable can offer quality programming for all."

While only 29% of all Puerto Rico households are currently on cable, Palerm said Adelphia reaches up to 45% of the San Juan area households that receive cable. Since 1997, when the cable industry split into two companies, one that provides services in San Juan and another to the island, Adelphia’s customer base has grown 19% from 118,000 clients to 140,000 clients.

"Cable’s penetration is rising," Palerm said, noting that Adelphia doesn’t provide cable to public housing projects and rural communities.

It’s cable that Antonio "El Gangster" Sanchez points to when explaining why people began demanding more variety in their choices and local television shed its highly conservative skin. Sanchez produces and stars in Telemundo’s (and the island’s) No. 1 ranked show.

"Producers kept doing the same thing over and over again, and we watched the same programs with different names," said Sanchez, who estimates he’s making about three times more now than 10 years ago. "Then cable arrived in Puerto Rico and people realized there were other things."

Sanchez, who started in radio back in 1978, credits Logroño for breaking the ice in local television with his program Sunshine’s Café in 1989. "He opened that door and let, not just me, but many other people in with different ideas that we’ve seen have worked."

For Logroño, cable is one of his main rivals. "I don’t see what’s being done in Channel 2 or 11 as competition because everybody has a different style and there’s an audience for everybody," he said. "Our direct competition are video clubs, parabolic antennas, cable television, and the Internet, because people are choosing between those things and us to spend their free time."

The issue of quality

It’s no secret that many viewers, and advertisers, have flocked to cable seeking higher quality in productions. Local programs have been criticized for their low quality, not only in props and staging, but also in content–which at times includes explicit sexual jokes and scantily clad women, industry officials said.

Still, despite what some many turn up their noses at, local programming reigns uncontested across the island, especially outside the capital city.

"Most of the people in San Juan can’t really judge what the whole island is doing," said McKenna. "The leading program in the metro area is not the same as the main program in the whole island. Depending on the time of day, San Juan tends to prefer news and movies, while the rest of the island tends to prefer soap operas and local production."

For some, the issue of content is moot because they say television is there to entertain, not educate. Attempting to do the latter, they say, is a losing proposition on an island where high unemployment and low education levels lead to an average TV viewer who spends eight hours a day glued to the boob tube.

"One has to be very careful with what we say is good or bad for people," said Televicentro President Joe Ramos. "That’s one of the first things I learned when I started working in television: our goal is not to educate. If a TV producer or station manager thinks it is, they’re going to fail."

Ramos, who headed first-ranked Telemundo for 14 years, moved to Televicentro in 1997. He said he welcomed the challenge of reviving the station, which was trailing in the ratings. Today, Televicentro has four of the top 12 locally produced programs.

"What we’re going to see is a limitation in the quantity of locally produced programs to improve the quality," said Ramos. "In the measure in which the public begins to demand more and as we compete with cable, there will be more quality and more local programming."

Product integrations

One man who doesn’t buy the Rome-old philosophy of giving the masses what they want is Sylverio Perez. Having previously worked at both Televicentro and Telemundo, Perez’ show on Teleonce is similar to Jay Leno’s or David Letterman’s.

He attributes his program’s success to the decision to avoid what’s most popular on locally produced television. Although the show is aired after prime time, which is 6 p.m. to 10 p.m., it has received higher ratings than the program that precedes it, according to Perez. He said they have logged five ratings points above the prior program, something he said is unheard of.

That support, he believes, comes from people who had been turned off by local television and flocked to cable. It’s those same people who now tune in to his program seeking the same level of quality as cable talk shows, with the added benefit that it’s in Spanish.

Another trait that distinguishes his Anda P’al Cara is its product integrations, where Perez endorses a particular product on the air, complementing commercial interruptions. Perez said the program’s producers have to beat advertisers back to prevent the program from being filled with such product integrations.

Since his show is broken down into five segments, that would mean 15 product integrations per program at approximately $700 a shot. That would yield $10,500 in product integration revenue alone per program. "I limit it to one product integration per segment because it’s not comfortable for me to do more," Perez said.

Logroño also credits product integrations for the increased financial success of local programs. Advertisers, he said, benefit more from local productions because they have more control over what gets promoted and how.

"Take a beer company, for example, that takes out an ad in a certain movie. When the actor is suddenly seen drinking a beer that’s the competition, neither the station nor the advertiser can do anything about it," he said.

In local productions, on the other hand, advertisers can place the product they want to promote as part of the story, Logroño said. "In the case of El Condominio, when we’re in the laundry area, there are detergent and rinse products on top of the washing machines."

Too much is never enough

Thus, viewers don’t just get commercial interruptions, they also get commercials within the programs. When is so much advertising too much? When viewers say it is, according to Mediafax’s McKenna.

Most viewers, however, don’t appear to prefer programs with fewer commercial interruptions. Those who watched Minga y Petraca, Telemundo’s fourth-highest ranked program within the station, sat through a full 17 minutes of commercials during the one-hour show in the week of Aug. 7 to 13. Those watching the No. 5 ranked program in Televicentro that week, El Show de Raymond Arrieta, had almost 16 minutes of commercials during the one-hour program, according to Mediafax.

"More commercial revenue is the reason these stations can afford to compete for local production talent, as has happened this year," McKenna said. "I think that’s good. It’s more jobs in the industry, more local actors can work and we can keep the money in Puerto Rico."

This Caribbean Business article appears courtesy of Casiano Communications.
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