News Column

Shrinking Divide

July/August 2005, HISPANIC BUSINESS Magazine

Joel Russell

tv

Six years ago, a study by the Federal Communications Commission concluded that the revenues of minority broadcasters were 63 percent lower than for their non-minority counterparts, based in part "on stereotypes about the minority consumers." But today, that historical ad-price gap has largely disappeared for television broadcasters, according to advertising executives interviewed by Hispanic Business.

"There has historically been a pricing gap between English- and Spanish-language advertising," agrees Alex López Negrete, CEO of Houston-based López Negrete Communications and chairman of the Association of Hispanic Advertising Agencies (AHAA). "That gap is closing, closing, and in some dayparts has closed." (A daypart is a time segment into which the day is divided by broadcast media.)

He cautions that in network TV advertising – the only comparable market, he claims, because so many variables impact local spot markets – the English-language audience is much larger than the Spanish-speaking audience, so in absolute terms the mainstream networks logically command higher prices. But in terms of the price to reach a thousand people (called CPM, or cost per thousand) "our eyeballs should be priced the same as anyone else's," Mr. López Negrete says.

"Hispanic CPMs have risen faster than the general market, so the gap has been closing," explains Nancy Tellet, director of media services and strategic planning at SiboneyUSA in New York. "As to whether it has closed, on some demos [Spanish-language] is as expensive as the general market, and on others not. It varies by demographics."

Factors contributing to the improvement in Hispanic CPM include better audience measurement and a higher profile for Hispanic media companies. "Univision more than anybody wanted that [price] gap to close, and they were setting their price accordingly," observes Ms. Tellet.

Players such as NBC, Fox, and CNN now sell advertising in both languages, leading to direct comparisons on price and audience. "Organizations like that are in place and have relationships. Whether they sell English or Spanish, they are salesmen on commission. So why should they sell it cheap?" asks Mr. López Negrete.

"The people at NBC who decided to spend money [purchasing] Telemundo were making a bet prices would go up," says Héctor Orcí, CEO of La Agencia de Orcí & Asociados in Los Angeles. "The real phenomenon is that Wall Street is paying attention to the Hispanic space and moving capital in this direction. Univision was a prime mover of that capital, and now NBC. So they are happy with the outcome."

While measurement tools such as Nielsen ratings have improved, Mr. Orcí believes client education ranks as a more important reason for rising CPMs. "We have had accurate numbers for some time. But it has never been a numbers game; it has always been a question of people's willingness to believe the numbers," he says. "They believe when the bottom line is affected. At one time ignoring Hispanics was OK business behavior. It's not anymore."

For years, advertisers justified lower payments for Hispanic advertising by citing lower income and spending patterns by Hispanic consumers. But for the last decade, "Hispanic purchasing power has increased at a compound annual growth rate of 7.5 percent – more than twice as fast as the 2.8 percent rate for total U.S. disposable income," according to "The U.S. Hispanic Economy in Transition: Fast, Figures & Trends," a report from HispanTelligence®. Mr. López Negrete says the 2000 Census opened a lot of eyes in the marketing industry, and efforts by media outlets, Hispanic agencies, and the AHAA have convinced corporations to properly value the Hispanic consumer.

For savvy marketers, income doesn't matter as much as purchasing patterns, Mr. López Negrete continues, "and if you put pencil to paper, [Hispanics] over-index in a lot of categories." Ms. Tellet reports that the most popular demographics for advertisers in the Hispanic market are "the day-keeper mom," or females 18 to 49 years old, followed by overall adults in the same age bracket. Not surprisingly, the big spenders in the market include retailers, consumer goods, and automotive, Ms. Tellet says. These advertisers target female buyers, and given the Hispanic household's tendency to over-purchase, they'll pay the market price to reach them. (For a list of top advertisers, visit www.hispanicbusiness.com/go/mediamarkets)

In the dayparts where a price gap remains, Mr. López Negrete looks at the quality of programming. He cites the late-night fringe period (11:30 p.m. to 2 a.m.), when CPMs for Spanish-language TV hover in the low-$20 range. Comparable CPMs for the English-language network come in around the high-$20 range. But Mr. López Negrete says programming during this period has never been strong on the Spanish-language networks, although he sees hope in this summer's "up-fronts."

While the price gap has nearly closed, Mr. Orcí believes that in today's communication environment, advertisers should pay a premium instead of a discount for Hispanic consumers. "We used to say you could get Hispanics at a discount, and you'd get a better customer. It surprised us because it's a supply-and-demand world," he recalls. "Now marketers understand that if they don't take this market seriously, it will affect their overall marketing goals."

In support of the premium argument, Mr. Orcí notes that the return on investment in the Hispanic market has been better historically than in the general market. That stems in part from Hispanics having larger households and a tradition of family TV viewing, which results in more eyeballs seeing the ads. But the Hispanic consumer also tends to depend on advertising for information and believes the ads tell the truth. "That's very different from the general market, where people want to escape being talked to," Mr. Orcí says. Because of these factors, Hispanics score higher on advertising recall tests. "It isn't the differential in cost as much as the response rate. That's one thing Hispanic advertising has not lost."

In the short term, premiums for Hispanic consumers seems unlikely: Ms. Tellet reports that after years of rising CPMs, the rates for Hispanic ads now march in step with the general market.

"It's not a sure thing that we're a bargain anymore," she says. "We're certainly an attractive market for a lot of reasons: growth in network viewership, lack of the audience fragmentation in the general market, growth of population, and the proliferation of media choices for advertisers."

But given those reasons, Mr. López Negrete of the AHAA proclaims the market is "still a bargain, even though the gap has closed." New advertisers coming into the market don't suffer from the memory of discount rates and see the market purely in terms of opportunity.

"The advertiser community is continuing to learn the value of Hispanic consumers. We will be the new majority. They're asking how can we adapt to that new reality," says Mr. López Negrete. "I look forward to totally eliminating the gap."



Source: HISPANIC BUSINESS Magazine


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