Lost In Translation

Most everybody in the television industry knows that EchoStar Communications controls the international programming market within the United States. But few know exactly how EchoStar got this control or what is being done, by cable operators and the international networks themselves, to break this market grip. Many don’t even know why it matters. It does matter. People who speak a language other than English at home totaled 47.7 million, or 18.3% of the country’s population, according to the U.S. Census Bureau’s 2002 update to the 2000 census numbers. The update shows a 0.8% increase in the number of people speaking a foreign-language at home compared to 2000, a small but statistically significant jump, the bureau notes. Also, as of 2002, there were 33 million people in the United States who were born elsewhere, a 0.7% increase from 2000, another small but statistically significant increase. Remember when Hispanics were a small but significant ethnic group? EchoStar does. EchoStar offers more than 50 television networks in at least 10 languages, more than any other mainstream television provider in the country. Almost 1 million subscribers have signed up for EchoStar’s international programming, about a ninth of the satellite provider’s entire subscriber base, according to Paul Maxwell’s Media Business Corp. EchoStar has gained these subscribers by cutting exclusive carriage deals, aggressively marketing to ethnic communities and providing in-language customer service. And, according to at least one lawsuit, EchoStar has also allegedly resorted to shady tactics in order to get and maintain control of this market. EchoStar, of course, denies these allegations, fighting them every step of the way. And, to stay on top of this market, EchoStar is planning to offer 100 more international networks via its new satellite. As well it should. Competition for foreign subscribers is heating up. On the satellite front, EchoStar’s competitor DirecTV could get a windfall of foreign programming if News Corp. succeeds in taking it over as expected by year-end. On the cable front, a few operators have gotten more aggressive and are carrying new foreign networks via cable-specific means, such as video on demand. Cutting carriage deals is difficult, though, since EchoStar’s exclusive contracts restrict the distribution of international networks, specifically non-Hispanic networks. So, as a matter of last resort, a few of the international networks themselves have taken matters into their own hands and are making bold moves to fight EchoStar’s stranglehold on their distribution. One of those is Russian Media Group, a small foreign network group that is using that all-American recourse-litigation. RMG vs. Goliath U.S.-based Russian Media Group, which provides Russian television daily to viewers throughout the country, sued EchoStar’s subsidiary Kelly Broadcasting Systems Inc. this summer, says Mark Golub, RMG president and CEO. The lawsuit contends that KBS used unlawful means to help EchoStar corner the market and ruin the group’s Russian assets at the time, including the group’s contract rights to provide Russian-language programming to cable operator Comcast Corp. This lawsuit and, more importantly, a related lawsuit filed by Fleet National Bank, should give cable operators a keen understanding of how far EchoStar will go to keep subscribers of international channels. Filed in the U.S. Bankruptcy Court for the District of New Jersey last year, Fleet’s 85-page complaint charges EchoStar with breach of contract, fraud, racketeering and antitrust charges, among other things. The charges stem from the bankruptcy filing of a company called SkyView Media Group Inc., which actually started the international programming market within the United States and eventually sucked millions of investment dollars from Fleet. Shortly after SkyView filed for bankruptcy protection (which Fleet contends was prompted by EchoStar), both EchoStar and KBS attempted to buy SkyView. KBS even agreed to manage the bankrupt company. But neither EchoStar nor KBS followed through with their purchase agreements. Instead, EchoStar bought KBS in the first quarter of 2000 and let SkyView go dark and lose its satellite transmission: KBS then told SkyView subscribers to sign up with EchoStar, the lawsuit contends. Essentially, EchoStar and KBS swiped the bankrupt company’s subscribers without having to pay for them, the lawsuit alleges. "It was an absolute rape of the company," says David Moro, the former founder of SkyView. "The fact of the matter is who can blame them. They were hard-nosed competitors." EchoStar denies these allegations, according to a response to the Fleet complaint last year. EchoStar executives did not agree to an interview with CableWORLD on the company’s international programming past, present or future. Spokesman Steve Caulk says EchoStar typically does not comment on pending litigation. Both lawsuits by RMG and Fleet are pending. Lawsuits filed by individual networks or even cable operators may be the only way to break EchoStar’s control, according to a few international networks that spoke with CableWORLD on condition of anonymity. Five international networks expressed fear of legal repercussions from EchoStar if they attempted to get distribution deals on cable or DirecTV or even talk to the press. All of them say they would never dare to irritate EchoStar-the one major U.S. distributor they have. EchoStar helps them with not only distribution but also with marketing. In fact, they all expressed gratitude to EchoStar for its assistance. Cable Strikes Back? Lawsuits aside, cable operators are slowly starting to get the picture, most international networks interviewed by CableWORLD agreed. A few pointed to Comcast as the lead cable operator when it comes to carriage and marketing deals for international networks. Last year, Comcast hired Mauro Panzera as its senior director of multicultural marketing and charged him with finding new channels to offer to the ethnic market. "It is our duty and it’s an honor for us to be able to cater to all of our customers," Panzera says. "We feel that in such a diverse country we need to feel that we offer the right and appropriate programming … so everybody can be connected." Comcast offers a range of international networks on its digital tier or a la carte basis at an extra cost depending on the market, similar to EchoStar. Comcast’s San Francisco market, for example, offers 16 channels in languages ranging from Japanese to Russian. Pricing of the a la carte non-Hispanic networks runs from $10.95 to $25.99. Panzera also plans to offer its international channels on demand. VOD is a good solution for the "smaller ethnicities because there’s not enough households" to warrant a linear channel, he says. Panzera, however, is focusing on Hispanic offerings first because, frankly, it is a larger demographic to serve. Similarly, Cox Communications hired a new multicultural marketing director about four weeks ago to target Hispanics first, then everybody else. "Our primary objective is to increase our customer base in the Hispanic community," says Cesar Cruz, Cox’s new director of multicultural marketing. Cable One also targets mainly Hispanics since most of its systems are in Western rural areas, which are typically absent of big ethnic clusters other than Hispanics, says Jerry McKenna, Cable One’s VP of strategic marketing. To compete with EchoStar’s strong Hispanic package, Cable One rolled out a package with 10 Hispanic channels for just $2.49 on top of its expanded basic tier. "We’ve studied what they’ve done very, very closely," says McKenna of EchoStar’s pricing and packaging. "They priced it such so you don’t have to have a lot of buy-throughs to get it." EchoStar also carries Mexican broadcaster TV Azteca exclusively, McKenna notes. In fact, EchoStar sued Azteca this year when the company branched out and tried to offer some of its programming to cable operators. "We would love to carry TV Azteca," McKenna says. "I think it gives EchoStar a slight edge because it’s very well known and well regarded in the Mexican community." But it’s a big world, and there’s more programming to be found. The World According to Rainbow Networks, both foreign and national, are starting to take significant steps to spread international channels across the U.S. Rainbow Media, for one, plans to announce this month a service that will offer between 10 and 20 foreign-language channels nationwide, a spokesman told CableWORLD. These channels will be offered either on a digital tier or on demand and will feature diverse programming ranging from news to dramas. The Rainbow spokesman would not release the name of this new service or any other details. The International Channel Networks, which aggregates foreign-language channels, also offers foreign-language networks via SVOD to cable operators. The SVOD programming package currently includes Korean, Vietnamese and Russian language television, says Kent Rice, ICN president. No operator has taken ICN’s new SVOD product yet, though, Rice said as of late last month. The group also plans to represent more international networks in carriage, local ad sales and marketing deals with cable operators in the next few years. Last month, in fact, ICN launched the first African channel to be carried by cable. ICN wants to focus on Asian networks presented in both Asian languages and in English rather than Hispanic programming, since Hispanic has essentially outgrown the niche category. Even Michael Schwimmer, EchoStar’s SVP of programming, said at a satellite conference late last month that Hispanic programming is no longer niche, not even ethnic. "It’s American," he said on the panel. Rice agrees. That’s why he’s looking for everything foreign except Spanish-language programming. "Two-thirds of what we do is Asian," Rice says. On the International Channel itself, which broadcasts programming from around the world, the network features a prime-time block called Asia Street. Kent says this block has been working well. The target demographic is young Asians, an extremely attractive draw for advertisers and, subsequently, cable operators. Foreign-language subscribers in general are sexy customers because they tend to be more loyal than your average-Joe cable subscriber: Most ethnic subscribers stick with whoever distributes programming in their native tongue, according to seven international networks. And they typically pay more for their programming. Foreign-language packages on EchoStar, which can include just a few channels, cost between $10 and $50. The Russian subscribers to Russian Media Group, for example, pay their TV subscription bills when they’re due 99% of the time, says RMG president Golub. "That’s unheard of," he adds. And the churn rate for subscribers to German TV, which launched last year, is zero, a German TV spokesman says. German TV launched on the direct-to-home satellite platform GlobeCast last year because it refused to give EchoStar exclusivity, says Berlin-based Dr. Wolfgang Krueger, German TV’s managing director. "This was very, very complicated and not very comfortable for us," Krueger says of the exclusivity deal. "We knew that around 40,000 German-speaking people subscribe to Dish Network-EchoStar. In our business plan, we need 70,000 subscribers. To have exclusivity rights, this would be a problem for us." While EchoStar isn’t out of the picture altogether for German TV, Krueger hopes to land more cable deals. He’s already got a few. Last month, German TV announced a hunting license for carriage deals with all Time Warner Cable systems. The new foreign-language network also has a deal with Adelphia Communications in Colorado Springs, Colo. French network TV5 is also aggressively pursuing carriage deals with cable, providing research to distributors that shows French television is of interest not only to French speakers but also to Francophiles. "We consider ourselves a multicultural market," says Patrice Courtaban, chief operating officer for TV5 USA. "Fifty percent of our market is Francophiles." Southeast Asian channel Zee TV, which launched on EchoStar in 1998, hopes to capitalize on the growing foreign population in the United States. Of foreign-born people living in the U.S., 8.8 million are Asian, the U.S. Census Bureau update notes. As one of the few channels that does not have an exclusive deal with EchoStar, Zee TV stepped out on its own this month to secure more carriage deals. Originally represented by the International Channel Networks, Zee TV pulled out of its agreement with ICN Oct. 31 so it could represent itself and its other Hindi products. In fact, Zee TV will be one of the only programmers on the Western Show floor this year, the last Western Show of them all. "It feels like kind of a coming out party for us," says S. Venkatasubramanian, assistant VP of operations for Zee TV USA. "We’ve never dealt with cable companies on our own. We are excited and confident." Zee TV is available on about 100 or so cable systems, a majority of which launched the channel within the past 30 months. While Venkatasubramanian is looking forward to pursuing more cable deals, he praises EchoStar for its visionary strategy, business acumen and marketing skills when it comes to international programming. EchoStar does not force international subscribers to buy an English-language package first before they can access programming in their native tongues, as many cable operators do. It also provides in-language marketing expertise, according to all the international networks that spoke with CableWORLD. DirecTV may soon do the same. News Corp. plans on "increasing the amount of programming on DirecTV targeted at culturally, ethnically and linguistically diverse audiences" if its merger is approved, according to a News Corp. filing with the Federal Communications Commission in September. When in Rome Regardless of whether television distributors decide to increase their carriage of international networks, EchoStar will have a fight on its hands if the Russian Media Group, backed by Fleet, has its day in court. RMG’s president Golub has a history of perseverance. He started the first Russian channel in the United States 13 years ago, built it up, sold it to SkyView and brought it back out of bankruptcy without subscribers. Once again, he built it up to make his Russian network group profitable, he says. He may very well offer more channels in different languages if all goes well. And he’s not about to give up on that good old-fashioned American method of competing-suing the pants off someone.