Univision's KMEX widens its lead.

As Univision Communications Inc. awaits government approval of its pending acquisition of Hispanic Broadcasting Corp. the dominance by its local flagship, KMEX (Channel 34), is probably not helping the cause.

It's a problem Univision executives are happy to have.

"Ten years ago when (A. Jerold) Perenchio bought Univision from Hallmark, his order was to make KMEX the best station in Los Angeles. Period," said Jorge Delgado, general manager of KMEX and sister Los Angeles station KFTR (Channel 46). "Our goal is not just to compete with Spanish stations, but to compete with everyone."

In the past year, Univision has been doing just that. It has left its main rival, Telemundo, squarely in its dust while issuing a simultaneous wake-up call to its English-language competitors.

Like same of those competitors, both Univision and NBC-owned Telemundo possess two television stations in the Los Angeles market. But while the audience for Telemundo's duopoly is shrinking Univision now commands more overall viewers than any other company in Los Angeles, regardless less of language.

Opposition to the Univision-Hispanic Broadcasting merger has come from opponents like Telemundo and radio company Spanish Broadcasting System Inc. that claim the combined entity would command two-thirds of the $2.4 billion Hispanic advertising market. Nevertheless, the FCC is expected to approve the deal, perhaps as soon as this week, because it would not violate any current ownership restrictions.

While Telemundo's woes predate its acquisition last year by General Electric Co.-owned NBC for $2.6 billion, the numbers underscore the widening gap among local stations. Consider:

* KMEX's average primetime rating among adults 18-49 was second in Los Angeles only to Fox's KTTV (Channel 11).

* KMEX improved its average primetime audience share by a full ratings point, to a 5.7 (each point is equal to 53,000 households) between May 2002 and May 2003, the best gain of any local station. Meantime, its chief rival, Telemundo's KVEA (Channel 52), declined to 0.9 primetime average in May from a 1.6 in the same period.

* KMEX's 5.7 average primetime rating was better than KCBS (Channel 2), KCAL (Channel 9) and KCOP (Channel 13) combined.

* Despite being little more than a year old, Univision's second network, Telefutura, which airs on KFTR (Channel 46), finished with a higher average of total viewers than KVEA and came to close to unseating that station in primetime.

Together, the Univision and Telefutura networks captured more than 78 percent of the U.S. Spanish-language primetime television audience in the most recent season, according to Nielsen Media Research.

Coming back?

The competition for viewers has intensified as the Hispanic advertising market continues to expand faster than the general market. At an estimated $260 million, upfront advertising on Spanish-language networks was up 20 percent this year over 2002, compared with less than a 10 percent for the general market, which was also considered a healthy gain.

"I believe Telemundo can bounce back, but the gap is the same or even widening since NBC took over," said Liz Castells-Heard, chief executive of Castells & Asociados, a Los Angeles Hispanic advertising firm. "If they continue on this path they are not going to see the upside of NBC ownership. Univision is a force to be dealt with."

In some ways, NBC's positive influence at Telemundo is just a matter of time. That includes coverage of the 2004 summer Olympics (NBC has the rights) and, closer to home, KVEA and the other local Telemundo station, KWHY (Channel 22) enhancing their nightly news programs by borrowing video feeds from sister station KNBC's (Channel 4) helicopter.

But there remain several sore spots, starting with primetime.

"They did some reality shows and some telenovelas (soap operas) that didn't really work," said Roberto Orci, president of M3 Alliance Consulting, and a former president of advertising agency La Agenda de Orci & Asociados. "Not only are they losing to Univision, but Telefutura is taking over as the number two station in many markets."

During the week of July 21, KMEX had six shows ranked among the Top 25 primetime programs in Los Angeles, while KVEA had none.

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Manuel Abud, vice president and general manager for KVEA and KWHY, said that the May sweep ratings, coming at the end of Telemundo's move to NBC's Burbank studios, was an anomaly, and not representative of the gains the network has been making.

"We had some issues with some novelas that drove our schedule down, but we're recovering that ground in July," Abud said. "NBC is a numbers-driven company and there is always pressure to improve. But NBC didn't come in here expecting changes overnight."

Running second-tier novelas has plagued Telemundo for years. Univision, which is 25 percent owned by Mexico's leading telenovela producer, Grupo Televisa SA, has had the pick of that company's shows, which have been consistent ratings leaders.

In response, Telemundo has been producing some of its new novelas in the United States, with a U.S.-born Hispanic audience in mind. Several of those new shows, as well as more reality programming, will debut this fall.

In addition, Abud said major changes are on the way for KWHY, which, unlike the other local stations owned by Telemundo and Univision, does not have network affiliation. He said the intention is to make it "the ultimate hyperlocal play for L.A. Hispanics."

Counter programming

Predictably, the weakness in primetime has affected news programming. KVEA's 11 p.m. weekday news show, for example, dropped to a 0.6 rating from a 2.3 the previous May. Meantime, KMEX increased its rating to a 3.4 from a 3.1 the previous year.

As Delgado put it, "We pride ourselves on our local newscast, but there's nothing like a good lead-in."

With Univision the dominant network, Carl Kravetz, chief executive of Cruz/Kravetz Ideas, a Culver City Hispanic ad agency, said Telemundo's strategy has been to counter program with an appeal to U.S.-born Hispanics. But Kravetz questioned that approach.

"In trying to forge some kind of competitive difference, they are appealing to U.S.-born or U.S.-acculturated Hispanics, but they are trying to do that in Spanish," he said. "Neither one of them is talking to the fastest growing demographic-U.S.-born Hispanics who speak English."

In fact, Telefutura has had more success counter-programming the Univision network than has Telemundo.

"The novelas skew heavily female, so the thing we are doing is programming that skews younger and male," Delgado said. "The Univision schedule is set, but KFTR also gives us a venue to experiment with new types of shows."

Despite Telemundo's weak performance, Leland Westerfield, a media analyst with Jefferies & Co. Inc., said the network remains well positioned if it can make even modest gains.

"It will continue to be a two-horse race," Westerfield said. "The Hispanic media sector as a whole is still a young growth market and both the leading TV players are well positioned to be dominant."

But, as Kravetz pointed out, the problem for Telemundo hasn't always been what they are doing wrong, but rather what Univision is doing right.

"Clearly Univision has greater appeal to the Spanish-speaking audience," Kravetz said. "Spanish television probably represents about 80 percent of Hispanic ad dollars, and most of that is going to Univision."