For the distributors and producers out there who had all but given up hope of ever cracking into the Spanish broadcast market, it might be time to try again. The once-closed environment dominated by a handful of terrestrial broadcasters and strong regional channels, all of which had limited slots for kids programming, is undergoing something of a transformation as the nation prepares to switch from analogue to digital TV transmission on April 3, 2010. Since the government began issuing digital terrestrial (DTT) broadcast licenses in 2005, pubcaster TVE has launched free 24-hour kidnet Clan TV (a first for Spain), while the country’s second-largest private broadcaster Antena 3 has opened up space for kids content on DTT net Neox. Broadband IPTV is also coming on strong and boosting exposure for traditional cab/sat nets such as Cartoon Network and Disney. What it all adds up to is this: more opportunities for content owners to break into the market, maximize windowing opps and exposure once there, and maybe splash around in a new stream of ancillary revenue. But the Spanish kids market isn’t entirely as sunny as Barcelona on a summer’s day, and the challenges are worth some careful consideration.

The numbers game

With a population of 40.3 million (including 5.8 million kids ages zero to 14) and around 14.6 million TV households, Spain certainly isn’t Europe’s largest market. But its healthy middle class and an economy that’s grown by around 3% annually since 2003 make it a desirable territory. And its kids broadcasting scene is just embarking on a period of fragmentation that has already opened up new opportunities for some.

In the last 18 months, new terrestrial player Cuatro has joined majors Telecinco, Antena 3 and TVE, while 20 new channels have been licensed for DTT. In terms of TV households, terrestrials still net the lion’s share of viewers, but thanks to a government-led push, DTT has been growing quickly. There are roughly three million DTT-enabled households in the market, and according to DTT association Impulsa, Spanish consumers are snapping up digital set-top boxes at a rate of 300,000 per month. If this adoption pace continues, TV industry researcher Kagan projects the number of installs to hit 4.4 million by 2008.

In contrast, the rate of uptake for satellite and cable, which is where you’ll find global kidnets Cartoon Network, Disney and Nick, has stagnated of late at roughly 3.3 million households. Relatively high monthly subscription rates are most likely to blame, with Digital Plus’ two million satellite subscribers ponying up around US$60 and cable households paying roughly US$32. Interestingly, the growth of IPTV services should give entrenched cab/sat kidnets a boost in viewership as they start getting carriage on the new platform.

According to Kagan, ‘Spain is one of the most dynamic IPTV markets in the world right now.’ No fewer than four telecoms have thrown their hats in the ring to deliver linear and VOD packages to consumers via broadband. At around US$15 a month on top of a broadband line (which costs up to US$20 and includes a phone connection), IPTV is becoming an attractive option for Spanish TV viewers. So far, Telefonica’s Imagenio service is leading the way with 300,000 subscriptions, while competitors Jazztelia (Jazztel), Orange and Ya.com (Deutsche Telecom) are just getting off the ground.

‘February marked the first time a terrestrial network led the ratings with less than a 20% share,’ says Ignacio Orive, president of brand management company Elastic Rights. ‘The main network shares should settle down at 15%, with new players living well at around 5%. If you’re solely a distributor, this is very good news.’

So network-wise, who’s come out to play? On the terrestrial front, children’s programming hasn’t traditionally been viewed as a genre that generates much ad revenue. But after axing all kids shows some years ago, market leader Telecinco has reintroduced a weekend kids block, and number-two net Antena 3 has also recently debuted a weekend slot. Pubcaster TVE has experienced some growth with the genre and now broadcasts a weekday morning block on TVE’s La 2, as well as kids blocks in the late afternoon and around bedtime. And Cuatro has a morning boys action offering, programmed by Elastic Rights, that airs seven days a week.

It’s early days still vis à vis DTT, and for channels in the space right now, it’s more about staking a claim than drawing a huge audience. On the kids side, there’s TVE’s Clan TV broadcasting kids fare 24/7 and the Megatrix block on Neox. Plus Veo has just gotten into the game with a preschool morning block and is looking to add fare for older kids in the coming months. And new pay-TV preschool channel Kitz TV has announced its entrée with the recent acquisition of more than 100 hours of international programming from Barcelona-based Icon Animation, which just branched out into third-party distribution this past year.

What might be most attractive about these new players for distributors selling into the region is that, unlike the strong FORTA-member regional channels, they broadcast in Spain’s official language, Castilian, so no additional dubbing costs are necessary.

Demand for preschool heats up

In terms of the biggest opportunity in the current market, a number of signs point to preschool programming. Anecdotal evidence gathered while researching this story suggests Spanish parents are looking for a safe channel in front of which to park their toddlers. Moreover, TVE’s success in the last four years with in-house puppet show Los Lunnis has really paved the way.

Los Lunnis became so popular, it sparked the biggest ancillary rollout for a preschool entertainment license Spain had ever seen. In 2004, goods based on the property topped NPD’s sales charts, and its merchandising may only be starting to cool down now. TVE has since added the likes of Zinkia’s Pocoyo and Caillou from Cookie Jar Entertainment to its preschool offering on La 2. As Cartoon Network Spain program director Vincent Sordeau notes, ‘There is now enough programming on La 2 in the morning to show [other broadcasters] that preschool shows are economically feasible,’ adding that he’s since launched a morning segment for under-fives on Boomerang.

For HIT Entertainment, this seeded a breakthrough the British company thought would never happen. ‘Spain has always been a frustrating territory for us,’ says head of international TV and video Maria Chappelow. Within the last six months, she’s managed to place Bob the Builder on TVE for the first time (it launched in February); score a deal with Antena 3 that will see Thomas & Friends air on the terrestrial and Neox; and program upstart Veo’s entire two-hour morning block with shows cherrypicked from the HIT library. It’s particularly interesting to note that Antena 3 has also picked up Spanish licensing rights for Thomas.

While he’s an established merch classic in many other parts of the world, according to Chappelow, Thomas doesn’t have much of a presence in Spain. All that should change, though, when the show starts airing later this spring. Master toy licensees RC2 and Tomy have product ready to go, and Antena 3 is lining up local licensees for a launch later this year. Chappelow is confident the property will gain exposure and traction. Putting it bluntly, ‘Antena 3 is the licensing agent, so it’s really in their interest to air Thomas as much as possible.’

Zinkia has also registered an uptick with Pocoyo. The Spanish-born CGI preschool show featuring a curious blue-clad toddler has been airing on both La 2 and Boomerang and is about to achieve licensing lift-off. ‘What is noticeable about the market is there’s a very buoyant disposable income with families right now,’ says Maria Doolan, director of business development at Zinkia. ‘If you can put a good L&M strategy together, there’s a strong possibility of making it a success, whereas in past years, there were only a few hits.’ She adds that parents seem to be actively looking for preschool product now.

That’s been the experience with Pocoyo at least. Product soft-launched exclusively at department store El Corte Inglese at Christmas and sold through briskly. This month, Pocoyo DVDs, puzzles, back-to-school goods and apparel will roll out to other retailers in the territory.

Maximizing sales windows

But before you can hit ancillary paydirt, shows need placement, and the proliferation of new outlets that primarily acquire content (and eschew production) has, at the very least, created windowing opportunities and the chance to generate respectable broadcast license fees. Certainly no one’s going to get rich, but if a distributor can land deals for the same program with cab/sat, DTT and then terrestrial nets, it could add up to a decent secondary take.

Right now the going rate paid by terrestrials and regional broadcast group FORTA is somewhere between US$8,000 and US$10,600 for a half hour of animation, depending on the strength of the property. Cab/sat nets pay about 25% of that range, and the new DTTs pay somewhere in between, depending on the strength and reach of the channel. Elastic Rights’ Orive notes that DTT spend has ‘brought some life and happiness’ to the market of late.

Like several of his contemporaries, Icon Animation MD Sergi Retig believes seeding a program on pay-TV (especially one of the big three kidnets), and then moving onto DTT and terrestrial is the most sensible distribution path to take in Spain. Subsequent sales to FORTA stations (if you’re ambitious enough to make the most of language-bound rights) and VOD platforms then become the icing on the cake.

Beyond jibing with a channel’s programming profile, creating windowing opportunities is still key to attracting pay-TV interest. Both CN’s Sordeau and Jetix Spain MD Carlos Ortega negotiate for exclusive first windows on acquisitions because network branding is paramount.

‘Our window is usually six months before free TV, depending on the product,’ says Sordeau. ‘When we acquire prime action-comedies for kids six to 11, we try to go for longer windows. For preschool with Boomerang, we can be more flexible.’ Not surprisingly, digital rights are also playing into negotiations and, like most broadcasters these days, Sordeau is trying to acquire as many platform rights as he can. However, he says he’s going after them on a case-by-case basis since not all shows will work on every platform.