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We were a bit nervous
March 6, 2008, Lidove Noviny
„We lost a few older viewers, but to Czech Television“ stated Managing Director of Nova Petr Dvořák evaluating the first month of the direct clash between the main evening news programs of Prima and Nova.
Last year’s revenue of Nova and the parent company CME were at a record high. What contributed to this?
On one hand we succeeded in attracting viewers and delivering efficiencies in television and also due to the fact that we continually strive to have our business model set so that we do not have the advertising limits completely full, we had the ability to absorb not just what our clients wanted to spend on us but also additional money that advertisers could not spend on other television stations. Prima and Czech Television were both sold out for practically the whole year and with regards to the fact that their viewing figures, Prima in particular, were significantly below expectations, they were often not able to deliver even the expected impact. Therefore if a client wanted to strengthen a campaign they had practically no choice but to turn to us. This was evident particularly in the second and fourth quarters of last year. In 2006 clients also stopped thinking that they could have a major campaign without advertising on Nova. Whilst we are more expensive we offer a significantly higher quality product. We offer a target group of viewers aged 15 to 54, which determines that clients give us the most. This was evident, for example, when negotiating annual agreements for 2008 – many clients first agreed conditions with us and only then started to negotiate with Prima and ČT.
Is it possible to estimate how you will change advertising prices this year or next year?
For the moment I would not like to give a prediction. Currently clients are confirming that the system we have offered them – the ability to adjust the average annual price of advertising by running adverts in high season or low, prime time or outside prime time – is working well because the distribution of individual spending is regular with us. Much more than before, clients are actually considering how they will spend money. We differentiate between three seasons: low (January, February, July, August), medium (March, June, September, December) and high (April, May, October, November). Purchasing advertising time during the weaker months may be beneficial for small advertisers or, for example, advertisers with a high annual spend but because they are targeted at a specific group, such as housewives, it pays them to purchase advertising time when the overall advertising volume is not so great. Thanks to this they are more visible.
Is the structure of the client portfolio changing as clients give preference to other types of media, such as the Internet?
We have managed to increase our number of clients by thirty to thirty-five per cent by attracting small clients, which completely refutes the theory that television advertising is out of reach to small clients. This shows that TV advertising is accessible if the small clients plan their campaigns sensibly, responsibly and effectively. This is good for us too because if television is dependent on the large expenditures of a small number of major international companies there is a risk that in the event of a crisis, like the one we had in the United States, they will reduce their expenditure. This can be compensated for if your portfolio contains a range of small and local clients.
We therefore offer a range of sales mixes and try to combine expenditure on standard adverts with sponsoring or with expenditure on other channels. We currently offer clients Galaxie Sport, from April we will also offer the option of advertising on Nova Cinema and there is the possibility of placing an advert on the Internet.
You intend to support the start of your high-season for advertising, which begins in April, with new programs. What will these be?
I can’t say that yet. However, we behave logically like all commercial television stations. We try to place our best products in the high season and not to release them all at once. We release them gradually so the viewers have time to absorb them. For example, this year we commenced a series of “Ordinace v růžové zahradě (Hospital in the Rose Garden)” in January with which we linked the show Mr. GS, and another, the new series “Místo v životě (A Place in Life)”. Three years ago we made the mistake of releasing perhaps seven things at once and it proved to be a poor strategy because the viewers were not able or willing to absorb it all.
„Místo v životě” will finish in April. Will you replace it perhaps with the long-awaited original crime series?
We will think of something…
What contribution did the senior manager, and Operations Director of CME, Adrian Sarbu, make to last year‘s record results? Does he have a hands-on management role or just supervisory?
He played a major role in the fact that we did so well in 2007 by helping us to set up and define the entire restructuring that we implemented. The fact that this was done well was then reflected in last year’s results. This was not just with respect to the new sales model that we started to use in 2006 but also cost management. Today we attempt to define a precise margin for individual types of programs. We are not interested just in viewing figures but also in the effectiveness of programs – how much does it cost us to buy the viewing figures. The main indicator for us is not, for example, that a program had a sixty per cent share of the market; we are interested in the viewing figures in relation to expenses that we are prepared to lay out. If these two parameters correctly match each other a program has a chance to survive.
Did you not previously monitor costs in relation to viewing figures?
It’s more that our previous system did not allow its precise determination. Today we are able to evaluate programs according to how much we pay external suppliers but also how much it costs internally – all possible overheads, which includes everything, even my salary. Management is much more transparent now.
What influence does Mr Sarbu have on content?
Again: the year before last we worked together to define principles that we should observe: strengthening news output, strengthening in-house productions, in particular fiction, which means serials, and the strengthening of the period before prime time, i.e. from five to half past seven when the main evening news starts.
From the 4th February the Prima evening news is on at the same time as your news (Televizní noviny). How is it going?
After our experience with Big Brother we have taken care not to underestimate any move by the competition. In this case too we tried to anticipate what they might do, pre-empt it with our own steps and have a prepared argumentation in case the competition succeeds in their move. The fact that since 2006 Prima has not been able to introduce any format that would raise viewing figures above the average shows that we are doing well. With Czech Television we have only had three problems with regards to viewers. However, as they are not a direct competitor of ours with respect to advertising it did not hurt too much. The ČT programs that worried us were “Uvolněte se, prosím”, “StarDance” and “Četnické humoresky”.
In the case of Televizní noviny we were a bit nervous, it would be stupid not to admit it, but it conclusively proved that you cannot go up against a successful product with the same product unless it has added value. To start with viewers were curious and watched Prima but after a month the gap between the Nova and Prima news programs widened - our viewing figures increased, Prima’s dropped.
Sixty per cent share is still a bit less than you used to have...
True but it depends on which target group you look at. If you look at the 15-54 age group, the one which we sell, we have for some time been back at the figures that we used to achieve, 61 to 63% market share. It is true that a few older viewers have left us, but they have gone to Czech Television and not Prima evening news. Because they sell advertising for 15+ (viewers older than 15 – editorial note), they benefitted most from the change.
How do you explain this? After all, ČT shows regional news and sport after seven thirty...
The standard habits of the Czech viewer who watches the news was such that at 18.55 he turned on to Prima and then sometime after seven switched to ČT, then at seven thirty switched to Nova. People who were not mad about news would watch a bit of Prima or our “Ulice (The Street)” before watching “Televizní noviny (TV News)”. Now for the half hour from 19.00 to 19.30 people who want to watch the news and are not fans of fiction have no option but to watch Czech Television. Despite being a public channel they arrange the news so that viewers are occupied between 19.25 and let’s say 19.40, when they show “Události v regionech” (news from the regions). Therefore at the start of Televizní noviny viewing figures have not increased as fast as previously, but more gradually. In the end, however, people switch over to us. From this change ČT has benefitted in the first half hour; average viewing figures used to be around a million, today 1.2 to 1.3 million. At the same time on Nova, Ulice has benefited; it used to have viewing figures around a million to 1.15 million and today it can easily reach 1.3 to 1.4. “Milionář”, which is broadcast by Prima at the same time, is a program that has completely run out of steam.
Would you agree with the former Executive Director of Prima, Petr Chajda, that it is too short; just half an hour with an eight minute advert break in the middle?
I think that you shouldn’t make the same mistake twice and that applies both to Milionář and the news. Milionář has had its day on our television screens and when it is daily pitted against news, which is strong, and against fiction, which is also strong, it doesn’t have a chance. It was a vain attempt and a mistake.
With regards to the time between 19.30 and 20.00, we are at our previous figures. Prima has an average of ten per cent, about the same as MASH achieved, and between eight and nine they have lost forty thousand viewers and 0.7 per cent of the market share since the evening news change.
You are talking, however, about the 15-54 age group in relation to which you sell advertising. They still sell on the 15+ basis.
Yes but if we take figures for the hour; they had an average number of viewers 15+ for their news of 850 to 900 thousand. Today they have trouble reaching five hundred thousand. What they lost in the second half hour they could have gained in the first, but there they are losing even more because Milionář has such low figures.
Where do you stand in the 15+ target group?
We are some four per cent lower than we used to be. We used to achieve 65-67 %, and today we have 62-63 %. The trend is, however, still ongoing. In the last four weeks our news has grown continually and Prima’s has declined.
Prima news has around a 14% share which is still a few per cent higher than the station had at the same time before.
Fine, but to gain a few per cent with such a shift whilst losing so much... It is also important to see why this happened. The viewer today requires a different kind of news to the one Prima is presenting. We are benefitting from the fact that our news is lively, fast, current and concentrates on the events of the given day. We also to a large extent concentrate on regional events, where people actually live. People are interested in what is happening right now. If instead of daily events you devote time to long-term trends, people will lose interest. We are also benefiting from the fact that we invested a lot into our news coverage, and that is why people are sticking with us. They know that we are not just trying to gain viewers but also give them something. We show them beautiful, colourful pictures, more of them, live broadcasts from Prague and the regions. The viewers appreciate this.
That is your interpretation. We can also say that it was just viewing habits that won.
That as it may be, we are back where we were and that was the basic objective of the whole exercise.
What was the worst case scenario that you had prepared?
We had no worse case scenario.
You said that you were prepared for anything…
We were nervous and if necessary we were ready to provide extra and greater marketing support. This has so far proved unnecessary.
Can you find at least something positive at Prima?
I don’t want to praise them. They can judge that themselves.
The change was prepared by your former colleague Pavel Zuna; furthermore, it is clear from our discussion that you have an understanding of the competition project…
You can’t expect me say what they should do differently to gain higher viewing figures.
Tell me then not as Managing Director of Nova but as a viewer …
As a viewer I am not really interested in [TV Prima’s] news.
According to you people appreciate the fact that you give them more colourful and beautiful images. Recently you also told me that digitalisation will be driven by a technical change, a higher quality picture, high definition for example. Why are you not already broadcasting in HD over satellite when last autumn you launched high definition in such grand style?
We broadcast on the terrestrial digital network Telefónika O2, in multiplex C. Its operator is keen to test the technology itself, doesn’t want anything from us and our broadcasts will be discontinued at the moment that some new digital channels start up.
You have already finished with multiplex B.
That was just a short-term test of the technology and we utilised it until the time when the operator started to want payment from us. We know that it is just a short-term thing that the law for the moment does not give us the opportunity to broadcast long-term, and we therefore ended it. When the law gives us the opportunity to broadcast all our programming in HD and when we also receive sensible conditions, which by the way we are discussing with České radiokomunikace, we will do it. The current legal standards take no account of technical progress and this is their basic problem.
If you want to introduce a technological change it is logical that you will have to pay something. Payment for the broadcast of signal is a standard thing.
We are aware of that but on the other hand it would differentiate us from the other channels and help us to maintain our dominant position. If you want to lead a market it will cost something. However, you must always pay a little or enough.
And why are you not even on satellite yet?
They wanted a certain amount of money from us for carrying our signal. However, they were not willing to guarantee a width of data flow. We would have been broadcasting in high definition but it would not have been full quality. It is not worth it for us at the moment.
For sufficient band width you could have paid extra.
It is always necessary to consider how many people would be receiving your service and what benefits if would bring you. Currently there are so few televisions out there able to receive the HD signal that you would only be broadcasting to a few thousand viewers. Then it is necessary to consider whether the threshold has yet been reached that makes the investment worthwhile.
In the autumn you told me that in order for the mass of people to follow, the new technology must be purchased by those who are blazing the trail.
That is the same as what came first the chicken or the egg.
Fine but you yourself said that you will introduce the change, someone will join in as the first and the others will follow.
In the end it will be the same as with mobile phones... Today there are a lot of HD ready televisions available. Over the next few years the majority of televisions will be equipped with internal set-top-boxes or so that they can receive the high definition signal. Once the market penetration of such devices exceeds ten or twenty per cent it will be worth investing in it. Because these are the sort of people who if you give them a signal they will spread your message further.
For additional information, please contact:
Romana Tomasova
Director of Corporate Communications
Central European Media Enterprises
+44 (0)20 7430 5357
romana.tomasova@cme-net.com
