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Eastern European Hitmakers
June 17, 2009, C21
EASTERN EUROPEAN HITMAKERS: CME experienced a challenging start to 2009, but on the plus side entered into a partnership with Time Warner. As Discop East starts in Budapest today, Martin Buxton reports on the broadcaster's hopes for the future.
Central European Media Enterprises (CME) has been in the headlines a lot recently, not least for its widely reported deal with Time Warner in March that saw the US giant spend US$241.5m on just under a third (31%) of the Central and Eastern European broadcaster.
The transaction means the pair will launch and operate Warner Bros-themed television channels in CME territories. If all goes to plan, the move should boost the content production capabilities of both companies, and help put them back on track for growth after a few rough months.
One of the leading TV broadcasters in Central and Eastern Europe, CME was founded by Ronald Lauder and local partners in 1994, five years after the fall of the Berlin Wall and collapse of Communist regimes across the region. The company began offering free-to-air channels but now operates on cable, satellite and digital terrestrial platforms.
In total, it has 18 channels across seven countries: the Czech Republic, Slovakia, Romania, Croatia, Ukraine, Slovenia and Bulgaria, many of them the number one or number two stations in their territories, reaching 97 million people in all.
However, the region's potential for growth has not made it immune to the effects of the economic downturn, as the recent batch of first-quarter results highlighted. An indication of the challenges the company and perhaps the region as a whole are facing came when CME released its Q1 figures for 2009, which showed a loss of US$44m, compared with a profit of US$14.5m in the same period the year before.
In what CME president and chief operating officer Adrian Sarbu (above) described as the "toughest first quarter" in the company's 15-year history, revenue fell by 37% from US$223m in Q1 last year to US$141m. In terms of its markets, the company saw revenue falls in six out of the seven countries in which it operates, with Croatia and Ukraine posting losses. Its Bulgarian interests could not be counted, as CME acquired them only in August 2008. In fact, the one thing that drew the sting of the economic collapse and helped the company retain liquidity was its deal with Time Warner.
However, CME's business strategy still appears to be sound, and the region's TV ad market is growing on the back of a number of young consumer product industries - credit cards, for example, have become available only in the past few years, while the region's car and financial industries are also still young. And CME's channels themselves are maintaining audience share. In three of the company's strongest-performing territories, the Czech Republic, Romania and Slovenia, it has average total audience shares of 40%, 35% and 37%, respectively.
But times still look set to be tough, and Sarbu claims the company has already begun making decisions to ward of a potential nightmare scenario and secure the future. Confident that the region's TV industry will beat the downturn, CME has begun diversifying its revenue streams and is planning to ramp up its production and distribution divisions.
"We are focused on our business, but it is obvious that over the next two years, nothing is going to be easy," said Sarbu, speaking at the UK Media Summit in February. "Definitely our current way of thinking has changed. "We have revisited and restructured our strategy and we have a new plan based on TV growth plus content with which we'll try to survive undamaged through what will probably kill off a lot of players in many of our markets."
The company has already begun reorganising operations in an attempt to become the largest production entity in Europe. Two years ago, it increased its commitment to local programming by making a number of scripted formats across its territories, including Slovak sitcom Neighbours (Susedia) and the extension of its daily soap The Street (Ulice) in the Czech Republic.
The firm currently produces 28,000 hours of content a year, with around 2,000 of these being original fiction and another 2,000 non-fiction, mostly based on international formats. And in an attempt to boost these numbers, the company is creating regional content divisions along the lines of its Romanian production outfit, which includes studios, content development teams and regional and international distribution.
Sarbu also says the company is investing in a new media division and setting up online catch-up players alongside its channels. "We are currently seeing 1.5 million visitors per day," he claims, adding that the company is also investing in mobile and web content.
But CME will not forget its core business and is setting its sights high. "We currently have the capability to generate another five to 10 channels, some of them original and some of them franchises," he claims. "But we plan to become the largest provider of channels for Europe in DTH and cable."
Flying the CME flag
CME operates 18 channels in seven countries. Here's a brief run-down of each country's flagship CME network:
TV2, Bulgaria
TV2 is CME's Bulgarian general entertainment channel, carried via DTH and cable platforms nationally. Its schedule consists of news, sports, locally produced content and acquired series and movies, with its core demographic being 18- to 54-year-olds.
International programming is acquired from a range of sources, with movies coming from package deals with Sony and MGM, telenovelas from Mexican distributor Televisa International and children's programming from a range of distributors.
Recently acquired formats include Wife Swap from the UK's RDF, which premiered in April.
Nova TV, Croatia
Croatia's first privately owned commercial general entertainment network, Nova TV reaches nearly 90% of the country's 4.6 million population.
The channel's target demographic is 18- to 49-year-olds with a female skew, and last year it grabbed a 22.5% share of its target group, slightly up on 20% the year before.
Broadcasting for 21 hours a day, Nova TV's schedule is a mix of locally produced entertainment formats such as the Idol franchise, and acquired series such as Heroes (above) and 30 Rock, telenovelas and children's programming. About 36% of the schedule is locally produced.
Last year's top-performing locally made programme was reality series The Farm, which achieved a 38.6% share, while acquired shows also performed well, with Sex And The City grabbing a 29.1% share.
TV Nova, Czech Republic
The market-leading commercial network in the Czech Republic, TV Nova attracted an average 45.7% share of its 15- to 54-year-old target audience in 2008.
Roughly half of the channel's schedule comes from acquired programming, comprising locally produced formats such as Idol and Wife Swap, with acquired finished productions including the CSI franchise and House. In-house-produced content includes news and scripted, such as drama and comedy series.
Pro TV, Romania
General entertainment channel Pro TV reaches almost 99% of Romania's 21.5 million people, achieving an average all-day share of 16.5% during 2008.
Almost half of its schedule is locally produced, in the form of news, fiction and entertainment formats such as Bailando por un Sueño (Dancing For A Dream, left), a format from Mexico's Televisa, which has just finished its seventh season on Pro TV.
Around 40% of the channel's schedule is acquired. Series and movies come predominantly through output deals with US majors such as Warner Bros and Sony, and include CSI: Miami, The OC and Supernatural.
Markiza TV, Slovakia
Markiza TV reaches around 86% of Slovakia's 5.4 million population, attracting a 35.9% all day share of its 12-54 target audience during 2008.
About 30% of its schedule is locally produced, including its daily magazine show Reflex and sitcom Susedia (Neighbours). Acquired formats, such as Slovakia's Got Talent, which last year attracted a 59.6% share of the channel's target demo, are growing in importance.
Pop TV Slovenia
CME's general entertainment channel in Slovenia, Pop TV reaches just over 96% of the country's two million people and attracted 32% of the channel's core target group of 18-49s during 2008.
Its schedule contains a wide variety of series, movies, news, entertainment formats and locally produced content.
With the performance of telenovelas on Pop TV in decline, the station is turning to US content to fill its schedule, with shows such as House (which achieved a 34% share of 18-49s in 2008) and the CSI franchise, proving popular.
Series such as Life, Poirot, Private Practice, Burn Notice and sitcom 30 Rock are set to air on the channel this year.
Studio 1+1, Ukraine
With a 14% share of the Ukrainian television market, Studio 1+1 currently holds second place to its main rival, Inter.
The channel's core demographic is female-led, with a narrow 30- to 35-year-old age range and features a schedule that is 60% acquired content, in the form of drama and formats, with these programmes occupying around half of 1+1's primetime grid.
The channel is relying less and less on the US for acquired drama, and is replacing its stateside fare with locally produced content and series and feature films from Russia.
The company is also searching globally for formats, having last year launched dance format Dancing For A Dream from Mexico's Televisa.
CME's chief operating officer Adrian Arbu described Studio 1+1 as "the core of our growth strategy for Ukraine," following its takeover of the channel last October.
For additional information, please contact:
Romana Wyllie
Vice President of Corporate Communications
Central European Media Enterprises
Krizeneckeho nam. 1078/5
152 00 Praha 5
Czech Republic
+420 242 465 525
romana.wyllie@cme-net.com
