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The worst is hopefully behind us
August 7, 2009, Lidove Noviny
Whether the Czech advertising market will be revived is mainly the decision of foreign company headquarters, believes Petr Dvooák, the General Manager of television Nova.
ONDOEJ AUST
LN The company CME, the owner of Nova, is expecting the decline in advertising revenues to bottom out in the third quarter of this year. Does this also apply to the Czech Republic?
Not that we expect significant growth in the fourth quarter, but if we compare the year-on-year declines in all of this year’s quarters, the fourth quarter should have a lower percentage decline than the third quarter. But this does not mean, however, that this will be the turning point of the crisis and the expenditures of advertisers will increase steeply.
LN But in 2010 you are expecting a year-on-year recovery of the advertising market.
This will depend mainly on the situation abroad. Whether the market will be revived is seventy to eighty percent dependent on the decisions of foreign company headquarters. If they feel the certainty of recovery in their own markets, whether in the USA or Western Europe, that they may also return here. Because the advertising investments are still less expensive here than in the west, but the value of the goods that they sell both here and abroad is the same.
LN So when the head of CME Adrian Sarbu said that in 2011 he is expecting the return of advertising revenues to the 2008 level, this will come later in the Czech Republic than abroad?
The prediction is such that the volume of the advertising market, which declined by around twenty percent in the Czech Republic, will only return to the same level in two years, 2011, 2012. The speed of the recovery, with regard for what I have already said, can occur faster here than in the West, but the western markets must stabilize first.
LN Isn’t the considerable loss that you are experiencing higher because the growth of your revenues was helped in the past two years by the taking away of advertising from Czech Television?
I don’t think so. The departure of advertising from CT neither helped nor hurt us. Markets like the Czech one had the tendency to grow a lot and when the crisis came it hit us more than the West because some of the American headquarters withdrew their money. Whereas at home they could not afford to completely leave out television advertising, in the more developing and younger markets they can all of a sudden afford to do this for one or two seasons.
LN A couple of years ago, advertising time valued at approximately one billion Crowns disappeared from CT. I imagine that you took the most of that money with regard for your market leader position.
We only have internal data, it’s hard to say, but I would expect that it was a significant amount from the point of view of the market position that we have. Afterwards we increased the price of advertising and one could see, and once again at the end of last year, that if the crisis would have not come, the market would have accepted the price increase. Last year at the end of November we had signed approximately 70 percent of the total 2008 volume. Clients took advantage of the discounts they received for signing early. Only then in January and February, due to the crisis, they all of a sudden were completely unable to judge whether they will maintain the total yearly spend or not. In order to keep them, we offered them more advertising space for the same price. This increased the sell-out of advertising time above a level to which we are used, but as a result we were able to keep the money that generally remained on the market. This is proven by the fact that whereas in the previous years the sell-out of Prima and CT advertising time was one hundred percent, this by far was not the case in the first half of this year.
LN How do you want to entice clients this fall?
I don’t want to get ahead of things. We are preparing various scenarios of how the advertising market could develop, and we would like to come with the new business model in the fall, like we do every year.
LN Will you raise the price of advertising?
The information that when Adrian Sarbu said that we are expecting a recovery means that we will immediately raise prices is really only pure speculation. We will see how the market will behave and we will go meet it. We are considering either to radically change the model, or to remain with the one we have today. Then we will have to calculate it.
LN So is now the time to consider a more radical change in the way television advertising is sold?
A more fundamental change will probably not occur. Originally we had anticipated, however, that we would be considering a more radical change next year, for 2011. We had expected that the Brussels Directive -- which will make new forms of deals possible, including product placement (the placing of specific branded products into the story, editor’s note) -- will be already implemented in the Czech Republic. According to EU directives, this should be approved by member states by the end of the year at the latest. There is still a chance that this could get done before the elections. Then we would begin redefining our business model.
LN What effect would that have?
I don’t think this will increase our revenues by tens of percent, but it is a new method of communicating an advertising message that is interesting for us because it will expand our offer, and also for our clients because it gives them better targeting opportunities.
LN Would you begin with product placement already next year if this law is adopted this year?
I see it more likely in the fall than the spring. In the shows where product placement is most frequently used, the production takes place at least half a year before we air the episodes. Moreover, we want to use product placement sensitively so that our shows do not become an exhibition of brands.
LN You spoke of radical change, what else could be around the corner?
The radical change will not occur next year because we will not be prepared for it, but in a horizon of a few years it could happen that for some of our channels we would begin selling commercials directly for specific target groups. We will be launching a channel for the young (music and entertainment oriented MTV, editor’s note), we have a channel for men, Cinema also targets men more, Nova is more of a women’s channel.
LN How did you cut costs in programming?
In the first half year, the year-on-year costs declined by a single digit percent. We made the majority of cost cuts in the area of programming. We deferred programs originally planned for this spring; we didn’t know how long the crisis would last. Now we have the feeling that the worst could be behind us, that we have hit the bottom, and therefore the strategy of the entire CME, not only in the Czech Republic, is to increase viewership so that we are able to offer the maximum possible performance to the advertisers. Both fall shows, SuperStar and Dum Snu (Dream House) are of such a caliber that they could carry the season individually. The fact that we are putting them next to each other shows that we are prepared to invest into this.
LN According to Sarbu, the CME head, in 2013 the entire CME should stand on three pillars, operating divisions: broadcasting, Internet and production and distribution of content. Will Nova’s role change?
Not significantly. Within CME, the Czech Republic and Romania serve as the pilot projects for the aforementioned planned setup; perhaps we will make minor organizational changes here, but we will not weaken broadcasting in any way. We want to strengthen the show production division so that it does not generate revenues only from Nova, but so it is also able to get them elsewhere, by selling shows to other stations.
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
