CME, based in Hamilton, Bermuda, last year introduced Nova TV, the first major commercial TV station in the former East Bloc. And if its Czech Republic success is indicative, CME will soon be riding high.
When Nova started in February 1994, Czechs favored the newscast of the nation's public broadcaster, Czech TV, 3-to-1. But Nova introduced more domestic news and broadcast from a flashy ground-floor, peek-in newsroom. Now the Czech taste in news has reversed-in Nova's favor.
Nova also airs popular interactive programs: game shows with at-home players, and an "Oprah Winfrey"-style call-in, "Taboo." And Nova has a big hit in video booths it placed in high-traffic areas: For a few crowns, Czechs tape messages eligible for TV airing. Anything goes, Mr. Fertig said, "from `I love my mom' to `I think the president is a goat.'*"
Czech management and a creative team, relying heavily on homegrown programming, gave Nova TV about 70% of the Czech market in little more than a year.
Nova's objective news and lively entertainment is CME's model for expansion in Central Europe and Germany. CME has TV and radio alliances in the Czech Republic, Hungary, Romania, Slovenia and Germany, and is seeking broadcasting licenses in Poland, Bulgaria, Slovakia and Ukraine.
Mark Palmer, former U.S. ambassador to Hungary, and Ronald Lauder, Estee Lauder cosmetics heir, built CME through their regional development group, Central European Development Corp. CME is publicly held and independent of CEDC, but the magnates provide CME with political and economic insight. Mr. Lauder, a former U.S. ambassador to Austria, is CME's chairman, and Mr. Palmer advises the media group.
CME has attracted other friends in high places, forming alliances with powerful local Central European media magnates. In February, it joined forces with two regional Slovenian broadcasters and will invest $6 million in Pro Plus, Slovenia's first independent national TV production and ad sales company.
Pro Plus will supply programming to the two broadcasters, which will reach 60% of Slovenia's 2 million inhabitants when it hits the air this fall.
CME linked with one of Romania's three powerful private media companies in April. The Media Pro Group boasts a Bucharest sports and news channel with rebroadcasting rights for CNN International, a joint-venture ad agency with Young & Rubicam and a news wire, among other services. Romanian TV does not allow private investors, but CME's Media Pro will link the programming of its stations in the fourth quarter, creating a national commercial network.
CME recently became a partner in Hungarian company 2002 Kft., which won a license to broadcast in metropolitan Budapest. CME desires a national frequency, but Hungary has never passed a media law regulating privatization of its state broadcasters.
"We're not waiting," Mr. Fertig said about these stations. Hungary and Romania have been reluctant to privatize state stations, but CME has snapped up local broadcasters to gain a foothold in the market for that possibility.
As in Slovenia, CME often invests in multiple regional broadcasters, combining local stations through a national network offering shared programming and more advertising salability.
In Poland, CME is part of a consortium that received 12 regional licenses last year. CME lost its bid for a state broadcasting company privatized last year, but Nova-style innovation may find its place. Poland may allow mergers of large regional stations, creating competition for its two national broadcasters. Private commercial station Polsat has garnered only 16% of the market, and public broadcaster Polish TV retains the lion's share.
Mr. Fertig has experience in taking advantage of sudden opportunity. In 1985 he co-founded Request Television, America's first pay-for-view, satellite-delivered channel, and later helped introduce U.S. pay network The Entertainment Channel. He has also been a consultant to Warner Brothers, Hughes Communications, Capital Cities/ABC, American Airlines and The Comedy Central Cable TV network.
Such involvement may explain CME's presence in Germany. Nine years ago it had only two national TV channels and no local stations, but last year Germany opened frequencies for regional TV broadcasting, and CME jumped in. Now CME operates private regional German stations 1A Berlin and FFF Nuremberg.
The German stations showed a loss last year, but CME is banking on tremendous opportunity there. "There are enough advertisers who would love to advertise on TV but have only a regional distribution, and therefore would favor local TV," said Jens Putze, chairman of Zenith Europe in Frankfurt. "If a media company becomes active in all the planned local TV stations, this could become a profitable business in years to come."
That may be true for Germany, but despite 17 million viewers there and in Central Europe, CME's regional presence doesn't offer many advantages for marketers yet.
"Many of our clients are not geared to viewing this market as a region," said Tim Scott Hunter, media director of Lintas Buda-pest. Companies like Unilever are establishing themselves in the region's individual markets.
And country-to-country, CME comes up short in some areas. In the Czech Republic, CME attracts a mainstay of food and consumer goods advertising from Unilever, Procter & Gamble, Coca-Cola Co. and PepsiCo, but in Hungary, CME is just introducing a market of 500,000 to 800,000.
Packaging media time regionally sounds attractive, but Lintas' Mr. Hunter says he wouldn't want to subsidize CME's small Hungarian station to buy time on Nova.
CME also is not Central Europe's only major player. Munich-based Hungarian-German MTM also has a strong regional presence, selling programming and media time in Hungary, Croatia, Slovakia and Romania. In Hungary, it holds broadcasting rights to popular game shows like "Wheel of Fortune" and "Jeo-pardy."
Cable TV may also provide competition for ad spending. Advertisers are starting to reconsider their decision not to advertise on cable, which has not proved an effective marketing tool.
Still, the numbers talk. Advertising sales in Germany increased in the past five years to $4.3 billion from $1 billion-before regional advertising. In Romania, TV advertising stands at $8 million annually, expected to double each year for the next four years.
Slovenia has the region's highest ad expenditure, at $45 per capita. CME's alliance with the media company Media Pro Group may get it a sizable chunk of the revenue.
Mr. Fertig thinks Germany and Central Europe demonstrate the need for Czech-style viewer-responsive programming, but investing in Central European media is a gamble. In Hungary, local frequencies could be revoked once the law is rewritten. And Poland sliced the regional broadcasting frequencies so thinly that some stations can't afford to go on the air.
Still, Mr. Fertig said, "Some risks are worth taking."
Doru Lionachescu, Normandy Madden, Andrej Koziara and Dagmar Mussey contributed to this story.