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BERNE, Switzerland- Compagnie Luxembourgeoise de Telediffusion, or CLT, has become a European TV giant by thinking small.

Unlike satellite and cable TV channels with a pan-European approach, CLT, from its home base in tiny Luxembourg, has been penetrating markets one at a time and building general entertainment TV stations with ads that target a local audience.

The rifle shot approach has enabled CLT to become the largest private radio and TV network in Europe by revenue, surpassed only by several state-owned broadcasters, whose revenues come from government subsidies as well as ad sales.

CLT owns all or part of nine TV channels in Germany, France, Belgium, the Netherlands and Luxembourg, including RTL Television in Germany, Europe's biggest TV channel by ad revenue. CLT stations reach nearly 90% of the homes in their five main markets, or 52.8 milllion a day, company officials said.

"Advertisers who want to get their message across in Europe have recognized that the real power of CLT is its ability to speak locally," said Andre Van Hecke , deputy general director of Havas-owned IP Group, the Paris-based ad sales house that handles CLT's ads.

In each market, RTL telecasts a mixture of locally-produced and imported movies, news, sports, series, soap operas and talk shows, geared to local tastes. In Germany, for example, "Colombo" re-runs are especially popular.

Though often panned as lightweight entertainment, the stations have drawn more and more viewers away Europe's subsidized stations, whose programs tend to be less entertaining and more thought-provoking.

Even multinationals which are heavy supporters of the pan-European channels, Nike, Coca-Cola and Unilever, for example, are also major advertisers on CLT stations.

Marketers see that Europe today is not a collection of national markets, but rather regional markets, Mr. Van Hecke said. In fact, analysts said only about 1% of European ad revenue stems from cross-border marketing.

"Ten years ago there was a lot of excitement about satellite TV, about people watching the same program," said Ross Parsons, an editor at CIT Publications, a subsidiary of media research company CIT Group. But it has become clear that people like to watch TV reflecting their own market, he said.

Kay Delaney, exec VP, Turner International Advertising Sales, New York, said the idea of a pan-European channel is not to replace national broadcasting. "It enhances it," she said. "What's emerging in Europe is a new media opportunity for advertisers," allowing them to reach a common demographic.

But CLT has found that the more locally focused programming and advertising is, the more lucrative it can be.

Between 1988 and 1992, CLT more than tripled its net ad sales to $1.7 billion, 78% from TV ad sales alone, with the remainder coming from radio stations, magazines and production companies, and more than tripled net profit to $73 million. That put its revenues behind only state-owned broadcasters in Germany, Italy, the U.K. and Spain, all beneficiaries of state funds as well as ad money.

And this year, CLT channels are likely to sell $1.9 billion in ad time, up from $1.6 billion in 1993, Mr. Van Hecke said.

Although CLT's ambitions are of the scope of international satellite channels, its biggest rivals for viewers and advertisers are the national broadcasters.

Nike buys CLT channels in Germany, France, Belgium and the Netherlands because the stations target a local audience. Bianca Verburg, Nike Europe's media manager, based in Hilversum, the Netherlands, said, "If we buy centrally, the question is whether you lose control over the individual market."

Consequently, RTL's ad rates are pitched against local rivals. For example, a 30-second spot averages about $1,200 per 1,000 people reached, making it a $37,620 buy on Germany's RTL and a $9,027 purchase on RTL4 in the Netherlands.

CLT's next big push is to break down national markets into even smaller units, an endeavor started in a small way three years ago, said Hans-Holger Albrecht, CLT's TV development manager.

A new strategy for tapping local ad dollars is being tried in Switzerland. RTL Germany, which already appears on Swiss cable networks and draws between 12% and 14% of Swiss viewers, last year tested the Swiss ad market with spots tailored for the Swiss and dubbed "Swiss ad windows." The spots were beamed via satellite into Swiss cable networks, blocking out national German ads that usually appear.

Takers on the Swiss window include Procter & Gamble, Nestle, Jacobs Suchard and Toyota, which account for about 60% of the window's $8 million revenue.

Now, other German TV channels, such as SAT 1, are trying to come up with Swiss windows of their own, but none have put together a plan so far.

RTL is following up through newly-formed RTL Switzerland Television with an application to broadcast an hour daily of Swiss news and entertainment on the German RTL channel. If the government approves-a decision is expected by May-RTL expects ad revenue from the Swiss window to hit $16 million a year by 1996.

And if Austria lifts its current ban on private TV channels, RTL might try the same concept there.

But CLT hasn't always waited for government approval. In the Netherlands, CLT ignored the continuing ban on private TV and in 1989 simply created a new Dutch channel, RTL 4, to beam into Dutch homes from Luxembourg. Now RTL 4, competing against three state-owned Dutch channels, has the country's highest TV audience and ad rates, and has spawned a second Dutch channel, RTL 5, introduced in November 1993.

Bruce Crumley and Dagmar Mussey contributed to this story.

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