Broadcaster Exits Market, Takes Big Write-Down

Michael Hedges January 5, 2012 Follow on Twitter

Major media companies invest where opportunity exceeds cost. Patience, say the sages, is a virtue. But these are special times and “you’ve got to know when to fold ‘em.”

Stockholm-based broadcaster Modern Times Group (MTG) will vacate its Slovenia television channel TV3 and take a €360 million “asset impairment” charge mostly on loses from Bulgarian television channel Nova Televizia, said a company statement (January 4). With the write-downs effective on the Q4 balance sheet, MTG will have completely written off its €620 million 2008 purchase of Nova Televizia. There’s no business like show business, said a famous person once upon a time, but thousands like accounting.

“This does not affect our commitment to the market or our belief in the longer term potential of our Bulgarian operations,” said MTG CEO Hans-Holger Albrecht, completing the official statement. The company also “aligned the accounting treatment of the results of its Ukrainian satellite pay-TV business with that applied to its other pay-TV operations.” That’s accounting-speak for writing off another €5 million.

More blunt was TV3 general manager Gregor Memedovic, who now must settle up with 39 full-time staff and about 20 part-timers when the free-to-air channel closes at the end of March. “We've been forced to such a radical step by the situation in Slovenia's media market determined by monopolies and a lack of competitiveness,” he said in a separate statement (January 4). MTG has been in Slovenia with TV3 since 2006. He praised the TV3 staff saying they had “created a great channel.”

“We were forced into these extreme measures,” said Mr. Memedovic, quoted by Dnevnik (January 4), due to “the non-competitive environment and the resistance of State authorities.” TV3 and public television broadcaster Radiotelevizija Slovenija (RTVS) complained to Slovenia’s Competition Protection Office (CPO) in 2009 over what they called abuse of market position by sales house Pro Plus, which is owned by Central European Media Enterprises (CME), which also owns two television channels in Slovenia - Pop TV and Kanal A. Pro Plus, they said, offers more attractive rates to advertisers who place exclusive ad contracts with Pop TV and Kanal A. Because a decision from the Slovenian CPO has not been forthcoming, MTG may take their complaint to the European Commission, said Mr. Memedovic.

Offering better rates to advertisers placing a substantial percentage of budgets is a renowned sales trick. Newspapers probably started using it sometime in the last century. Far more recently Ireland’s public broadcaster RTE was forced by the Irish Competition Authority (October 2011) to end the practice after a complaint by private sector broadcasters. Ten years ago (July 2002) the Norwegian Competition Authority forced commercial broadcaster TV2 to give up the practice.

“The loss of TV3 will have a negative impact on the Slovenian advertising market in future,” added Mr. Memedovic, “but will also give a direct negative message to other foreign media investors.” It’s a message clear to media companies invested in the so-called “peripherals,” be they new Member States or any on the boundaries. There are limits.

See also in ftm Knowledge

Flying Through Turbulence – Media in the New EU Member States

ftm reports on media in the 12 newest EU Member States. Will media find clear air or more turbulence? Country reports, company reports and broadcaster/publisher reports. 98 pages PDF file (February 2007)

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