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Week ending March 21, 2009

Television without Frontiers: Commission warns Estonia to apply the EU's TV advertising rules - March 19, 2009

The Commission today warned Estonia that it is not complying with EU rules on television advertising. The major Estonian television channels are frequently breaking the rules in the EU's "Television without Frontiers" Directive that limit spot advertising and teleshopping to a maximum of 12 minutes per hour, according to an independent expert report requested by the European Commission. The Commission does not agree with Estonia's interpretation that certain forms of advertising spots are sponsorship and therefore has sent a letter of formal notice, which is the first of three steps in an infringement procedure under the EC Treaty.

"The commonly agreed rules of the game for advertising on European TV have to be respected by everyone in Europe, in the interest of fair competition and to ensure that TV programmes are not excessively interrupted," said Viviane Reding, the EU's Media Commissioner. "Sponsorship messages are designed to inform the viewer, but not to place more advertising than is allowed under European law."

At the request of the Commission, independent experts monitored how Estonia applies the rules contained in the EU's "Television without Frontiers" Directive. The monitoring exercise revealed that Estonia interprets "spot advertising" too narrowly and does not use a correct definition of "sponsorship messages" (as required by Articles 17 and 18(2) of the "Television without Frontiers" Directive). Many Estonian broadcasters combine a sponsorship message with an advertising spot and the Estonian authorities do not count these combined advertising spots within the EU's limit of 12 minutes per hour. This means that Estonia is not respecting the EU's advertising rules, and that as a result there is more advertising on TV in Estonia than in other EU countries.

Under EU law, the promotional nature of an advertising spot is not changed by the fact that it also contains information about the sponsorship of the programme. Sponsorship messages exist to inform viewers that there is a sponsorship agreement. These combined spots fall within the 12 minute advertising limits set by EU rules.

The Commission has sent Estonia a letter of formal notice asking it to fulfil its obligations under the EU's "Television without Frontiers" Directive. The Estonian Government now has two months to respond to the concerns expressed in that letter.

Today's decision by the Commission comes at a crucial time as Member States are currently putting the modernised rules for Europe's audiovisual industry (the Audiovisual Media Services Directive) into national law. The new Audiovisual Media Services Directive reaffirms the limit of 12 minutes per hour for spot advertising and teleshopping.

RCS MediaGroup Board of Directors: Results at 31 December 2008 approved - March 18, 2009
from Maria Verdiana Tardi/RCS Mediagroup

At its meeting today, the Board of Directors of RCS MediaGroup, under the chairmanship of Piergaetano Marchetti, examined and unanimously approved the consolidated results at 31 December 2008.

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The results of the RCS MediaGroup in 2008 must be taken in the well-known context of the severe financial crisis which, particularly from the second half of the year, also had serious repercussions on the real economy and substantially hit advertising investment and the media sector to a greater than expected degree.Thanks to the Group’s early implementation of rigorous efficiency measures and comprehensive investments, especially with regard to accelerating receipt of digital revenues, in all areas of the Group, both in Italy and abroad, RCS MediaGroup was able to limit the fall in profits in 2008 and face 2009 with determination.

Consolidated net group revenues totalled EUR 2,673.9 million, compared with EUR 2,728.2 million at 31 December 2007 (-1.9%; -4.6% on a like-for-like basis).This decline is primarily attributable to the progressive and severe slowdown in advertising spending in the second half of the year and to the drop in the circulation and sales of add-on products and partworks, common to the entire sector.

Group advertising revenues fell from EUR 963.2 to EUR 942.1 million (-2.1%; -4.4% on a like-for-like basis), due especially to the more marked decline in the sales of Spanish Newspapers, together with lower revenues on account of the exit from radio advertising portfolio (around EUR 21 million), which was partly offset by growth in revenues of Dada, Blei and the numerous online activities.

Circulation revenues fell from EUR 1,458.5 to 1,407.9 million (-3.4%; -5% on a like-for-like basis), due to the decline in revenues from add-on products and partworks stemming from a reduction in the number of titles launched in Italy and the unfavourable euro/sterling exchange rate on revenues of GE Fabbri.The result was partly offset by the Books division, which benefited from the positive performance of Italian fiction/non-fiction and higher revenues from external publishers in France.

Lastly, other publishing revenues, increased to EUR 323.9 million (+5.6%; broadly stable on a like-for-like basis) due to numerous initiatives, especially by Dada.

EBITDA fell from EUR 360.4 million to EUR 266 million. On a like-for-like basis the fall would have been EUR 109.4 million, including cost reductions of nearly EUR 40 million and non-recurring restructuring costs of EUR 23.3 million (excluding these costs, EBITDA would have fallen by 19.7%; -22.9% on a like-for-like basis).The Group’s EBITDA was hit by the marked slowdown, particularly in Spain, in the advertising market and in the sale of add-on products, and also by the higher promotional and marketing costs of Spanish newspapers.In Italy, it was also hit by the drop in sales of partworks products.EBITDA reflects charges relating to the significant investment made by the Group in new initiatives for the New Media segment and for the promotional and advertising campaign for the launch of La Gazzetta dello Sport in full colour.

EBIT fell from EUR 259.8 million in the full year 2007 to EUR 137.4 million.This figure reflects the change in EBITDA and the basis of consolidation as well as write-downs on tangible and intangible assets totalling EUR 14.8 mainly relating to goodwill from the Dada group and the Books division, valued through impairment tests.It also includes write-downs on Digicast’s television rights concerning television channels, which are in the process of being renewed.

Net financial charges rose from EUR 35.6 to EUR 68.1 million, due particularly to the increase in the average debt level and higher interest rates compared with 2007.

The Group’s net profit was EUR 38.3 million, including the write-down of the stake in Poligrafici Editoriale (EUR 9.7 million) and the net proceeds of EUR 13.2 million generated by the sale of Economica SGPS.In the full year 2007, net profit totalled EUR 220.3 million, and benefited from capital gains on the sale of non-strategic shareholdings (EUR 51.9 million) and dividends (EUR 11.7 million).

The net financial position, at EUR 1,146.8 million, rose by EUR 180.6 million compared to 31 December 2007, due mainly to investments totalling EUR 260 million for acquisitions (relating especially to Digicast and VEO – the Spanish TV company) and technical investments.This was boosted by a positive cash flow of EUR 110 million from ordinary operations during the period.

The average headcount at 31 December 2008 fell to 6,701, compared to 6,944 at 31 December 2007, due to efficiency measures implemented as part of the reorganisation plans launched in Spain and Italy, and changes in the basis of consolidation, despite new staff taken on as a result of the expansion of the Dada group and the New Media segment.

Comments on performance in 2008

Despite the prevailing general economic and sector crisis, the RCS MediaGroup continued with its expansion and innovation strategy throughout 2008, in tandem with rigorous reorganisation and efficiency measures.

The Italian Newspapers division recorded revenues of EUR 711.3 million (EUR 734.6 million in 2007).Advertising revenues declined by 2.7% but posted a better performance than the market, which fell by 7%. In particular, the performance of revenues from the integrated system linked to La Gazzetta dello Sport was excellent:total revenues increased by 11.7%, clearly bucking the market trend.Circulation revenues rose, despite the marked decline in add-on products (-15.8%), due both to higher revenues from digital activities and increases in the price of Corriere Magazine and Io Donna. In 2008, Corriere della Sera and La Gazzetta dello Sport, despite being affected by the general slowdown in circulation, retained leadership positions in their markets with average daily circulations of 613,000 (-6.3%) and 380,000 (-1.3%) respectively.The multimedia systems centred around the two publications (including supplements, local editions, online and mobile versions) recorded ongoing positive performances.Note especially the continuous improvement in all indicators of online media in the Italian Newspapers division, which recorded a total of 15.7 million unique users and an increase in the number of average monthly unique readers of corriere.it (+31%) and gazzetta.it (+33%).EBITDA fell from EUR 121 million to EUR 99.8 million mainly owing to the lower contribution of advertising and add-ons, together with investment expenses relating to the launch of La Gazzetta dello Sport in full colour and, to a lesser extent, the Corriere Fiorentino, although this was offset by stringent cost-cutting measures.

Unidad Editorial (Spanish Newspapers) reported an increase in revenues from EUR 619.1 million to EUR 647.9 million (+4.7%; -5,8% on a like-for-like basis).Circulation revenues were EUR 300.1 million, compared with EUR 275.5 million in 2007, (broadly stable on a like-for-like basis).Advertising revenues fell from EUR 280.9 million to EUR 269.4 million (-4.1%; -14.1% on a like-for-like basis) due to the drop in revenues from titles, which was only partly offset by the solid performance of the online segment (+20.4%). Other publishing revenues rose from EUR 62.7 to EUR 78.4 million.In 2008, El Mundo confirmed its position as Spain’s second-largest daily, with a circulation of 323,000 average daily copies (-3.8%).Marca, which confirmed its leadership in sporting information, reported a circulation of 296,000 copies (-6%). Circulation of Expansiòn and the periodicals Telva and Actualidad Economica reported an increase through kiosk sales.Excellent performances were also recorded in online activities in Spain, where elmundo.es confirmed its leadership in Spanish information websites, both nationally and globally, with an average 56.8 million visitors and 11.3 million unique users (+15.6%) in 2008. Marca.com and expansión.com reported an increase in unique users of 24.2% and 70% respectively.EBITDA fell from EUR 127 million to EUR 69.8 million (-45%; -50.2% on a like-for-like basis) due to the slowdown in the advertising market mentioned above, the intensive promotional and marketing activities implemented in response to similar investments by competitors, and non-recurring costs incurred as part of the ongoing restructuring process, although the result was offset by stringent cost-cutting measures.

Revenues in the Books division were down from EUR 730.8 million to EUR 691.9 million, mainly due to a lower contribution from partworks in Italy and the unfavourable euro/sterling exchange rate on the revenues of GE Fabbri, which was partly offset by the positive performance of Italian fiction/non-fiction and higher revenues from external publishers in France.For these reasons, EBITDA fell from EUR 67.4 to EUR 53.7 million, and despite the benefits arising from the review of processes and restructuring of business areas implemented during the year.

Total revenues in the Magazines division fell from EUR 330.7 million to EUR 313 million owing to the drop in advertising revenues, circulation and receipts from add-on products that affects the entire media sector, partly offset by an increase in other revenues (+14.2%).Advertising revenues, despite falling by 3.4%, reported a substantially better performance than the market, which declined by 7.3%.The multimedia systems linked to the Group’s periodicals that were launched during the year, namely Atcasa.it (home furnishings) and Leiweb.it (for women), plus the TV channel Lei, distributed on Sky since January 2009, recorded excellent results in terms of audience.EBITDA decreased from EUR 25.7 million to EUR 18.5 million due to the drop in advertising revenues and to investments connected with new initiatives in the New Media segment, but was partly offset by the cost-cutting plan implemented during the year.

The Dada Group posted a 7.4% increase in revenues in 2008, from EUR 158.5 million to EUR 170.2 million, broken down by business:Dada.net 54% and Dada.pro 46%.Overseas activities accounted for 48% of consolidated revenues during the year.EBITDA rose by +20.5%, from EUR 22.4 million to EUR 27 million.

The Television division (Digicast Group) posted an increase of 26.8% in revenues, from EUR 21.3 million to EUR 27 million.EBITDA jumped by 32.5% from EUR 7.7 million to EUR 10.2 million owing to greater investment in productions with a useful life of several years and despite non-recurring costs of EUR 1 million relating to the transfer of activities to the Milan office.On a like-for-like basis, revenues were down by EUR 0.9 million, while EBITDA increased by EUR 0.8 million.

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The uncertain outlook at the end of the third quarter of 2008 deteriorated in the last few months of the year, when the difficulties on the financial markets turned into a more general economic crisis, which is heavily impacting on the global media sector.

The risks and uncertainties that the Group will face in 2009 chiefly relate to trends in macroeconomic variables and their impact on the media sector in the countries in which it operates. Against this backdrop, and taking in account the situation in the first quarter of 2009, it is difficult to make forecasts, particularly for advertising revenues, which continue to be affected by a strongly negative and worsening trend without sign of a soon reversing.

The Group’s strategy and focus on core businesses will be accompanied by further action and measures that, in the last few months of 2008, led to the RCS Group achieving cost reductions of around EUR 40 million and incurring one-off restructuring costs of EUR 23.3 million. The particularly effective cost reduction plans implemented by the management of Unidad Editorial in Spain – a country hit by the economic crisis earlier and much harder than Italy – made a significant contribution to these results. In addition, the agreements signed in February (Corporación Bermont and the sale of buildings) will have a positive impact on Unidad Editorial’s net debt figure in 2009 of around EUR 60 million.

Forecasts for the publishing sector point to a contraction of volumes and revenues, except in the area of new media. Growth in advertising revenues for digital media is projected to continue, albeit at lower rates than in 2008, which, compared to 2007, exceeded 40% in Italy and were around 20% in Spain. RCS MediaGroup launched a growth strategy for digital revenues in 2008, and will continue to make considerable efforts to develop this business.

The trend in activity in the first few months of 2009, given the further deterioration in market conditions and the increasingly bleak outlook, therefore made it an urgent requirement to implement a global action plan focused on costs and business models across all Group functions and at every Group company in Italy and abroad. The plan, which is currently being drafted by the management, will be submitted to the Board of Directors for approval in the next few months. Particular attention will be paid to the financial situation, and – depending on market trends – the possibility of disposing of some non-core assets has not been ruled out. The Board of Directors has completely acknowledged this approach.

In view of the high degree of economic uncertainty and in the absence of unforeseen events, the Group expects to report lower results than in the previous year, notwithstanding the far-reaching measures already in place and further action to be implemented shortly, with the aim of minimising the negative effects of the crisis.

New radio licenses for NRJ Norway - March 18, 2009
from Lea Maier/NRJ International

On March 16th the Norwegian Media Authority announced the winners of new local radio licences in 20 larger areas. NRJ Norway was granted 24 hour licences in Oslo (not Greater Oslo), Bergen and Stavanger. In Trondheim NRJ was granted a licence on a shared frequency. NRJ also got new licences in Kristiansand and Tromsø. NRJ’s sister channel, Soft AC brand Klem FM, was granted licences in Nesodden (near Oslo), Røyken & Hurum and Malvik (near Trondheim).

The licences were given out for the second time after The Norwegian Ministry of Culture Affairs overruled and reversed the first decision by the Media Authority on November 25th 2008. On June 2nd 2008, NRJ had already been granted 24 hour licences in Greater Oslo, Bergen, Trondheim and Stavanger.

“NRJ is now relieved after a long period of uncertainty. We will now work hard to make even better radio and fulfil the requirement of our new licences,” says Richard Mazeret, Managing Director at NRJ Norway. The new NRJ Norway network will cover approx. 1.5 million potential listeners in the urban areas of Norway. The licence period is effective from January 1st 2010 to December 31st 2016.

Azercell Pleased with ARPU Generated from Celltick's LiveScreen Media - March 17, 2009
from Samantha Talpir/Celltick

Azercell Telekom, the largest mobile operator in Azerbaijan announced today its decision to expand its Celltick-operated idle screen broadcast channel to its entire customer base.

The service, called "Simurq' which is powered by Celltick's LiveScreen Media platform was originally launched to a limited audience of 300,000. Based on the impressive ARPU figures, Azercell has nominated Celltick to manage the service for the entire user base in cooperation with Unimark, a leading content aggregator in Azerbaijan.

Simurq broadcasts entertainment, news, sports, business and lifestyle teasers, as well as advertising and operator promotions, direct to the idle screens of mobile handsets, turning them into a network of synchronised, interactive personal billboards. Azercell sees Simurq as one of the big media channels in the country after TV and Radio and believes it will lead the evolution to mobile advertising.

Revenue from the service is generated by content downloads, premium content applications, and subscription services, which account for 77% of all clicks.

Azercell is the first company in the TeliaSonera Eurasia group to deploy Celltick’s LiveScreen™ technology. TeliaSonera Eurasia is a leading provider of mobile telecommunications services in the Eurasian emerging markets through its operations in Azerbaijan, Kazakhstan, Georgia, Moldova, Tajikistan, Kirgizstan, Uzbekistan, Nepal and Cambodia. The company's network coverage spans over 115 million people.

“Despite having aggressive targets for growth, the success of our Simurq service has exceeded expectations,” comments Ali Agan, CEO at Azercell. “As well as raising content usage, Celltick’s LiveScreen™ Media platform has enabled us to provide an exciting value added service to our subscribers, as well as raise awareness and consumption of our content catalogue. Based on Celltick's unique knowledge of this media, we believe that they are best able to help us reach even higher revenue goals by working directly with us to manage the service."

Stephen Dunford, CEO of Celltick said, “While Celltick already has over 35 operator customers around the world, Azercell’s Simurq service was a key implementation for us as it provides us with an entry point into the emerging markets of Moldova, Georgia, Azerbaijan, Kazakhstan, Uzbekistan & Tajikistan. We are positive that our success with Azercell will spur additional implementations in the region.”

Google to host epa content on Google News - March 17, 2009
from Clara Armand-Delille/Google News

Google and epa today announced a new agreement under which the search engine will host epa content on Google News. Under the agreement, Google News users will be able to quickly and easily find original text stories and photos from the online services of several of epa's eleven shareholding agencies.

“This new approach not only enhances the experience for users, it also gives proper recognition to journalists and publishers who work hard to break the news,” said Josh Cohen, Business Product Manager of Google News. “We are delighted to work with epa and through it with eight of Europe’s leading national news agencies.”

“We are pleased to have accomplished an agreement with Google that is good for all: epa, the participating agencies and Google will benefit from the monetization of our original articles and photos hosted by Google, and users will benefit from the user-friendly approach to this type of display of news agency content,” said Jörg Schierenbeck, epa’s Managing Director.

In the coming months, Google will now be able to link to the source of the news agency content. “Previously, Google News would often display multiple copies of the same news agency articles and photos, with separate links to various sites,” said Cohen. “Thanks to the agreement with epa, Google News will now be able to link directly to the original article, on a page hosted by Google.”

Users will also have the option to click to see all other copies of these articles, wherever they have been published, giving them additional opportunities to click through to those publishers websites and see extra content, background, and analysis from publishers.

“The importance of this agreement is that the news agencies are recognized for the original content they create, and can generate new revenue through the advertising revenue share split with Google for all hosted articles on Google News,” said Walter Grolimund, Chairman of epa’s Supervisory Board.