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Week of July 28, 2008

Record profits at CME
…more details on Bulgaria deal…

There is no question that CME (Central European Media Enterprises) benefits from consumer and advertising growth in its target markets. Q2 (April – June) financial results (July 30) show revenue growth, year on year, bigger than a spurt to US$305 million from US$216 million. Most growth comes from the Czech Republic, where CME owns market leader Nova TV, and Romania, where CME found its COO Adrian Sarbu.

Earlier this week CME announced buying 80% of a company owning TV2 and a cable sports channel for €110 million. TV2, it turns out, is a network of 27 regional TV stations, licenses for which expire in 2010. According the Bulgarian regulator CRC all of the TV2 licenses are temporary and about half of the network will cease broadcasting when Bulgaria switches off analogue TV.

But, fear not investors. CME hired as a “consultant” well-known local fixer Krassimir Gergov, chairman of the Bulgarian Association of Advertising Agencies, head of the National Tourist Board and golf course developer. Gergov most likely owns Top Tone Media, the company CME bought. The original TV2 owner Gergana Dakovska – the network has only been on the air since last November – said she’s just now in the process of “transferring” ownership to Top Tone. (JMH)

UK regulator taps license fee
…show me the money…

UK super-regulator OFCOM fined the BBC £400,000 for Broadcasting Code violations, the seemingly endless revelations of fraud, deception and – oh, my – scandal in on-air phone-in competitions. OFCOM said competitions on BBC TV radio shows in 2007 were “unfair.” Other UK broadcasters have been fined millions and millions for a variety of sins. (See last years big fine story here. See last months big fine story here.

Unlike fines paid by commercial broadcasters, UK license fee payers bear the cost. Scott Matthewman of The Stage (July 30) notes OFCOM has received almost £10 million in recent months in something like the classic radar-trap. OFCOM gets to keep the money.

Outgoing OFCOM Chairman Lord David Currie recently suggested that a slice of the BBC license fee be divided up by other broadcasters. Presumably, OFCOM would keep an administrative fee. Who said there isn’t big money in broadcasting today? (JMH)

CME acquires Bulgarian TV start-up
…quick closing…

New free-to-air channel TV2 and sports cable channel Ring TV will be  Central European Media Enterprises  (CME) first acquisitions in Bulgaria. The typically complicated transaction will buy out 80% of Top Tone Media Holdings from Krassimir Gergov or Ognyan Dimov, exact ownership is hazy, for about €110 million (US$170 million).

“The closing is expected within two weeks,” said the CME statement.

TV2 was launched in November 2007.

Nothing further has been heard of News Corporation selling its Bulgarian asset bTV, a rumor floated last week. (JMH)

Satellite radio merger approved
…bird-land bailout…

It has been a long hard slog for Sirius Satellite Radio (and serious) CEO Mel Karmazin in the battle to win the hearts and minds (and votes) for the merger with XM Satellite Radio. The official word came down late Friday night (July 25) that the US Federal Communications Commission (FCC), voting along political party lines, approved the deal allowing one monopoly company to march on where two competing companies could not. FCC Chairman Kevin Martin confirmed Thursday (July 24) an agreement “in principle.”

The last bridge to cross was the vote of Commissioner Deborah Taylor Tate. Not questioning the long list of objections brought forward from American terrestrial broadcasters, consumer groups and a few politicians Commissioner Tate held out for just a bit more money (US$ 19.7 million) from Mr. Karmazin…small change considering the hundreds of millions of OPM* that have been blasted off into space. When the FCC in 1997 drafted rules creating satellite radio licenses one condition was that the two companies never merge. (See more on satellite radio)

Earlier last week (July 24) XM Satellite Holdings secured debt refinancing through senior notes worth more than US$ 700 million. Stock traders have long been fans of Mr. Karmazin’s deal making skill. (JMH)

*OPM - Other People's Money

UK radio survey analyzed
…The Gap Recedes…

RAJAR’s quarterly release is – usually – filled with “the thrill of victory and the agony of defeat.” Q2 doesn’t disappoint. Yes, the full and bloody details will appear Monday.

Some of the twitter has been about the suggestion that The Gap between BBC and commercial radio has receded.  Yes, indeed, the market share of all combined BBC radio shrank as commercial radio’s market share grew… a bit.

Benefiting from superior numerical analytic tools (Excel) and loads of data points I discovered that historically – in the last 5 years – Q2 results are often nicer to commercial radio than, say, Q1…or Q4. The average Gap in Q2 has been 10.3%, BBC radio always winning. But the Q3 Gap has been even tighter: 9.8%. Is it possible that people listen to commercial radio more when daylight hours are longer?

But, the trend is the trend.

Larger graphic here

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