INTERNATIONAL: MEDIA OWNER PROFILE - Can Lauder increase his TV strength in Eastern Europe?/Ronald Lauder’s CME capitalised on the fall of the Iron Curtain. So, what next? Alasdair Reid reports

Ronald Lauder, the chairman of Central European Media Enterprises, is an unlikely media magnate. The son of Estee Lauder, he was executive vice-president of the family firm - the world’s largest privately owned cosmetics company - until he decided on a change of career in 1983. A spell at one of the company’s magazine outlets: Conde Nast or Hearst Magazines perhaps? No - he joined the Pentagon as deputy assistant secretary of defence for European and Nato policy. From there he moved on to become US Ambassador to Austria.

Ronald Lauder, the chairman of Central European Media Enterprises,

is an unlikely media magnate. The son of Estee Lauder, he was executive

vice-president of the family firm - the world’s largest privately owned

cosmetics company - until he decided on a change of career in 1983. A

spell at one of the company’s magazine outlets: Conde Nast or Hearst

Magazines perhaps? No - he joined the Pentagon as deputy assistant

secretary of defence for European and Nato policy. From there he moved

on to become US Ambassador to Austria.



Lauder was a political animal. He ran for the post of Mayor of New York

in 1989, is a leading light in America’s Jewish community - he is

chairman of the Jewish Heritage Council - and is a director of the

Museum of Modern Art.



Against all of this, the activities of CME must seem like an amusing

sideline; but the company is now the largest operator of commercial

television channels in Central and Eastern Europe, with channels in

Germany, the Czech Republic, Poland, Romania, Slovenia and the Slovak

Republic. It evolved out of a property development company set up by

Lauder in 1991 to take advantage of opportunities after the collapse of

the Iron Curtain.



Lauder certainly had the contacts to make it happen - and not just

because of his business and diplomatic backgrounds. His roots are

Hungarian: the Lauder family fled to the US in the 30s to escape the

Nazis.



The bandwagon began rolling in 1994, with the acquisition of two local

eastern German stations (in Berlin and Brandenburg) and the launch of

Nova in the Czech Republic. Nova was the first private national TV

channel to launch in a former Warsaw Pact country and has been the most

successful.



In November last year, it achieved a 64 per cent audience share and

takes dollars 100 million in ad revenue - 60 per cent of the country’s

TV advertising market.



As expansion plans evolved in 1995, Lauder realised he needed to bring

in top management talent. He found it in Leonard Fertig, a former ABC

executive and cable TV entrepreneur.



Fertig, CME’s president and chief executive, is the ideal hard-headed

foil to Lauder’s political figurehead role. Between December 1995 and

the summer of last year, CME launched channels in Romania, Slovenia and

the Slovak Republic; and along the way it picked up the contract to sell

airtime on the Ukraine’s leading state-owned channel.



Further expansion is planned for this year. The company has acquired

several local broadcasting licences in northern Poland and has forged an

alliance with TV Wisla, which has similar licences in the southern half

of the country. The launch of a national channel is planned for

October.



And in Hungary, it is bidding for the two national state-owned channels

being sold off by the Hungarian government. CME is up against two other

strong contenders, CLT and Scandinavian Broadcast Service.



But the company has hit choppy waters for the first time. In its

recently announced 1996 financial results, CME reported a turnover of

dollars 136 million, a 37 per cent increase on the previous year.

However, it recorded an operational loss of dollars 30 million - largely

due to the heavy burden of development and start-up costs on all of its

operations. It has, after all, invested a total of dollars 250 million

and payback won’t come overnight.



In May, however, CME attempted to raise a further dollars 125 million

through a convertible bonds issue. But as it approached the big Wall

Street institutions, its share price began to plummet and it was forced

to call a halt to the plan.



At the end of May, CME decided to pull the plug on its loss-making

German operations, writing off dollars 20 million in the process. The

Berlin and Brandenburg stations (now branded as Puls TV), which have

been losing a total of dollars 1.2 million a month for the last year and

a half, are expected to file for bankruptcy unless investors can be

found.



There have been equally worrying developments at Nova. CME was already

the channel’s dominant shareholder, but earlier this year it bought out

a local investor, CET-21, acquiring total control. This did not amuse

the Czech government, which prefers foreign media owners to act in

partnership with local companies.



But CME’s approach to programming is one of its strengths - it takes

international formats and develops them locally. It is not surprising to

find that Eastern European viewers have a taste for things like NYPD

Blue (even if their governments do not), but it has taken the arrival of

CME, with its professional management culture, to make commercial TV

viable.



Mel Varley, the London-based regional media director of Leo Burnett,

points out that CME is relatively small on a global scale of media

owners - but she is confident that it can continue growing. She adds:

’It is not yet at the stage where it is able to offer a regional sell,

but that could be interesting if it happens. The missing piece of the

jigsaw is Russia.



I think CME could emerge to dominate the TV scene in that part of the

world.’



Hungary. Coming home?



CME’S EMPIRE

Television and radio interests in Eastern Europe. Turnover for the year

to 31 December 1996: dollars 135.99 million.

Czech Republic

Nova TV: Launched 1994. Reaches 99 per cent of 10.3 million population.

1996 revenues of dollars 100 million (60 per cent of total TV

advertising market).

Radio: Nova Alpha.

Romania

Pro TV: Launched in 1995. Reaches 55 per cent of 22.7 million

population.

1996 revenues of dollars 13.5 million (40 per cent of market).

Radio: Pro 102 FM.

Slovenia

Pop TV: Launched in 1995. Reaches 80 per cent of two million population.

1996 revenues of dollars 8.2 million (50 per cent of market).

Slovak Republic

Markiza: Launched in 1996. Reaches 80 per cent of 5.4 million

population.

1996 revenues of dollars 7.3 million (47 per cent of market).

Germany

Has interests in four local TV stations - in Berlin, Brandenburg,

Leipzig and Dresden.

In May it stopped funding the Berlin and Brandenburg stations.

Ukraine

Has a 50 per cent stake in the airtime sales house for UT-2, the

country’s leading state-owned channel, reaching 93 per cent of the 52

million population. The Ukrainian TV advertising market is worth a total

of dollars 20 million but there are no figures available on the UT-2

market share.

Poland

Plans to launch TVN, which will reach a planned 50 per cent of the

country’s 39 million population, in October 1997. The Polish TV

advertising market, worth dollars 385 million in 1996, is the largest in

the region.

Hungary

Is bidding to buy both state-owned channels, currently being privatised

by the government. Asking price for each ten-year franchise is dollars

48 million.



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