Feature

World Media 2007: Eastern Europe

The ad markets of Eastern Europe are racing ahead despite concerns about underdeveloped infrastructure and poor governance. There's money to be made, but only by the cautious.

Eastern Europe's Westernisation continued this year as two more countries - Bulgaria and Romania - joined the European Union. The region is still showing all the signs of healthy growth, with Russia and one or two smaller economies showing strongly. But, despite eight countries from Central and Eastern Europe joining the EU in 2004, there are still mutterings about ill-run economies and blinkered governments.

In 2004, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Slovakia and Slovenia all joined the EU. More than 100 million people have been brought in. The new entrants - Bulgaria and Romania - have been growing steadily, like their predecessors.

But these are two more countries where the leaders are not interested in any significant level of reform. A worrying fact when you see the entirely inadequate infrastructures across the region and the heavy social burdens on citizens, which has led in part to the wave of westward migration. In Poland, the most important of the former communist countries in the EU, its prime minister and president, the twins Lech and Joraslaw Kacynski, have been a diplomatic disaster abroad and have not delivered great reforms at home. More recently their Law and Justice Party has been embroiled in corruption allegations.

Advertising expenditure across Central and Eastern Europe is growing fast: it is expected to rise 17.5 per cent in 2006 and to maintain that double-digit growth for the next three years. All five of the fastest growing markets in the decade to 2005 were in this region.

The merger of the Eastern and Western European markets has fuelled a focus on Europe as a strong media market. There are suggestions that the Americas are less interesting at present, with the dollar's depreciation against most other currencies and ongoing problems in Latin America. Only Asia can compete.

This growth is not by any means a given. Much of the general economic growth in Russia is down to the increase in oil prices; a crash in those prices would have a profound effect. There are also worries that a change of government in the general elections in 2008 could have a negative effect on the economy. But Russians like to spend when times are good so, for now, trade is brisk.

But it's not just Russia that is booming. Estonia and Latvia are growing at 11.6 per cent and 10.9 per cent respectively, outstripping forecasts. They both have stable economies with relatively clean governments, although observers maintain concerns that their economies are likely to overheat.

Germany's Axel Springer has done well out of a raft of new ventures across Eastern Europe; it is now behind two of the top three newspapers by circulation. Ringier also has some significant Eastern European assets. News Corporation invested in a TV station in Poland last year, adding Serbian and Georgian stations shortly after. The Modern Times Group has also profited. There is no shortage of investment.

But for all the headlines about mobile penetration reaching 85 per cent in Poland and more people using GSM multimedia services than in the US, there is much that is basic in Eastern Europe. Across the region, commercial media structures are unsophisticated. They are still learning basic lessons, after emerging from communism at the end of the 20th century. Yes, growth is healthy and carefully managed investment by Western companies can advance the industry and make profit. But they tread carefully.

ADVERTISING EXPENDITURE
USdollars million at current prices. *Estimated
Total News- Maga- TV Radio Cinema Out- Online
papers zines door
2000 9,477 1,795 1,559 4,671 485 47 906 14
2001 10,733 1,707 1,743 5,653 514 51 1,040 25
2002 12,603 2,013 1,971 6,617 661 55 1,251 35
2003 14,544 2,407 2,273 7,539 799 85 1,386 55
2004 17,593 3,004 2,732 8,947 1,072 104 1,613 121
2005 20,343 4,056 2,542 10,249 1,224 132 1,950 190
2006 23,904 4,498 2,773 12,361 1,425 157 2,376 314
2007* 27,883 5,038 3,032 14,743 1,591 183 2,847 449
2008* 32,064 5,620 3,279 17,122 1,760 206 3,442 635
2009* 36,761 6,169 3,519 19,886 1,938 231 4,096 922

TOP 20 FASTEST-GROWING AD MARKETS
USdollars million at current prices.
Rank Country Year-on-year Total spend Total spend
% change 2006 2005
1 Egypt 47.3 837 568
2 Saudi Arabia/Pan Arab 39.0 3,924 2,823
3 United Arab Emirates 36.8 1,333 974
4 Romania 34.4 413 307
5 Russia 30.1 6,516 5,010
6 Qatar 28.5 121 94
7 Kuwait 26.6 500 395
8 Vietnam 25.2 418 334
9 Lithuania 22.4 389 318
10 Slovakia 20.6 1,145 949
11 Poland 19.6 4,749 3,970
12 Estonia 19.0 108 91
13 Indonesia 17.2 3,299 2,814
14 Bulgaria 17.1 469 400
15 China 16.4 11,378 9,775
16 India 15.8 4,248 3,668
17 Brazil 13.7 7,386 6,496
18 Hong Kong 13.3 2,848 2,515
19 Latvia 12.4 119 106
20 Turkey 12.2 1,885 1,680

REGIONAL AD MARKETS GROWTH
Year-on-year % change
Romania 34.4
Russia 30.1
Lithuania 22.4
Slovakia 20.6
Poland 19.6
Estonia 19.0
Bulgaria 17.1
Latvia 12.4
Turkey 12.2
Czech Republic 12.1
Hungary 6.8