Q&A: CME’s Adrian Sarbu

June 8, 2011 World Screen
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PREMIUM: Adrian Sarbu, the president and CEO of Central European Media Enterprises (CME), discusses his strategy for producing and broadcasting high-quality local programming and independent news; building groups of channels in each key market; and sharing knowledge and skills between locally managed teams.

 

WS: Tell us about Doma TV, the channel you recently launched in Croatia. Are you looking to launch more channels in other countries?
SARBU: Doma, which means “at home,” is a concept we developed in Romania 12 years ago, [at this time it was] named Acasa. Why? Because we thought, and we still think, that women are our most important target group, not only for us, but for the advertisers present in the region. We need to offer quite a large range of programs to women of different ages. For the last 12 years we have been expanding this channel concept, first into Slovakia, then in Croatia, and we have it on the shelf for all our other markets. Today competitors try to copy us. But Doma/Acasa is not the only format we have prepared for the coming years. As recovery progresses in our markets, new projects will start to air.
 
WS: What are the advantages of having several channels in the same country?
SARBU: Today we have more than 20 channels in six countries. The multichannel strategy is a normal evolution of tele­vision. You experienced it in America in the ’80s and ’90s. The development of distribution platforms—cable, satellite, IPTV and others—requires a more diverse offer from any broadcaster who wants to maintain audience share. So, in effect, we are looking to maintain our share by diversifying our portfolio of channels. We are aware that if we do not do this, our competitors will eat away at our audience. However, from now on we are looking to diversify our revenues and increase the subscription fees, which we get from the cable or satellite operators. 
 
The multichannel strategy was a choice and also a must for us ten years ago. We understood the need, we understood the expectations of the audience, we understood the way we should evolve our operation. And the result is that we are leaders in audience.
 
WS: The overall GDP in the CEE region is expected to reach about 3.2 percent this year. That’s two percentage points higher than GDP in the Euro Zone. What impact will this have on the television industry and on advertising?
SARBU: Analysts and investors have been expecting this recovery for more than a year. We see our markets gradually pulling out of the economic crisis. GDP is an important indicator. In a normal economy, an increase in GDP would trigger a trickle-down increase in the advertising market. But for the first months of this year, and probably for the whole year, we’ll still have to wait and see what the impact of this expected rise in GDP will have on consumer spending and TV ad spend.
 
We enjoy a position that we’ve built up over the years, which gives us a very high operating leverage. Our market share in all our countries varies between 41 percent to over 70 percent. Our audience is stable and strong, so from every dollar spent more than 50 cents will come straight to our bottom line. We expect all of our markets to recover this year. 
 
WS: MediaPro is the leading studio in the region. How important is it at this point to develop an international distribution business?
SARBU: It’s very important, because we have quite a rich slate. MediaPro produces more than 1,000 hours of content a year for our broadcasters as well as for our home-video and theatrical-distribution arms. So having an international sales department is a normal evolution for MediaPro. Today we sell our products in more than 15 countries.
 
WS: What does MediaPro have to offer studios and producers in the West?
SARBU: First of all, MediaPro can be a co-producer of movies, TV series and romantic drama novelas, which sell very well worldwide. Secondly, it offers production services for large American and international projects which are set and shot in CEE, and thirdly, it offers its services in cofinancing international productions as well distributing international products throughout CEE, which is its area of expertise.
 
WS: What benefits has CME derived from the Time Warner investment?
SARBU: To have a strategic investor like Time Warner is the dream of many media companies in the world. Time Warner is a strong content company. We are a strong content company in our region, and there are a lot of affinities with respect to the way we see the development of our businesses. We think we can share expertise and resources. We are a buyer of Time Warner content, not only for television, but also for theatrical and home-video distribution. We also have several projects in development with Warner Bros. A lot of investors ask me what the benefits are of Time Warner’s investment. The first benefit of having Time War­ner as a shareholder is the fact that it’s Time Warner. The second is the way we can structure CME in the future and harmonize with Time Warner’s strategy for content, which is similar to ours.
 
WS: What are your plans for digital? And at this point what type of content do you provide online?
SARBU: As you know, in the last ten years, there isn’t a single digital strategy coming from a television company or even a large media operation that has proved to be the right one or the only one.
 
Here at CME we are more in line with the philosophy that was expressed by Time Warner: TV Everywhere. We see the Internet as a new distribution territory. We see our product being used by various groups of consumers on all possible distribution platforms and devices, and we are working on providing as much of our content as possible. In the first stage of our digital development, our brands were available on the Internet and we had a very strong presence in our markets. So basically we moved to the Internet first with a news portal and various types of sites, which were financed by advertising.
 
In the fourth quarter of 2010, we launched Voyo in the Czech Republic, which has similar characteristics to both the BBC’s iPlayer and Hulu. Voyo will offer our channels online and will also be a platform for video on demand and catch-up TV. We will aim to be the same leading provider of content through the Internet in our markets as we are through our television stations.
 
WS: Are advertisers responding well to growth opportunities on digital?
SARBU: Generally advertisers and ad agencies are moving quite fast in expanding their presence in new media. In our markets, advertisers are choosing the Internet mostly at the expense of print media while the share of television advertising is still growing. So advertisers are willing to get a complimentary Internet advertising offer from us on the top of what we give them through television.
 
WS: Are you optimistic about the future of CME?
SARBU: I was always optimistic, but now I am more optimistic than at any point over the last two years.        
 
WS: How have CME’s stations built on their foundation of providing balanced news coverage?
SARBU: We are not only the undisputed leader in six countries (Slovenia, Croatia, the Czech and Slovak Republics, Bulgaria and Romania), but we are strong leaders in news. Our evening news programs achieve audience shares of between 30 and 70 percent. This is a clear acknowledgement of what we did to build news as an integral part of the brands of our stations.
We see news not only as a means of informing the audience—because today the audience can be informed by various means—but we see news as a form of entertainment in the good sense of entertainment. That’s probably the reason we are so successful. The CME brands are driven by the success of the stations’ news.
 
WS: Does the CME station group as a whole have a certain programming mission that sets it apart from other stations in the region?
SARBU: The last two years have been an interesting experience. On one hand there was the [financial] crisis, which affected our region deeply. On the other hand we had to reposition CME from a simple broadcaster to a vertically integrated media company with strong content, broadcasting and new-media divisions. We produce CME content not just for one but for several countries.
 
Today we have common programming projects—for example, in the Czech and Slovak Republics, in Slovenia and Croatia, and in Romania and the Czech Republic. In the development pipeline are projects that we hope will be successful across all our regions. These projects will retain the flavor of a local product but will be international enough to work in cultures that are quite different, while still satisfying the expectations of the audience.
 
We see television as the main growth driver for our content, which can be produced by us both locally and abroad. We then have the means to export it outside the region. We also acquire strong formats and programs from the international market, which complement the programming mix of our general-entertainment stations.
 
WS: What are the advantages of having several channels in the same country?
SARBU: Today we have more than 20 channels in six countries. The multichannel strategy is a normal evolution of television. You experienced it in America in the ’80s and ’90s. The development of distribution platforms—cable, satellite, IPTV and others—requires a more diverse offer from any broadcaster who wants to maintain audience share. So in effect we are looking to maintain our share by diversifying our portfolio of channels. We are aware that if we do not do this, our competitors will eat away at our audience. However, from now on we are looking to diversify our revenues and increase the subscription fees, which we get from the cable or satellite operators. 
 
The multichannel strategy was a choice and also a must for us ten years ago. We understood the need, we understood the expectations of the audience, we understood the way we should evolve our operation. And the result is that we are leaders in audience. We have shares between 35 percent and 55 percent in our six markets.
 
WS: What benefits has CME derived from the Time Warner investment?
SARBU: To have a strategic investor like Time Warner is the dream of many media companies in the world. Time Warner is a strong content company. We are a strong content company in our region and there are a lot of affinities with respect to the way we see the development of our businesses. We think we can share expertise and resources. We are a buyer of Time Warner content, not only for television, but also for theatrical and home-video distribution. We also have several projects in development with Warner Bros.
 

A lot of investors ask me what the benefits are of Time Warner’s investment. The first benefit of having Time Warner as a shareholder is the fact that it’s Time Warner. The second is the way we can structure CME in the future and harmonize with Time Warner’s strategy for content, which is similar to ours.