CME and broadcasting in the former communist countries

The development of commercial television in the former communist countries was closely associated with the activities of Central European Media Enterp rises (CME) and particularly its successful Czech station, TV Nova. This ar ticle looks at the overall strategy of CME, and shows that while it had som e important successes, its primary strength was its political connections r ather than its grasp of the television business. As the market developed, s o its weak business model became more and more apparent. Its failure to win national licenses in Poland and Hungary, and the failure of its attempts t o force an entry into those markets, meant that its prospects for commercia l success were very small indeed. Its share price collapsed, its operating losses mounted, and by early 1999 it was entirely dependent upon the bounty of its rich founder, Ronald Lauder. It faced a choice of collapse or take- over. In the event, it was taken over by SBS, a US-owned niche broadcaster active in peripheral western European markets. The overall lesson of this e xperience is that broadcasting in central and eastern European countries de pends on "political capital." In order successfully to enter the market, po litical connections are essential. Where these are absent, it is very diffi cult to develop a competitive position. On the other hand, once a company i s broadcasting commercially, then the small size of the advertising market means that there is a bitter competitive struggle. Just as in western capit alism, those who cannot survive the competition are forced out of the busin ess. CME was a casualty of the very logic that it introduced to the region.