For Broadcast, Nov 30, 2001

The advertising market is down and out across Europe, but smaller TV markets and those with less developed commercial television are feeling less of an advertising pinch.

This is principally because they were less over-heated than the Big Three --UK, France and Germany-- and so had less far to fall. This relative resiliency has provided a certain cushion to the strategy of SBS Broadcasting, which operates TV and radio stations in the Netherlands and Poland, as well as nine other European countries, but has no business in the Big Three.

In SBS's Netherlands and Hungarian territories, the ad market is flat; it's 8% down in Denmark and it's 10% down in Sweden - but these are far less falls than the 16% decline in the UK. Even with this relative advantage, SBS has still needed drastic strategic changes to guarantee its future. As a newer entrant in its TV markets, SBS typically runs edgier, stations designed to appeal to younger audiences. Focused on expansion at all costs over the last decade, SBS pushed top line growth without worrying much about the financial consequences. SBS's strategy gained it new markets, but in 1999 corporate costs equalled total station revenues, not a great return.

The new market realities has led to a new management team and heavy cost cutting. This year, most of the new media ventures have been shuttered. Ninety jobs out of 770 have been cut and another 70 are expected soon. Some offices have been closed, funding for an ill-fated and Swiss TV project with TA-Media called TV3 (SBS pumped in $30 million) has been suspended. Even the SBS company plane was sold.

Acquired programmming costs of $100 million a year are also being cut with two major studio deals reportedly with Warner and Fox recently re-negotiated. These alone will bring estimated savings over the next two to three years of circa 25%. Budgets for local programming are also being cut. The biggest station loser has been SBS's Belgian station VT4, where the audience share was flat at 5% and some truly tasteless programming was on air (one local game show had contestants eating cow's eyes). That station team was sacked and a programme line-up that appeals more to Flemish tastes is being planned.

New COO Markus Tellenbach wants the 11 SBS stations to work more like a loose federation and co-produce to cuts costs. For example, Fox's US adventure format show Temptation Island is being shot with one Scandinavian cast speaking Swedish for air on across SBS's Scandinavian stations: Sweden (Kanal 5), Denmark (TV Danmark) and Norway (TV Norge). The 60% cost savings is compelling against the risk that non-Swedish speakers might turn off when the show begins airing next Spring.