Why Eastern Europe Will Resist Netflix

Marseille Still - H 2016
David Koskas/Netflix

Marseille Still - H 2016

The head of Eastern Europe's largest broadcast group kicks off the NEM 2016 conference with a defiant call to arms: 'linear TV is stronger than ever!'

Netflix and other internet companies have made major inroads in the television industry worldwide, disrupting business models and keeping old media companies up at night with their direct-to-customer online video offerings.

But old TV can resist the Netflix attack, according to Christoph Mainusch, CEO of Central Europe Media Enterprises, the largest broadcaster in Central and Eastern Europe.

In his keynote address opening the 2016 NEM media conference in Dubrovnik, Croatia on Tuesday, Mainusch told the audience to not believe that hype.

“Linear TV is stronger than ever! 90 percent of TV viewing (in Central and Eastern Europe) is still linear!” Mainusch said, pointing to figures that show that traditional TV players have so far been the winners in the digital revolution.

He noted that in the six Eastern European countries where CME operates, total TV usage has actually gone up in the past 10 years, to 244 minutes a day, from 216 minutes, a 13 percent jump. Pay TV penetration of CME channels has gone up from 39 percent to 65 percent over the same period. CME's share of the total advertising spend in its region has also increased, from 48 percent in 2005 to 54 percent in 2015. The increase in online revenue, he said, has come at the expense of print advertising, not TV.

Eastern European channels have, so far, been able to resist Netflix & Co. because they are still relatively cheap and because they offer local content the local audience wants, Mainusch argued.

It's true that while Netflix and Amazon have invested heavily in big Western European territories — financing series such as Marseille, The Crown and Black Mirror (Netflix); or Peaky Blinders and car show The Grand Tour (Amazon) — they have not made similar local investments in the less lucrative markets of Eastern Europe.

Mainusch sees a window of opportunity for big regional players to diversify the business and establish online and on-demand offerings before the big boys truly arrive in force.

“If we don't offer these (online and on-demand) services, the consumer will turn somewhere else to get it,” he said. “You have to fragment yourself before the others do it for you.”

He noted that in the Czech Republic, CME's largest TV market, the number of channels has almost doubled in the past 10 years. But because the main three TV networks successfully fragmented themselves, starting up their own new free and pay-TV channels, they have kept more than 90 percent of their total audience.

Going forward, Mainusch predicted the battle will be for top live content — particularly sports rights —which have proved to be a strong driver of audience figures even in a fragmented market, such as the huge ratings traditional TV networks have garnered for the Euro 2016 soccer championships, which kicked off on Friday.