GOLDEN DAYS FOR TV. RATINGS ARE GROWING AND CHANNELS WILL NOT ACCOMMODATE MORE ADS, SAYS NOVA’S CEO JAN VLČEK

According to the CEO of the largest local commercial TV, with the pandemic remission the Czechs have returned to shopping, and retail chains, electronics producers or e-shops spend billions on ad spots with unparalleled intensity. “We have not seen such good times for TV ad sales for a long time,” says Nova’s CEO Jan Vlček in an interview for HN.

The pandemic crisis attracted more viewers to TV screens last year and the viewers did not leave. TVs are riding the wave of unexpected boom. “The TV market is not able to accommodate more ad investments than it does at the moment. In fact, all channels in the market are sold out,” he describes. Nova generates nearly five billion crowns annually from the sale of ad spots on TV and on the internet. Last year, the group’s net profit increased by seven percent to 865 billion crowns. Advertisers’ demand is so strong that Nova can afford to increase its ad price lists by 12.5 percent for the next year.

Vlček, who rarely gives interviews, has been managing Nova since June 2019 in tandem with Klára Brachtlová. He has been in charge of sales in the company for ten years. Now, the management duo has spent the first year with the new owner, the PPF group. PPF acquired Nova together with TVs in other four East European countries as part of the acquisition of Central Media Enterprises (CME).

PPF assumed the TV conglomerate CME exactly a year ago. What are the tasks assigned by your new owners?

PPF had a very constructive approach to us and provided great support to transformation towards digitalisation. It confirmed our management team and more or less approved our recent direction. The key part of our strategy is the development of Nova as the TV market leader. This is reflected in our investments. We feel great support from our shareholder in introducing new things to increase viewership and develop new programmes and to have relevant and credible news coverage. Our news programme is the most watched in the market and is thus the pillar of our strategy. In all areas we want to cooperate with the best people in the market as this is the only way to make the best content.

Where did investments go this year?

For example, we have launched a new news studio this year. For this modernisation, we hired a firm that makes similar projects for West European TV companies. Our ambition is to be the market benchmark in all areas, including news. We have also invested in new own programmes, not only for prime time but also for the so called later prime time. We have a successful programme Souboj na talíři. After a long period of time we have invested in a new format shown in early prime time - after 5 pm. It is a competition The Chase hosted by Ondřej Sokol. In this time slot, the competition increases our viewership five days a week and it is beneficial for the series Ulice that follows.

What is the development of Nova’s TV rating?

Positive. For example now in September, Nova’s share in the total TV rating in prime time has grown to 37.2 percent from 36.8 percent last September. All this in the 15-54 target group.

During the pandemic the viewership was growing in general, namely in the news, because people stayed at home. Has this passed?

The news rating grew dramatically across target groups. TV logically became the first medium where people were searching information in uncertain times. TV rating in general has remained strong and has not declined to the original levels.

What is your explanation?

We as an industry were able to respond to the specific needs, adjusted our schedule to demand and obviously, we addressed people who were not much interested in TV. Some of them got used to TV content again and simply stayed with us.

Viewer rating has also grown for younger audiences. For example in the news in category 15-24, the rating was up 30 percent. Do you respond to this with your programme?

The pandemic was accompanied by a number of special phenomena and this was one of them. This target group is always a hard nut to crack for classic media. Young people are the first to try new things. They find information and watch video content on the internet. So if you come with a format that addresses this target group you have an opportunity to achieve a mass reach. Internet or any other medium is not able to do this. Our effort to target this group is reflected in formats that we have introduced this year, for example the very successful Love Island.

The pandemic also meant a slump in ad income. What is the situation now?

Especially around the second quarter of 2020, our income from advertising dropped dramatically, in tens of percent on a monthly basis. Starting from the third quarter of 2020, it was going up sharply again. We saw a small stumble at the beginning of the year when the market slowed down a bit. But is has been growing again since then.

Is the money spent by advertisers back at the pre-Covid level?

Now, in the second half of the year, we experience income that has not been here for a long time. We will see what all-year figures will look like. In any case, the TV market is not able to accommodate more ad investments than it does at the moment. All channels in the market are sold out. We have not seen such good times for TV ad sales for a long time.

Is this a reflection of the current overheated economy?

Apparently. We feel it so. It is a bit unexpected consequence of Covid. All were expecting recession but it was quite the opposite. The market saw an inflow of retained consumer demand.

How does it look like if you say that you are “sold out”?

One of the elements of our business strategy is that we never sell out advertising up to the limit of 12 minutes per hour, which is the maximum permitted by law. We flexibly reduce ad breaks if possible. On average we are around 75 percent of the statutory limit. We want watching our programmes to be relatively comfortable for viewers.

How much will the price list costs grow in Nova next year?

We increase prices by 12.5 percent. What we take into consideration is the market demand and efficiency with which we can build reach that is higher than that of our competitors.

You have said that the boom is reflected in demand and prices. But there are advertisers that have nothing to promote, such as car manufacturers...

It is one of the aspects of the post-Covid era. There are segments of advertisers who are the winners of the situation, such as e-commerce and retail chains. Who would have guessed a year ago that they would grow so remarkably? And there are those who did not win to put it mildly. Car manufacturers are cautious now and consider carefully any marketing communication. It is probably because they do not know when they will be able to go firing on all cylinders again.

And are you able to replace the loss of these advertisers by the other ones?

Yes, we are. In aggregate, advertising grows significantly. Demand has moved to months with a higher index, which generates higher sales.

Is Nova’s business performing better than in the relatively good pre-Covid year 2019?

We as a private company do not disclose this information. Given what the media market has gone through we are doing very well.

Commercial TV companies raise funds not only from advertising but also from some TV content distributors, e.g. from satellite and cable companies. In terrestrial broadcasting, they have to pay for transmitting a signal. Nova was not too satisfied with this situation. But with the new format of digital terrestrial broadcasting it would be technically possible to charge money from viewers receiving a signal through aerial. The problem is that the Czechs in general do not like paying for TV. And it is a complex issue in terms of business and policy. What is your opinion?

We can see a gradual change. Several years ago, terrestrial broadcasting had a majority share in the Czech Republic. Now it is close to the middle. This means that households gradually move to paid broadcasting with better quality and additional services.

Is it possible that terrestrial broadcasting will be subject to a fee?

If the market structure will allow for such additional services in future, we will not be against it.

You would have to consider whether you will be able to collect more money from paying viewers or from advertising. Income from advertising is still dominant.

It is, but have a look at the satellite and cable distribution. They also have ads. As soon as it makes more sense to impose fees through distribution we will consider it.

For your group, the key source of income from online content is the web platform Voyo. The CEO of CME, Didier Stoessel, has already said that Voyo’s goal is to have one million subscribers in Czechia and Slovakia within five years. What is the progress?

You are right that with the entry of the new owner, Voyo has become a strategic project. At the moment is seems that the goals of the growth plan will be exceeded. One of the factors that helped us was the pandemic that made many people try something new, for example the SVOD services (such as Netflix). But we are not going to disclose the number of subscribers. I can say that we have annual goals to get to the one million horizon within five years and at the moment we are above the goal defined for the end of this year.

Isn’t the goal too ambitious?

We can see that this type of prepaid video services accounts for about 20% in local households. In Western Europe the share is much bigger. In some countries it is up to 50%. Our experience and the experience from other markets shows that the success of SVOD platforms is driven by quality content, by the fact that viewers find something exclusive there. We will thus develop exclusive content for Voyo. We have already announced a series about Iveta Bartošová or a series Národní házená. We will make a miniseries about the Czech murderer Roubal. These programmes will be exclusively for Voyo and with the production quality that our viewers are used to.

Most Czech media have found that production of video content is too expensive and it is difficult to cover it either from advertising or subscription.

Our growth plan anticipates positive income including these investments. There is no way without investments. We estimate that the Czech market has the potential for any household to use two to three services of this type on average. We expect that Voyo will definitely be one of them. Up to half of households could subscribe to Voyo. It is the potential that we can see in more advanced markets. Voyo should be number one for local content because Netflix and similar companies will never be able to compete in local content. Local content is what will attract viewers.

But various websites also prepare local content, including Seznam.

If it were so easy to make quality local content there would be many TV companies.

The cost of content creation has probably become much more expensive - wages and costs of material are growing. Will this not thwart your plans in some projects?

We have to take it into consideration. Fortunately, the market situation is positive and we can work well in a situation when the costs of input are growing. There is no other way.

If Voyo is a pay service it reduces your income from online advertising, doesn’t it?

We have to be prepared that fragmentation of video content viewing will be higher. Different target groups will consume video content on different platforms. We have a VOD platform funded from advertising  - Novaplus.cz. It has an irreplaceable role and will continue to exist. This will help us use viewer fragmentation. In addition, we can offer various target sub-groups operating on platforms to our advertisers.

Do you succeed in reaching an older generation, e.g. 50+, with a product such as Voyo?

Yes, we do. We can see that quality content is attractive.

In November, contracts for the next year with major advertisers are singed. What will be your business policy?

It primarily builds on our strengths - especially top quality content that cannot be viewed elsewhere. We also do not overburden viewers with long ad breaks. Any advertiser knows that their spot will be shown in a short break and will not be included in a long row of ads. This relates to good memorability of ads and effectiveness of invested money.

In September, you renamed Nova 2 to Nova Fun and added eleventh channel - Nova Lady. Why?

It is one of our strategic projects - redesign of channels so that any channel overlaps the other ones as little as possible. We have also redesigned Nova Action. All this will help us increase our viewer rating and the speed in building net reach. Clients are searching for ways to reach their target groups effectively and with the lowest costs. We are offering channels that complement one another and can develop a broad reach with minimum ads. Our policy includes explaining to clients that programmes we are preparing for the next year will give them what they need for high viewership. With a young target group, we are able to show that we score well not only in Love Island but also in the recently launched series Pan profesor starring Vojtěch Dyk, and other programmes. We have to convince clients that we will be a reliable partner for them next year. They buy the expected all-year performance  from us in advance and their marketing success is at stake.

What reach can you promise to your advertisers for a spot shown in prime time?

It may be reach of one and a half million viewers.

Now when Nova and O2 TV are members of the same group, does it make sense for the two TV companies to operate separately?

For the initial period, our priority is Nova’s digitalisation. Naturally, there are various forms of cooperation between telecommunication companies and the media. No doubt there will be synergies in the future and we will take them into consideration. But now it is not our priority and no merger is on the table.

Apparently, we have also addressed people who were not too interested in TV before. Some of them got used to the TV content and stayed with us.

* We increase the ad price by 12.5 percent. We take into account the effectiveness with which we are able to build larger reach than our competitors. JAN VLČEK (53) Vlček was appointed Nova’s CEO in June 2019, he has been working in this role in tandem with co-CEO Klára Brachtlová. He joined the group in 2011 as CSO being responsible for the sale of ad time and sponsoring on all TV and internet channels. Before that he led BigMedia, a company focusing on OOH advertising. For ten years he was working in companies of the WPP advertising group, for example in Mindshare or in the Prague and Moscow branches of JWT.

Photo by author:   Photo: HN - Honza Mudra Photo description:  “The TV market is not able to accommodate more ad investments than it does at the moment. In fact all channels in the market are sold out,” says the head of TV Nova Jan Vlček.

Source: archiv.hn.cz