The media world has been changing at a mind-blowing pace; this and the somewhat unfavorable specifics of the Bulgarian media market explain the Western companies' hassled departure of the last several years.
The story behind Nova TV and its recent owner MTG is a good example of the peak and decline of interest manifested by foreign companies. In 2008 the Sweden-based multinational company bought the Bulgarian TV channel for the phenomenal sum of 620 million euro. The global economic crisis started almost straight after the purchase; it transformed media markets worldwide and the Bulgarian market in particular. As a result, MTG sold Nova for 185 million euro this February. Despite the overall good management and the series of acquisitions the group had made in Bulgaria, its local business was devalued by 435 million euro.
Yet, the crisis is not the only explanation behind the dwindling valuations of Bulgarian media companies. A leading motive for investing in Bulgaria had been the rapid, large-scale growth expected in the years prior to the crisis. The most important indicator to watch then was the amount of advertising investment per capita, which in Bulgaria was almost one-tenth of that of the so-called developed markets in Western Europe. The expected growth, though, never materialized, at least not in Bulgaria.
As it turned out, taking for granted that the Bulgarian market would sooner or later fall into the Western pattern, was a wrong approach. The world crisis and local specifics (the political reluctance to introduce reforms, the non-working legal system, etc.) have left that potential on the Excel worksheets. Growth of investments in advertising would come from growth in consumption, which in turn comes from higher incomes; for higher incomes there must be growth in production and investments which in turn depend on favorable political environment of the type that has failed to emerge in Bulgaria. The current advertising investment per capita in Bulgaria (estimated by Central European Media Enterprises (CME), the owner of bTV) amounts to 26.8 US dollars compared to an average of 376 US dollars on the Western market, and 77.4 US dollars in the Czech Republic, for instance.
This wide gap can hardly be seen as a guarantee for a future boom and the companies that are in the position to sell their local businesses gladly do so while those businesses still have some value. Time Warner, which controls CME, is also trying to sell it. The lagging growth is - as was the case with MTG - not the only factor to blame, though. One has to take into consideration the global changes in media markets as well. The Swedish company, for instance, has sold all of its TV businesses after announcing a full swing in its strategy, and is now striving to become a supplier of content rather than a distributor. The reasoning behind the decision is the fact that television is facing a crisis similar to the one that has shaken the printed media. In 2017 for the first time investment in online advertising surpassed investment in TV ads. On the other hand, TV channels are threatened by a decline in the number of viewers due to new OTT (Over the Top Television) platforms like Netflix, Amazon Video, Google Play, etc.
This trend explains why American telecom AT&T recently announced the purchase of Time Warner. The content of the media platform would allow the operator to offer new services to its clients and stay in business. In Bulgaria, the integration of telecommunications services and media content is demonstrated by the local telecoms and the cable networks. A similar logic might stand behind Petr Kellner's simultaneous acquisition of Telenor Bulgaria and Nova TV. The synergy between media and telecom has the potential of raising yet more profits in the years to come. In case of failure, the Bulgarian market offers a second chance - the TV station can always be sold to a local player - the MP Delyan Peevski, who is the public face of the Bulgarian behind-the-scene establishment.