High costs, slow growth take toll

Gaylord Entertainment Co. will shut down its money-losing country music cable network CMT Europe, but it remains committed to its CMT Asia-Pacific Rim and CMT Latin America operations, company officials said.

After losing $10 million in Europe in each of the past two years, the Nashville, Tenn.-based company will cease its CMT Europe satellite feed March 31. The service has roughly 1 million paying cable subscribers and about 3 million households from carriage on a British Sky Broadcasting direct-to-home satellite package.

When CMT Europe launched in 1992, Gaylord believed the burgeoning European cable industry would grow sufficiently to put its country music channel closer to break-even by this point, said Carl Kornmeyer, president of Gaylord Entertainment’s Communications Group. While all U.S. cable programmers that expand overseas expect to incur losses for at least the first five years of operations, Kornmeyer said the high cost of doing business in Europe, combined with a much slower than expected growth rate for cable operators, made CMT’s financial prospects bleak.

“In 1992, a lot of people were putting money into European cable, but that’s not true anymore,” Kornmeyer said. “Cable in Europe is not developing.”

It’s also more expensive to do business in Europe than most other parts of the world, Kornmeyer added. For example, he said CMT Europe had to pay $7.7 million for its satellite transponder compared with $1 million for CMT Asia-Pacific Rim.

In place of its 24-hour cable network, Gaylord will try to keep the CMT name alive in Europe by selling blocks of its programming to other TV distributors. The company will try to emulate the successful model created by E! Entertainment Television for selling chunks of its programming internationally without a dedicated feed. Kornmeyer said his best prospects are Germany, Ireland, Scotland and Scandinavian countries.

Because Gaylord will expand its Pacific Rim and Latin American CMT cable networks, Kornmeyer said the demise of CMT Europe will result in no layoffs. Instead, employees will be transferred to a different part of the world.

Though the rocky economies of many Asian countries is making it difficult for Stateside businesses to succeed, CMT Asia-Pacific Rim is on relatively steady ground because the majority of the division’s business comes from Australia, a country that has plenty of indigenous country music and a fondness for the U.S. variety.

“So long as the Australian economy hangs in there, we’re fine,” Kornmeyer said.

CMT is distributed in all of Australia’s 700,000 cable homes and the country contributes 60% of CMT’s Asia-Pacific Rim total revenues. To capitalize on Australia’s hankering for country music, Gaylord will launch a separate CMT feed so the channel can feature a bigger ratio of local country artists.

The rest of the Asia-Pacific Rim division’s revenues come from New Zealand, Thailand, Japan and Indonesia. Kornmeyer said the division’s programming and marketing budgets will be increased “modestly” this year. The company predicts the red ink will turn to black in two to three years.

In CMT Latin America, Brazil’s 1 million subscribers account for 70% of total revenues. The service also has subscribers in Mexico, Chile and Argentina. The Latin American division also is getting a modest boost in its programming and marketing budgets. Like Asia, Gaylord hopes to break even in Latin America in two to three years.

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