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Is Central Enterprises losing sales? Only in the mind of experts.

The future of Central Television Enterprises (CTE), the London-based program sales company, looks uncertain. The unhealthy overseas market, the recent upheaval in the UK TV business, plus its internal complacency, indicate that CTE needs to reassess its position.

Surprisingly, an initial glance at CTE's activities would only suggest security and success.

CTE is the wholly owned subsidiary of Central Independent Television, which is now considered to be one of Britains richest and most powerful ITV broadcasters. Leslie Hill, Central TV's chairman and chief executive, last year retained his company's regional TV franchise for pound2,000 a year, a bargain compared with London-based Carlton Televisions pound43.17 million a year. It means Central will be paying the UK government only pound5 (less than $10) a day for the next 10 years to transmit programs to nine million viewers in the Midlands region of England.

In 1991, the company's pre-tax profit jumped 27.5 per cent to pound24.4 million only due to successful cost-cutting exercises. The company also owns 20 per cent of Meridian Broadcasting, which defeated TVS to snatch the new franchise for the extremely lucrative (in terms of advertising revenue) region of South and South East England.

With such a resourceful parent company, more cash should be available for Central's program output and for CTE's distribution catalog.

But, a closer look at its activities would reveal that CTE cannot afford to be as complacent. According to official figures, last year CTE generated pound10.4 million from international sales, down from over pound13 million in 1990. Domestic program sales, mostly to the ITV consortium, reached pound59 million in 1991.

The estimated 500 hours of programs, out of a total library of 1,500 hours, sold internationally generated an equivalent of $40,000 per hour, compared to an average of $300,000 per hour for a similar-sized U.S. distribution company. Industry statistics now show that UK advertising agencies do not expect to see an upturn in TV revenue this year. Such news will force Central TV to be cautious about program investment. International competition, and the fact that overseas networks are also suffering, could mean further sales erosion for CTE even on firstrun material.

Revenue from Central TV's total turnover fell 2.7 per cent to pound306.6 million last year. The restructuring of the ITV network means that even source of income is no longer secure. Starting next year, the ITV network commissioner is free to select programs from any source, including the burgeoning UK independent sector. Consequently, CTE is no longer guaranteed access to the network programming, as has been the case so far.

CTE's sales to the U.S. dropped 78 per cent to pound2.8 million in 1991, compared to 1989, and sales from the rest of the world have fallen 10 per cent, reaching pound7.6 million.

Philip Jones, CTE's 48-year-old managing director, states the reason for the massive dip in U.S. sales: "A shift in the tax and levy laws in this country made it less attractive for us to do more business in the U.S .... back-end U.S. deals were less favorable." But he admits that what CTE needs is a good TV movie in America to boost revenue. "One significant deal with a U.S. network can dramatically affect those sales figures. It is a license fee which is worth more than all the business we do in the rest of the world."

Nonetheless, Jones comes out apparently unscathed. One possible explanation is that Jones tends to underestimate potential annual sales volume. Even if Jones meets his own sales predictions, he's still seen as a good executive and even commended if actual sales exceed the expectations. Another explanation for such seeming complacency could be that according to official company reports, revenues from "international shares are immaterial."

Jones, who joined Central in 1983, becoming CTE's managing director in 1988 and being appointed to Central TV's board of directors last year, declined to detail his divisions operating costs. He simply said, "The sales business is very expensive. It requires huge administrative and support costs." But he admitted that he's closely monitoring the fate of ITV distribution arms.

Television Entertainment Limited, HTV's distribution business, has collapsed. It said its catalog is not large enough to justify an international sales arm.

And Tyne Tees Television has merged its broadcasting operations with those of Yorkshire Television. They are bound to share distribution costs. London Weekend International and Granada International have combined their sales forces tO reduce overheads.

Jones said the solution for CTE is illustrated by the profitable TBA, its jointventure with Granada International to supply programs to Germany. TBA also represents third-party clients in Germany, such as UK's Channel 4, and Italian production company SD Cinemategrafica. "We are in discussion with various people about slashing costs and doing things together. What we are doing with TBA is a foretaste of what we are talking about," Jones concluded.
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Title Annotation:Central Television Enterprises
Publication:Video Age International
Article Type:Company Profile
Date:Oct 1, 1992
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