Weather Channel Exits Four Euro Markets

Author:
Publish date:
Updated on

London -- In a move that marks the largest retreat ever
from Europe by a U.S. cable programmer, Landmark Communications Inc.-backed The Weather
Channel is closing four European versions of its service, which collectively had reached
20 million multichannel homes.

This is one weather development that can't be blamed
on El Niño.

TWC has been unable to stem mounting losses because of
lower-than-expected cable distribution. One insider claimed, 'The money tap had been
switched off,' citing 'profligate' expenditure to date, with current losses
for the European operation alleged to be as high as $2.8 million per month.

Landmark declined to comment, other than to say that it had
conducted a strategic review during the fourth quarter, and it blamed 'infrastructure
and regulatory problems' for the decision.

TWC was a relatively late entrant to the U.S.
channel-expansion game in Europe, but Landmark over the past few years had established
channels in Britain, Holland, Germany and Italy, all of which are being closed down.

The 69 staffers in the London office -- which was used for
the British, Dutch and Italian channels -- were informed of the closures Jan. 23. Three
days later, Jan. 26, the company informed employees of its German operation, Der Wetter
Kanal, that it was shutting down, as well. A total of 40 employees there were dismissed.

According to one insider, Landmark's European
competitor, Weather Network -- which has existing data- and software-supply contracts with
TWC -- is considering whether it should acquire any of TWC's European interests.

TWC's German service shut down last Friday, so that
the German partners were able to absorb the accumulated losses of reportedly 15 million
deutsche marks ($8.3 million) within their 1997-98 fiscal year. The U.K. service was also
expected to go black last week.

There had been earlier signs of trouble at the German
channel. In December, negotiations to try to get Pro Sieben Group to take over a 25
percent stake of German publishing group Holtzbrinck, Landmark's major German
partner, had failed. Landmark itself owned 45 percent of the German operation.

The German channel was launched in 1996, but last year, the
shareholders had already pushed back their breakeven target to 2001 from 1999.

Landmark expected, as in the United States, that most
Germans would watch the channel in the morning, but they wound up preferring to watch in
the early evening. The distinction proved to be fatal, because Der Wetter Kanal had only
landed spotty, part-time carriage, and it had targeted morning slots. The channel's
distribution was stronger in the morning. On a part-time basis, the service reached 14.4
million cable homes in Germany.

TWC had 50 percent penetration in the Netherlands' 6
million cable homes, where it was known as Het Weer Kanaal. In Britain, the service was
reaching 1.6 million cable subscribers and 2.5 million direct-to-home satellite
subscribers.

Up until late 1996, TWC was involved in an acrimonious race
for U.K. distribution with Canada-based Pelmorex and its more modestly run Weather Network
operation, which, according to sources inside the company, had cost around $5 million a
year to operate.

The two competitors merged in February 1997, with many
staff relocating from Weather Network's Birmingham location to new facilities in the
center of London's Soho district.

However, starting in November 1996, there were frequent
reports suggesting that TWC's U.K. revenue stream was nonexistent -- something
strongly denied by Landmark CEO Michael Eckert. At the time, he said that despite the two
U.K. services being forced to merge, the British market 'was and is commercially
attractive' for a weather service.

Patrick Scott, Landmark's U.K., Middle East and Africa
managing director, admitted last year that investment in Europe had been substantial,
saying, 'Investment in 1996-97 exceeds the whole investment in Landmark's [U.S.]
Weather Channel to date.' He had said that the U.K. service hoped to reach 5 million
subscribers by its fourth year.

'Four years from now, we also want total European
homes, including the Middle East and Asia, to be bigger than the mother service,'
Scott predicted at the time.

Over the past two years, Scott had embarked on a
high-profile publicity campaign for TWC's European operation. His efforts included
flying U.K. media buyers to American and European ski resorts, sponsoring a hot-air
balloon and mounting an expensive U.K. national-press-advertising campaign.

Despite the European shutdowns, TWC is expanding its
original programming in Latin America with specialized segments focusing on summer
weather. The channel is also increasing the amount of Portuguese-language programming for
the Brazilian market, where it is known as O Canal do Tempo.

Related