Alongside dramatic changes in the broadcasting infrastructure have come equally far-reaching ones in viewers’ tastes. When the first national commercial television stations debuted a decade ago, foreign involvement in those stations usually guaranteed access to U.S. and Western European content that appealed to local viewers. Since then, however, viewers have come to value programs that speak to their own cultural sentiments. Locally produced thematic channels are now the norm in many countries–especially in Russia (where several are produced by NTV-Plus), Poland, Hungary and Romania–and span such genres as news, sports, movies, business, entertainment and travel. The popularity of this programming and the sheer volume of numbers are making life increasingly difficult for even the best-known foreign channel operators, even those that broadcast in local languages.

Murdoch’s experience in Russia is illustrative, too, of a part of the world where, even in the new EU member states, regulations and privatization practices are not always in step with Western Europe’s transparency and open investment climate.

The local press was sometimes aghast at the "dumbed- down" programming, but the viewing public seemed to love what the station had to offer.

Not too long ago, another well-known Western investor, Ronald Lauder, lost his flagship TV station, regaining control only after years of struggle. Though he is not in the media business at home, Lauder’s grandparents came from Hungary and Slovakia, and he has long held an attachment to the region. He set up a company called Central European Media Enterprises (CME) in the early 1990s, partnering with a Czech national, former dissident intellectual-turned-entrepreneur Vladimir Zelezny. TV Nova, the first station CME established, made its debut in the Czech Republic in February 1994. The local press was sometimes aghast at the "dumbed-down" programming of American reruns and sensationalist news, but the viewing public seemed to love what the country’s first privately owned national station had to offer. TV Nova attained an audience share of 70 percent within 16 months.

This unprecedented success prompted the company to expand to other regional markets, but it was stopped dead in its tracks in 1999 when Zelezny, who had a falling out with CME and was fired, seized control of the station. He turned off the channel’s signal and walked off with the staff and the broadcasting license, arguing that the permit had been issued to him as a Czech national and not to CME. His action forced CME to embark on a four-year legal battle that culminated in an international arbitration panel awarding Lauder’s firm $353 million in compensation, payable by the Czech government, for the loss of TV Nova.

This kind of dispute between partners is less likely to occur now. The progress in taming the regulatory environment is visible. For example, the new EU member states do not share Russia’s barriers to foreign ownership. Nevertheless, investors must be wary of ventures that could have hidden shareholders or others secretly in control.

Since he received the favorable arbitration decision, Lauder has been on a buying spree in an apparent effort to reestablish CME’s dominant position in the region. The company has reacquired a majority interest in Czech TV Nova for approximately $930 million, along with a Czech franchise of the reality show Big Brother. Lauder also bought a national commercial station in Croatia (also called Nova TV) in a cash deal worth $29 million, and a sports channel, Galaxie Sport, which reaches the Czech Republic and Slovakia, for $5.1 million. According to Michael N. Garin, the chief executive officer of CME, the company is now looking to expand to other markets in the region and should be able to pay more than $1 billion for acquisitions.

Given the small size of many of the markets in which CME operates (TV ad spending in the relatively wealthy Czech Republic was only around $700 million in 2005, and only 10 percent of that in neighboring Slovakia), this investment is not likely to bring significant returns in the short-to-medium term. In the future, however, several international media groups, including News Corp., have seen enough potential in CME to bid on stakes in the company itself. Lauder confirms that the company is definitely not for sale. But stay tuned for more media companies to battle in this region, even if they have to enter through the arena’s back door.

Chris Dziadul is the London-based editor of the weekly publication Broadband TV News Central and East Europe.