RPCV Mick Hawk is Chief Executive of Bonton Entertainment Group in Czeck Republic
Bonton on the block
Entertainment empire's subsidiaries go on sale; storied music label could fetch 450 million KC
By Mark Andress
For The Prague Post
(September 4, 2003)
Not even one of Bonton Entertainment Group's own movies could capture the tale of its rise and sale.
The multidivisional multimedia empire, which spent the 1990s morphing into the Czech Republic's biggest privately held company, spanned movie- and music-making and distribution, a radio station, a publishing house, a film studio and an advertising agency. Now it is selling its most prominent businesses.
Next on the block is its film and video unit, which includes film distributor Bontonfilm, home-video arms Bonton Home Entertainment and its counterpart for Czech videos, Centrum Ceskeho videa.
The unit could command a purchase price of up to 900 million Kc ($30 million), according to industry estimates.
In August, Bonton chose a shortlist of three financial investors from the 14 original bidders.
"This is an investment-banking beauty contest. The bidders -- we're talking white shoe, Wall Street, the cream of the cream," said Bonton chief executive Mick Hawk.
The due-diligence stage is next; the deal is to be closed by the end of the year.
The upcoming sale takes Hawk far from the days when he was paid $68 (now 2,040 Kc) a month as a Peace Corps volunteer from the University of North Carolina's master's in business administration program, advising Bonton's founders on management strategy in June 1990.
Today, Hawk owns about 5 percent of Bonton. U.S. private equity investor Bancroft, international institutional investors and the company's management each own approximately one-third.
Classical music next up
With the sale of the film and video unit entering the final stages, Bonton will next focus on selling Supraphon, the renowned music label whose extensive archive has been declared a national treasure.
Sources say two of the world's five major music labels already are interested in the former Czechoslovak state enterprise, with others expected to follow once the sale process formally begins in the autumn.
FOR THE RECORD
Supraphon facts and figures
• Awards: Two Grammy nominations in 2002 for Leos Janacek's opera Sarka, conducted by Sir Charles MacKerras
• 2002 revenue: $6 million (180 million Kc)
• Annual cash generation: Nearly $1 million
• Expected price tag: $10 million-$15 million
• Label registered: 1932
• Name origin: Supraphon was the name for an electronic phonograph
Unnamed Czech individuals fascinated by Supraphon's cultural heritage are also lining up, and the company's management is considering a buyout.
"Supraphon owns almost the entire output of the country for the last 50 years. I don't think any other music label in the world can boast that," Hawk said. "We've got arguably three of the best conductors in history -- Rafael Kubelik, Karel Ancerl and Vaclav Neumann. Their recordings are used as a benchmark of perfection."
While the value of any eventual deal will be relatively small in monetary terms -- Supraphon might cost up to 450 million Kc -- the cultural significance is huge. All Czech recordings -- classical and pop recordings -- classical and pop -- made during four decades of communism belong to Supraphon.
Its archive is also boosted by about 10,000 pieces of music from Panton, the other state-run label that Bonton bought and incorporated into Supraphon, as well as 15,000 works from Bonton Music itself.
Although Supraphon's monopoly was eroded after 1990 by new independent labels such as Multisonic and by the arrival in 1992 of the major international labels, its archive still has more than 120,000 pieces of music that represent about 90 percent of all recordings in the Czech Republic. So far, only about one-seventh of them have been issued on CD.
Export potential
What makes Supraphon so unusual in Central and Eastern Europe is not just its domestic dominance -- last year it enjoyed a commanding 38 percent share of the Czech Republic's classical music market -- but also its mass export appeal.
The label's classical repertoire, which includes acclaimed Czech Philharmonic recordings of Dvorak, Smetana and Janacek under the baton of Jiri Belohlavek or Britain's Sir Charles Mackerras, have found great success in Japan, the United States, France, Germany and the United Kingdom.
Export markets account for a quarter of Supraphon's revenue, which last year rose 2 percent to 180 million Kc.
"Supraphon has a big reputation abroad for classical music, which extends primarily from the 1960s, when there was unlimited money here to record. The recordings were produced on thick, top-quality vinyl," said Jana Gonda, Supraphon's managing director. "The Czech Philharmonic was almost the house orchestra. If they had an hour left after rehearsal, they would record something. They did about four recordings a month, which is absolutely staggering."
Today, Supraphon's archives share the same status as the rarest work of art -- they have been declared a part of the National Heritage fund. "No master tapes can leave the country," Gonda said.
Since Bonton bought Supraphon for $500,000 in 1994 as a state enterprise with debts of 180 million Kc, the music label has restructured, slashing its work force from 2,000 to just 25, closing almost all its 180 shops and selling a CD-pressing plant.
Now, Hawk said, the company is profitable, annually generating nearly 30 million Kc and virtually debt-free.
Piracy rare
Furthermore, the company has remained resistant to the worldwide downturn in the recording industry because its roster of pop legends, including the back catalog of crooners Karel Gott and Helena Vondrackova, not to mention its classical repertoire, remains popular today. What is more, Supraphon's CDs are sold cheaply enough for Czechs to afford and to keep pirates away.
Importantly, Supraphon will be able to start making pop music again, an activity that it refrained from during the years of Bonton's joint venture with Sony Music between March 1998 and May 2003.
Bonton sold its 49 percent in Sony Music Bonton to the multinational corporation, which now owns 100 percent. Since that deal in May, Supraphon has begun releasing discs from its pop back catalog again -- Sony Music Bonton's exclusive right previously -- with 30 rereleases planned this year. "Obviously, once we start doing a major new genre [like pop], we have to evaluate everything," Gonda said. "We'll start releasing new material some time next year once we find some new talent. I'm convinced there's talent there."
Bonton's other interests include its retail and distribution business, which groups audio/video distributor Panther, retail chain Bontonland and the children's book publisher Albatros. Last autumn, Bonton sold top-40 station Radio Bonton to Italian group Elemedia for close to 60 million Kc.
"This is not a fire sale," Hawk said. "We'll wait for the right price on everything."
Mark Andress can be reached at business@praguepost.com
