A Digital Marriage of Convenience Or True Love?

Michael Hedges November 23, 2010 Follow on Twitter

The flash-bang of digital television was meant to bring more than new technology to broadcasting. More, possibly interesting channels would entice viewers and, overall, broadcasting would continue to thrive and innovate much along the same lines it had at the end of the last century. Hello, content; meet distribution.

The digital revolution wasn’t necessarily meant to spur a rush into pay TV. But it has. While television advertising still claims the bulk of ad spending, the crush of digital TV channels has increased demand for television content. That content - the good stuff, at least – is expensive and viewers like to gather before the mighty screen to see it. They don’t much care how it gets there. 

Cyfrowy Polsat is a satellite-based pay TV operator with 3.3 million customers in Poland. Telewizja Polsat is a television operator offering a mix of free-to-air analogue and digital channels. Its main channel, Polsat, was the first commercial television channel in Poland, launched in 1992. Billionaire investor Zygmunt Solorz-Zak is the principal owner of both companies. Last week Cyfrowy Polsat announced it is buying Telewizja Polsat.  The merger creates Poland’s largest media operator by revenue.

Zygmunt Solorz-Zak comes out of the clever stock swap leveraged buy-out with a pile of cash 2.2 billion zlotys ($775 million). Stock traders were dismayed by the deal, a clear signal of worthiness, because the money raised wouldn’t be going to shareholders. Rather than buy an existing telecom in Poland, all of which are rumored for sale, Solorz-Zak wants to be a telecom and offer broadband, mobile media and, of course, lots of television.

“Most important are infrastructure investments, not takeovers,” he said to Reuters (November 19). "There is no need to buy everything there is for sale. I have once said that you do not need to buy a brewery to have a beer.”

“We are concentrating on the growth in paid television, development of broadband access to the internet and cellular telephony, as well as launching new products,” said Cyfrowy Polsat president Dominik LibickI when the deal was announced (November 15). It’s widely expected the company will rollout LTE 4G networks with the newly found cash stash. Short and mid-term benefits, said Libicki, would be the expected savings from centralized administration, cross-promotion and marketing,

The Polish market is distinctly not suffering. M&A activity this year, according to Bloomberg (November 18) has almost tripled over 2009 to $12.7 billion. The big one was Banco Santander (Spain) buying Bank Zachodni for 16.6 billion zloty. “Being the only EU member state not experiencing recession in 2009 and attaining about 3% growth this year, Poland can certainly be a prime candidate for investors’ interests,” said TakarekBank head of research Zoltan Adam (November 22). Last week (November 19) Cyfrowy Polsat  was awarded  a Large Pearl for business effectiveness at the annual Pearls of the Polish Economy ranking by the Institute of Economic Sciences at the Polish Academy of Sciences

Poland’s media sector has grown in fits and starts. ITI Group, owner of commercial TV operator TVN, brought digital platform operator n more directly within TVN operations last year. A month ago (October 18) TVN and incumbent telecom Telekomunikacja Polska (TP) signed a 10-

year agreement to cooperate; TP offering broadband, TVN providing content.

“We recognize access to high speed broadband internet services are the next megatrend in Poland,” said TVN Group CEO Markus Tellenbach in a company statement, “and we are very pleased to enter into this co operation with TP, the leading broadband supplier in Poland. This will further strengthen TVN Group's competitive position in the Polish pay-TV market as we deepen our customer relationships by providing easy access to the widest range of high quality communication services, through bundled multi-play product offers.” Tellenbach knows pay-TV having been president of Sky Deutschland prior to joining TVN in September 2009.

Public television, whose saga is book-length, is a strong competitor both in audience delivery and production. Constant politically-driven restructuring plagues TVP seen now as losing incumbency advantage. Media watchers in Poland now compare TVP unfavorably with Russian State TV.

The Polsat deal underscores frustration among Poland’s broadcasters, often directed at government inability to move forward on regulatory issues as quickly as Poland’s consumers move into digital media. A report by consultancy KPMG (November 19) said not only would Poland fail to make the European Commission’s digital television switch-over deadline in 2012 completing the process might be beyond 2015. Because of “legislative stalemate,” said the KPMG report, “broadcasters and infrastructure providers do not know on what basis to deploy digital television.”

If, in fact, Zygmunt Solorz-Zak with the merged Cyfrowy Polsat/Telewizja Polsat moves forward on LTE 4G investment the entire definition of digital television changes. It’s a meaningful evolution in broadcasting, perhaps more meaningful than simply a consolidation of telecom and television operators.

See also in ftm Knowledge

Media in Poland

Poland is the biggest media market of the new EU Member States and the changes have been often surprising, sometimes radical and never ending. Publishers, broadcasters and new media are plentiful, talented and under constant stress. ftm has its eye on Poland. 43 pages PDF Includes Poland's neighbor Belarus, resources (March 2009)

Order here

Become an ftm Individual or Corporate Member and receive Knowledge files at no charge. JOIN HERE!

ftm Knowledge files are available to non-Members at €49 each. The charge to Individual Site Members is €15 each.