TVN CEO Says Revenue Structure Will Shift
The TVN Group owns and operates 12 TV channels as well as the digital DTH platform N, and the company’s TVN offering is one of Poland’s major FTA channels. This breadth of operations makes TVN a major presence in the Polish broadcast landscape as well as one of the biggest broadcasters in Eastern Europe. In the three-months period that closed at the end of June, TVN Group generated revenues of 548 million Polish zloty ($191.5 million). Markus Tellenbach, CEO, of TVN, discusses the Polish broadcast market and how he hopes to grow the business.
VIA SATELLITE: What is the next phase of TVN’s growth strategy?
Tellenbach: If you look at the bigger picture, we will develop our revenue structure a little bit further away from being dominated by advertising. We want a more balanced situation where advertising should account for 50 percent of our overall revenues, and both transactional as well as carriage fees driven by pay-TV, as well as other services, will make up the other 50 percent. We believe this is a healthy target.
We have also launched pre-paid TV at the lower price point range of the market. That has been very successful with over 500,000 cards sold and more recently, we started to offer on the pre-paid side, a bundle of HD channels. You have a basic pre-paid package, and you can add on to that the pure HD pre-paid package with 10 HD channels. This is for a target group that does not want to have a broad choice that the post-paid platform offers but wants to have high quality on their selected content. The pre-paid service has been one of those elements that has enabled us to drive the pay-TV proposition in other segments of the markets.
We are a content house, so strengthening of the thematic channels will also be a key focus for us, so we will look to develop that still further. We are the dominant online media portal in Poland. O Net has fantastic growth rates. We see a structural shift from traditional display advertising into online. There are strong growth rates, so you will see strong developments related to advertising in the online area, which after many years has kicked in. This will fuel investment into the online offerings.
VIA SATELLITE: What is the split between advertising and other revenues today?
Tellenbach: In the first half of 2010, we generated 36.5 percent of revenues from non-advertising sources, compared with 32.8 percent in the full year 2009. So we are on track to get there and I am convinced that our revenues will be fully balanced in two to three years.
VIA SATELLITE: Has the global economic recession had an impact on advertising revenues?
Tellenbach: Looking at the advertising situation in this country, the first quarter advertising market was flat in terms of growth. We recorded a healthy rebound in the second quarter with 8 percent growth in terms of TV advertising. Poland, with regards to the conditions of its advertising market and electronic media is in good shape. You will see mid single-digit growth in the market this year in terms of television advertising. TVN operates in this healthy environment and our channels have been very successful. In the last two quarters, we have increased our market share on the audience side and, therefore, have outperformed the competitors significantly.
VIA SATELLITE: What are your HD plans?
Tellenbach: Poland has always been based on technology having a leading role on the broadcast landscape. HDTV has been embraced enthusiastically in this market. TVN channels are made available in HD. The satellite platform we operate called N already has 14 HD channels. We detect a very clear consumer demand on the backdrop of flat screen sales that HD is a requirement. It has been a driving element, particularly on the pay-TV side, where we have moved in very early and have the largest number of HD channels today. Looking forward, we will increase substantially our HD offering this year. We are looking to add a number of new channels in [the fourth quarter] or at the latest, the first quarter of next year. The technology plays a key role as a competitive advantage. The Polish consumer has an interest in technology and having a best quality viewing experience.
VIA SATELLITE: Are you exploring 3-D TV?
Tellenbach: We are looking at it. We are keeping a very close eye on it. We are not at a point where this can be seen as a general driver on the satellite side. I think when you look at it from an events perspective, it is a unique experience and over time, 3-D will be an important element in the mix. Right now, I don’t think 3-D is going to become a broad recipe for all content. There is certainly strong interest in sports and events that 3-D can enjoy huge popularity. It is also a huge driver in terms of cinema and theatre in this country.
VIA SATELLITE: When would you look to have your first 3-D broadcast in Poland?
Tellenbach: 3-D TV broadcasts in Poland already happened, limited so far to the sport events. For example, we have presented the final game of UEFA Champions League in May. I believe that this technology will be first applied in pay-TV platforms. If successful, it will be then rolled out by FTA broadcasters, but it is too early to be more specific about the timing.
VIA SATELLITE: What impact as the large number of DTH operators had on the market for broadcasters?
Tellenbach: The topographic situation in Poland is as such that cable naturally focuses on areas where there are dense populations, therefore, large parts of the country have been left with limited choice in terms of FTA. At an early stage, satellite became popular, and we have four platforms in this market competing heavily. However, there are 13.5 million homes, so it is quite a sizeable market for Europe. We still see some growth. We might also see some consolidation in this market, but for the time being, there is fierce competition. It also explains, technology-wise, why we are so far ahead. The N platform we operate is 100 percent MPEG-4, so this gives you a feel of how up-to-date we are on the technology side. This is as a result of the competition we face in the market.
VIA SATELLITE: What major initiatives is TVN working on in terms of content delivery?
Tellenbach: [Poland] is a country where high-speed broadband penetration is below 40 percent, so I expect broadband to grow and become a more relevant form of delivery for the consumer. We already deploy hybrid boxes capable of hooking up to the Internet that also have satellite capabilities. These boxes can also receive DTT transmissions. DTT will become an additional means of delivery, particularly to the non-cable parts of Poland. It will be accelerated by the analog shutdown. We believe this will happen in the 2013 timeframe, although there is some uncertainty surrounding the exact date. The means of delivery will be richer and broader.
On our side, we having quite successful operations with O Net, our online portal. O Net has introduced a VOD service at the beginning of the year. We are also looking at catch-up services to bring our television shows online as well. We have taken initiatives such as time-shifted television. There is quite a lively landscape. The general policy of the group is to be platform agnostic, as we run large FTA stations and a bundle of thematic channels. We have the leading news channel. You can expect that adaptation will also take place on the mobile landscape, so it is a very lively development on the technology side.
VIA SATELLITE: What are the major challenges for a broadcaster to stay relevant in this new media environment?
Tellenbach: We have launched our own offers to participate and take a share in the multi-channel environment. [Through] this early involvement and creating a bouquet of channels, we believe we have substantial upside with the main channel and substantial growth with the thematic channels as their technical reach increases as the quality of the content increases. Fragmentation has not impacted us as much as others due to the commitment of a bundle of thematic channels.