Poland satellite pay-TV operator in Canal+ CYFROWY is targeting a major subscriber push in the rural areas of the country. It operates the CYFRA+ digital direct- to-home (DTH) platform and hopes an aggressive push for DTH services in rural areas will reap rich dividends.

Arnaud de Villeneuve, CEO of Canal+ told Satellite News, “We will work on a new product for rural customers. Thirty five percent of the population live in the countryside, and there is no competition from cable networks there. It is an interesting potential market for us. We might have to think about new packages. We are doing a lot of research in this area and we hope to start aggressively marketing new services maybe at the end of the year.”

The operator received a boost last week with the news that it has won exclusive rights for the Polish soccer league for three seasons, starting from the 2005-2006 season. The deal will enable Canal+ to broadcast 240 matches a year, of which 100 will be broadcast live. It also will have the rights for two highlights show. Financial terms of the deal were not disclosed but the deal is a huge boost for the platform as it gives it a key edge in this area.

Poland Market Dynamics

With digital television penetration at less than 10 percent, and two strong satellite pay-TV operators competing for market share, the Polish TV market is ripe for growth. There are around 13 million households in Poland, yet the two major satellite pay-TV operators, Canal+ and Polsat have around 1.2 million subscribers between them. The bigger of the two players is Canal+, which is the leading satellite pay-TV operator in the market. At the end of 2004, the operator had 700,000 subscribers on the CYFRA+ platform, an increase of 11 percent compared to 2003. This was a record year for subscriber growth for the operator and company management is confident these trends will continue.

In terms of the prospects for DTH in Poland, de Villeneuve said, “The forecasts are very promising as the digital market has just started developing. With the rate of under five percent, digital market penetration is still very low in Poland. We are best prepared to enhance the development and to profit from it. We have our own seven channels and many exclusive rights for content. We distribute them not only on our platform, but we also offer them to cable operators.”

He continued, “Although new technologies, like triple play or DTT, are approaching, they are not such hot issues in Poland. DTT will be more of a challenger for cable operators. Cable operators will remain a part of the market, but DTH is growing more quickly. I think that our future is very promising. We successfully restructured the company two years ago, and this year we celebrate ten years of Canal+ in Poland, being confident about the future.”

DTH Subs Could Double

Anna Hunt, a media analyst at IMS Research believes there is plenty of potential in the digital television market in Poland and that the satellite operators could see significant growth. In fact, subscriber numbers could double for Polsat and Canal+ throughout the next three years. Hunt told Satellite News, “On the satellite side, we haven’t really seen that strong a growth throughout the last couple of years. The two satellite platforms have gained subscribers, but the numbers have not been significant. But, I think throughout the next couple of years, the two platforms really do have an opportunity to have significant growth. By the end of 2005, we expect satellite to have around two million subscribers. Two years after that, we expect them to reach three million. So, within the next three years, they could double their customer base.”

The Polish digital television market is loaded with potential. While the country still has a number of analog pay-TV subscribers, the opportunity is there for digital satellite operators to make their mark on the market. Hunt believes the country has some very unique dynamics compared to other countries in Eastern Europe.

“Poland has always been a very strong market in comparison to all the other eastern European countries when it comes to digital TV,” Hunt said. “It is really more like Western European country if you look at it closely. If we look at our forecasts, more than 50 percent of the satellite market is digital. If we look at the whole market for pay-TV services, at the end of 2004, there were over six million pay-TV subscribers. So, that means that nearly 50 percent of households are already subscribing to pay-TV, which is a huge penetration for a country that ten years ago was going through a lot of change, both politically and economically. The consumers in Poland are ready to use new digital TV services. I think there is significant potential for both digital cable and satellite.”

PVR Services In 2006?

One of the key challenges for any operator will be to bring new services to consumers. With Polsat an impressive competitor, Canal+ will hope to bring services such as PVR (Personal Video Recorder) and High-Definition Television (HDTV) to the market. In terms of the potential timeframe to bring these services to market, de Villeneuve said, “The Polish people are catching up with Western Europe in terms of new technologies, especially since they have joined the European Union. To give you an example, there has been a rapid increase in the number of people buying flat screen TVs. It is for such reasons that we are closely watching the HDTV market and we are ready to enter the market when the time is right. What is important with PVR is not only the opportunities offered by the equipment, but also all the accompanying services such as video on demand, for which the rights’ issues have to be worked out before. We could launch PVR services in Poland next year or in 2007, depending on the development of the market.”

The operator also hopes to boost its interactive offerings in 2005. The operator already has some interactive thematic channels and the market is beginning to develop here. “We have recently noticed growing interest of advertisers for new interactive advertising opportunities,” de Villeneuve said. “We are also analyzing advanced interactive services such as home banking. We are getting ready for it. But such services require more partners at appropriate technological level. They are also costly and people in Poland are not very wealthy. When our analysis shows we have the coverage and we have the revenues to cover costs, we will go for it. But, at this stage, that has not been reached.”

However, while the operator is in a strong position, there are obstacles ahead. The major issue is, without a doubt, a tax issue that could have a potentially huge impact on the operator’s revenues. “Last year, in May 2004, there was a co-ordination of the Polish regulations with the European Union law,” de Villeneuve said. “May 1, 2004, when Poland joined the European Union, our VAT rate changed from VAT Exempt to seven percent. We thought that was all we had to swallow. But unfortunately the government and different parties may intend to further change our preferential rate of seven percent to 18 percent. It would of course have a negative impact on revenues and affect our subscribers. The current government has already started work on this and, although there are elections in Poland coming up, the main opposition party also has the same idea.”

Content Issues

However, with this issue really out of its control, Canal+ will continue to try and broaden its content offerings. Programming costs account for around 40 percent of its overall revenues. The company has around 66 channels, of which 46 are Polish channels and another 14 have Polish subtitles and voiceovers. In terms of the main content issues, de Villeneuve said, “We intend to give our subscribers the best sports content in our Canal+ Multiplex offer. We have Canal+ premium, we have Canal+ Film and Canal+ Sport and, having a lot of sports’ rights, last year we have launched Canal+ Sport2 weekend service in Poland. We are investing a lot of money in the content, e.g. in different sports’ rights (we have exclusivity for many European football leagues, NBA, boxing, speedway etc).”

The competition with Polsat is intense. Polsat has around 400,000 subscribers and is playing catch-up. However, de Villeneuve believes in terms of content, the operator is in a strong position. He said, “We are the only platform in Europe to offer two premium bouquets, all exclusive: Canal+ and HBO. Two out of three subscribers choose Canal+. At the same time, the offers are complementary. HBO has no sports and mainly American movies, while sport and international cinema are the priorities of Canal+. We also have the advantage of having all the other major channels, like public TV channels, as well as FTA (Free-To-Air) channels from HotBird. We have a variety of our own products, like kids channels, movie channels.”

–Mark Holmes (Marta Jozwiak, Canal+ CYFROWY, [email protected]; Anna Hunt, IMS Research, [email protected])