The competition between satellite pay-TV operators in Poland already is intense and the pay-TV market as a whole is being stoked even more by the growing presence of cable services.

Satellite operators Canal+ (Cyfra) Polska and Polsat have about 1.5 million subscribers between them in a country in a population of close to 40 million, making Poland one of Eastern Europe’s biggest markets.

The new kid on the block, Polsat, has about 700,000 subscribers, nearly catching up with its rival throughout the last five years. "In 2001, when I became president of Polsat, we had 70,000 subscribers," said CEO Dominik Libicki. "At the same time, the merged platform of Cyfra+ and WizjaTV announced that it had over 700,000 subscribers. Today, we have 700,000 customers while our competitor talks of 800,000 subscribers."

Polsat intends to reach 1 million subscribers by 2007, and if it carries on with its current rate of growth, could overtake Canal+ Polska in the next year. It is clear Polsat is going to be a major player in Poland’s digital TV market for a while yet. It also shows the potential for a second DTH player in markets does exist, and Polsat is a good example of how a new platform can be successful, but the challenge will be to build on this and bring new services to customers.

Libicki considers Polsat Sport, which covers a number of high profile sports, as the "gem" of the company’s content offer. The operator launched a second sports channel, Polsat Sports Extra, in 2005, but Libicki does not believe adding more Polish channels is key to winning more customers.

"I think that importance of Polish channels is low, but what really matters is the way international channels are packaged," Libicki said. "Such channels should have Polish programming blocks, Polish soundtracks, Polish commercials, etc. The viewer should feel his affiliation both to the world and to his/her own country. A personal touch in the strategy of global companies is very important. Also, you have the fact that Polish channels have some problems in maintaining the quality of their offer. Channels, which are mostly dedicated to Polish heritage, are unusual in this field, and I don’t believe their future isn’t bright."

Attracting Younger Subscribers

Canal+ Polska is still the main player in the market, and it hopes a deal with Poland’s largest telco, TPSA, to launch IPTV services. The two companies have started a trial where 200 subscribers are taking part testing TV services.

Arnaud de Villeneuve, Canal+ Polska’s CEO, hailed this as a win-win deal for the operator. "You have the combination of two number one players in the same deal," he said. "I think there will be other operators launching ADSL offers. TPSA will have to offer the last mile connection and I think this evolution of the law offers the possibility to other partners. For us, it is an opportunity in cities where we have difficulties in terms of putting satellite dishes. ADSL will be complimentary to our satellite offer."

Offering content on platforms other than satellite could be a key focus for the operator. De Villeneuve added, "Generally, we want customers to receive the same offers, but technically in a higher quality and modern technology," he said. "This year it will be ADSL. Next year it might be DTT or mobile. We want to have more and more of our own content available via different distribution platforms."

Jacques Aymar de Roquefeuil, the COO of Canal+ Polska believes an IPTV offer will attract different kinds of customers. "We know that ADSL subscribers are younger than the average DTH subscribers," he said. "So for all new young subscribers in Poland, who are say,just married, and want to have TV with very good quality, IPTV will be an attractive option. We hope to gain a number of subscribers in the first year. We know that in France for 60 percent of IPTV subscribers, this is their first subscription to paid TV. They were not cable or DTH subscribers. We think it could be the same in Poland."

The deal between Canal+ Polska and TPSA echoes the deal between France Telecom and Canal+ in France. "We are still working on the business model which we will use with TPSA," Roquefeuil said. "One possibility is exactly like what you see in France. The main idea is to have the same programming that we have on DTH. If you want to subscribe to Cyfra+ platform, you will have the choice between DTH and satellite."

Certainly, Canal+ Polska would like to have the success that Canalsat — the French DTH platform — is having in France recruiting IPTV subscribers. Canalsat is gaining around 20 percent of its new subscribers via IPTV rather than satellite.

"There is one big difference between France and Poland, which may affect the success of IPTV," Roquefeuil said. "For example. in Paris, it is forbidden to install a dish on your balcony. Here, if we have 20 percent of our new subscribers coming from IPTV, we will be very happy with such a result. It is very hard today to predict what the market will be. At the very beginning, DTH will be stronger as DSL will only be available in big cities. In the main cities, I think it will be possible to get 20 percent of new subscribers. It may also be more difficult for IPTV to succeed in Poland because of strong cable competition."

Libicki hopes Polsat can negotiate a similar opportunity. "In my opinion, IPTV will gain subscribers in Poland," he said. "However, this project requires detailed technical preparations and relevant, advanced solutions in the field of customer service. ADSL technology has been developing all the time and is starting to expand in Poland. It will encourage the development of various services making use of this technology."

"We hope that there will be a place for our company in the TPSA project, and that the Polsat offer will be available to TPSA customers," Libicki said. "We have been conducting negotiations with TPSA all the time. Generally, Polsat wants its offer to be seen by the biggest number of viewers possible, and IPTV is one of the stages in our growth strategy."

Paul Erickson, a media analyst at IMS Research told Satellite News he believes IPTV possesses strong potential in the short to medium term. Erickson believes it’s a smart move for TPSA, although he believes competition will be tough for IPTV in Poland. "IPTV has shown that it can sell based on the strength of triple play and especially broadband, and TPSA should be no exception," he said. "The company will also benefit from France Telecom’s experience and hopefully its content agreements as well. The primary obstacle will be pressure from alternatives — cable triple play in the country is not that far off, satellite (especially free to air) is continuing to gain in popularity and digital terrestrial will also likely be launched sometime before the end of 2007. The low cost proposition offered by satellite FTA and DTT, combined with existing cable popularity that is expected to drive transitional uptake of cable triple play when it arrives will all likely blunt some of IPTV’s long term potential."

Erickson also believes with the market still lacking in digital alternatives, the market still has huge potential for satellite offers. "Given that DTT, IPTV, and digital cable are not current digital TV threats, there is plenty of potential to be tapped by both satellite operators in the near term and it should be an interesting battle to watch," he said. "Ultimately the consumer is the winner, as the competition will only speed deployment of advanced services such as HD and DVR to DTH customers, in the quest by each operator to gain competitive advantage."

HDTV and PVR

Polsat also would like to add personal video recorder (PVR) services to help meet its growth plans, but that will come down the road, Libicki said. "I haven’t the slightest doubt that PVR will be part of the market in the future for Polish consumers, but nowadays the price of set-top-box is still too high."

While the main focus for Canal+ Polska will be launching a TV over DSL, the operator also has one eye on PVR and high-definition (HD) TV services. "In terms of PVR, we don’t know who we will be working with," De Villeneuve said. "PVR is something for next year too. This year we concentrate on ADSL. What is more, PVR alone is not so interesting. We think it would be more interesting combined with push" video on demand."

The HD market will also take time to develop in Poland, De Villeneuve added. "I think for HDTV, a lot will depend on the availability of receivers," he said. "In my opinion, the market is not ready for HDTV. Last year, I thought HDTV might be launched by the end of this year, but it will not be so. I believe it may be possible in one year."

Canal+ Polska also intends to go after Polsat more in the low end of the market, De Villeneuve said. "In terms of public perception, we were considered high quality but expensive," he said. "We have recently added to our rich offer, a package for the equivalent of 5 to 6 euros ($6.40 to $7.70) to target the low end of the market. This package now constitutes up to 10 percent of our portfolio. In this case, ARPU is not the first target — by introducing this offer, we want to create a different image and make a strong impact in the low end of the market, where the second platform has been active."

Contact, Marta Jozwiak, Canal+ Polska, e-mail, [email protected] Olga Zomer, Polsat, e-mail, [email protected] Paul Erickson, IMS Research, e-mail, [email protected]