01 Feb 1998

Poland may be Europe's fifth-largest TV market with a relatively mature menu of channels, but the forthcoming arrival of digital satellite television has sent the temperature rising in the country's TV kitchen.

Masterchefs like @Entertainment and Canal+ Polska seem intent on taking their carving knives and stabbing each other in the back rather than preparing a delectable new dish for their 12 million TV homes. The result is that the two could end up looking like Polish sausage when they would rather become lobster thermador.

It all started when the cable TV giant Polska Telewizija Kablowa (PTK) decided last autumn to make the move to a digital satellite-delivered service, a plan that its main competitor Canal+ Polska said was far too early for such an underdeveloped pay TV market. But (interestingly) even as it decried the digital leap-forward, the French-backed TV operator moved into gear, boasting that it too would launch a digital satellite TV bouquet and even faster than PTK. The race was on.

Now to add to the drama, PTK's parent company @Entertainment Inc had only recently gone public on Nasdaq in the US, raising nearly $300 million (£183.3 million) to fund its digital plans. But the summer IPO price (Nasdaq: ATEN) of $21 a share didn't hold up long, plummeting by the end of 1997 to a low of $9 a share. In what seemed a thinly veiled attempt to gain credibility with the market, the company announced it has hired British pay-TV gurus Sam Chisholm and David Chance (both recently departed from BSkyB) as consultants and new board members. Let it be said that the two-year deal for the brains behind BSkyB's pay-TV success didn't seem to have a market impact and by early January @Entertainment had announced a share buy-back programme, where it will spend up to $1 million to buy its own stock.

"This (digital TV business) is a business that for most people is really difficult to value," says Robert Fowler III, @Entertainment's CEO, about the weak share performance. "And we are competing against a very large pay-TV operator."

Canal+ Polska's size (or more accurately the clout of its parent in France) is its ace in the hole. Canal+ Polska bets it can launch a rival eight to ten-channel digital package before @Entertainment's 15-channel Wizja TV package goes live on April 18. The French operator also has economies of scale working for it in terms of digital boxes, through its other markets, which enables it to reduce the unit price. Canal+ Polska is also using the less-expensive and more watched (in Poland) Eutelsat satellite.

On the programme front, Canal+ plans to launch Polish versions of its French thematic channels likely to include Canal Jimmy, Seasons and others.

But surely its strongest play is its being "involved in deep discussions with TVP public television".

Canal+ Polska already counts about 230,000 subscribers to its one-channel service. But its analogue offer is pricey at about $130 to $180 (depending on discounts) for the receiving equipment and a six-month subscription, a fact that the @Entertainment folks plan to take advantage of.

@Entertainment plans to undercut Canal's analogue channel price with a subsidised digital retail price of $150 for a box and a year's subscription, for the first 500,000 boxes. 500,000 boxes also happens to be the company's forecast digital DTH break-even. And although it may appear the underdog, @Entertainment's cable TV unit already counts more than 750,000 cable TV subs (granted they pay no more than about $6 a month at most for the service). But churn (or turn-off) has been very low on cable, at about eight per cent.

@Entertaiment has also signed an exclusive distribution deal with HBO Polska, owned by Warner Brothers and Sony Pictures Entertainment. The company claims that it has 10 agreements in all with channels like Fox Kids, Knowledge TV and TNT/Cartoon Network, as well as local music channel Atomic, in which it owns a stake.

"The mistake Canal+ made is that the market is ready for a multi-channel offer and they didn't put an offer price on their (analogue, one-channel) service that makes people want to sample it," says Fowler.

Canal+ says that it will cost it $100 million or so to launch a digital package, but that may not include the cost of converting its current analogue base. By contrast, @Entertainment forecasts a $315 million spend over three years to launch digital satellite on the Astra satellite and convert its cable nets to digital.

Canal+ is also defending its healthy analogue business by suing HBO Polska in court claiming the pay-TV company is breaking Poland's laws by not complying with local content quotas (HBO claims it is not a broadcaster but a cable-caster) and that the cable technology used for the pay-TV channel on cable is easily broken by pirates, thereby depressing Canal+ Polska's ability to sell its pay-TV channel.

The final irony is that while the two chief digital cooks - @Entertainment and Canal+ Polska - are possibly spoiling their broth, the 12 million Polish TV homes have been gorging on a new main course launched last autumn - TVN, the country's fifth free-to-air broadcaster.