01 Dec 1998

The Polish TV market, both public service and pay-TV, are being heavily fought over. In any market where competition is introduced this is not unexpected. But on closer scrutiny, there are more politics at play in the Polish TV business now than there are advertising minutes available.

The prize at stake is Europe's sixth-largest TV market and it's an attractive one. Televison in Poland accounts for almost 60 per cent of the total advertising market, this year worth about $1 billion. Market forecasters say it will grow at a rate of 20 per cent a year, despite the economic problems in neighbouring Russia. For the pay-TV players, Poland is among the richest of the former Eastern Bloc countries with an appetite and a pocket book to pay for more TV.

Let's not be naive. TV is a powerful medium and no government easily relinquishes its control. Yet, at the same time, governments covet the money they can raise by selling off broadcast frequencies as well as the tax they can realise from the new businesses that deregulation creates in their countries. But, in Poland there is another good reason the government wants its TV industry to appear deregulated and modern. Poland wants to join the European club of countries, the European Union (EU), and it wants to do it soon.

So what does Poland's EU membership have to do with its TV industry?

Plenty it would seem. Over the last few months the diplomatic lines have been buzzing between Warsaw and Brussels, with a lot of routing through Paris, Hungary, London and the US.

After an on-, off-again alliance, Poland's two pay-TV companies, Nasdaq-listed @ Entertainment and rival CAC-traded Canal Plus, are engaged in a knock-down drag-out fight for the TV remotes and monthly subscription fees of Poland's 12.5 million TV homes.

Canal+ has been pulling out the stops, both diplomatically and in the courts, claiming that @Entertainment's pay-TV package, called Wizja TV, is illegally distributing the HBO pay-TV movie channel.

Canal Plus claims that the distribution of HBO - backed by a consortium of Time Warner, Sony and Disney - is violating Polish and European law because it has no Polish license, uplinks the channel from Hungary (where HBO has uplinking facilities) and in its Poland-based cable TV systems is using a signal trapping technology that can be easily broken. Canal Plus says that because people can easily "steal" the HBO signal, its own pay-TV business is threatened.

@ Entertainment says the lawsuit is spurious. Lots of channels in Europe are uplinked from outside of the country of distribution. European content laws require compliance only "where practicable", and @ Entertainment maintains HBO probably wants to protect its signal and its revenue base from paying customers, even more than its competitors.

According to @Entertainment's CEO Bob Fowler, Canal Plus is essentially invoking a strategy not unlike the one orchestrated in the movie Wag the Dog. The script sees a president and his advisors fake a war with Albania in order to attract press attention away from the president's illicit extra-marital affair. Fowler says that Canal Plus is using the suit and its connections in Brussels to deflect attention from the real issue of what its Polish Pay-TV service, Canal Plus Polska, has to offer the Polish consumer.

From a sceptic's viewpoint, Canal Plus deftly delayed rival Wizja's original launch-date of spring 1998 by agreeing and then disagreeing to co-own one digital TV platform with @ Entertainment.

Canal Plus Polska (now relaunched as Cyfra+) should be given credit for lining up a powerful local shareholder group. This includes commercial broadcaster Polsat, which holds between 22 to 25 per cent in its new joint venture digital platform Cyfra+. And, after months of saying it would have a programming alliance with Polish state broadcaster Telewizja Polska's (TVP), Canal Plus Polska announced late in October it had sold a 40 per cent stake in Cyfra+ to TVP. Ironically, this means that Polsat, the biggest competitor to state broadcaster TVP now sits together with TVP on the Cyfra+ board. The Polish government had not approved the TVP-Canal Plus Polska venture as of mid-November, but Canal Plus says the Polish TV regulator supports the deal.

Interestingly, it is this same regultory body that's under pressure from Brussels and French government officials to pursue the HBO-Wizja case.

Again, a cynic might say that Canal Plus is using its clout as a European company to bend ears in Brussels and Warsaw in order to hurt its rival.

Then again, maybe all's fair in warring competitive TV land. One thing is clear: the Polish government does not want to offend anyone anywhere near Brussels as long as its EU membership is pending.

In its first two months of operation, Wizja signed up 61,000 subscribers and claimed in mid-November that it was signing 1,000 new subscribers a day. Canal Plus Polska commenced service on October 30, and says 80,000 people had registered to buy the package by early last month.