Ready for the Big League

April 2006

As the TV markets in Poland, Hungary and the Czech Republic continue
to mature, they are beginning to resemble their more developed cousins in
Western Europe.

By Chris Dziadul

Two years ago, when eight former Soviet Block countries joined the
European Union, many media insiders were expecting to see dramatic changes in
their television landscapes—from lavish investments by Western media
companies to significant changes in TV schedules. As it turns out, there have been no drastic changes. Instead,
these countries have gradually evolved into more mature markets, not too
dissimilar from those in Western Europe, where locally produced content draws
the most viewers.

This is particularly true in Poland, Hungary and
the Czech Republic, which together account for around 75 percent of the E.U.’s
80 million new citizens. With some 40 million TV households, Poland boasts the
largest TV market in Central and Eastern Europe, outside Russia. Polish viewers
are served by a public broadcaster, TVP; two national commercial stations,
Polsat and TVN; and several regional services. Poland also has a cable industry
with around 4.5 million connections, two digital DTH platforms with a combined
total of almost 1.4 million subscribers, a fledgling DTT sector and large
number of mostly thematic, cable and satellite-delivered channels.

According to AGB Nielsen Media Research, the main
broadcasters in Poland posted revenues totaling $1.6 billion from advertising
and sponsorship in 2005, or $220 million less than the previous year. At the
same time, TVP’s five channels (two national, one regional, one
satellite-delivered and one thematic) had a combined audience share of around
55 percent, with Polsat and TVN claiming 16.7 percent and 15 percent
respectively.

polish
potential

While the slight fall in commercial earnings could be explained by the
introduction of more realistically priced rate cards, it masks the fact that
TVP holds the upper hand over its rivals by also deriving revenues from license
fees. Costing each TV household $60 a year, license fees currently account for
34 percent of the public broadcaster’s total income.

However, TVP and other large stations such as
Polsat and TVN are gradually losing their audience share to smaller channels.
This undoubtedly explains their decision to launch a raft of new services, with
TVP alone launching Poland’s first cultural channel, TVP Kultura, in May 2005,
and hoping to add further channels offering sports, classic movies,
entertainment and kids’ programming in the first half of this year.

These services will target niche audiences and
complement rather than compete with TVP’s main channels. The flagship TVP1 is a
general-entertainment channel. TVP2 offers more movies, series, educational and
entertainment-based programming, while the regional TVP3 has the highest amount
of news content. Such is their reach that even an ostensibly minority interest
play, Theatre of TV, which aired on TVP1 this January, secured just a 3-percent audience
share but was still watched by over a million people.

Among TVP’s highest-rated programs are the news and
current-affairs program Panorama and the locally produced soap M Jak Milosc. Although co-productions do not
exceed the 10-percent E.U. minimum requirement for independent local
productions, they are an important part of TVP’s output. The public broadcaster
co-produced a movie on the late Pope John Paul II with CBS and RAI.

TVP currently operates limited digital terrestrial
TV (DTT) services in the south and southeast of Poland and has made no secret
of its plan to eventually establish a national digital-TV platform to
distribute its growing portfolio of thematic channels. It is also engaged in an
interactive TV project, funded with a grant of $3.8 million, which will
eventually lead to the launch of all its channels on the Internet.

A somewhat different strategy has been adopted by
the commercial broadcaster TVN, which is owned by the local media company ITI
Holding and operates eight thematic channels in addition to its flagship
national service. Waldek Ostrowski, TVN’s VP and research director, says it
employs “two programming concepts”—the first is to seek out the “best
formats in the world,” and the second is, “to develop our own ideas, specific
for the Polish market, which are not formats, and look for our own talents.”

With formats, TVN has already achieved huge success
with local versions of Big Brother and Who Wants to Be a Millionaire?, and more recently with Strictly
Come Dancing. Among its original productions are
such shows as Magda M, which Ostrowski likens to a Polish Ally McBeal, and the Szymon Majewski Show, a weekly one-hour cabaret
program. Other hits include Kryminalni, an original production that has already aired for
three seasons.

While all these are prime-time programs, TVN has
also worked hard to “build a loyal audience” through such access-prime-time
output as the daily talk show Rozmowy w Talku and W-11, Poland’s first-ever docu-crime
series. These, along with a new daily series on private detectives, Detektywi, which made its debut in
February, provide “stability” ahead of the evening news bulletin Fakty, which airs at 7 p.m.

Ostrowski adds that TVN, unlike TVP and Polsat,
reaches only 85 percent of the population and tends to target young, affluent
viewers aged 16-to-49 living in large cities with over 100,000 inhabitants. Its
share in peak time in this target group was 29.8 percent in November 2005, or
almost double its rival Polsat’s 16.2 percent.

Although Polsat operates a digital DTH platform,
called Cyfrowy Polsat, and has its own portfolio of thematic channels, TVN has
undoubtedly set the pace in launching such services, with at least two more in
the pipeline. According to Ostrowski, the idea behind them is to identify unmet
needs in the market and “look for ways of obtaining ad revenue from sources
that would be hard to reach with TVN itself.”

Ostrowski believes that “Polish viewers do not
differ from those in other countries and want to watch local programs. All the
most popular shows in Poland are now serials, and U.S. imports are not as
popular as they were five years ago.”

A TELEVISION
RHAPSODY

To some degree, this also holds true in Hungary, where two national
commercial stations, RTL Klub, owned by the RTL Group, and TV2, backed by SBS
Broadcasting, dominate the market. The public broadcaster Magyar Televizió
(MTV), unlike its Polish counterpart, continues to struggle. RTL Klub and TV2
tend to target the same 18-to-49 demographic, though TV2 also aims for urban
female viewers. According to AGB Nielsen, in 2005, RTL Klub had a prime-time
audience share of 36.5 percent among the 18-to-49 age group, while TV2 had 29.9
percent. MTV, on the other hand, could only muster 9.1 percent.

Hungary has some 50 thematic local-language
channels, 15 to 20 of which are funded by advertising. Significantly, both RTL
Klub and TV2 increasingly tend to act as advertising rep firms for many of
these channels.

According to AGB Nielsen, the best-performing
programs in 2005 were an Osbournes-type reality show called Gyozike and Who Wants to Be a
Millionaire?,
both of which aired on RTL Klub; they achieved audience shares of 58.3 percent
and 53.6 percent, respectively. They were followed by the long-established
scripted format Barátok Közt, from FremantleMedia, on RTL Klub and TV2’s comedy show
the Irigy Hónaljmirigy Show.

Commenting on his station’s output, TV2’s head of
programming, Lörand Poich, says that its most popular show is currently Deal
or No Deal, which
switched from a weekly to a daily format at the beginning of this year. It has
had “immediate success, beating a daily local soap on a regular basis.”

Poich adds that a TV2 tabloid magazine show is now
performing better than RTL Klub’s Who Wants to Be a Millionaire?, while TV2’s talent show Megasztár
is now in its
third season and still highly popular, and the daily local soap For Better
or Worse, which
launched a year ago, is steadily building an audience.

Poich also points out that TV2 has just launched a
new local comedy show named Not Your Day, while the Irigy Hónaljmirigy Show remains the best performing comedy
show in Hungary and Frei Dosszié is the number one infotainment show. All told, locally
produced shows account for 50 percent of the station’s schedule and TV2 works
with a “select few” independent local production companies.

Sweden’s Modern Times Group (MTG) is present in
Hungary through Viasat 3. Although it relinquished its terrestrial frequencies
at the beginning of 2005 and is now only available via cable and satellite, the
station’s audience share among the 18 to 49 demographic was still a respectable
5.5 percent last year. More to the point, it posted its first-ever operating
profit in the last quarter of 2005.

The Hungarian public broadcaster MTV, meanwhile,
lurches from one financial crisis to another, delaying plans to launch up to
five thematic channels.

cZech
this out

This contrasts sharply with the situation in the Czech Republic, where
the publicly owned CT launched a news channel called CT24 and a sports channel,
CT Sport, in time for this year’s winter Olympics in Turin. The Czech market
has undergone considerable changes since E.U. accession, with the U.S. company
Central European Media Enterprises (CME) reacquiring TV Nova, the country’s
leading broadcaster, for almost $900 million in 2005 and then adding the sports
channel Galaxie Sport to its portfolio for a further $5.1 million. At the same
time, MTG entered the Czech Republic by securing a 50-percent stake in GES
Holding, a company that owns the national commercial station Prima TV, for $114
million.

Despite its turbulent history, TV Nova has been the
market leader for over a decade and, according to ATO, commanded an audience
share of 45.59 percent among viewers aged 15 and up at the beginning of
February of this year. CT’s first channel, CT1, was in second place with 20.74
percent, followed by Prima TV at 20.19 percent and CT2 with 6.54 percent. In
terms of programming, TV Nova’s news bulletin Televizni noviny remains the most popular overall,
and the CME-owned station rarely relinquishes any of the Top 10 spots.

At the end of last year, however, Prima TV’s
reality show VyVoleni broke all records, claiming at one point 2.2 million adult viewers.
Other programs that have performed consistently well over the long-term include
the news-based Zparvodajsk denik and Sportovni denik, along with the Czech series Rodinna pouta ll.

Prima TV targets young viewers and relies on
high-quality acquisitions, having recently completed a long-term deal with
Warner Bros. The station also invests considerably in its own productions. In
2005, local fare accounted for 24.36 percent of Prima TV’s output.

A SELLER’S
MARKET?

The increase in local productions in all three markets since E.U.
accession has been noted by Tom Toumazis, the executive VP and managing
director for Europe, the Middle East and Africa at Buena Vista International
Television (BVITV).

Although the Disney-owned BVITV currently lists
Polsat and TVP as its main clients in Poland, it has also done deals with HBO;
Ale Kino!, a basic cable movie channel; and Club, a basic cable channel aimed
at women.

In Hungary, BVITV does most of its business with
RTL Klub, though it also has deals with TV2 and MTV. In the Czech Republic, its
main client is TV Nova, but it also sells to Czech Television, as well as to
AXN across all three territories.

“Lost has been a stand-out for us in the area,” says Toumazis.
“It is a huge success in Poland on TVP”—where it attracts 5.08 million
viewers per episode— “and in Hungary on RTL Klub,” where it garners a
share of 53.5 percent. Although both Lost and Desperate Housewives have yet to make their debuts in
the Czech Republic, Toumazis says, “We have great confidence that these two
shows will perform very well.”

Toumazis believes that Poland, in particular, is
increasingly becoming like a middle-sized West European market. “It is
developing much more quickly as it has learned from the mistakes of other
markets, and so is much more likely to experiment, having acquired this
knowledge,” he says.

Chris Sharp, the chief programming officer at
chellomedia-backed Zone Vision Networks, notes that “the competition [in all
three countries] cannot be compared to when we launched our first channel,
Romantica, in 1998.” Certainly on the terrestrial side, “people are now
producing programming with substantial budgets,” with the trend perhaps most
marked in Poland.

growing
portfolios

Zone Vision Networks has a growing portfolio of channels, with the
most recent additions being The Horror Channel and Reality Extra, which made its
debut this February. Romantica is currently enjoying huge success with the
Brazilian telenovela The Slave Isaura, while Club includes Jerry Springer, Extreme Makeover and Faking It in its schedule. and Europa
Europa has deals with all the major studios.

According to Sharp, Zone Vision has also “always
had a strong local presence, especially in Poland,” and as part of its strategy
continues to remain “close to the market.”

The same undoubtedly holds true for FremantleMedia,
which, according Sue Green, its managing director of productions in Nordic and
Central and Eastern Europe, is the second-largest local producer in Poland.
“Indeed, we intend to consolidate our position over the next few years, and to
expand our business and our portfolio. We also want to develop our production
business in Hungary, and to explore new opportunities for programming in the
Czech Republic.”

FremantleMedia has enjoyed particular success with Idols (TV Nova and Polsat), Barátok
Közt (RTL Klub)
and Na Wspolnej
(TVN), all of which are still in production. It is also in pre-production on
two entertainment shows for Polsat.

With their active local production industry,
growing advertising markets—growing, in fact, at much better rates than
advertising in Western European territories—and competitive spirits
awakened by the race for ratings, Poland, Hungary and the Czech Republic are no
longer to be considered emerging markets. They are no longer sitting on the
fringes of the European Union. They have, indeed, caught up with their Western
cousins.