Battling for your attention
Last year saw the main media players rake in huge amounts in advertising revenue as companies engaged in an all-out assault on the populace's attention span.
A number of media companies got caught up in the PR gold rush, and competition for market share across the industry was fierce. In radio, the struggle was particularly frantic. Radio Zet, in a bid to outmaneuver rival RMF FM, brought superstar Madonna out to bat. The star's recruitment, for a reputed fee of zł.2-3 million, is just one example of lengths to which media companies have gone to raise audience numbers and keep advertisers coming back.
Data gathered by the Expert Monitor media house reveals that in the first 10 months of 2004 the sector received zł.1.079 billion, a dramatic 17 percent jump on the same period in the previous year.
In the battleground for newspaper circulation, advertising spending rose by a shade over 23 percent to reach zł.1.951 billion. The entry of Axel Springer's Fakt into the market in 2003 generated fierce competition for the long-term sales leader, Agora-owned Gazeta Wyborcza, that shows no signs of abating.
The lowest growth rate occurred in television, which, despite pulling in zł.6.886 billion between January and October last year, grew roughly in line with predictions at four percent. Television companies are now reviewing ways of boosting revenues this year.
Prime time
Executives have announced their intention to cut the huge discounts on ad time that major clients receive. Whether stations can afford to raise prices when television's share of the advertising market overall has dropped-from 62 percent in 2003 to 58 percent in 2004-is another question.
Tomasz Ramza, head of negotiations and buying at media house MPG, says any price increase will have to be minimal.
"We're talking about three, four, maybe five percent at most. That means that all those stories about cutting discounts radically are fables. This is such a competitive market-they won't let them touch the prices."
After commercial station TVN's debut on the Warsaw Stock Exchange proved a success, competitor Polsat is hoping to crash the party with a flotation of its own on the WSE during the first half of this year. Although the heightened rivalry may contribute to the price battle, most believe the flotation itself will do little to change the face of the sector.
This is largely because the public stations will be the ones who continue to dominate the sector. They're still winning the ratings war: TVP1's share of the daily audience (26 percent) is nearly twice that of TVN's (13.6 percent). On top of that, they show fewer commercials than their private competitors. For example, in 2001, the average commercial break on TVP1 lasted one minute, 36 seconds, while Polsat's averaged one minute, 30 seconds. By last year, TVP1's commercial breaks had increased slightly, to one minute, 41 seconds, whereas Polsat's had skyrocketed to three minutes and thee seconds.
"Public television still has room for more advertisers and advertising seconds," says the CEO of media house OMD, Jakub Bierzyński. "They should increase their revenues this year."
However, the rise in television ad prices is expected to prompt companies to look to other media to reach their advertising goals. "TV will have to increase their prices sooner or later, and that will push the money to other media," says Bierzyński.
Hot off the press
Newspaper owners will be glad of any crumbs falling from the TV table as the circulation war continues. Observers say that the entry of German-owned Axel Springer caused the market to expand much more than had been anticipated, allowing both Fakt and its rival Gazeta to raise income, and advertisers to reach a larger audience.
"When Axel-Springer started Fakt, everyone thought that it would take money away from other publishers," says Expert Monitor president Piotr Słaby. "Of course, that happened a little bit, but still it's very clear right now that it just made the market broader. Nobody believed that would happen."
Although third-quarter circulation figures for September 2004 show Gazeta losing out to Fakt, with an average 436,800 daily sales compared to Fakt's 525,500 copies, Gazeta commands a much larger slice of the advertising pie.
Włodzimierz Giller, a media analyst at Deutsche Bank securities, believes that the print sector's growth will push Gazeta Wyborcza and Agora still further ahead of their rivals.
"Fakt only got three percent of the advertising market. In copy sales it's a significant player but in ad revenues it's not," he says. "Therefore, Gazeta Wyborcza should benefit. We expect that advertising revenue for Agora should rise some 12 percent this year."
Publishers in local paper market, which churns out two million copies a day, have recently agreed common price packaging, giving them the strength to negotiate together for the profitable national advertising market.
"This is a newspaper market superpower emerging," says Bierzyński. "This is not a change in Gazeta Wyborcza's favor, especially when it comes to revenues."
Pump up the volume
In radio the outlook appears strong, although spending may not match 2004's 17 percent increase. "In radio the media margins went up in the second quarter of 2004. Although it did decline again in the third quarter, we see some positive trends. We expect growth this year of 11 percent," says Giller.
In an effort to stay afloat over the past few years, several national radio stations launched smaller-market spin-offs. December 2003 saw the launch of RMF Classic-sister station to the national leader, which can now be heard in six major cities across Poland. Along with its newspaper business, Agora owns 29 regional stations, most of which have yet to return profit.
"Business in local radio is not really profitable, because the real stream of advertising goes to nationwide stations," explains Giller. Still, he believes that the expanding role of media in general can only mean good news for these stations. "We expect them to experience revenue growth because the market is growing," he says.
The big picture
The outlook for the media's ad revenues in 2005 is a good one. Analysts expect few major changes, and look for higher revenues across the board. The expansion of the market will bring more outlets in every sector, especially in print, where several new magazines are expected to appear. Non-television media will gain the most from advertisers looking to extend their reach.
"Trends that show that the efficiency of TV advertising is declining, because of too many advertisements on TV, will make advertisers shift some budgets to print," says Giller.
According to Bierzynski, the clash of the print titans has the most potential for a sector shake up. "This year will be the year of troubles for Agora and Gazeta Wyborcza," he told the WBJ.
Giller, however, doesn't see any potential for Fakt to overcome Gazeta's stranglehold on ad revenue. "After one year of being on the market and a huge advertising campaign, Fakt was only able to get three percent of the market. I think they will increase their market share to not more than six percent."
A number of media companies got caught up in the PR gold rush, and competition for market share across the industry was fierce. In radio, the struggle was particularly frantic. Radio Zet, in a bid to outmaneuver rival RMF FM, brought superstar Madonna out to bat. The star's recruitment, for a reputed fee of zł.2-3 million, is just one example of lengths to which media companies have gone to raise audience numbers and keep advertisers coming back.
Data gathered by the Expert Monitor media house reveals that in the first 10 months of 2004 the sector received zł.1.079 billion, a dramatic 17 percent jump on the same period in the previous year.
In the battleground for newspaper circulation, advertising spending rose by a shade over 23 percent to reach zł.1.951 billion. The entry of Axel Springer's Fakt into the market in 2003 generated fierce competition for the long-term sales leader, Agora-owned Gazeta Wyborcza, that shows no signs of abating.
The lowest growth rate occurred in television, which, despite pulling in zł.6.886 billion between January and October last year, grew roughly in line with predictions at four percent. Television companies are now reviewing ways of boosting revenues this year.
Prime time
Executives have announced their intention to cut the huge discounts on ad time that major clients receive. Whether stations can afford to raise prices when television's share of the advertising market overall has dropped-from 62 percent in 2003 to 58 percent in 2004-is another question.
Tomasz Ramza, head of negotiations and buying at media house MPG, says any price increase will have to be minimal.
"We're talking about three, four, maybe five percent at most. That means that all those stories about cutting discounts radically are fables. This is such a competitive market-they won't let them touch the prices."
After commercial station TVN's debut on the Warsaw Stock Exchange proved a success, competitor Polsat is hoping to crash the party with a flotation of its own on the WSE during the first half of this year. Although the heightened rivalry may contribute to the price battle, most believe the flotation itself will do little to change the face of the sector.
This is largely because the public stations will be the ones who continue to dominate the sector. They're still winning the ratings war: TVP1's share of the daily audience (26 percent) is nearly twice that of TVN's (13.6 percent). On top of that, they show fewer commercials than their private competitors. For example, in 2001, the average commercial break on TVP1 lasted one minute, 36 seconds, while Polsat's averaged one minute, 30 seconds. By last year, TVP1's commercial breaks had increased slightly, to one minute, 41 seconds, whereas Polsat's had skyrocketed to three minutes and thee seconds.
"Public television still has room for more advertisers and advertising seconds," says the CEO of media house OMD, Jakub Bierzyński. "They should increase their revenues this year."
However, the rise in television ad prices is expected to prompt companies to look to other media to reach their advertising goals. "TV will have to increase their prices sooner or later, and that will push the money to other media," says Bierzyński.
Hot off the press
Newspaper owners will be glad of any crumbs falling from the TV table as the circulation war continues. Observers say that the entry of German-owned Axel Springer caused the market to expand much more than had been anticipated, allowing both Fakt and its rival Gazeta to raise income, and advertisers to reach a larger audience.
"When Axel-Springer started Fakt, everyone thought that it would take money away from other publishers," says Expert Monitor president Piotr Słaby. "Of course, that happened a little bit, but still it's very clear right now that it just made the market broader. Nobody believed that would happen."
Although third-quarter circulation figures for September 2004 show Gazeta losing out to Fakt, with an average 436,800 daily sales compared to Fakt's 525,500 copies, Gazeta commands a much larger slice of the advertising pie.
Włodzimierz Giller, a media analyst at Deutsche Bank securities, believes that the print sector's growth will push Gazeta Wyborcza and Agora still further ahead of their rivals.
"Fakt only got three percent of the advertising market. In copy sales it's a significant player but in ad revenues it's not," he says. "Therefore, Gazeta Wyborcza should benefit. We expect that advertising revenue for Agora should rise some 12 percent this year."
Publishers in local paper market, which churns out two million copies a day, have recently agreed common price packaging, giving them the strength to negotiate together for the profitable national advertising market.
"This is a newspaper market superpower emerging," says Bierzyński. "This is not a change in Gazeta Wyborcza's favor, especially when it comes to revenues."
Pump up the volume
In radio the outlook appears strong, although spending may not match 2004's 17 percent increase. "In radio the media margins went up in the second quarter of 2004. Although it did decline again in the third quarter, we see some positive trends. We expect growth this year of 11 percent," says Giller.
In an effort to stay afloat over the past few years, several national radio stations launched smaller-market spin-offs. December 2003 saw the launch of RMF Classic-sister station to the national leader, which can now be heard in six major cities across Poland. Along with its newspaper business, Agora owns 29 regional stations, most of which have yet to return profit.
"Business in local radio is not really profitable, because the real stream of advertising goes to nationwide stations," explains Giller. Still, he believes that the expanding role of media in general can only mean good news for these stations. "We expect them to experience revenue growth because the market is growing," he says.
The big picture
The outlook for the media's ad revenues in 2005 is a good one. Analysts expect few major changes, and look for higher revenues across the board. The expansion of the market will bring more outlets in every sector, especially in print, where several new magazines are expected to appear. Non-television media will gain the most from advertisers looking to extend their reach.
"Trends that show that the efficiency of TV advertising is declining, because of too many advertisements on TV, will make advertisers shift some budgets to print," says Giller.
According to Bierzynski, the clash of the print titans has the most potential for a sector shake up. "This year will be the year of troubles for Agora and Gazeta Wyborcza," he told the WBJ.
Giller, however, doesn't see any potential for Fakt to overcome Gazeta's stranglehold on ad revenue. "After one year of being on the market and a huge advertising campaign, Fakt was only able to get three percent of the market. I think they will increase their market share to not more than six percent."
