Canal, Wizja join forces on digital TV

Wizja, which was scheduled to launch its digital television platform Saturday, April 18 at 12:01 a.m., postponed its launch at the last minute because of the partnership, announced Friday afternoon. Had the launch gone ahead as planned, Wizja would have gotten a five-month jump on Canal+ Polska, which planned to launch its own digital platform in September.
The two companies will now launch a new service, Wizja+, probably this September.
"As I see it, and I'm sure Canal+ sees it the same, it's a perfect marriage," Andrzej Muras, president of Wizja TV, said late Friday. "Everybody gets something out of it."
The binding letter of intent that pulled last week's rivals into each other's arms was signed late Thursday in Paris by Wizja's parent company, @Entertainment and France-based Canal+.
The deal still has to be approved by Polish media market watchdog the National Radio and Television Council (KRRiTV). But after meeting with Boleslaw Sulik, head of the KRRiTV, late Friday, Muras said the council was pleased by the partnership.
He expects the council to issue an opinion on the deal within 45 days.
Analysts said the partnership made more sense than head-to-head rivalry.
"It seems the best solution to combine the two digital platforms in a country like Poland," said Richard Taylor, an equity analyst with Schroders Securities in London.
@Entertainment, which is traded on the U.S.'s Nasdaq exchange, was planning to spend $350 million on its digital platform, while Canal+, traded on the Paris bourse, had previously said such high investments would take too long to recoup.
Under the agreement, @Entertainment's fully owned Poland-based production unit, DTC Productions, will assume a 40% stake in Polska Korporacja Telewizyjna (PKT). This is the parent company of Canal+ Polska, the broadcaster of Poland's largest pay-television channel, which has 250,000 subscribers via radio waves, satellite and leased cable networks. @Entertainment said it would pay approximately $112 million for the stake.
In return, PKT will pay $38 million to partially reimburse @Entertainment's investment into Wizja's launch, as well as assuming most of the contracts it signed with programming partners, Muras said. Once the agreement is finalized, PKT, which will be the sole owner of the new digital platform, will be owned 40% by Canal+ Group, 40% by @Entertainment's DTC Productions, 10% by Polish media group Agora, which publishes Gazeta Wyborcza, and 10% by Polish investor group Polcom Invest. A statement from Canal+ said the new digital platform was still open to other local investors.
The two companies will stay independent as far as Canal+'s analog channel and @Entertainment's Polska Telewizja Kablowa (PTK) cable television network go. However, when they launch Wizja+, PTK, with more than 800,000 subscribers, will be the main carrier for the platform, Muras said.
"It's our input in the deal," he added.
This cable outlet is important to Canal+ because it currently must use third parties to reach a third of its subscribers.
In addition to cable access, Canal+ will receive finalized license agreements with more than 10 international channel providers that were to be beamed from an Astra satellite to all PTK subscribers last Saturday.
However, Canal + brings its own value to the deal. Its dominant European position as a pay-TV broadcaster secures the success of the new project, analysts said.
While @Entertainment is a well-established local operator, it is still local, Schroders' Taylor said.
But Canal+, while being a marginal player in the Polish cable market, has vast European broadcasting experience, noted Carlo Campomagnani of Lehman Brothers. In addition to analog channels in France, Spain, Italy, Belgium, and the Netherlands, it also has a European digital platform called CanalSatteliteNumerique, which was launched in April 1996.
Throughout Europe, the group has about 4.3 million subscribers, Campomagnani said, with total revenue at the end of 1997 of FrF 13.6 billion.
"We get Canal+ Polska's subscribers and its European back-up, while they get our distribution force and production potential," Wizja's Muras said.
But the agreement signed last week also contains a provision under which neither of the parties involved would launch a digital platform within 45 days after the execution of the agreement. This meant that Wizja's launch party scheduled in Warsaw for last Friday night proved to be a bit premature.
But the show went on anyway.
"We have to postpone the launch, but it does not mean the party is called off, it's just that we'll be celebrating something else," Muras said.