Christian Kozar:

"Pay TV has existed for only 10 years so it’s too early to talk about a monopoly."
By : Anna Kocińska

    The merger of digital platforms Wizja TV, owned by Amsterdam-based United Pan-Europe Communications, and Cyfra+, a subsidiary of France’s Vivendi Universal, had been talked about for nearly three years before the deal was inked in August. More than two months later, however, the merger is still awaiting approval by the Office for Competition and Consumer Protection (UOKiK). The deal, which groups the No. 1 and No. 2 players on the digital-platform market, stands to create a virtual monopoly in the pay-TV sector as the only other platform, Polsat 2 Cyfrowy, runs a distant third. As the UOKiK considers whether to approve the deal, Wizja TV and Cyfra+ are hush-hush about the merged entity’s plans, leaving their combined 600,000+ customers to wonder how the merger will affect programming and subscription fees. Christian Kozar, the general director and chairman of the managing board of Canal+ Polska, talked to the Business Journal’s Anna Kocińska about why the UOKiK has yet to approve the merger and its implications for the pay-TV market. The following is a translated, edited version of their conversation.

   Q: Do you think you will become the CEO of the new platform once the merger is approved by the UOKiK?

   A: I’ll wait until the new platform’s supervisory board meets and decides to appoint a CEO. I will follow its instructions.

   Q: But would you be surprised if they appointed you?

   A: No, I wouldn’t be surprised. I would be proud and honored unless personnel here had something against it.

   Q: Does Canal+’s management in Poland have a strong influence on strategic decisions regarding the merger?

   A: We’ve established a joint committee with representatives of Cyfra+ and WizjaTV, who meet once a week. So decisions concerning Poland are taken here. Only this morning, Lew Rywin, president of Cyfra+’s supervisory board, met with me and we were making decisions about the merger. In fact, he’s our liaison with Polish authorities. And last but not least, 99% of the personnel here is Polish.

   Q: While the merger has many supporters, I’ve also heard criticism that the deal may negatively impact the pay TV market in Poland. Skeptics argue that with a weak Polsat 2 Cyfrowy (Poland’s third digital platform), the merger of Wizja TV and Cyfra+ will create a monopoly. How would you answer these charges?

   A: A market void – when there isn’t a single player out there – is the worst kind of monopoly I can imagine. If this merger is not completed, there will be no digital platform at all on the Polish market. It’s as simple as that. It’s no longer a secret that under current economic conditions, to break even in this business you need 700,000 to 800,000 subscribers. No platform in Poland can achieve that figure now and (it) cannot afford to wait to get that many subscribers. After the merger with Wizja TV we’ll have approximately 650,000 subscribers, according to our estimates, so we’ll need 12-18 months to break even. We’re now waiting for the regulatory office’s decision. Without its approval we cannot really proceed with the merger. The longer we wait, the more tired our subscribers become. So it’s important for us to start (the new platform) as soon as possible.

   Q: Will the recent nomination of a new UOKiK president delay the decision?

   A: The decision will have nothing to do with the new president’s personality. It will depend on the quality of the documents we filed. It’s not a political but an economic decision so I hope there will be no delays.

   Q: But I’ve heard that the new president (Andrzej Cezary Banasiński) is concerned about Poland’s compatibility with European Union (EU) antimonopoly laws. Given that stance, and the fact that the UOKiK’s raison d’etre is to protect consumers, isn’t it likely that Banasiński would take seriously the complaint filed by Astra TV (the Poznań-based producer of decoders) in which it accused all three digital platforms of ripping off subscribers by forcing them to buy separate decoders for each station rather than a single standard version?

   A: The issue is more complicated than that. Today, we’re struggling against piracy. It’s a huge problem because we are constantly being forced to come up with a new encryption code to protect our signal. So this is why you can’t separate a decoder from a pay-TV card. It’s us who fights against piracy and has to pay for it. Once a week we change the encryption code, so if we allow an outside company to distribute and sell our cards, we would lose control over that. In my opinion, on the pay TV market you can’t really separate programming from a card that enables subscribers to watch it. Perhaps if it weren’t for piracy it would have been possible. But there is another solution. If there are companies that would like to sell pay-TV cards, they should give us financial guarantees that they will pay for our losses resulting from piracy.

   Q: Do you think you can convince the civil servants who work for the UOKiK that you’re right?

   A: I was a civil servant myself, so I think everybody has the right to file a complaint. I trust that the authorities are sufficiently competent and will make a decision that will harm no one.

   Q: How would you explain U.S. pay-TV channel HBO’s decision to send a letter about the merger to the UOKiK?

   A: I wasn’t surprised. It was part of the standard procedure (under which the regulatory office welcomes both favorable and critical opinions about a media transaction that is undergoing scrutiny).

   Q: Apparently, though, no other companies have voiced their concerns to the UOKiK.

   A: There must have been one or two companies that reacted, otherwise the procedure couldn’t be called effective. Maybe even we would respond the same way if we were in their (HBO’s) position. As far as I know their letter wasn’t aggressive and didn’t attack the concept of the merger. It was like sending a message that says, ‘look, we’re here, don’t forget about us.’ Polsat was also at some point concerned, but now Mr. (Zygmunt) Solorz (owner of the Polsat 2 Cyfrowy platform) said that he favors the deal and is happy to have one competitor instead of two.

   Q: So if Solorz is no longer critical of the merger, do you think this means he would like to one day merge his platform with yours? Also, if there is only one digital platform on the market (after the merger with Polsat 2 Cyfrowy) there won’t be the excuse that there is no monopoly on the pay TV market.

   A: We should start to look at competition in a different way. One should think about what a monopoly is and what it is not. At the beginning of the 20th century in France there were hundreds of champagne producers. Today, there are only a few of them, represented by one organization and nobody calls it a monopoly. I would compare pay TV to luxury goods. From a technological point of view, it’s becoming more and more sophisticated, but expensive at the same time. So if you can’t increase subscriptions anymore, it’s natural that competitors decide to merge. In France there are two satellite pay-TV providers, TPS and Canal Satellite. They are considering an alliance because of economic reasons and, again, it’s not being dubbed a monopoly. If you want to talk about a real monopoly, it has to be a company that owns cable TV, digital to home (DTH) and free-to-air TV at the same time. In Poland, consumers still have a choice. When talking about a monopoly in the pay-TV sector one often forgets that there are many cable operators.

   Q: But are you considering merging with Polsat 2 Cyfrowy?

   A: For the time being we are involved in a deal with Wizja TV. It’s not even at the closing stage yet. The merger requires the approval of the regulatory office to take effect. Paris and Warsaw weren’t built in a few days and we don’t want to act ahead of schedule. But we are open to talks if somebody wants to talk to us.

   Q: Why are cable operators who belong to the National Cable Communications Chamber (OIGKK) so supportive of the merger? How are they going to benefit from it?

   A: That’s a good question. I think they are glad not to have too many interlocutors. In addition, over the last few years Canal+ has demonstrated that it wanted to help cable operators introduce interactive channels to their networks. We have been talking to them a lot for the last two years and I think they trust that we are not interested in stealing their business. We do think we need competition on the market.

   Q: Shouldn’t they be concerned about the potential increase in the prices of channels they are now buying from two platforms but soon will be buying from one?

   A: Why do journalists always ask questions about monopolies? While nobody else talks about a monopoly, all the journalists do. I also know this from France where there are only two platforms, which are discussing a merger. But we also have cable, analog TV and other systems in France, so where is the monopoly? If you make a list of various broadcasters, it will turn out that there are too many of them and customers don’t want them all. So there is a need for the regrouping, rationalizing of the (programming), instead of talking about a monopoly, which doesn’t really exist on this market. At the same time, nobody writes about what Canal+ does for Polish cinema. So far, Canal+ has invested $120 million in Polish movies. Why are we the only private company donating money to Polish cinema? Yes, you are right, this is a kind of monopoly, but people forget to talk about it.

   Q: What about HBO?

   A: Yes, HBO does invest, but others? Well, TVP (public broadcaster Telewizja Polska), and no one else. It’s a monopoly then. I’m joking, but why (do journalists) always attack me about a monopoly? Pay TV has existed for 10 years only so it’s too early to talk about a monopoly in this sector. We can talk about it in 20 years. Now it’s time to mobilize one’s programming for the future needs of customers. There will be a lot of additional services such as interactive services to be covered so there is room for many players on the market.

   Q: Is there any deadline for the launch of the merged platform?

   A: March is the best time for pay TV, so with that in mind as soon as we get the official approval for the merger we’ll either continue broadcasting both Wizja’s and Cyfra+’s programming for a couple of weeks before launching the new platform, or we’ll do it after getting the approval.

   Q: Which channels that are now available on both platforms are you going to keep in the merged one?

   A: It won’t be a simple combination of all programs available on both platforms. I already know the results of market research surveys (whose aim was to see which channels are most popular). Actually, we’ve finished compiling a list of the most popular programs, but I can’t tell you details. We’ll be able to talk about it once we finish negotiations with specific channels.