Complete control
By : Anna Kocinska
Jarocin is a modest city of 70,000 souls, about 100 kilometers south of Poznan. It's typical of many cities dotting the Polish provinces, and an unlikely place for media moguls to lock horns.
But Jarocin is in the thick of a battle for control of the lucrative provincial media market and the city's weekly paper Gazeta Jarocinska (GJ) could be the next center of this struggle.
With a circulation of 12,500 copies a week, GJ covers not only Jarocin, but also the rest of the county. It was established in 1990 by Piotr Piotrowicz, owner of three other local publications Zycie Pleszewa, Zycie Rawicza and Zycie Gostynia as well as JaRadio, a radio station.
Since GJ's early days when it was more or less a part-time job for Piotrowicz and a handful of journalists, the newspaper is now a profit-generating company and stable employer. The paper's reporters earn up to 40% more per month than the average local wage (zl. 1,000), Piotrowicz said.
Big fish: Piotr Piotrowicz runs a small empire of communicty media sources in Jarocin.
Also GJ has a strong position on the local market compared to the national dailies. While most of its 12,500 copies sell out, national and provincial dailies such as Gazeta Wyborcza or Glos Wielkopolski can only manage to sell 200-400 newspapers a day, he said. "We owe it to our paper's independent and critical profile," he said. "You want proof? The right calls me a komuch (supporter of communists) and the left says I am an anti-leftist hawk."
GJ's main source of revenue is local business advertising. While Piotrowicz wouldn't reveal what his turnover is, he said he's in a good enough financial position to have launched Zycie Rawicza this year as well as prepare for further investments.
"If I can generate a profit from a small group of publications, it's obvious that one can make money on a larger group of local media," he said.
The idea to unite the county press became a driving force in local media consolidation strategy announced last year by Chemiskor. The former tannery changed its profile and name transforming itself into media group 4Media.
4Media, which plans to merge the interests of local media, including press and radio stations, is about to fight with foreign companies for corporate control over the relatively rich pickings that is local media.
Wojciech Krefft, president of 4Media's managing board, is adamant that small, regional press holds the key to riches.
"It's a very interesting segment of the market that might not be so obvious if you're looking at it from Warsaw," he said. According to Krefft, the weekly circulation of existing local, community-based publications exceeds 1.5 million copies. "Local papers have a dominant position on the market, so we want to consolidate them and achieve a critical mass, an effect of size," Krefft said.
The race is on
But the idea to tap the local press market for major financial gain is not a new one. Other publishing companies such as Germany's Passauer Neue Presse and Norway's Orkla Media have also established networks of newspapers outside Warsaw.
Passauer Neue Presse is the No. 1 regional publisher in Poland. It owns every daily newspaper in Krakow: Dziennik Polski, Gazeta Krakowska and Echo Krakowa. Acquiring smaller publications is also part of its strategy. In 1998, Passauer bought 15 regional weeklies with a total circulation of 30,000 copies from Gdansk-based publisher Arkona. Orkla, which through its subsidiary Presspublica owns 51% of national daily Rzeczpospolita, is also strengthening its position on the local market. It controls 13 regional dailies and weeklies published in Koszalin, Bydgoszcz, Lublin, Bialystok and Rzeszow, among other cities. Both companies also have a network of printing houses around the country.
"Local (powiat) press is the last enclave of Polish capital on the press market, the rest is either German or Norwegian," said GJ's Piotrowicz. Despite this, Piotrowicz said he was not sitting on his hands and was busy battling competitors his own way, even before 4Media announced its plan to consolidate the market and challenge Passauer and Orkla.
Last September Piotrowicz sold a 40% stake in his four papers to Poznan-based publisher Glos Wielkopolski Oficyna Wydawnicza. Glos, in addition to its flagship publication, daily Glos Wielkopolski, owns 11 sub-local weeklies. "I did it because Passauer had acquired Ziemia Kaliska, a weekly published in Kalisz, the area also covered by our Gazeta Jarocinska," he said. "It was a serious threat to our paper and we needed a strong partner to compete with Ziemia Kaliska." According to Piotrowicz, Passauer's strategy is not to band together independent local papers into one group.
Burning the midnight oil: Managing editor Jacek Kaliszan reviews stories in the Gazeta Jarocinska newsroom.
"What they really do is gradually take over the advertising market and unify the titles they control," he said. "Once they do that, regional papers lose their unique character and weeklies from different cities have almost all the same content."
Meanwhile, 4Media's Krefft said that it is still not too late for his group to emerge as one of the key players in the regional press market. The crucial weapon in this battle, he said, is printing.
"We want to print all publications within our group," he said. "It's a profitable business and profit from printing will be reinvested." Even though most community publications are printed in facilities belonging to Passauer and Orkla, Krefft said he could change that by acquiring several printing houses and creating a competitive network. 4Media has already purchased the Azet Grafico printing plant in Pruszkow and the company is in talks with several other printing houses.
"There are few Polish printing houses in the area and they are expensive," Piotrowicz said. Gazeta Jarocinska is printed at Passauer's facility in Tarnowo Podgorne. "If Chemiskor (4Media) offers good pricing and quality we will print with them."
Local press is part of 4Media's strategy to create a media group consisting of free publications, the Internet, national publications and local radio stations.
"Local radio stations have no chance to survive unless they become part of a group," said Piotrowicz, whose station JaRadio is generating losses. "I'm in talks about joining a group, a partner that will allow my radio station to survive."
4Media plans to consolidate several local radio stations into its group. "It will make it easier for us to become a key player on the local market," Krefft said. "All segments of the local media market will complement one another when it comes to attracting advertisers."
But the local radio market is also a battlefield, primarily between Agora, the media-group publisher of national daily Gazeta Wyborcza, and Eska, a radio group comprising 12 radio stations.
According to Janusz Janiec, head of Agora's radio division, there is no room on the market for a third player. "And we are not going to sell anything," he said. "On the contrary, we will strengthen our position on the local radio market." he said. Agora, which began with one radio station in 1997, currently has stakes in 15 local stations and is considering new purchases.
Apart from Agora, other players such as publicly traded Yawal and media holding Eurozet also have plans to expand their presence on the local radio market.
Eurozet, which owns Radio Zet, a leading national commercial radio station, as well as Radiostacja, announced that it may acquire up to 10 radio stations within the next year and a half. Czestochowa-based Yawal Radio announced last year that it planned to buy 25 regional radio stations. Meanwhile, the company, which also has a press subsidiary, is negotiating with 4Media. "We are talking to Yawal, if we succeed we will have 15 radio stations," Krefft said.
At present, 4Media owns four local radio stations: Radio Top broadcasting in the Silesian region, Radio Fama in Kielce, Radio Konin and Radio Warta, located in the Wielkopolska region.
But strong interest in the regional media market has also made potential purchases more difficult.
"After the new players (4Media, Eurozet) emerged, prices of local media started to go up," Janiec of Agora said.
According to Dariusz Kaszubski, deputy president of 4Media's managing board, acquiring shares in local media firms requires millions of zlotys. "In Wielkopolska (western Poland) a 50% stake in a community paper costs zl. 6 million-zl. 8 million ($1.5million-$2 million)," he said.
Eurozet plans to spend zl. 40 million ($10 million) on local radio market investments and Yawal Radio needs zl. 30 million ($7.5 million) to expand its operations.
4Media, meanwhile, is planning a share issue to finance current and future acquisitions. On Jan. 2, the company decided to issue 4.35 million shares for zl. 1 each, to be distributed among managers and employees of its subsidiaries. It's also planning an issue of 7 million shares at zl. 3 each, to be directed at selected investors such as Yawal System and Wolne Slowo (publisher of Zycie daily, purchased by 4media in January). 4Media may also consider using other financial instruments, such as credits and bond issues, Krefft said.
But how 4Media will make money in the long run remains to be seen.
"As for today, transactions made with the help of share issues are interesting for potential partners," said GJ's Piotrowicz, who is in negotiations with 4Media. "But at some point you need to start making money and stop share-issue financing. You cannot fool investors."
Looking for the Golden Fleece
While Krefft said that substantial revenue will come from both local and national advertisers, Agora's Janiec was skeptical.
"If someone thinks that you can support a local radio station relying mainly on national advertisers, they're making a serious mistake," Janiec said. "You can do it only by attracting local advertisers. In our stations the national:local advertising ratio is 20:80."
But according to Piotrowicz, papers such as GJ, which is currently generating a profit from local advertising, could also attract national advertisers if its readership figures are good enough. "I am sure that it would prove sensible to advertise in regional media because the cost per person for an advertiser to reach a potential consumer is much lower than in the national media," he said.
The problem is money, since conducting research on local media markets would be very costly, Piotrowicz said. "No local paper could afford zl. 60,000 to analyze its readership every month," he said.
Readership surveys for national publications are equally expensive but they are sponsored by publishers belonging to Polskie Badania Czytelnictwa (PBC), an association set up to monitor readership.
According to Maciej Chodorowski, director of research at CR-Media, a media-planning consultancy, PBC publishers are not interested in conducting research on small local publications. "They can't see why they should spend money on that and risk their revenue with their main national titles," he said.
Marek Frackowiak, PBC's president, said that such surveys are extremely expensive. "While one would have to pay more than $20 per respondent, there are also problems with methodology because the current group of respondents (36,000) is not enough to cover areas in Poland smaller than a province," he said. "For current counties we would have to use trial groups three, four times as large as 36,000, with no guarantee that the survey would be accurate."
