Few firms dominate the advertising market, for now

The recent consolidation among media houses has given them increased negotiating power and resulted in bigger discounts from broadcasters and publishers for advertising space, according to industry sources. Meanwhile, media companies' attempts to reverse that trend by consolidating have so far been unsuccessful and may be thwarted altogether if the government pushes through a proposal to limit media ownership. Media houses are hired by advertisers to plan and negotiate advertising space with media. "It looks like the (media houses') consolidation did intimidate the media (into giving them better prices)," said Jakub Bierzyński, the chief executive officer of OMD Poland, a media house. "It's us who deal the cards in the market." OMD Poland and Media Direction merged in January, bringing together Media Direction OMD, Optimum Media OMD and Brand and Media OMD. Although each of the three subsidiaries operates independently, the group jointly negotiates advertising purchases. Other media houses have joined forces too, forming four (including OMD Poland) more or less formal alliances that command more than 90% of the market. The consolidated negotiating position of the houses has pushed the media to drop prices by some 10-15%, according to industry sources. "The first half of this year has shown that discounts in television have fallen," Bierzyński said.

Clients have always frowned on any cooperation among media houses since partners in a media house alliance usually work for competing clients, industry professionals said. But the current poor economy and a need to cut costs have prompted advertisers to tolerate media house alliances, according to Piotr Słaby of Expert Monitor, a media research firm. In return, advertisers are able to negotiate lower prices for their media campaigns. But the slow and tentative consolidation among publishers and broadcasters has also worked to their favor. "There are some attempts among media (to cooperate on prices), but even then, potential partners often defect," said Marek Czarnecki, the managing director of MindShare Polska, a media house. Despite hawkish price declarations, media companies often give clients last-minute discounts, explaining that they wouldn't have been able to sell the space otherwise, Czarnecki said. Capital consolidation among media companies would strengthen their position against media houses and advertisers, advertising industry sources said. And Poland's maturing market has produced several leaders, which in the last few months have declared their intentions to buy other firms. But the government has proposed an amendment to the media law that would rigidly restrict capital concentration among media companies. The bill would prevent the formation of larger private media groups in Poland, weakening media firms' bargaining position with advertisers, industry sources said. "By suppressing consolidation in the media, the government is in fact helping media houses," Bierzyński said. But until the bill is passed, the relationship between the media and advertisers remains difficult to predict. "If, for instance, Agora (the publisher of the daily Gazeta Wyborcza) develops into a large media concern including radio operations, an online portal, an outdoor company and various magazines, then the way we talk to them will have to change," Czarnecki said. "Everything depends on what legislators decide."