Zygmunt Solorz:
By : Anna Kocinska
Poland's two digital platforms, Wizja TV and Cyfra+, are in merger talks, according to Bert Holtcamp, the director of group corporate communications at Amsterdam-based United Pan-Europe Communications (UPC), owner of Wizja TV.
Also confirming that a merger is in the offing is Jean-Marie Messier, president of France-based Vivendi Universal, the owner of Canal+, Cyfra+'s parent company. At an April 24 shareholders meeting Messier said that discussions with UPC are making rapid progress in Poland. By teaming up and combining their customer bases and programming, the two platforms expect to reduce costs and break even more rapidly than on their own. This is not good news for Poland's largest private television station, Polsat, whose founder, Zygmunt Solorz, is also determined to make inroads into the digital broadcasting business via his Polsat Cyfrowy digital platform, set up in 1999. According to UPC, Wizja TV has some 414,700 subscribers while Canal+ reports that Cyfra+ has 293,000. Polsat Cyfrowy, Solorz said, has 220,000 subscribers. In an interview with the WBJ's Anna Kocinska, Solorz said he was not worried about the pending merger between Wizja TV and Cyfra+, though he confirmed that Polsat was looking for external financing for its digital operations. The following is a translated, edited version of their conversation.
Q: What's your style of running a business? Do you allow others to participate in the decision-making process?
A: It's hard to evaluate yourself. Decisions are made very quickly. However, you don't make a decision relying only on some documents you also need to analyze everything. I do listen to advice, but in my opinion everyone should have his own way of thinking and running a business. At a time when new technologies are being introduced, it's obvious that you develop yourself and keep moving ahead. Nothing can (afford to) stop and function the way it used to. The market changes and you need to (embrace) that.
Q: How will the merger of Wizja TV and Cyfra+ change the market? Will it impact your platform?
A: It was me who from the very beginning said there is no room on the Polish market for three digital platforms. Now, if we have two platforms on the market due to the merger, it will be a step in the same direction I predicted in the past. Will the competition continue? I don't think that with two platforms the competition will be tighter. On the contrary, there will be only two and not three competitors. While two other platforms provided decoders free of charge, we were consistent and sold them (to our customers). So, it's not that our customers are poor. They needed to spend a significant amount of money on the decoder and installation. And we are developing fast. We are not going to let our customers down.
Q: Prior to the introduction of your pay channels, viewers who decided to buy your decoder didn't have to pay any subscription fee. Was that the right move? New technologies are costly
A: There are different concepts of operating this business. Cyfra+ provided the decoders and antennas for free counting on a high subscription fee (to get the costs of the investment back). We bet on a different strategy that we could subsidize the decoders, but on the other hand we need to have some revenue from selling and activating them. Consequently, that was a smaller investment for us. Getting a subscription fee from customers is difficult because many people simply don't pay. So, the only realistic step was to establish a subscription fee. And our subscription fee, recently introduced, is low (zl. 10-zl. 25 a month compared to up to zl. 88.99 and zl. 89 offered by Wizja and Cyfra+ respectively).
Q: How is your platform doing then?
A: We introduced pay channels in April and it's going unexpectedly well. Most of our 220,000 customers, who purchased a Polsat Cyfrowy decoder, already declared they would subscribe to the pay channels. But this has only just started.
Q: But how is the platform doing? Are you making any money?
A: Of course, people are paying (to subscribe to the pay channels). Most of them have already paid.
Q: Did you incur serious losses in 2000?
A: I don't know. The balancing (of the books) is not over and I don't know the results yet. We did invest a lot and you need to have a reserve for that, but as far as I know the balance after taxes is positive. It isn't yet a situation one of losses that would cause major moves on our part.
Q: Are looking for foreign partners? Rumors are that Polsat is looking for capital.
A: We are talking to everyone on this market about programming, cooperation, so let's stay calm. All I've ever said is that I am only talking about preparing (the platform's) structure. I need to take the financial elements out of the media structure (of Polsat) to make it clean and transparent to every potential partner or stock exchange. Whether I decide on a strategic partner, on a stock exchange or some fund, it's still the next stage, if it's necessary at all.
Q: But you said that new technologies are on the market and because of that you will need additional financing.
A: Obviously I will. But we have several possibilities to choose from. Financing the digital platform is costly and it will have to be done either on our own or through going public or finding an investor. What I need now is (to make Polsat more transparent) so I will have to sell shares in (Polsat's) financial subsidiaries (Invest-Bank, insurer Polisa Zycie, PTE Polsat pension fund).
Q: Are there any potential buyers?
A: For the time being we're 'cleaning' our operations by shifting shares to other non-media companies. Of course we are looking for a partner. I am not hiding that.
Q: What would be your ideal partner?
A: I haven't thought about that. We need to look at Polsat from a (certain) perspective and the first thing to do is find out if there is anyone (willing) to talk to us. There is a consulting company that will conduct talks and prepare documents for the stock exchange.
Q: So you've made up your mind about taking Polsat public?
A: All I've made up my mind about is to get additional financing from the outside and to achieve a transparent structure. That's also something the stock exchange will assess. Both individual investors and investment funds need to know that this structure is clean and that they won't have to care about other companies that Polsat is a shareholder in.
Q: What do you think of the National Television and Radio Council's (KRRiTV) performance? What kind of impact has it had on the media market?
A: I am dependent on them in a way so I would rather not make comments about their work. At the same time, I don't have that much contact with them. Obviously, I don't like certain elements (of their work). For instance, introducing censorship on broadcasters for running certain programs. And there are no clear criteria according to which the council evaluates programs. Putting Donald Duck through the wringer once results in no fine, but if you show it several times you are punished. It's this kind of criteria. So what you get is a situation in which everyone can be punished or acquitted. I can't accept that. Anything can be regarded as harmful to children.
Q: Going back to the media market, do you think KRRiTV has managed to give some structure to it?
A: Everybody knows that Telewizja Polska (TVP), the public broadcaster, has a better position (on the market). The state permits TVP to earn revenue from both subscriptions and ads. I call that preferential (treatment). So, TVP can do whatever it likes in this (ad market) and a public medium shouldn't be able to do that. I think that TVP should implement its mission and commercial stations should have access to ad sales and try to live on them. Otherwise, TVP will never really become public. By living on ad sales it will be commercial. TVP still holds a monopoly on the market. Having two channels, TVP1 and TVP2, and regional programs, it's able to run all ads available in this country. They can dictate conditions, lower or raise prices. Recently, they significantly lowered the prices of their ad time, which caused a drain on ads from other commercial stations.
Q: But it wasn't TVP that impressed advertisers last year, it was TVN that started to compete with the most powerful players on the market. Doesn't your recent programming prove that it's TVN you're really competing with?
A: The world hasn't stopped. We can see what's going on somewhere else and since reality shows have been very popular lately why shouldn't we do it? If someone launches a program it's natural that some other station will follow him. It's how it works everywhere. The only question is who is first. But if you compare for instance TVP and TVN, you can also say that many programs run by TVN are similar to those run by TVP, especially in the case of game shows. So you can't come up with something new and expect others not to do it.
Q: But after you launched "Dwa Swiaty," your reality show, TVN announced they would take you to court.
A: That's true, but it doesn't matter. It's like banning me from running the news or a game show. It's one of a certain series of programs and not the same program. "Big Brother" and "Dwa Swiaty" are totally different programs, although they stem from the same kind of program. So I am not afraid of any legal action against us.
Q: How would you use a financial injection if Polsat goes public?
A: But we're coping as we are. We still don't have those kinds of needs. Money, which you take from the outside, costs, so there is a question whether to take credit, find a strategic investor or go public. It will depend on talks with partners. If it turns out that we can cope on our own, we will go public and finance our operations this way. If not, then we will consider whether it won't be better for Polsat to find some foreign investor.
Q: So when could Polsat go public?
A: We are still preparing ourselves but I hope it will be possible this year. The fourth quarter of 2001 at the earliest.
Q: Is there a chance that Polsat could join the platform resulting from the merger of Wizja TV and Cyfra+?
A: If the other side expresses such a will, we were ready from the very beginning.
