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November 18, 2011
TV Polsat, the Polish free-to-air broadcaster, reported TV net advertising revenues (NAR) growth of one per cent year-on-year in Q3 2011 to PLN 170m (€38m). Main competitor TVN Group ended the quarter with a two per cent increase of TV NAR to PLN 230m. The overall Polish TV advertising market declined by one per cent in the same period.
Cyfrowy Polsat, the pay TV group, had acquired free-to-air broadcaster TV Polsat in April 2011. As a result, its revenues grew by 69 per cent year-on-year in Q3 2011 to PLN616m. This is also reflected in the 89 per cent EBIDTA growth to PLN 196m. Cyfrowy Polsat ended the quarter with losses of PLN 62m.
TVN Group also noted an increase of total revenues; from PLN 533m in Q3 2010 to PLN 566m this year. TVN Group's EBIDTA grew by six per cent year-on-year to PLN 107m. As a result of unrealized foreign exchange of Eurobonds, net loss in Q3 2011 reached PLN 415m, while in the corresponding period last year reported losses reached PLN 32m.
TVN Group's total advertising revenues accounted for 53 per cent of total revenues in Q3 2011. Of these, TV NAR made up 45 per cent and an additional eight per cent came from online advertising. In the same period, TV NAR of TV Polsat contributed 28 per cent to Cyfrowy Polsat's total revenues.
As in most CEE countries, TV advertising in Poland plays a major role in the advertising media mix, having accounted for 48 per cent of total advertising revenues in 2010. IHS Screen Digest forecasts this market share to remain stable throughout the next five years.
National channels from public broadcasters TVP, TVN and Polsat are still the main source of Polish TV advertising revenue with an 81 per cent share of total TV NAR in 2010.
However, multichannel continues to increase its market share, as exemplified by TVN Q3 results. In 2010, thematic channels accounted for 19 per cent of TV Polish revenues. Between 2005 and 2010 they showed a CAGR of 33 per cent, compared to a CAGR of the national channel segment in the same period. By 2015, we expect multichannel to reach 27 per cent of total TV NAR in Poland.
However, despite the growth of multichannel advertising, incumbent broadcasters are working to reduce their dependency on TV advertising revenues, a strategy reaffirmed by TVN in their Q3 2011 conference call. This is remarkable considering that the leading commercial broadcasters in Poland, TVN and Polsat, already possess a diversified revenue structure in which pay TV features prominently. Such strategies are indications that the 'gold rush' in CEE TV advertising has come to an end. The period of strong growth in which questions about convergence with Western European markets on key indicators such as ad spend per capita seemed to be a temporal instead of a conditional question has been cut short by the recession and is unlikely to be reingnited.
Following growth of four per cent in H1, the deteriorating macro-economic framework has left its mark on Q3 performance as the TV ad market declined by one per cent. TVN and Polsat have indicated further market contractions in Q4, expecting total TV NAR to grow by low-single digit. Considering a likely influx of late money in December as advertisers want to spend their remaining budget last minute to discounted conditions, we therefore forecast full year growth of three per cent for the Polish net TV advertising market. Over the next five years, we expect only single-digit growth for the overall Polish TV advertising market, underperforming the pay TV market.
Beyond multichannel and pay TV, broadcasters are looking to the high-growth online advertising markets to bolster their revenues. TVN Group for instance, earned PLN 47m from online advertising in Q3 2011- an increase of 18 per cent year-on-year, showing the higher dynamics of online compared to the TV segment.
We expect online advertising in Poland to grow with a CAGR of 12 per cent between 2010 and 2015. Especially the online video segment is thriving with year-on-year growth of 195 per cent in 2010. While still being small with a market size of €8m, or 4.5 per cent of online display advertising, it is an ideal format to monetise broadcasters' premium and long-form content beyond the linear broadcast environment.
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