Though by no means the most dynamic market in Central and Eastern Europe, Hungary is certainly one of the most important. New Television Insider visited Budapest to gain some insights into the local TV industry by meeting four of its key players.
FiberNet
Warburg Pincus-backed FiberNet is the fourth largest cable operator in Hungary after Liberty Global’s UPC, Magyar Telekom’s Kábel TV and RCS/RDS’s Digi. According to its CEO György Kerékgyártó, it has a presence in 200 locations throughout the country and currently has 155,000 video, over 90,000 broadband internet and 20,000 VoIP subscribers.
He adds that FiberNet launched a digital TV service last year offering basic and EBS packages. Both high and low end ones, with the latter consisting of around 25 channels and competing with services offered by DTH platforms, will also be made available on it from this month.
Kerékgyártó believes that “competition in Hungary has become very intense for all platforms, with DTH gaining share quickly compared to cable.”
This is a far cry from the situation that existed up until late 2006, when cable enjoyed a “quasi monopoly situation”, with the only DTH service then available – UPC Direct – “in balance with the rest of the market” and offered by UPC “as a complementary product”.
However, the Romanian owned DTH platform Digi (a sister service of cable operator of the same name) then entered the market, offering a product at almost half the “equilibrium price” of other services. This resulted in a “market share war” in which it has fared extremely well, securing over 400,000 subscribers in three years.
Kerékgyártó says that a further escalation in this “war” took place with the launch of Magyar Telekom’s DTH platform T-Home Sat, now known as Sat TV, in late 2008. Given that the incumbent telco provides services to 2.8 million of Hungary’s 3.8 million households, it has found itself perfectly placed to offer satellite TV as a bundled product to telephony and internet subscribers, in doing so even undercutting Digi in double and triple play offers.
Kerékgyártó adds that although Hungary is also now served by a fourth DTH platform, Hello HD is a high end product and has made no real impact on the marketplace. He believes its subscriber total to only be around 3,000.
Commenting on FiberNet’s plans for the future, he says that it will “definitely” introduce a PVR product this year and is in fact currently sourcing set-top boxes.
Although the operator will also “probably look at HD”, he believes it is “not a mass marketable product yet in Hungary.” Indeed, there are at present fewer than 10 HD channels available in the country at present.
FiberNet may also consider introducing catch-up TV, if not this year than in 2011.
Kerékgyártó feels that the main issue currently faced by not only the Hungarian cable industry but its entire telecom market is that of growth potential. Nobody can see it returning to double digits, at least in the short to medium term, for a number of reasons.
The main one is competition, not just within cable (FiberNet, for instance, faces it from an overbuilt competitor on a third of its network) but also from DTH and IPTV. “This creates a situation where prices and margins start to erode”, combining with “the relative saturation of the video and telephony market and slowdown in broadband growth.”
In Kerékgyártó’s view, the most realistic outcome is a speeding up of consolidation in the cable industry, leading to the emergence of two main players. FiberNet aims to be a “key player” in the process, which will see small and medium sized operators become the main take-over targets.
Antenna Hungária
The national transmission company Antenna Hungária has maintained a presence in Hungary’s pay-TV market for a number of years through the MMDS service Antenna Digital. Offering 100 channels, some of which are in HD, to under 40,000 subscribers in Budapest and environs, it is nevertheless not high on its list of priorities.
What is, however, is the company’s FTA DTT service MinDigTV, launched in December 2008 alongside a pre-pay offer named Terra+. Despite difficult beginnings, or more specifically a lack of content, it has in recent months begun to find its feet in what is a highly competitive marketplace.
Andreas Tóth, Antenna Hungária’s head of communications, identifies the major turning points as being securing carriage of the national commercial stations RTL Klub and TV2 last May and HD versions of the two main public channels M1 and M2 in July. Euronews followed shortly afterwards, and the company is currently in discussions to hopefully launch what would be a Hungarian version of the news channel.
Today Antenna Hungária, which is backed by France’s TDF, offers seven FTA channels and three radio stations on MinDigTV and two pre-pay channels (the news-based Hir TV and ATV) on Terra+, split between two multiplexes (A and C). It also operates a trial DVB-H service, offering four public TV channels, Hir TV and ATV to a potential 15% of Budapest’s population, employing a third multiplex (B).
According to Tóth, there is around 30% spare capacity on multiplexes A and C that would ideally be filled with more FTA channels or a pay-TV package. However, neither is likely to happen – at least in the near future – for a number of reasons.
Firstly, the general environment for new FTA channels is far from healthy, with TV ad spend having tumbled by 15-20% in Hungary in 2009 following several years of average annual growth of 5-7%.
Secondly, the launch of new FTA channels is being hampered by deficiencies in Hungary’s archaic Media Law, passed in 1997. Although the country is likely to have a new government later this year, new legislation will require a two-thirds majority in parliament, which is always difficult to achieve.
Thirdly, there is a huge obstacle to adding more existing FTA channels to MinDigTV as cable and DTH platforms on which they are already carried will refuse to pay royalty fees.
Yet despite these difficulties, Antenna Hungária’s CEO is on record as saying that the company would like to extend its FTA and pay offer this year.
Although Hungary has fixed December 31, 2011 as its ASO date, Tóth believes there is still “no great clarity” about the transition process. RTL Klub and TV2, for instance, still have analogue licences that expire in mid-2012, and “if the government wants an earlier ASO it needs to discuss it with them.”
For Antenna Hungária, however, the road ahead seems somewhat clearer – at least in the case of its DTT platform. Figures due to be published by the company this week are expected to show that heavy promotion of its services since last autumn – it allocated HUF680 million (€2.5 million) for publicity in 2009 and expects to spend a similar amount this year – yielded very good results in the run-up to Christmas.
On the other hand, there are question marks hanging over the future of its trial DVB-H service. According to Tóth, “the problem is that we don’t want to deal with the distribution, marketing and service side (of a full DVB-H service). We just want to do technical operations (provide infrastructure)”.
Unfortunately, Hungary’s three mobile companies Vodafone, Pannon and T-Mobile have until now shown little interest in co-operating with Antenna Hungária on a DVB-H platform. Were they to change their mind, it would be on the basis of decisions made by their headquarters on an overall strategy for DVB-H, not just one affecting Hungary.
It is therefore perhaps not surprising that Antenna Hungária feels there is a “low chance” of launching a full DVB-H service in the near future.
Magyar Telekom
The incumbent telco Magyar Telekom has emerged as a key player in Hungary’s pay-TV industry since the launch of its DTH platform in Q4 2008. Having dropped the T-Home branding, its residential services are now known simply as Sat TV, IPTV and Kábel TV and have a combined subscriber total believed by New Television Insider to be in the region of 600,000.
Ida Sztahura, head of department, Consumer Marketing Directorate, T-Home Marketing Branch, says that the company operates three types of networks. Copper offers customers ADSL, VoIP, PSTN and IPTV; fibre IPTV, VoIP and fibre internet; and cable voice over cable, cable internet and analogue and digital TV.
However, this is something the customer does not need to understand, their interest being in the service on offer, along with the price.
She adds that, “the Hungarian market is interested in double and triple play services”. In the case of Magyar Telekom, its most popular triple play package currently costs HUF6,640 a month.
However, satellite packages are cheaper than analogue/digital cable or IPTV ones.
Although all three platforms offer HD channels, IPTV and cable (six each) currently provide more that DTH (three). The HD portfolio consists of Eurosport HD, Filmbox HD, National Geographic HD and History HD, along with M1 HD and M2 HD, though the latter two offer only a limited amount of HD content.
Although the company’s cable operation is well established and DTH platform surprisingly successful, Sztahura says “we believe in IPTV very much. (We) focus on IPTV because it offers so many new features.”
Despite being slow to get off the ground, the IPTV service now has over 60,000 subscribers. However, it can be received by a potential 700-800,000.
The only real competition it faces is from Invitel, though some 2-3 ISPs now also take Magyar Telekom’s wholesale offer and distribute it using their own brand names.
Commenting on the company’s DTH platform, Sztahura says that many of its customers have come from the rival services UPC and Digi, as well as from small cable operators.
Magyar Telekom’s cable operation has meanwhile deployed DOCSIS 3.0 to offer its subscribers broadband internet access at speeds of up to 80 Mbps.
Sztahura adds that TV remains the main driver in the industry and that customer retention in what is a very price sensitive market is a challenge for all players.
Chello Central Europe
Chello Central Europe is a business unit of Chellomedia, Liberty Global’s Europe-based content division. Headquartered in Budapest and with offices in six other CEE capitals, it has through a series of acquisitions since 2006 built up a portfolio of thematic channels that are distributed throughout the region.
Sport 1, for instance, is offered in Hungary, Romania, the Czech Republic and Slovakia, while Minimax is present in the same four countries, as well as in Serbia, Macedonia, Montenegro, Bosnia & Herzegovina and Moldova.
Commenting on the Hungarian market, Levente B. Málnay the general manager of Chello Central Europe, says that it is currently served by 86 local language channels, over 60 of which are researched by AGB. Those belonging to Chello “are fully localised, with video feeds created for the Hungarian market, and in the case of most of our products, local content is a very important feature.”
Sports 1, for instance, features the local premier football league, while Spektrum, the long established channel bought from HBO in 2008, “has some documentary series produced by us in Hungary.”
Málnay adds that, “in general, we believe that in the thematic market tailor-made products do have a future.” He is also of the view that the presence of other content companies – such as IKO Media, some of whose products compete with Chello Central Europe’s – “helps the thematic concept”, growing the audiences of such channels at the expense of classic channels.
What is more, although thematic channels find themselves competing for a relatively small portion of the TV ad pie – RTL Klub and TV2, Hungary’s leading TV stations, account for around 80% of the total – this is seen as an opportunity rather than obstacle by Chello Central Europe.
Málnay says that, following initial cuts that were brought about the economic crisis, he believes it to be “a fair and realistic assumption that budgets will be spent differently” and that by 2011 a “safe bet that thematic TV channels will be beneficiaries” of this change.
Commenting on Chello Central Europe’s plans for the future, he adds: “we now have 10 brands and we believe our next step is to make sure as many as possible are present in as many markets as possible.” He also says the company is “definitely examining” the possibility of adding HD channels to its portfolio.
Sport already features strongly in the portfolio through the complementary Sport 1 and Sport 2. It has since December also included Sport M, a channel specifically offering Hungarian sport and targeting Hungarian language speakers. It is already available in Hungary and will by the end of March also be offered to viewers outside the country, with interest in it having been expressed as far afield as the US and Canada.
There is at present only one other channel in Chello Central Europe’s portfolio – the movie-based Filmmúzeum – that is aimed at a Hungarian language audience.
Significantly, Chello Central Europe also represents The History Channel, Bloomberg, Hallmark Channel, BBC and movies 24 and other thematic channels. Its other interests include the ad sales representation agency At Media, which lists Viacom, Canal+ and Disney among its major clients; and Mojo Production, a film production company that has made content for both the proprietary TV Paprika, Filmmúzeum and Deko and for third parties.
Table
Chello Central Europe – Sports channel penetration
Channel Subscribers
Sport 1 Hungary 2.3m
Sport 2 Hungary 2.1m
Sport 1 Czech/Slovak 1.3m
Sport 1 Romania 2.1m
Total: 7.8m in four countries
Source: Chello Central Europe
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