Bulsatcom has bounced back after a period of financial instability and remains a leading provider of pay-TV and broadband services in Bulgaria. How was this recovery achieved?
The team was pivotal. Jointly with the investors’ group, we managed to recruit a leadership team of top industry experts – Bulgarians with a proven track record both internationally and locally. The management team engaged immediately with the present employees of the company, on all levels, to listen, to communicate, to set a common language. We managed to swiftly align internally and agreed on a mission. We promoted transparency and fairness. Endorsed a culture of speaking-up. This approach was instrumental in transforming the internal mindset, from the” friends & relatives” organisational set-up we encountered, to a proper enterprise culture, capable to sustain change and growth. Bulsatcom had been a family-run business, deprived of the opportunity to evolve organisationally, in line with its growing market dominance. The old organisational dynamic, in fact, had its positive side as well. We stepped into a company abundant of loyal, dedicated and hard-working employees, who were deeply invested in the Bulsatcom brand. Despite the difficulties they had had to endure, they found the energy to help us recover the company to its best state.
We explored thoroughly what the organic DNA of the company was. We then invested all our efforts in strengthening the core services, the ones in which we exceled. Bulsatcom delivers news, live sport, drama, documentaries, music, educational content, etc., to more than 2,000,000 Bulgarians. In many cases we are the households’ sole access to entertainment, especially in the country. To the Bulgarian diaspora abroad, we are the link to home. Our brand carries deep emotional connection with our clients, they trust us to keep them entertained and connected to the World.
Bulsatcom’s media and entertainment DNA was what we chose to use as grounds for our future strategy – to enhance our capabilities of aggregating and delivering high-quality video entertainment to the Bulgarian households. We reinvented our self-produced movie channels and established a strategic partnership with a polythematic/publicity channel, promoting the freedom of speech and high-standards journalism. We launched a channel, particularly dedicated to the high-quality broadcast of local sports. Bulsatcom had a strong brand association with the distribution of sports. It had been the first operator to distribute F1, ATP and premium soccer in Bulgaria during the first decade of this century. Sport-rights exclusivities are not a thing in Bulgaria, where the premium sports packages are distributed via all large and medium operators. However, almost all of the sport-packages-generated cash had been leaving the country and not contributing to the development of the local sports ecosystem. We addressed this vacuum for a local sports entertainment product and our “b1b-box” channel has been rapidly attracting more and more eyeballs, and as an effect drawing more sponsors, willing to support Bulgarian sports.
What are the main challenges currently facing Bulsatcom and how can they be addressed?
Like the majority of the DTH operators around the world, we are challenged by the rapid growth of the ITV penetration. We invested in decoupling our TV and video entertainment services from their delivery networks. Bulgaria had been at its peak of DTH penetration for a while and in order to grow, we needed to diversify. Namely, we have been migrating our DTH clients to ITV platforms – our network-agnostic IPTV2.0 service with adaptive bitrate over Bulsatcom’s managed devices, streaming apps, as well as an AndroidTV-based “b-box”, serving our super-aggregation ambition. It is not an uncommon approach for DTH operators with well-positioned entertainment brands, to evolve to vMVPDs. We have agreed with our investors’ group, that the “Sky-like” approach is the better fit for the future Bulsatcom, rather than going into the “telco” direction. Still, we make some good use of our broadband network, reaching around 40% of the Bulgarian households, to deliver our ITV services, along with high-quality Internet.
Bulgaria has a particular market-specific problem, a historical one, that we call “grey market”. Currently a couple of hundred small and sometimes medium-sized pay-TV operators, service between 1000 and 50 000 households each, totalling at estimated 400 000 households or around 15% of the factual pay-TV market. They underreport their client base with 20% to 40% and therefore do not pay content distribution rights in full. Their lesser costs allow them to dump the larger operators’ prices, resulting in a price war. At their end, the telcos bundle the TV packages with telco services, allowing them to support extraordinarily low pricing as well, adding even more fuel to this endless price war. It is a “Catch-22” situation, leading to unrealistically low consumer prices and to perhaps the lowest pay-TV ARPU in Europe. No one benefits in the end, including the consumers, as for the low price eventually they get low quality content. We don’t see how this situation could resolve itself, unless the government or the regulator steps in. In fact, we are already in talks with representatives of the new Bulgarian government, sharing our experience and ideas on how this could be addressed.
How do you perceive the wider electronic communications market in Bulgaria? Are companies such as United Group, through their recent acquisitions of – amongst others Nova TV and BTC (Vivacom) – making a real difference?
Not enough time has passed to see any real difference. I am personally very curious on professional level what kind of synergies UG plans to achieve between the top broadcaster and the top telco in the country, two sister companies as of recently. There has been significant chatter, or even anxiety, especially in CEE, how politically powerful and therefore dangerous such a combination could be. From my professional perspective, such mergers are very interesting to monitor, not for their hypothetical political influence, but for pure economic reasons.
We are all aware that telcos in general have been heavily diversifying their businesses (a topic on its own) in the attempt to remain relevant services providers for the households and to avoid commoditisation. Advertisement revenues is the flow of funds in the industry that telcos, at least in the CEE region, have not necessarily been successful in reaching. Broadcasters are the gate-openers to advertisement revenues and we may soon see some interesting execution of smart advertisements projects in the region.
Do you expect the consolidation recently seen in Bulgaria to continue and will it benefit consumers through improved services, etc?
Price dumping, “suffocating” the small operators and then consolidating them, has been the approach in Bulgaria for larger players to deal with the “grey sector” challenge. UG has not been an exception. They have acquired and merged into Vivacom several of the mid-sized operators, that hopefully will lead to some normalisation in the competitive environment. The Covid-19 driven inflation, estimated at 7.8% in Bulgaria for 2021, combined with the price war I mentioned earlier, inevitably led to an unbearable economic situation in the sector. The top three telcos announced all-around price increases, averaging at 8-10%. At Bulsatcom we increased the prices as well, but only for new clients and the non-binding subscriptions. The recent consolidations, combined with the now adequate pricing, may be a good start for a growing sector of media and entertainment in Bulgaria.
Consolidation is not the only feasible approach to stabilize and develop the Bulgarian market. As mentioned, it is the only approach seen to seemingly work so far, in tackling the “grey market”. However, it comes with the threat that, as a consequence, there may be no environment for small and medium sized businesses to operate. Segment that I personally find very important for any market and any industry. Smaller companies are typically better at innovation, when compared to large international telecommunication or pay-TV enterprises, where internal processes often eat up the innovation energy and you need to pass several board approvals for a simple product.
How popular are streaming services, both local and international, in Bulgaria and are any offered by Bulsatcom?
Bulgaria is behind the trends with regards to the consumption of streaming services. Perhaps the main reason is the size of the market and what RoI the global players would achieve when localising. For the past few years only HBO from the global players has been having a local service – HBO Go, being replaced by HBO MAX on March 8. I would assume that they have achieved up to 7-8% market share. Disney+ announced that this year they will enter into Bulgaria, along with other CEE markets. From what I understand, this news does not mean much. Only that Disney will remove the geo-blocking of the Disney+ service and will accept Bulgarian payment instruments for the subscription. I don’t see a statement in the announcement that the content will not be localised. Netflix “entered” Bulgaria and a hundred other countries, the same way, several years ago. Without a content library in the local language, localised adds, local partnerships, or local productions, it is questionable, from my perspective, whether a global player really enters into a market or just accepts more payments from more locations.
Here at Bulsatcom we believe that our future is one of partnering with global and local streaming platforms. Our strength is aggregation, distribution, curation of content. Our clients have been trusting us to aggregate and deliver high-quality home entertainment via the TV channels, and we believe nothing would change when we enable them to watch content on Netflix, Disney+, DAZN or some other global steaming service as a part of their monthly plan with Bulsatcom.
Additionally, let’s not forget that online services penetration in any market is limited by the level of penetration of online payment instruments. Therefore, it is not surprising that the global players have been open to local partnerships, in order to reach higher market penetration. We are looking forward to working with any streaming platform, when they are capable to deliver content that addresses our clients in Bulgarian.
Looking to the future, how would you like to see Bulsatcom develop in the next 3-5 years?
We have just launched a new multi-channel digital media portal “b.trend”. Over Instagram, Facebook and, within a week or so, on TikTok and Discord. With “b.trend” we address generations “X” and “Y”, with content recommendations, favourite series and movie playlists curated by celebrities and influencers. We publish news, promote and chat about innovation, curate hot topics from our industry. The goal is to connect these young people with Bulsatcom, not as a service provider, but as a cool, trendy, trustful source for video entertainment, ideas, lifestyle hacks. If we manage to enter into the life of these generations, then in 3-5 years, when they marry, have children, there is a high chance they will choose us as their home entertainment service provider. That’s how we want to see ourselves in 3-5 years. As the first-choice home entertainment platform in the households of the young Bulgarians.