Piano: First figures, first disappointment?

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Piano as the method of paid internet media content was launched in Slovakia in May 2011 and marked a milestone, which had deserved vast media coverage and a lot of emotions. Since the media strategy of the company Piano Media, a.s. was that of not bringing out any particular figures, we had to wait until the said company's first financial statements were published. Now, the financial statements came to life, or more precisely, are available from the Collection of Documents of the District Court of Bratislava. And I could not miss this opportunity to sound the Piano out; I mean to take a closer look at it.

However, before I touch the figures, allow me to quote several statements of the Piano Media, a.s. representatives:

  • "Total revenues of Piano for the first month of operation exceeded EUR 40 thousand." (TS, 17 June 2011)
  • "A Bratislava-based IT company Monogram that cooperates with several media in the design/production of their websites, provided Piano with the investment of EUR 300 thousand." (Živé.sk, 30 September 2011)
  • Before launching the Piano, there was a plan to win 0.8 - 1.5 % of the internet population within a year. Bella has not changed the estimate so far. (Živé.sk, 29 November 2011)
  • The system of charging for selected content and services at the media websites - Piano - has been successful in Slovakia, claims Piano Media after nine months of operation in this country. (Živé.sk, 12 January 2012)
  • "The premium web system Piano in Slovakia yields a profit of 1.1 eurocent per user per month on average for the operators of involved websites." (Živé.sk, 16 March 2012)

Revenue of EUR 104,000 and loss of double of revenue.

Let us now check the real figures as per accounting books of Piano Media, a.s.:

  • Revenues for the period from March till December totalled EUR 103,998 (I assume the company in fact began to generate revenues only from the moment when Piano was actually launched, i.e. from May onwards);
  • Deferred income (i.e. the collected money, however relating to the following year) of EUR 37,524 (I suppose this is a paid yearly subscription or monthly subscription from December expiring in January 2012 or later);
  • For the accounting period under review, the company reported the loss of EUR 222,048;
  • The company has no software in accounting (i.e. the key asset is not recorded as an item in its accounting books);
  • The company reports an investment of EUR 215,000; this, however, has not been contributed through the increase of registered capital, but via other capital funds.

Isn't EUR 9,100 a month too little to operate the involved services?

But what can one derive and estimate from the above figures? First of all, we must name one prerequisite, namely that the revenues of Piano Media, a.s. involve all the subscriptions paid by the users.

If this is the case, I may conclude that the involved media which should have retained a 70% share on subscription gained EUR 72,799 for 8 months the Piano has been in business, on average EUR 9,100 a month. Meaning, more than 8 media and their services made part of the Piano were to be covered by the monthly amount of EUR 9,100. To illustrate the situation let us take Medialne.sk, which first locked the whole of its content behind the paywall (and thus relied on the Piano income). It is questionable whether Medialne.sk would have survived economically, had the whole of EUR 9,100 been allocated to run the said web only...

Subscribers in one-digit thousands, Bell's target a long way ahead

The second question is how many people have actually been using Piano and paid the subscription fee. The answer will be based on rough estimates; yet anyhow it may indicate the current situation of the Piano. To make the calculation simple, I will abstract away from corporate subscriptions having their own pricelist (still not so much different to significantly impact the estimates).

I guess that average monthly revenue per one subscription might range from EUR 2.01 to EUR 3.3 (both sums exclusive of VAT). The golden mean is the monthly access price of EUR 2.42 (EUR 2.9 incl. VAT). Given the revenue of EUR 103,998 and the estimated average monthly fee of EUR 2.42 I conclude there were 43,000 monthly subscriptions in total paid for 8 months of the Piano commercial operation, which means 5,400 subscriptions per month. Here it must be said that following the Piano's launch, its representatives informed that the Piano generated revenues totalling EUR 40,000 in its first month of operation. If I am to assume that this rocket rise to the market has been driven by users' interest to test the system and the majority of subscriptions were for one month only, then the average number of subscribers could drop down to 3,800 in the remaining 7 months. Imprecise as they may be, these estimates suggest that Tomáš Bella is still far away from hitting his goal to cover 0.8 - 1.5% of the internet population (i.e. of some 2,500,000 users).

Conclusion or the end...?

The beginning of Piano in Slovakia (despite strong media support especially by those media involved in it) seems to be economic- and operation-wise awkward. The question is what has to be changed to get the system of online pay-for-content in Slovakia operable and profitable. With respect to the life and circumstances here in Slovakia, system's incubator, it is rather likely that the paywall system for online media will either be switched off in some time or will transform into a rather less active form and find its future only in the markets where both users and media have a different attitude towards paying for a good quality content.


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