Jan Cienski in Warsaw -

Poland has suffered a German invasion - this time by newspaper publishers - but so far the winner in the battle for readers is the local Polish media house Agora, which continues to dominate with its Gazeta Wyborcza daily. So much so that Agora has amassed an almost €300m war chest and is reputedly looking to buy the Polish financial news portal Bankier.pl for more than €38m.

It wasn't supposed to work out like that when Germany's Axel Springer stormed the Polish market. It first launched the Polish edition of Newsweek in 2001, and the magazine now occupies a solid second place among the weeklies. In 2004, Axel Springer began publishing the Fakt daily, a tabloid based on its German Bild tabloid that's long on bums, breasts and celebrities, but short on story length. Fakt is now the highest circulation daily in Poland, with about 520,000 copies sold.

In 2006, the German media company then took direct aim at Agora, launching the Dziennik daily, targeted squarely at the urban mid-market segment dominated by Gazeta Wyborcza.

Agora responded clumsily by launching a new paper called Nowy Dzien, but it was a misdirected jumble that failed to find many readers and was closed after only three months. The Polish publisher was also thrown on the ropes by Axel Springer's decision to launch Dziennik at PLN150 (€0.45), forcing Gazeta Wyborcza to reduce its newsstand price by PLN1 to match.

Agora's results took a beating in 2006, but last year the company bounced back. Gazeta Wyborcza has seen its readership remain steady at about 440,000, while Dziennik has seen its own sales numbers plunge from about 250,000 to around 160,000.

Politics of newspapers

A key part of its comeback was the ideological battle Gazeta Wyborcza waged against the previous right-wing government of Prime Minister Jaroslaw Kaczynski and his Law and Justice party. Gazeta Wyborcza was an unwavering opponent of Kaczynski and his often divisive methods, while Dziennik was first launched as a right-wing alternative to Gazeta Wyborcza that was in general sympathy with Kaczynski. As Kaczynski's rule descended into strife-torn farce, Dziennik shifted its editorial line, eventually joining the ranks of Kaczynski's opponents. But Gazeta Wyborcza was already occupying the anti-Kaczynski terrain and Dziennik's change of political hue ended up alienating its more conservative readers.

Gazeta Wyborcza traces its history to 1989, when it was the election gazette of the Solidarity movement during the first semi-free elections against the communists, an election in which the Party was trounced, thanks in no small part to the campaign waged by the newspaper and its editor, Adam Michnik. That helped give it a street credibility that the German-owned Dziennik was unable to gain, especially when Kaczynski started to question its pedigree after Dziennik turned against him.

On top of that, Gazeta Wyborcza owner Agora managed to claw back some of the money it had lost due to lowering its newsstand price by coming up with a system of bundling books, movies and other promotions with the newspaper for a higher price, pushing up newsstand revenue by over 50% last year. As a result, more than two years after the German onslaught, Gazeta Wyborcza remains by far the leader in the Polish advertising market, controlling about 41% of all newspaper advertising spending. By contrast Fakt and Dziennik each have only about 13% of the advertising market.

Gazeta Wyborcza has also been unruffled by a second German challenge, this one from Verlagsgruppe Passau, a big player in Poland's regional press, which late last year launched the Polska daily. Polska is a cooperative enterprise of the regional papers, and has a circulation of about 350,000, about half of what had been predicted at launch.

A triumphant Marek Sowa, Agora's CEO, called his German rivals "bloodied" by the fight against Gazeta Wyborcza and proclaimed that: "I don't see why we shouldn't be able to deal with them. We aren't the ones bleeding now."

Agora's revenues came to PLN1.3bn (€380m) last year, up 12.2%, while profits rose by 213% to PLN100m. Gazeta Wyborcza was responsible for about 70% of that result.

Now that he has gained some breathing room over the Germans, Sowa plans to quickly diversify Agora so that the group will be less reliant on Gazeta Wyborcza for its profits. He has a war chest of about PLN1bn to expand Agora's reach in magazines, outdoor advertising and especially the internet and television, with the intention that they will generate more than half of the group's profits within three years. "I want to shift the emphasis of the group to areas growing faster than the paid circulation newspaper," Sowa said.

Indeed, on April 16, the Czech-based brokerage Wood & Company claimed following a meeting with Agora's management that the Polish firm is considering acquiring Polish financial news portal Bankier.pl. Agora is "looking closely at Bankier.pl financial portal as target," Wood & Co. wrote in a report. "Sounded like there's a lot of interest in it and the price for this asset... could exceed estimates of PLN130m."

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