Nervous moves on the Hungarian media market

The Hungarian advertising market is struggling, mainly due to the economic problems and growth of online media. And there is an on-going political fight over the media.

The Hungarian media market is changing very quickly. One of the reasons is the global shift of advertising expenditure to online media, as well as competitive struggles and political issues. The decline in Hungary’s GDP has affected the situation in the industry. According to the World Bank, its value reached USD138.3bn in 2014, whereas in 2008 it amounted to USD157.1bn.

This is why the Hungarian advertising market is struggling. In 2008 the total advertising expenditure reached HUF176bn (USD608m). In the following year, advertising expenditure collapsed to HUF143bn (USD494m). Up to 2014, the industry was not able to get back to the level recorded six years earlier. The Hungarian Advertising Association estimates that the previous record level was not reached in 2015 either, with advertising spending potentially amounting to HUF161bn (USD556m).

The profitability of the Hungarian media companies is even worse. In 2008, the profits of the top one hundred companies reached HUF19bn (USD65m), and they were not able to repeat this result until 2014. In the years 2009-13, the cumulative loss in this group reached HUF25bn (USD86m), so taking into account the period of 2009-2014, the industry was still in the red to the tune of HUF6bn (USD20m). The final data for 2015 is not yet available, but the profits of the Top 100 are estimated at HUF11bn (USD38m).

Newspapers are losing and the internet is gaining

The shift in the structure of advertising expenditure in favour of the internet is the most conspicuous of the changes. In 2008, the internet had a 10 per cent share in the advertising “cake”, and after seven years, in 2014 – already a 25 per cent share. The largest market losses were recorded by the press: daily newspapers, weeklies and monthlies. The reason for that lies in the outflow of readers who are quitting the printed press and moving to the web in search of information. The share of the printed press in advertising expenditure reached 34.5 per cent in 2008, but fell to only 18.2 per cent in 2014. The importance of television has also decreased: during the same period its share declined from 39 per cent to 26.3 per cent.

In light of this situation, we should consider the data on state expenditure associated with the media. In 2016, the Hungarian government will spend HUF135.5bn (USD468m) on the media controlled by it and on the advertising of its own actions in the media. To this amount we should add more than a dozen billion forints in respect of the advertising and sponsorship costs to be borne by the companies of the state treasury.

This year the state television and radio stations and the national press agency will cost Hungarian taxpayers exactly HUF77.7bn (USD268m). All these institutions are currently organized under the single umbrella of the so-called Media Services and Support Trust Fund (Médiaszolgáltatás-támogató és Vagyonkezelő Alap, MTVA). Thus they have lost their independence and integrity, which they had enjoyed since 1925, in the case of Hungarian radio, and even since 1880, taking into account the history of the Hungarian News Agency MTI, operating throughout this time period without interruption.

This year the sum of HUF32.3bn (USD111m) has been allocated for the operation of the National Media and Infocommunications Authority (Nemzeti Média- és Hírközlési Hatóság, NMHH), which manages the frequencies for radio and television stations, as well as for telecommunication. This body gained international notoriety in connection with its refusal to renew a license for the use of frequencies for Klubrádió, one of the few remaining radio stations opposing the government. The office did not execute the legally binding judgment of the court obliging it to grant the frequencies. In the end – after a struggle lasting several years – Klubrádió was able to continue its activities solely thanks to the intervention of European Comission, and sued NMHH for a multi-billion compensation for the lost advertising income. The Media Council (Médiatanács), which functions within the NMHH, keeping a register of the media and checking the contents of the programming for potential infringements of the laws regulating the media and advertising activity, costs the taxpayers nearly half a billion forints.

The government decides who gets the advertisements

In 2016, the government will allocate more than HUF25bn (USD86m) for the promotion of its own and government agencies activities in the media. In order to manage the spending of such a huge sum, a special central agency – the National Communications Office – was established in 2014. The head of the office singlehandedly decides which ministry or office or other public institution can advertise its activities, how much they can spend on advertising and which of the three selected agencies they can hire for that purpose, as well as where these ads are to be placed.

Of course in practice this means that the commissioning of advertising services is an instrument for the government to finance the favourable media. This is nothing new in Hungarian reality, as such practices also existed during the rule of the Socialists, who liked to place advertisements and government announcements in the newspapers which were favourable to them. The only novelty about the actions of Viktor Orbán’s government is the size of the support. During the reign of the Hungarian left, the press close to the Socialist Party received more public announcements than the media supporting Orbán at that time. However, „more” is different from „nothing at all”. After the election which Fidesz won, this practice has changed and now the opposition press gets virtually no ads from the Orbán government.

The degree of interference with the media market can be seen most clearly when we remove political emotions from the assessment. The independent media market research company Mérték Médiaelemző Műhely (Mérték Media Monitoring) claims in its latest report that structural politicization is the biggest problem of the Hungarian press. This applies not only to the political press, but also to the entertainment media and the commercial radio and television stations. The market has been distorted as a result of the dominance of the media controlled by the authorities and the allocation of spending used by the government for the promotion of its activities. The societal damage is mainly due to the fact that the „government” media do not reflect the Hungarian socio-political reality in its entirety.

This is reinforced by the practices of the control offices, favouring one political party. Mérték Media Monitoring quotes data according to which in 2008, during left-wing rule, the biggest number of government ads was published in three daily newspapers: Metropol (Fidesz supporters) – 12.8 per cent of the total amount of such expenditures, Népszabadság (the Socialists supporters) – 12.7 per cent and Magyar Nemzet (Fidesz supporters) – 7.4 per cent. The first three in 2012, that is during the reign of Viktor Orbán, were: Metropol (Fidesz supporters) – 49 per cent, Magyar Nemzet (Fidesz supporters) – 22.3 per cent, Magyar Hírlap (Fidesz supporters) – 5.5 per cent. The biggest national daily Nepszabadsag (the Socialists supporters) was ranked only fifth, with a share of 2.3 per cent. The data on television and radio ads, as well as tabloid newspaper ads, shows a similar practice.

Quarrels within the family

It is interesting to observe the reshuffles and sudden changes in the orientation of the media. Lajos Simicska, until recently a favourite of Orbán, is the owner of a media empire. In the span of several years, this billionaire has made a fortune on public contracts, and before becoming involved in big business, he spent some time as the treasurer of Fidesz. He headed Hungary’s internal revenue service during Orbán’s first government. He also financed Orbán during the years when Fidesz was in opposition. Until last year it had seemed that Simicska would be actively involved in completing the second reconstruction of the media market after the regime change in 1990, carried out for the benefit of Fidesz.

Last year, Viktor Orbán and Lajos Simicska, who was known up to then as the prime minister’s right-hand man, had a dramatic falling out. The business magnate insulted the prime minister with such vulgar invectives that the press – and not only those titles supporting Fidesz – refrained from quoting him for a long time. As a result, the process of dismantling Simicska’s empire and creating alternatives was launched. The Prime Minister’s struggles with his former friend, whom he had known since university times, have in a certain sense moved to the streets of Budapest. In recent days, the city authorities have been removing huge advertising pillars with the police assistance. The columns are owned by Simicska, but were erected on land leased for 25 years from the municipal government. Recently, however, the city hall has unilaterally terminated the lease agreement as economically disadvantageous to the city. The structures, dismantled and taken outside the city, are being brought right back to their previous location by Simicska’s crews. This is a source of entertainment for the Budapest residents. Although one does not need tickets to watch this scuffle, the costs of these „games” will inevitably appear in the city budget.

Simultaneously with the dismantling of Simicska’s empire, the Hungarian Prime Minister has already started building an alternative media empire with the help of new obedient entrepreneurs. It is led by the new pro-government journal Magyar Idők (Hungarian Times). The newspaper, however, has a very low circulation. At the same time, the viewership of the state television, which became an unpopular propaganda tool of the government and Fidesz, has decreased heavily. The authorities were not even helped by regulations pursuant to which all cable operators are legally obliged to place the state television channels at the top of the list.

A new television is needed

As a result, a demand emerged in the government camp for a television with high viewership ratings. For this purpose, the government used the instrument of expropriationary tax rates, which in practice only applied to one entity, in an attempt to force the sale of a Hungarian television station owned by the RTL Group to a person close to the Prime Minister. The Luxembourg-based company did not give in, changed its editorial policy and started criticizing the authorities in its daily news programmes, even though before that its news broadcasts were dominated by sensational material about two-headed calves, crime stories, or reports of natural disasters. The RTL Group also filed a complaint to the European Commission claiming that the only objective of the new tax was to ruin its company in Hungary.

The conflict was eventually resolved following negotiations with the Bertelsmann group, which owns RTL, and after information from Brussels that the European Union authorities were preparing to launch a procedure concerning the infringement of EU directives. The tax rates were changed and the government had to settle for another television station – second in terms of ratings but financially unprofitable – which was bought by Viktor Orbán’s new favourite, Andrew W. Vajna.

This billionaire is the owner of the Korda Film Studio operating in Hungary, a former Hollywood film producer, the current government commissioner for the state financing of motion pictures and the owner of almost all the Hungarian casinos. He is also ranked 7th on the list of the most influential Hungarians. The transaction was finalized, despite the fact that on the day on which it was announced Lajos Simicska declared that he had pre-emptive rights to the station based on the billions’ worth of loans which he granted to this company a few years ago. The dispute will soon continue in the court.

The next parliamentary elections in Hungary will take place in 2018, and so by the time of the nearest election campaign order is to prevail in the Hungarian media world. This means that Viktor Orbán’s camp is going to have an overwhelming media advantage over the rivals, such as the one it had in the elections of 2014, when in addition to the state media it was also supported by the most important newspapers and radio stations controlled by Simicska, who was still serving the Prime Minister then.

In conjunction with the changes in the electoral law that provided voting rights for a wider group of Hungarians from abroad and the redrawing of electoral districts, the advantage in the media allowed Fidesz to get 44 per cent of the votes back then, which was enough to win a two-thirds majority in the parliament. It should be noted that the electoral law has prohibited commercial television stations from receiving payment for the broadcast of election ads. As a result, such ads were not shown. In other media, the opposition had little or no possibilities at all. The current skirmishes on the media market are therefore not carried out by the government just for the sake of it. Instead, these are manoeuvres in preparation for the next great battle, which is supposed to be once again overwhelmingly victorious.