This article comes from The Buzz Around the Ballot edition of Visegrad Insight 2/2017 devoted do media landscapes and disinformation in Central Europe. Read full contents page here.

The journalists of SME Daily, the biggest broadsheet Slovak newspaper, for years did their best to cover the corruption scandals in their country. One of them involved an alleged link between the country’s government and Penta Investment, a financial group operating throughout Central Eastern (CE) Europe – a charge that the company denies.

What was to the journalists surprise was when, in 2014, they found out that Penta had bought 45% of the stocks in the Petit Press publishing house which owns their newspaper. In an act of protest, 50 journalists, including the editorial board, left the paper.

“People from this company [Penta] were open about the fact that this acquisition was their ‘nuclear suitcase’. They did it to protect their interests,” says Tomaš Bella, one of the deputy editors of SME who left. “We did not want to work for them”.

Those leaving SME, which counted Mr Bella as one of the leaders, decided to set up their own publication – Dennik.N, where “N” stands for “nezavislost”, “independence”. To maintain it, they decided not to rely on funding from advertising and base their revenues on crowdfunding and subscriptions.

Three years later, in the relatively tiny Slovakia (5.3 m inhabitants), they have 23,000 active subscribers who pay a nominal monthly rate for the content they produce. In July, they made their first small profit.

Dennik.N is one of the new media projects that have emerged in CE Europe in recent years which have turned down advertising as the main source of funding. Instead, they choose to create variations of existing business models that rely more on communities around their media.

Data gathered by the World Association of Newspapers and News Publishers show that the vast majority of private news publishers still choose advertising as the main source of their revenues. But at the same time, 73% publish more sophisticated forms of promoted content, like brand or native advertising, and more than a half rely on alternative ways of funding, such as events, or reader-generated revenue in the form of subscriptions and crowdfunding.

Grzegorz Piechota, researcher at the University of Oxford and Harvard Business School, says that the main reason why media business models are changing is the fact that the previous paradigm which publishers have always relied on to earn money – via monetising advertisement – is not working as well as it used to.

Traditionally, while public media have been financially backed by governments and have never worried about money, private publishers have had to base their business models on advertising. But recently, that safe stream of money they had got from advertisers has changed direction towards internet platforms such as Facebook and Google.

Even though the Silicon Valley giants call themselves “technology companies”, in reality they have the same business model as many digital publishers – they aggregate audiences and monetise their attention with advertising. In 2016, Google and Facebook captured between 60% and 77% of all digital-advertising spent in the USA, and between 89% and 99% of the market’s total growth.

What is more, studies show that the share of money that goes to publishers is divided by various intermediaries who create complex digital advertising ecosystems, such as agencies or data providers. Out of every 1$ spent by an advertiser, a publisher receives on average 29 cents, according to the European Magazine Media Association.

PRINCIPLED CONSEQUENCES

Groups of interest can influence the media not only via acquisitions but also advertisement. If the biggest share of advertisement in a country comes from state-owned companies, then a government can easily pressure publishers not to produce content inconvenient for the party.

This is what happened to Gergő Saling, who was an editor-in-chief of Origo, one of the biggest Hungarian news portals. He got dismissed after he had published a story on alleged misuse of public funds by the head of the office of Victor Orban, the Hungarian Prime Minister.

“Every time we wrote something negative about the government’s politics, there was a pushback. The government put a lot of pressure on what we should and should not write. As a result, the whole political section left, and we decided to set up something new”, says Mr S.ling.

This is how they created Direkt36, an analysis portal with news from Hungary that focuses on what Mr Saling calls “hardcore journalism” – the one that requires a lot of research and investigation. “We knew we could not rely on advertisers, so we started to rely on people. Many of them heard of what happened in Origo and did not agree with it,” Mr Saling adds.

They get half of the funding from crowdfunding and the other half from private institutions, such as Open Society Foundations and Rockefeller Brothers Fund. “It is still vulnerable,” Mr Saling says. “All institutions have an agenda and they try to push for it. But it is nothing like the pressure of the politicians,” he adds. His next goal is to reduce the share of institutional funding in his project’s revenues from 50% to 30%.

Shrinking revenues and the increasing necessity to reach as many users as possible to improve advertising numbers usually cause a decrease in the quality of content. “They [publishers] invest more and more in mass and shallow content of mediocre quality, they do not compose anything unique,” says Michał Kreczmar, digital transformation director at PwC.

Consequently, the information that reaches the readers can be politically biased, unresearched or an incomplete picture. And the readers know it: only 46% of the Polish audience trusts the political messages in the media, according to a survey carried out for Press Club Poland.

In a world with open-access media, the more unreliable the content, the more readers are willing to pay for quality content. Some new media projects use that as a way to earn money: they promise the content of the highest quality, and in return they expect monthly subscriptions. The widely mentioned example is Polityka Insight, a Polish analytical publishing house, which offers daily analysis and briefing on business and politics to its clients, which is fully subscription-based.

Experts notice that this model can be tricky because the Visegrad market is limited. “It is different with media like the New York Times – they publish in English, so the client range is much wider. How many people would be willing to pay for content in Poland, in Polish? A few thousand, tops,” says Mr Kreczmar. That is why publishers in the region who decide to put their news behind the paywall, such as Polityka Insight, often decide to translate their content into English, to reach audiences abroad.

But there are also those who rely on money from readers, maintaining their content open to the wider public. Jakub Gornicki, the founder of Outriders, a new non-fiction project, says that access to quality content for everyone is a key to a well-educated society.

Outriders aims to tell interactive stories from all around the world: they already cooperate with foreign correspondents in Mexico and Ukraine and will soon include stories from the Middle East. The articles are translated into English as well.

They managed to gather what Mr Gornicki calls “funding capital” – 83 526 zł – to keep the project rolling on a Polish crowdfunding site, wspieram.to.

Taking a more long-term perspective, they want to keep the website free for readers. Instead of subscriptions, they wish to create a community around their project – they need 5,000 – 7,000 people who will voluntarily support their journalism. This is the aim they want to achieve in a maximum of three years.

Apart from the supporters’ money, Mr Gornicki is looking for funding via cooperation with various brands, the organisation of conferences and journalistic grants. He is also planning to set up another crowdfunding campaign – this time internationally.

Mr Gornicki says Outriders focuses on foreign reporting and features because what happens abroad often influences public debate in Poland. “For example, the refugee crisis that has been a very hot topic in Poland but in fact, the actual flow has bypassed the country,” he adds.

At the same time, the country’s media have been decreasing spending on international news and dismissing foreign correspondents. “We have to start to heal the media. I miss some rebellion, I miss journalists that rebel – a rebellion creates initiatives. And Outriders is one of them,” he says.

 

 

Zosia Wasik is a journalist based in Warsaw who previously worked for the Financial Times in Warsaw, London and Paris.

 

In cooperation with Heinrich-Böll-Stiftung e.V., Office Prague. The opinions expressed in the contributions are those of the authors and do not reflect the positions of the Heinrich-Böll-Stiftung.

 

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Zosia Wasik

Eastern European Futures

In 2009, the European Union and six of its Eastern neighbours launched the Eastern Partnership (EaP) with the stated aim of building a common area of shared democracy, prosperity, stability and increased cooperation. A decade on, however, progress has been mixed.

Visegrad Insight is published by the Res Publica Foundation. This special edition has been prepared in cooperation with the German Marshall Fund of the United States and supported by the International Visegrad Fund.

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