Central European media desperately lack a profitable business model that would allow them to survive without donations from their owners.

Unless you are Steve Jobs, you cannot force people to change their consumers’ behaviour against their will. However, even Steve Jobs failed miserably in the case of media. Until these days, no one was able to produce a universal and sustainable model of media financing in the digital age.

Steve Jobs

If legendary investor Marc Andreesen is right and software really consumes the world, newspapers were the breakfast. However, only profitable media can be free and independent in the long term. The lack of a sustainable economic model and vulnerability to various influences, therefore, are the Achilles heel of all traditional media that are striving to survive. And nowhere it is so clear as in Central Europe.

Polarised landscape

The media landscape in V4 is heavily impacted by the financial and subsequent media crises as well as the regional history of important foreign investments after the fall of the communist regimes. Despite the differences among countries, taking over media by local capital and financial groups can be traced in all of them. Naturally, the deepening polarisation of the political landscape and societies is reflected in the national media landscape.

A very good example of polarisation can be seen in the largest and economically most important Polish market. The market size is also the reason for the ongoing strong presence of foreign capital in the media sector, that has led the ruling Law and Justice party to ideas of capping their ownership, for instance to 20 per cent as in France. Especially the German capital is still present both in the press and digital platforms.

The most-read daily Fakt Gazeta Codzienna, the influential weekly Newsweek and a popular platform “Onet.pl” are owned by Ringier Axel Springer. Also, a group of opposition-leaning news and thematic channels, the TVN Group, is now in the hands of a US company.

Yet, several influential media, including second most read daily Super Express owned by ZPR Media, popular radio stations such as Eska and Vox, or the strongest commercial TV Polsat, are in Polish hands. Famous and currently the anti-government newspaper Gazeta Wyborcza, owned by Agora company, as well as Rzeczpospolita (Gremi Business Communication) and Dziennik Gazeta Prawna fall under this category. There are also several influential media owned by wealthy entrepreneurs with roots in the communist regime.

As for the television channels, Telewizja Polsat was established in the early nineties by Zygmunt Solorz, a former operative of Security Service, who also owns mobile operator Plus, energy and other media companies. Those outlets maintain a more or less neutral tone with leaning towards the ruling party. The TVN brand consisting of numerous channels has been established in the nineties by two people cooperating with the communist regime. First owned by ITI Group, then TVN Group, as of March 2018, is a subsidiary of Discovery Inc.

Needless to say, the state-owned TV is quite openly supporting the Polish government.

Changes in the media landscape that reflect the development of the political scene are witnessed also in Slovakia and Hungary. However, from the perspective of economic dependence, the Czech Republic can be seen as a pure example of the transition of the whole media landscape into the hands of local financial groups and interests.

It all started with… Bakala

The impact of the financial crisis has not been severe in Central Europe. Especially in the Czech Republic, many sectors defied the slowdown. Not the media. Before the crisis of 2008, the biggest Czech media outlets were owned by strong foreign investors. The important German publishing house Verlagsgruppe Handelsblatt owned the main economic publisher Economia with its flagships Hospodářské noviny daily and Ekonom weekly magazine.

Zdeněk Bakala

Despite the interest of several investors, Economia was sold to Zdeněk Bakala, an influential financier, whose wealth came from the privatisation of the OKD coal mines. A deal that made him later quite controversial.

Bakala already owned Respekt weekly magazine, closely linked to the dissident and anti-communist movement, but in a quite bad economic shape. All media assets were merged under one roof and Economia later acquired Centrum Holdings, one of the biggest Czech online portals with popular Aktuálně.cz news site. Bakala bought Respekt from Karel Schwarzenberg, with whom he was doing business. Schwarzenberg was also the founder and most important figure of the TOP09 political party, supported by Bakala.

Bakala’s acquisition of Economia marks an important milestone after a few minor and mostly unsuccessful media ventures of Czech businessmen. However, the biggest news bang has yet had to come. On 24 June 2013, the second most wealthy Czech (and most wealthy Slovak by birth) Andrej Babiš announced on his Twitter account “Tomorrow, I’ll probably buy something.”

A famous sentence became a meme in quite a short time, but almost everyone expected that an experienced businessman made a deal to buy local assets of Ringier Axel Springer including profitable tabloid Blesk. One day later and to a surprise of many, Babiš’ company Agrofert (mostly focused on agriculture and chemistry) announced the acquisition of Mafra publishing house from the German owner Rheinisch-Bergische Verlagsgesellschaft.

It included two of the most influential investigative and political newspapers, MF DNES and Lidové noviny. As Babiš was already quite sound regarding his political ambitions as a leader of the new ANO 2011 party, the deal was heavily criticised. Babiš himself became Deputy Prime Minister, Minister of Finance and finally, the Prime Minister of the Czech Republic. He was later forced to abandon his media ownership (and the whole Agrofert holding by vesting its shares into non-blind trust) by means of a newly adopted law.

The Czech Ringier Axel Springer was later acquired by a business consortium led by Daniel Křetínský, a young financier focusing primarily on the energy sector. This deal was overshadowed by a political fight around Babiš and Mafra but marked another and from the long-term economic perspective maybe even more important milestone.

Křetínský started his career in influential Czecho-Slovak J&T Financial Group and later joined forces with the wealthiest Czech businessman Petr Kellner and his PPF Group. In a quite interesting twist, Křetínský admitted to having a relationship with Kellner’s daughter Anna.

“Nuclear briefcase”

Besides rather minor ventures, the PPF Group itself has constrained from the direct influence on media for a very long time. However, many companies owned by PPF such as O2 mobile operator, HomeCredit finance, or AirBank belong to the biggest advertisers on the shrinking Czech media market.

Petr Kellner

Kellner has focused on the more influential and also profitable business in commercial TV broadcasting. In the 2000s, PPF owned a stake in TV Nova, largest and most influential channel. One of the PPF top-managers became its general director and later became a general director of Czech public television.

Kellner’s O2 mobile operator started its own sport-oriented cable TV and the group unsuccessfully tried to acquire the largest TV in Bulgaria. The deal was rejected by local regulators. At the end of 2019, another milestone was reached, when PPF announced the acquisition of TV Nova.

Due to the group’s large portion of business in China and close relations with Chinese politicians, it is seen as the most influential proponent of Chinese communist party politics in Central Europe and its official entrance to the media market has been therefore heavily criticised. Even more interestingly, given the family relations between Mr Kellner and Mr Křetínský, the whole spectrum of most popular commercial media is currently under “one roof.”

All the financial groups and businessmen always and very angrily denied any allegations of direct or indirect influence on media. After the acquisition of local newspapers publishing house Vltava Labe Press (from a German investor), Marek Dospiva of the Penta financial group stated that media ownership in the Czech Republic is a kind of “nuclear briefcase”. Some type of deterrence of last resort among the wealthiest businessmen in Central Europe.

In the end, all influential private media in the Czech Republic are owned by large financial groups belonging to the wealthiest businessmen. Even former communist party official newspaper Rudé Právo (just Právo today) and its online version are co-owned by internet billionaire Ivo Lukačovič, founder of Seznam.cz, local search engine still fighting the Google dominance. Newly established media are mostly supported as anti-governmental by different business groups even directly or through foundations. As of today, there are no important Czech media backed by independent foreign capital without political interest in the country or region.

The Czech Republic, therefore, becomes a sandbox of media ownership by local entrepreneurs whose wealth and power mostly originate in the privatisation of state companies in the nineties and subsequent deals. It is undoubtedly the outcome of low or very often even negative profitability of most publishing houses.

Foreign and independent investors such as private equity funds became uninterested in the whole industry. Also, no media outlet is listed on the Prague stock exchange. Especially the newspapers are quite often heavily subsidised by their owners and fight to the death for the rest of advertising money on the market.

As a consequence, the so-called Chinese wall protecting the newsrooms is often pierced by the economic pressure also from important advertisers. The open criticism of large automotive companies, banks, or even mobile operators is quite rare.

Digital cure

The outcome is that trust in media among the Czech population is falling with disastrous consequences for public debate and, in the end, for the state of Czech democracy. The most-trusted of them, the Czech public TV and radio, ranks as trustworthy among half of the population and less than half for those aged older than 50. Also, less than 40 per cent of people can easily find media and news they can trust, according to a recent poll by the agency STEM. Similarly pessimistic seems to be the polls showing media literacy among the Czech population that is in general quite low across all demographic groups. Only one-quarter of them is able to recognise the objectivity of an article.

According to the Czech Atlas project by the Behavio independent research company, 71 per cent of the population looks for news in online media, in comparison to 38 per cent for printed newspapers and magazines. Not surprisingly, traditional publications are still popular among the upper-class with higher education and income.

The majority of the market is moving towards the digital space and Czech publishers have not been able to cope with this crucial transformation. This is the main reason for economy-driven changes in the ownership structure and hidden concentration of media power in the hands of few.

It can be broken only by sudden innovations that would result in working economic models of monetisation for different types of content. This means not just relying on simple paywalls which have proved not to be working in a relatively small language-cornered market. The media need to use new economic models to better plan and budget content creation, eventually a new digital media outlet may be founded drawing on new approaches.

There is undoubtedly a huge market for professional journalism and digital media in Central Europe, yet as of now, traditional outlets were using misplaced and obsolete economic models with catastrophic results. If the independent media want to survive, the whole industry needs to focus on customers and persuade them that “tomorrow, you’ll buy something!”

 

This article is part of the #DemocraCE project. A Slovak version of this article appeared in SME.

*Disclaimer: The text was amended on 9 March to insert corrected polling numbers regarding public trust in Czech media.

#DemocraCE Fellow. Jan Klesla is the Director of the Institute for Digital Economy (IDE) and a former economics reporter, editor and commentator. He has focused on the digital economy, particularly investments and regulations in the area of the technological disruption of traditional industries. Currently, he externally advises the Czech government on issues of digital transformation and AI specifically, and is one of the co-authors of the National Artificial Intelligence Strategy.


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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