In December 2013, just before Christmas, an official announcement confirmed what had been previously rumoured for months. The German television channel ProSiebenSat1 sold its Hungarian subsidiary, the MTM-SBS Ltd., which owns TV2, Hungary's second largest commercial television channel. The transaction is mired in a number of odd circumstances, however. By Ágnes Urbán.

It is unusual for one of the country's major media corporations to be sold just three days before Christmas, not to mention on a weekend. But rumours of a pending sale have abounded for a while now. Already back in autumn market players claimed to have information about the conclusion of the deal, and the press, too, had reported on various potential scenarios involving the sale of TV2. What no one anticipated, however, was that MTM-SBS Ltd., which operates TV2, would be bought by the company's own general manager, Zsolt Simon, and its financial director, Yvonne Dederick. Moreover, the deal is based on a rather peculiar business construct: the buyers receive a so-called vendor loan from the seller, in others words ProSiebenSat1 extends a credit to those acquiring TV2, allowing them to pay the purchasing price later.

TV2 has been present in the Hungarian market since 1997 and is currently Hungary's second largest commercial television channel. It has been lagging behind market leader RTL Klub in terms of its audience share for years now, though both channels have been struggling with a declining trend in viewership. The main reason underlying this development is that as cable, satellite and later IPTV and digital terrestrial broadcasting have expanded, the share of multichannel households has been growing as well, with a corresponding decline in the audience shares of the two national commercial television channels.

Despite its declining audience, TV2's daily news show, Tények(Facts), and its weekly public affairs magazine, Napló (Diary), continue to have a wide reach and serve as important sources of information for many citizens. The editorial practices of TV2's news show have been palpably leaning towards the government parties for a while now. A joint analysis by Mertek and Publicus on the Hungarian news shows demonstrated that TV2 is rather partial to the governing parties. Even the media authority's relevant study showed that representatives of the ruling parties' receive some 86% of the total time allotted to politicians' comments in TV2's Tények.

In addition to such rather peculiar editorial practices, there are also some other signs which indicate that TV2 is close to the incumbent government. Based on press reports it is widely known that CEO Zsolt Simon is partial to the larger governing party, Fidesz. The bookshop he jointly owns with his wife even served as a venue for collecting the signatures that Fidesz needed to qualify for the previous election. In another striking development, an earlier advertising market analysis by Mertek revealed that TV2 was one of the major beneficiaries of state advertising expenditures. Even though in terms of its television market share TV2 is solidly stuck in the No. 2 spot behind RTL Klub, but anyhow, state advertisers prefer TV2, which is obviously a major competitive advantage in a market that otherwise suffers from declining revenues.

An analysis of Kantar Media’s list prices allows us to track how TV2’s and RTL Klub’s respective positions changed in terms of their income from state advertising spending. There was no obvious trend in the past six years. Indeed, the spending by public advertisers in the television market has fluctuated substantially in this period. What is nevertheless clearly apparent is that starting in 2012, a striking gap has emerged in favour of TV2 – more than half the television money spent by public advertisers since then has ended up with TV2.

State advertisers play a relatively minor role in the total budget of commercial television channels. Nonetheless, in light of the economic situation, as well as the fact that Hungary has to date failed to completely overcome the 2008 economic crisis – which has led to a concomitant decline in media market revenues that have dropped successively from year to year – it is worthwhile to compare the annual revenues of the two commercial television channels. Two things are nevertheless apparent: both companies have suffered from continually declining income since 2008, and that MTM-SBS Ltd. (TV2) is second to Magyar RTL Ltd. (RTL Klub).

Mertek has previously written about the pending sale of TV2. At the time, we considered that a media group close to the government, specifically Infocenter, would be the buyer. When the government first publicly hinted at introducing an advertising tax, this intention was already liable to be interpreted as an act to facilitate the position of domestic buyers of TV2, to scare off their potential foreign rivals (especially the Modern Times Group) and dissuade them from investing in the domestic media market. Whether this indeed facilitated the deal that was recently finalised is a matter of interpretation. Regardless, the general manager and the financial director have ended up buying the company, and it is abundantly clear that there are other actors behind the acquisition.

There is little reason to anticipate any growth in the Hungarian media market. Revenues have declined continually since 2008, and MTM-SBS Ltd. has been in the red for years now. There appear to be very little grounds for ProSiebenSat1 to expect that two private persons would be capable of actually paying the purchasing price; but in any case, they would hardly be able to do so by relying on income generated from TV2 itself. The most relevant and intriguing question now is whether we will ever learn the identity of the real stakeholders behind the new ownership arrangement. The legal status of the company that controls TV2, the MTM-SBS Televízió Ltd., has changed with the digital switchover that was concluded on 31 October. Its previous broadcasting agreement with the state has ceased to apply. As a result of the digital switchover, a new legal regime applies to providers: from here on out TV2 is a national linear media service that operates based on registering with the authorities. Though it is theoretically subject to transparency provisions, it is far from clear how resolutely the Media Council will attempt to disclose the real ownership arrangements. Though the Hungarian Competition Authority (Gazdasági Versenyhivatal) will have to be informed about ownership structures, it is by no means certain whether the complex corporate web of ownership chains that connects the different parts of Fidesz’ media empire will allow for unravelling the underlying intertwinements. It should thus be easy to manage the entire change of ownership without the public ever finding out who is behind the commercial television channel with the second largest audience share in Hungary.

Since we cannot predict the future, we cannot fathom what impact the change in ownership will ultimately have. On our end, we will continue to monitor how TV2 operates in the Hungarian media market. How and whether TV2 will become even more distorted, and what role it will play in the coming election campaign, is at least as exciting as the question how the actors in the advertising market will react to the fact that one of the most important advertising channels has de facto become politically aligned. We are obviously not naive and do not for a second wish to suggest that the Hungarian media market has thus far operated wholly on a market basis. We know full well that market players have been subject to direct and indirect political pressure. We have also repeatedly written about state capture. Yet the acquisition of TV2 marks a new milestone in Fidesz’ media policies. The governing party already controls the country’s only free daily newspaper, Metropol; thanks to the media authority a radio station in its sphere of interest, Class FM, enjoys a monopoly position in the national commercial radio market; and now TV2 will become part of the governing party’s unofficial media empire.

Author:  Ágnes Urbán

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The Mertek Media Monitor is a watchdog organisation and think tank. Its aim is to evaluate the impacts of media laws and other media policy decisions, and to publish the results on international level.