Ambition Can Be Boundless, Just Like In The Movies

Michael Hedges May 16, 2016 Follow on Twitter

Owning and operating a media organization is a tough slog in the digital age. There have been dropouts despite the alluring promise of fame, fortune and show business. For every one seeking escape new media operators spring up, plenty of them. Not all have the same aspirations. And we know who they are.

It’s “another step toward total media war,” wrote nol.hu (May 13), after news surfaced of TV2 Media Group preparing for two new all-sports channels fitted out with the appropriate rights packages. Earlier last week Hungarian media watchers were taken aback – if not exactly shocked – at TV2 Media’s announcement of plans to bring several new TV channels to the market. That appeared to be a competitive broadside against dominant TV operator RTL Klub. The new sports channels, if they materialize, might upset pay-TV channels operated by AMC, cable operator Digi’s three sports channels, Eurosport’s two channels and State broadcaster MTVA’s new sports channel M4.

The media sector in Hungary has been on edge for years, watching and waiting for pressure from the government thumb. Insiders know everything and outsiders, including most media watchers, are left to figure it out. It, then, was little surprise that the annual Media Hungary conference last week attracted 1,900 participants hoping to learn what’s new.

The biggest news at Media Hungary last week, all things being relative, came from TV2 Media Group. Between six and ten new cable-delivered and digital channels will be launched this fall, said acquisitions chief Gábor Fischer, quoted by nol.hu (May 10), from food channel Chili TV and soap-opera channel Izaura TV to music channel Zenebutik TV and a children’s channel. Existing lifestyle channel FEM3 will be re-branded. “Amazing quantities of movies have been purchased,” said Mr. Fischer.

TV2 Media Group operates channels TV2, FEM3, Pro4 and SuperTV2. In January the company was officially acquired by Magyar Broadcasting, owned by Hollywood film producer and Hungarian Film Commissioner Andy Vajna. The stations were sold to investors when ProSiebenSat1.Media Group exited the Hungarian market in 2014.

The new channels will “rearrange” the Hungarian television market, said Mr. Fischer. In an oblique reference to market leader RTL Klub, he said channels leading the market for the “last fifteen years” will be challenged. TV2 also announced acquisition of talent-reality show Star Academy from Endemol Shine.

TV2 Media Group registered with the state trademark office the names TV2 Sport and TV2 Sport 2 for new television channels. Rights to English Premiere League and MotoGP are being sought, reported Népszabadság (May 13). After that, inside sources said, it’s the Formula 1 Series, rights held by M4 but currently up for renewal. Launch dates for the new sports channels remain quite vague.

In addition to producing several Rambo, Die Hard and Terminator shoot-em-up beat-em-up secondaries, Mr. Vajna has close ties with Hungarian Prime Minister Viktor Orban and is a supporter of the ruling Fidesz political party. He “has undertaken the project not of his own volition but (a) political mandate, success relying on whether sufficient money is put in by the State,” offered news portal 444.hu (May 1). As a Hollywood film producer he understands the value of OPM – Other People’s Money.

Though considered quite wealthy, Mr.Vajna financed the TV2 Media Group acquisition and with it the aggressive development plans with long and short-term loans, HUF18.3 billion (roughly €58 million), according to business daily Vilaggazdasag (May 13). Hungarian taxpayer’s largesse contributed through State-owned Export-Import Bank finding. Mr. Vajna’s expanding media portfolio is not limited to television. Also last week media regulator NMHH approved the takeover by his Radio Plus Kft. of a Budapest FM frequency formerly occupied by Roxy Radio.

As nothing happens in a vacuum, Hungary’s Competition Commission (Gazdasági Versenyhivatal) fined five media companies under anti-cartel rules last week, Mr.Vajna having interests in four. The ruling also excludes violators from participating in government procurement, reported hirtv.hu (May 13). The following day, last Tuesday May 10, the Hungarian Parliament passed an amendment voiding the exclusion.

Viacom Hungarian representative Witak Bartosz, at the Media Hungary conference, complained that the big State-backed loans distort competition. Viacom operates Hungarian versions of MTV, Viva and Nickelodeon and plans to bring Comedy Central. Distorting competition is but a mild description.

Since acquiring TV2 Media Group, itself lifting eyebrows, Mr. Vajna has made several personnel changes. One of the first was hiring on-the-beach former RTL Klub CEO Dirk Gerkins as CEO. Creative director Gergely Ökrös was bumped up to program director in February. Tabloid writer Vivien Szalai was named news director, after which one-third of the TV2 news department left.

The arrival of Mr.Gerkins to TV2 had been rumored for several months, contacts with Mr.Vajna begin, reportedly, shortly after his dismissal from RTL Klub. “It was time for a change,” said RTL Group Executive Vice President Regional Operations & Business Development CEE and Asia Andreas Rudas at the time. Mr.Rudas was immediately appointed RTL Klub interim CEO and remains in that position.

It was widely speculated at the time that the Hungarian government might roll-back an advertising revenue tax aimed at RTL Klub if RTL Group replaced Mr.Gerkins, seen as the the TV broadcaster’s “war chief.” That ad revenue tax was, indeed, rolled back, threats of European-level court action by RTL Group suitably attended. Bringing Mr.Gerkins into the expanding TV2 Media Group was encouraged by Prime Minister Orban’s media advisor Árpád Habony, reported nol.hu (May 6), because Mr.Gerkins “knows the secrets” at RTL. Mr.Gerkins had worked with the company for 15 years.

Advertising revenues in Hungary, stagnant at best, are less important to TV broadcasters than distribution fees collected from pay-TV and cable operators. RTL Klub, which operates eight channels, reportedly takes 50% of TV ad revenue. Other reports estimate 40% of print advertising is State-directed, largely to pro-government titles. In the midst, ad spending is racing into the digital realm, one estimate suggests only 30% remaining with traditional media. Authoritative and detailed reporting of ad spending in Hungary has never been available.

When things unraveled in Hungary, RTL Group offered Mr.Gerkins a job running its Africa development division, which he declined. Now he’s threatening to sue RTL Group for back compensation of HUF310 million (€1 million). RTL Group is, then, threatening to sue Mr.Gerkins for breach of contract and asking the same amount.

The recent flurry of activity certainly originated with the advertising business. RTL Group did not buckle under and neither did Lajos Simicska, owner of Hir TV, newspaper Magyar Nemzet and Lanchid Radio and, notably, outdoor advertising company Mahir Cityposter. Mr.Simicska was a Fidesz party founder, its chief financer and supporter of Mr.Orban.

Those relationships unraveled with the infamous ad revenue tax, which would have touched Mr.Simicska’s bottom line. Contention between he and Mr.Orban degenerated into rather colorful name-calling. Then the Budapest city council abruptly cancelled a kiosk and ad installation contract with Mahir Cityposter, ordering immediate removal. Needless to say, the editorial positions of Mr.Simicska’s media outlets are no longer reliably pro-government; hence, action – the more dramatic the better – requires an experienced producer.

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