Political Parties Divvy Up National Broadcast Licenses

Michael Hedges October 29, 2009 - Follow on Twitter

The ugly side of politics and broadcasting has reared its head once again. Politicians see broadcasting licenses as fair game for political pay-offs. That everybody else loses is not their concern.

The Hungarian media regulator ORTT announced its decision on national radio licenses (October 28), dismissing incumbent licensees for politically connected newcomers. Slager Radio and Danubius Radio will cede their national licenses to FM1 Consortium and Advino, respectively. FM1 Consortium is aligned with the Hungarian Socialist Party (MSZP), Advino with the Hungarian Civic Union (Fidesz). The change-over, baring legal challenges, will take place November 19th.

The tender for the two national licenses was advertised last summer. Slager Radio and Danubius Radio sought renewal of existing concessions. Three other concerns also bid for the seven-year concessions.

Both the Slager Radio and Danubius Radio licenses had been renewed previously. Slager Radio, owned by Emmis International, was first licensed in 1997. Venture fund Accession Mezzanine Capital principally owns Danubius Radio with the European Bank for Reconstruction and Development (EBRD) as a minority shareholder. Both companies have made significant investment in the stations and are market leaders in audience and revenues.

The ORTT’s licensing process is part beauty contest and part auction. There is an annual fee, between €1.25 million and €2.5 million, plus a bid amount, expressed as a percentage of revenue. On top there are other considerations; Hungarian music content and public affairs programming commitments. Incumbency provides no advantage.

The national license tender had been scheduled for last year, the ORTT opting for repeated delays. The Media Law enacted by the Hungarian Parliament lifted a moratorium on frequency allocations and prevented existing licenses from being renewed. The Hungarian Constitutional Court ruled licensing provisions unconstitutional.

Slager Radio and Danubius Radio bid between 10% and 15% of revenue to secure license renewal, according to Emmis International President Paul Fiddick in an email (October 28). “At this level, we calculated that we would return at least half of our gross profit to the government in fees,” he explained.

The winning bidders both promised more than 50% of revenue plus the fixed annual fee. The decision, by appearances, was made on the money although one Budapest broadcaster not connected to the bidding called the financial promise “impossible.” Juventus Radio managing director Endre Laczko called the decision “pathetic,” quoted by MTI news agency (October 28), “lacking professional reasoning.” Both the Advenio and FM1 Consortium bids promised political talk formats replacing the music and news formats of the incumbents.

Others, closer to the process, agree. ORTT Chairman Laszlo Majtenyi, by statute not having a vote, argued against both the Advino and FM1 Consortium bids. At a press conference announcing the decision Majtenyi offered that the Advino bid “showed irregularities” and the FM1 bidder had no business plan. He said both should be excluded as “threatening to the radio business as a whole.” A Liberal party member of the ORTT board abstained from the vote. Through much of the process Hungarian President Laszlo Solyom and Prime Minister Gordon Bajnai remarked about the lack of transparency of the tender mechanism.

“I do not think this is the end,” said Mr. Majtenyi. “It is more likely the beginning of the scandal.” Reflecting further, Mr. Majtenyi said the national license awards were a “policy decision,” in an interview with public radio channel MR1 (October 29). Benefits to political parties, he said, are a “likely hypothesis.”  Lawsuits – and perhaps diplomatic discussions – are on the horizon. Mr. Majtenyi resigned from the ORTT the day after the decision was announced and refused to sign off on the new license awards.

Licensing is a sensitive subject. Commercial, private sector broadcasters are constantly aware that concessions are contracts; time marks all. Most make assumptions – and investments – based on fulfilling contractual obligations. Renewals are not taken lightly, regulators weigh many aspects. There is, however misguided, an assumption of fairness.

Ultimately – and unfortunately – a final decision in Hungary about its national radio licenses will rest with the courts. That expense is immense but pales in relationship to investments made. Today’s winners in the radio license contest – and their political allies - should take note of the costly mistake made in the Czech Republic when Central European Media Enterprises (CME) – in a similar grievance – took a case to the European Court of Justice and won €300 million. The result – aside from international embarrassment and a serious debit to State funds – was a change in legal structures.

A few years ago the European Broadcasting Union (EBU) sent a high-level team to lobby the Hungarian government for greater political and financial independence for the public broadcaster. Apparently they were successful. So successful that Hungary’s political parties see a need for their own media outlets.

But for the immediate, 60 employees at Slager Radio and 60 at Danubius Radio wonder what their work has come to. Others see a return to political control of broadcasting.

See also in ftm Knowledge

Media Laws – Rewrites Galore

If it seems that nearly every country as revised or rewritten media laws in the last five years it could be because nearly every country has…sometimes more than once…sometimes continually. Then new laws affecting media are proposed and debated just as quickly. From libel and defamation to privacy, licensing and copyright the ftm Knowledge file Media Laws – Rewrites Galore summarizes new laws and revised laws from a media perspective. 65 pages PDF (October 2009)

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