Fidesz takeover of radio market in full swing

May 1, 2017

Karc FM, a new “community radio” station run by hard-core Fidesz supporter Ottó Gajdics.

Translation of Ferenc M. László’s article “Fidesz puts pressure on the airwaves: ‘His strident voice soared’,”  appearing in the April 13th, 2017 edition of liberal print weekly Magyar Narancs (pp. 19-21)

The Fidesz takeover of the radio market is in full swing. While Andy Vajna has netted half the country using a loophole in the law, Árpád Habony’s other friend has laid waste the advertising market. However, they have not managed to defuse the landmines left behind by Lajos Simicska.
We can now be more or less sure that in 2014 after his election victory (perhaps even before?) he laid plans for a radical restructuring of the ownership of Hungarian media, and the acquisition of the radio market was part of this. Despite this, after G-day – that is, 6 February 2015 – and because Simicska had no intention of “handing over” the media that were under his name despite numerous warnings, Fidesz still lost control of organs that were acquired or set up by the right wing before 2010. Adapting to the new situation, new plans were drawn up within the Fidesz party. According to our sources, they first wanted to substitute those media that Simicska had “taken with him”, and naturally to also wrench the leftovers from Simicska’s hands. Among these was the market-leading Class FM, whose broadcast frequency covers the whole country. From Fidesz’s point of view, the results in the radio market have so far been rather mixed.

With all this in mind, Századvég, which is under Árpád Habony’s sway, began to show an interest in Gazdasági Rádió after buying the financial paper Napi Gazdaság (see Magyar Narancs, 30 October, 2014), but the deal fell through. In the end, the financial broadcaster lost the wavelength it had been using for 11 years because the Media Council – comprising only Fidesz delegates – judged that it should go to Hang-Adás Kft, a company that had never run a radio station. It had earlier turned out that this firm was a Trojan Horse for the governing party: a few years earlier it had secured the right to the frequency used in Siófok, but in the end this was used by a broadcaster with ties to Fidesz. The same scenario played out in 2015 to 2016, when Hang-Adás won the 105.9 FM frequency used by Gazdasági Rádió, then before starting filed a request for a change of name. In this way Karc FM, which can be received in Budapest and its agglomeration, was born. The new editor-in-chief was the same Ottó Gajdics who had earlier run Lánchíd Rádió, and who, in February 2015, was the first to turn his back on Simicska. Among those given air time were Zsolt Bayer and István Lovás, a fervent supporter of the Russian president. The firm that had originally bid for the frequency was bought out in August 2016 by the publisher of Magyar Idők. Karc FM was intended to be a counterweight to Lánchíd Rádió, which is still owned by Simicska. It is not doing very well at the moment, with surveys indicating that Lánchíd – with a similar broadcasting range across the capital, and still in Simicska’s hands – had far more listeners at the end of last year than Karc, which languishes at the bottom of the list. It is useful however, for weakening Simicska’s talk radio station by poaching its editors and programme hosts.

A blow for Simicska: the war of attrition against Class FM

However, Simicska was unable to hold onto Class FM, which began broadcasting in November 2009 and until the end was the market leader with 2.5-2.7 million listeners. Class FM won the rights to a national frequency in 2009, and although Simicska was thought to be behind it, it was only in 2013 that the former party treasurer became the largest shareholder in the station’s operator, Advenio Zrt (see the section “Conceived in sin” for a reminder of the 2009 tender). State advertising went to the broadcaster between 2010 and 2014, and after its rival Neo FM went bust in 2012, Class FM remained as the only nationwide commercial radio station. Thanks to this, it reaped enormous profits, and according to the last available financial report, the owners took out dividends of 1.55 billion forints (USD 5 million) in 2015.

The broadcasting license expired on 19 November 2016, although according to the media law, it should have received a five-year extension, providing it had an impeccable record. That meant it had to transfer the fee for the frequency in good time and put in its request for an extension well in advance, while its programme hosts had to be careful not to make serious and repeated breaches of the media law, for example with respect to the rights of children. The station’s lawyers were at pains to ensure the law was followed to the letter: fees were promptly paid, the request was sent to the Media Council on 30 July. With regard to serious and repeated breaches of the media law, they were “lucky”: before the outbreak of war between Orbán and Simicska, the Media Council treated Class FM with kid gloves. In six years, it only sanctioned the broadcaster five times – in matters of little weight, mainly breaking rules on advertising – and not once did it establish a repeated breach of the law.

Fidesz, however, came up with the clever idea of using a magnifying glass to examine the station’s operations retrospectively: the media authority would surely find a reason to launch an investigation, and thereby block the extension of the radio station’s broadcasting licence. The authority did its job: the station was sanctioned as many times in the first six months of 2016 as in the previous six years altogether. According to the Media Council, the station committed five serious breaches of the rules governing the media, and three of these were repeated breaches.
In the end it was not for this reason that they took away Class FM’s frequency. On 1 August last year, the Media Council decided to re-evaluate its frequency management because “in the interest of reaching more listeners in the Hungarian provinces” a fresh tender would be required. The station’s lawyers believe there was a reason that there was no reference to the breaches of the law, namely that the law states that a negative ruling only counts once it is final and binding. According to the Media Council, this was the case in all five rulings as the party in question “took delivery” of the ruling. However, Class FM’s legal team argue the ruling is only binding if upheld by a court review, and that as of August the authority’s rulings had not been transferred to the judicial services. Consequently, if the authority relies only on these rulings, Class FM could have successfully challenged the decision on its right to use the frequency.

Moreover, Simicska came up with a last-minute surprise in the radio affair: on 17 May – that is, before the Media Council’s ruling – he sold Class FM to a mysterious American investor. The new majority owner of the broadcaster was an investor residing in Colorado named Michael McNutt, about whom all that was known was that he had worked for a lobbying firm in Vienna, representing the interests of American firms in Eastern Europe. The media world spent months guessing who was really behind McNutt, and what did they see in the moribund Class FM. In any event, McNutt did not invest much time and energy in the firm: he rarely showed up in Hungary, was constantly travelling and would check in by telephone from a Turkish airport or from Romania. He declared when he bought the station that he had the support of America’s largest radio company, Emmis Communications, which operates Sláger Rádió. But the hopes of the station’s employees were in vain, and the American firm never re-entered the Hungarian market. Within Fidesz, McNutt was considered to be a front man for Simicska, and the extension of Class FM’s contract never came about. Despite making a request last autumn, Class FM was never allocated a temporary broadcasting frequency, so the station’s directors decided to continue on the internet. Since then, 19 November 2016, its audience has largely disappeared, while last October McNutt was banned from running a firm because of a 300,000 forint tax default, thus he also found himself outside Advenio’s board of directors.

One thing came of Simicska’s calculations, however. After Sláger Rádió lost its frequency in 2009, he appointed the same American businessman to represent the media company in court in its case against the Hungarian state. Although in the end they lost – Danubius and Sláger never got back their broadcasting frequencies – McNutt fought continuously for years, and he is still fighting. Although the Media Council has prepared the frequency tender, Advenio is litigating against the rejection of its request for an extension, so the tender process could drag on for years. Consequently, however much they may have hoped inside Fidesz, they will not get hold of Class FM’s wavelength during this parliamentary term.

The third front: Vajna and Rádió1

Our sources tell us that when replanning the media market in 2014 and 2015, Orbán did not want to repeat the mistake of entrusting the right-wing media to a single person. He was reluctant to allow TV2 and the country’s biggest commercial radio station to fall into the same hands and, according to our sources, Habony and his business partner Tibor Győri were tasked with building up the new broadcaster. Government commissioner Andy Vajna told the newspaper Népszabadság in a January 2016 interview that he was not interested “for now” in the Class FM frequency, and his ambitions were for a smaller radio station targeting mainly a youth audience. And so it was: the coverage of the 96.4 FM frequency to which he won the rights in February 2016 and named djFM was considerably smaller than that of Music FM, transmitting from the capital over a radius of 100 kilometres and, not incidentally, owned by Simicska – but then the original aim was that the government commissioner should gain some radio experience. This would lend considerable weight to a bid in a future tender, and Music FM’s licence expires in two years.
Meanwhile, inside Fidesz they had already realised by last summer that acquiring the Class FM frequency would not be as easy as they thought, and an alternative, temporary solution was being sought. Firstly they began to reposition the music broadcaster Petőfi Rádió. The programme structure was redesigned, and the station’s mission to support quality domestic light music was abandoned. They hired programme presenters who had previously worked for commercial stations. Regardless of the written protests of several dozen famous musicians, Petőfi was relentlessly retuned. Fidesz sources tell us that there was just one reason for this: they wanted to catch those listeners who had lost their broadcaster when Class FM was shut down, so that million-strong audience would get their news, filtered and spun, via a public service broadcaster.

Conceived in sin

Although in the last few months Class FM’s directors suggested that the loss of their frequency marked a further weakening of press freedom in Hungary, the radio station was itself conceived in sin, securing Danubius’ wavelength in 2009 in scandalous circumstances. Politicians from the then-governing MSZP party and the opposition Fidesz had struck a back-room deal whereby the frequency permits of the foreign-owned Sláger and Danubius were extended via a legislative change. However, this law was scuppered at the end of 2008 by the president of the republic, László Sólyom, who insisted on a public tender. The then-media authority, the National Radio and Television Commission (ORTT), then wrote a tender with completely irrational conditions. They enabled bidders who agreed to pay half of their revenue to the state as a frequency fee to secure the highest number of points – in other words, they risked running at a loss in order to win the tender. As firms operating on market principles, Sláger and Danubius were unable to make such a bid, so their places were taken by the FIdesz-linked Class FM and Neo FM, a station with ties to the left. The president of the ORTT, László Majtényi, resigned in protest.

The new system of fee paying lasted a total of six months, because the new media authority, the Media Council, set about changing the contracts. In the end, the two stations got a significant break, but despite this Neo FM could not withstand the market competition: it received fewer and fewer state advertising contracts and went bust in 2012. According to our sources, the former Socialist Party treasurer László Puch repeatedly asked Fidesz to keep its side of the 2009 deal, only to be told that “the agreement did not apply to two-thirds”.

Bait

Not only are frequencies changing hands, Fidesz also wants to bring them under their supervision and nationalise audience measurement. This was originally overseen by the market: previously the Radio Media Providers Association (RAME) put the task out to tender. The tender was won in 2012 by TNS Hoffmann and the Mediameter consortium, while the radio stations put together the annual costs of 60 to 70 million forints. The former is a multinational company, while the latter was until 2014 owned by Nézőpont Intézet. On the eve of the war between Orbán and Simicska, Mediameter was acquired by a private individual, Bálint Hantosi, who had previously worked at the Fidesz party treasurer’s billboard company Mahir Cityposter.

The consortium’s contract ended in March last year. The idea came up in RAME that contracts could be extended without a tender, but this was torpedoed by the state-owned broadcasters (Petőfi, Kossuth, Bartók, and Dankó). Then last summer the media authority surprised the radio market by announcing that it was prepared to fund the measurement, and would put it out to tender. One observer of Fidesz’s media-building activities said there would be no scandal whoever wins, because the radio firms will be glad that they do not cover the costs of the audience measurement themselves. At the same time, information obtained by Magyar Narancs suggests this is the first element in a wide-ranging plan: over time, the media authority wants to use state funds to create a competitor to the television audience measurement firm Nielsen.
Secondly, they allowed Vajna to expand. At its launch, the station changed its name to Rádió1. (Rádió1 has since poached the stars of Class FM’s most popular programme, the Morning Show. This was not difficult: Balázs Sebestyén would not hear of working at an internet radio station with an uncertain future.) Another station had previously operated under this name, which in the interests of a wider reach had linked local broadcasters to its network. The media law allows for this on condition that the local provider puts four hours of its own content within its daily programming; the rest can be centrally transmitted shows. The network’s previous members had one by one lost their broadcasting frequencies following decisions by the Media Council, and so the previous Rádió1 came to an end. However, last October the authority permitted Vajna’s regional broadcaster to add another six local stations to its network, and thus cover a quarter of the country. At this point it became clear why the government commissioner had chose this name: he wants to restore the previous Rádió1 network.

In terms of linking to the network, in addition to the Budapest frequency, Vajna now has at his disposal the rights to a frequency in Győr, Miskolc, Szekszárd, Baja, Dunaföldvár, Heves, Balaton, Paks and Nyíregyháza. News website 444.hu reported last week that companies with no radio experience had appeared from nowhere to bid for frequencies, while the Media Council disqualifies on formal grounds bids from radio stations that want to renew their licenses. Local frequencies are currently being jostled for in Békéscsaba, Eger, Esztergom, Hajdúböszörmény, Hajdúnánás, Hajdúszoboszló, Nagykanizsa, and Velence.

In several towns, bids were submitted by a firm called LB Rádió, owned by two lawyers. Of Zsuzsanna Litter and Balázs Bíró, 444.hu wrote that they enjoy good relations with Csaba Belénessy, who was appointed head of the state news agency MTI in 2010 until his retirement two years later. Another firm has also popped up, the Budapest-based FW Kft, which deals with business consulting but wants to get into the radio business. Sources in the market say that in the future these firms will connect to the Rádió1 network. But preparations for tenders are ongoing in – inter alia – Tokaj, Telkibánya, Szolnok, Pécs, Dunaújváros and Székesfehérvár, while the media authority wants to mete out a new, hitherto unused frequency. We understand that almost all of these will be commercial wavelengths. If they all move in with Rádió1, according to one specialist in managing radio frequencies, Vajna’s coverage could reach 50-55%. By way of comparison, Class FM’s guaranteed coverage was 68%. Market players think the media authority is rushing things because no one knows how Fidesz will do in the 2018 election. The mandate of the Media Council’s members expires in 2019, and if Fidesz does not have a two-thirds majority in parliament, it will be forced to allow delegates from other parties into the body.

Magyar Narancs has learned that Vajna’s people had earlier approached the owners of one of the most popular commercial stations, Sláger Rádió, too. (This is not the same broadcaster as the Sláger Rádió that closed down in 2009, only the name is the same.) This would not only have served to expand his radio coverage: the broadcaster’s owner, the Romanian Radu Morar, also has three TV channels, and TV2 would have liked to acquire them in order to launch its new cable channels, since launching a completely new broadcaster with cable operators is complicated and expensive. The deal never came about, while Sláger FM finally threw in the towel. Even if it did not change hands, it contracted with trading houses selling advertising slots for public media and other local radio stations. Behind Radio Sales House Kft lies a company called Atmedia, which in recent years has cornered more than half of the television advertising market, and late last year changed hands with lightning speed (see Magyar Narancs, 12 January 2017). The firm was bought by András Tombor, a good friend of Árpád Habony and former adviser to Viktor Orbán. Magyar Nemzet reported the other day that, despite easing the pressure on Morar, Habony has not yet given up on acquiring Sláger FM.