Central European media searches for key to independence

By bne IntelliNews November 20, 2014

Tim Gosling in Prague -


Journalists may be among the least trusted people on the planet, but they're still not as disliked as billionaires and politicians. That has seen Central Europeans rally round editorial teams as they jump from major newspapers that are being snapped up by the region’s oligarchs. Yet that support is unlikely to be enough to keep the myriad of new, independent media companies they're launching alive and kicking.

When Penta Group bought Slovakia’s respected largest daily SME in October, Editor in Chief Matus Kostolny and four deputies walked out. The murky Slovak financial group had clashed with the newspaper in recent years, in particular over its reporting of alleged corrupt deals that Penta made with senior government officials over the past decade. In trying to buy Sme through the acquisition of the Petit Press holding, the editorial team insisted Penta was not a financial investor but seeking political influence, and that would put editorial independence at risk.

By November 13, the former Sme team had launched a temporary website named Projekt-N, and says it plans to launch a full news site on January 1, 2015. There are also plans for a daily or weekly printed publication, its frequency to depend on the levels of investment and subscriptions they can raise.

The case made a big splash in Slovakia, and former SME deputy editor Tomas Bella told bne in the immediate aftermath of the walkout that the team knows it must move fast to tap into a wave of public support for independent journalism. "We're looking at different models to combine investors and paid readership," he reported.


It's a conundrum many are facing in the region. The crisis has seen losses piling up at media publishing companies in the small markets in Central and Eastern Europe. That has the international giants that moved in during privatisation in the 1990s selling out to powerful local business groups, and even politicians.

The highest profile case was the purchase in July last year of Mafra Group – publisher of several of the largest newspapers in the Czech Republic – by Andrej Babis. Owner of the country's largest employer Agrofert, the billionaire became finance minister in January at the head of his own political party ANO, and is viewed as increasing his power on an almost daily basis.

However, many other titles in Slovakia, the Czech Republic and elsewhere in the region have seen similar changes of ownership. That has seen editorial teams walking out one after another to form new ventures. Now they face difficult decisions to find the investment and business models that can sustain independence, even as the global media industry struggles to adapt to new realities.

While projects across the region talk of an impressive amount of public support for their principled stance, that will only go so far when it comes to paying salaries, printers and web servers.

There are some non-profit alternatives, says Vaclav Stetka, a senior researcher at Charles University in Prague, such as community-based funding or foreign NGO grants. "However, [most projects] can only hope they find a workable business model," he adds. With large question marks hanging over profitability in the region's media sector, and therefore the motivations of any large investor, that puts the onus on readers and advertisers.

Bella says the Project-N model relies on payment from users. "The one big advantage in Slovakia," he suggests, "is that paying for online content is much more developed, and readers are used to it." That's a reference to the Piano Media paywall system, which many Slovak media titles went behind in 2011. Bella is a co-founder and board member at Piano Media. bne went behind a Piano Media paywall in November.

Bella says Projekt-N is also looking at other business models in the region. The Slovak journalist has been discussing the project with Dalibor Balsinek, who left Czech daily Lidove noviny when Babis bought Mafra to set up the Czech "internet daily" Echo 24. Bella suggests that a regional network of independent news sites, including the likes of Hungary's 444.hu, could be "imagined" in the future.

However, some may already be finding the funding challenge a little too daunting. One commentator speaks of "speculation Echo24 is backed by similar sort of guys to those they were running away from." That refers to suggestions that Martin Roman – disgraced former chief of Czech state-controlled power giant CEZ and reputed political power broker – is ultimately behind the project, albeit there's little evidence. Balsinek failed to respond to a request for an interview from bne.

Eye of the tiger

Yet Project-N can look to much of CEE for inspiration and potential business models. "There's the same kind of readership and concerns across the region," points out Stetka. “Lots of people are concerned at the moment about corruption, and the threats to democracy and media freedom."

Latvia's IR is the great survivor, having launched under very similar circumstances to Projekt-N in 2009, when the daily Diena was sold to local oligarchs. Like Bella and his colleagues, the editorial team there looked to harness the anger that the events threw up in the country quickly, says Editor-in-Chief Nellija Locmele.

"We got small amounts, typically around LVL5-10 (€7-14), and with around a dozen or so investors that gave us a start up of around LVL200,000," she estimates. However, she warns that the team's initial hope of getting the new project off the ground within three months was unrealistic. "The investment needed was much bigger," she says.

While instinct might suggest that starting a new media company is simpler and cheaper in the age of the internet, many argue exactly the opposite. The weight of competition is so great, and revenue options so limited, that the likes of IR went to the other end of the spectrum. IR was a hardcopy magazine from day one, and relies on selling a quality product, notes Locmele. "We said from the start we're not cheap," she says. "Quality journalism is not cheap!" Readership is around 60,000, the editor says, pointing out that's a big number in a country of just 2m.

Michal Musil at the glossy Reporter magazine in Prague – set up by another set of Mafra orphans – says the team had been eyeing the impact of online media on the industry with concern since 2011. The acquisition by Babis was just the kick out of the door on a project they had been working on for around 18 months before they put out the first issue in September.

"The time of the big media houses is clearly coming to an end," he suggests. "A small organization can better control costs and revenue. The big companies are hardly able to start contemplating change to keep up. The old, single publication model is dead. Society is fragmenting."

The funding and business model remains fluid, Musil notes. Around a year ago, the non-profit Reporter Foundation was set up for donations, however the business model focus at Reporter, which mixes political features with culture and lifestyle, is firmly on advertising. "If we tried starting with a website we'd struggle to gain enough traction to attract advertisers," he points out. "We would have needed a big investor. We didn’t have one."

Instead, Reporter has gone straight to banks, financial services firms and travel companies to pay for a printed magazine. Sponsorship packages, including cover mounted logos, features and a slice of the 30,000 print run to hand out, accounted for around 70% of the first issue he estimates. Similarly, he guesses revenue is split 30-70 between donations from "those that know of the Babis issue" and from ads.

That illustrates that the big question for the range of independent media projects now cropping up across the region – Stetka mentions several more have set up, especially in Hungary and Romania – remains.

Without the promise of large profits or political influence, the motivation at first for larger investors in IR was ethical, suggests Locmele; mostly drawn from the diaspora or members of the business community interested in a free Latvian media. However, that can't replace fundamentals. "Our aim is to be profitable, and we are," the Latvian states. "Media independence starts with financial stability."

For the meantime, "it's nice as a journalist to feel some support from the public for a change," laughs Musil.

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