The radio market as a political playground

The one year anniversary of the shuttering of Neo FM is looming. We will leave aside for once how Neo FM received a license to use a frequency in the first place, nor will we shed tears for a station that owes its very existence to political backroom dealings. Nevertheless, it is worth examining the context and process whereby a government-friendly enterprise, Neo FM competitor Class FM, has come to enjoy a monopoly in the national commercial radio market, and how this process was duly assisted by the legislator and the authorities. By Gábor Polyák and Ágnes Urbán

The victory of Class FM and Neo FM in the frequency tender issued by the predecessor to the current Media Council, the ORTT, gave rise to massive controversy right at the outset. The decision of the media body, which consisted of party delegates, led to the resignation of the ORTT’s chairman at the time, László Majtényi. We discussed the background of this case in a previous post, so we won’t delve into the details of the political backroom deal that resulted in launching Class FM, regarded as a right-wing station, and Neo FM, which was considered a left-wing radio, as leading players in the market, while foreign-owned Danubius Rádió and Sláger Rádió were deprived of their respective frequencies.

The time since has ended up affirming the interpretation of events that was apparent already in autumn 2009. The left-wing politicians involved had obviously hoped that the previous system of wheeling and dealing would continue to prevail, and that though the victor of the upcoming elections would benefit disproportionately, the other side wouldn’t have to worry either. But the right-wing politicians already had some premonitions that the elections would result in a lopsided victory for them, and they were getting ready for a winner takes all type of situation.

And that is exactly what ended up happening after the election: advertisers made a circle around the station that was associated with the losing left, Neo FM, while Class FM – owned by Zsolt Nyerges, a businessman considered to be close to the government – was inundated in ads. It was self-evident that the time would come when Neo FM would be unable to pay the broadcasting fees, while Class FM naturally faced no such problems – though the Media Council’s decision to lower the fees clearly did not hurt either. Still, the reduced fees failed to improve Neo FM’s situation, while Class found itself in a rather favourable position: thanks to the reduced fee it came to enjoy a monopoly position in the national commercial radio market.

Up to this point we might chalk all this up to simple good fortune: the political backroom deal was struck while the ORTT was still around, and the Media Council’s fee reduction helped radio businesses survive; the Council has no direct influence on where advertisers spend their money. Though of course somehow it was possible to structure the fee reduction in a way that it only yielded palpable relief to Class FM, while Neo profited next to nothing.

There is no good faith explanation, however, that would account for the Media Council’s failure to issue a call for tenders to use the frequency previously utilised by Neo FM, which was silenced in November 2012. This decision did not only lead to a distortion in the national radio market but has also resulted in the loss of a significant source of revenue, since national radio frequencies have substantial pecuniary value. The Media Council decided that the rather strained central budget can do without these few hundred million forints. The legislator facilitated the Media Council’s course by removing the legislative proviso which partially settled the issue of new tenders for vacant frequencies. For the time being, the law lacks any notion that freed up frequencies ought not to fall into disuse.

In any case, we are left with an obvious situation: by failing to solicit tenders for Neo FM’s former frequency, the Media Council preserves Class FM’s monopoly in the national commercial radio market. Class FM rakes in lots of cash, helped in no small part by the fact that not only Neo FM but other competitors as well have either disappeared or grown weaker. Mertek’s recently published report describes in detail the changes in the market for local and district radios – changes that naturally stem from the Media Council’s frequency decisions.

The icing on the cake, however, is that radio audience measurement has also undergone changes. Previously Szonda Ipsos used to measure radio audiences, but this changed in 2013, as the corresponding tender issued by Association of Radio Media Providers (Rádiós Médiaszolgáltatók Egyesülete – RAME) was won by a consortium of TNS-Hoffmann and Mediameter. Mediameter Kft is a company founded in 2012 and is owned by the Nézőpont Institute – represented by Ágoston Sámuel Mráz – a company that is well known for its political research projects.

Unfortunately, we have no precise information on how advertising revenues evolved in the radio market as a whole, but several sources in the industry have recounted that advertisers have palpably turned away. They’d rather advertise in sectors where state influence is less pronounced, where the most significant owners are not prominent media oligarchs, and where market success is determined by competition between media businesses rather than strategic moves by the Media Council.

Not only media economists will find the goings-on in the Hungarian media market to be a juicy treat. What has happened here has also shown how the state can completely reshape a slice of the public realm and make it politically and ideologically totally one-sided, without having to levy as much as a penny in fines. What is left in place of the radio market is neither a market nor a source of information. It’s some demented political playground.