Media Ownership and Privatisation in Central and Eastern Europe

The issue of media ownership is a central one for media freedom, with adequate privatisation initiatives a crucial safeguard against media concentration, and a way to ensure true media plurality, resulting in a press that provides a multiple views, and not merely multiple outlets.  The question of privatisation has received considerable attention in Central and Eastern Europe (CEE) since the fall of the Soviet Union, with clear trends and patterns emerging from new media structures in the region.  Changes in the political system prompted an upheaval of the media environment, though not necessarily in ways that could have been expected.  In most CEE countries, the changes in media ownership did not extend to rapid changes in media legislation, with the prevailing opinion in most of the region maintaining that the newly acquired environment of freedom of expression should not be limited by restrictive media legislation.  Public debates were based on the assumption that media legislation was not necessary at all, and that the media should be left to be regulated by the politically and ideologically ‘neutral’ market forces.   However, in many cases private media came to be seen as tools to command political power and influence, rather than as viable business undertakings.  The process of legislative reform in the media proved to be a drawn out process  Some countries, such as Hungary, went through a process of ‘spontaneous privatisation’, in which the editorial boards themselves began negotiations with foreign investors in order to gain independence from the former party state.  However, this process was a controversial one as it lacked transparency and financially benefited the former communist party which generated ‘media wars’ in subsequent years.  In the past two decades, the status of media freedom had generally been better where the media were privatised early and worse in countries where privatisation was delayed.  Broadly speaking, private media enriched choice, and in some cases managed to relieve the press from external political influence.

Unlike the broadcast media, the press was privatised early in almost every country in the region, with investors being allowed to buy existing titles.  However, as most of the markets were, and still are, comparatively weak, the lack of state subsidies systems to support loss-making print outlets forced many newspapers to associate themselves with the various political and business elites in order to remain in print.  Yet despite the general consensus that privatisation is preferable to state ownership for a free media, the question of the best way to organise the media remains. 

Questions of media ownership, transparency, distribution and professionalism are all integral issues to resolving this. 
Ukraine is a significant exception to the general trend of privatisation in the region, as unlike the rest of region, print media privatisation in Ukraine took place much later and in a different fashion.    Currently, much of the municipal and regional press is still funded by the state, and therefore has strong political links.  Periodicals that are privatised are mostly owned by oligarchs with strong political connections, whose interests in the media outlets are political rather than economic.    More worryingly, the laws surrounding media ownership and access to information do not lend themselves well to a free and transparent media environment, and it is possible for owners to hide their assets from the public and media.  The issue of media ownership transparency is a central concern for many CEE countries. Some, such as Bulgaria, have recently adopted legislation obliging the media to disclose their real owners, but overall the situation is still unsatisfactory across the region, often making it possible for the owners to sidestep the regulation on cross-ownership, because they remain hidden behind third parties or off-shore companies.

Privatisation in CEE Countries

In most countries in the region, the privatisation process started as a result of independence, in 1991.   In some countries, including Slovenia and Estonia, media workers began to buy up shares in their newspapers and claimed joint ownership.  However, this type of ownership did not last for long, and the process of market concentration began in the mid-1990s, when local businesses started to buy out journalists’ shares.  By the late-1990s, even countries that went through a period when the media workers owned their publications saw a change in media ownership trends.  Thus, after a brief interim period of joint ownership, state ownership was simply replaced with monopolies by media moguls.  Generally, they were bought by foreign media corporations, with German and Swedish corporations dominating the market, but in some cases the owners were local businessmen with strong political associations.  
   
 It is clear that the status of media freedom has generally been better in those countries where the privatisation process was completed early.  However, although private media are often equated with free media, privatisation is not necessarily a prerequisite of media independence, and the mere plurality of media outlets doesn’t always mean plurality of opinion. In the case of the Balkans, privatisation of media was often acutely political.  The ruling elite, no longer able to exert its influence on the media overtly, was still able to control the press through financial pressures such taxation and selective advertising, as well as taking advantage of broad defamation laws to silence their critics.  Thus media privatisation is no guarantee that the mechanisms of political influence in place in the country become automatically dismantled.  Transparency, access to information and limitations on ownership and concentration are prerequisites that would come closer to guaranteeing true plurality of opinion in the media.

The change in media ownership in the region during the early 1990s was therefore a cause for concern as well as hope.  It was wrongly assumed that media democratization could be achieved simply through changing ownership.   As private ownership passed from media workers to local businesses to international conglomerates, it was broadly believed that western owners would guarantee media plurality because of their political independence and view of regional press as a business investment rather than a political platform and propaganda tool.  Well established western corporations would, it was assumed, be immune to domestic political pressures, and perhaps be able to set up western-style managerial practices and nurture journalistic values and democratic media culture, as well as provide modern technology, financial resources, and expertise.  In many countries it was strongly believed that without foreign investment, it would have been impossible for local media to improve printing quality and modernize offices.  

Adequate media legislation has, no doubt, been a defining factor in ensuring a free media environment during the privatisation process, and an assessment of the legal context of the privatisation process is a necessary step in ascertaining the media environment in the region.   Most countries in the region have no laws that directly address the media sector, and media is generally regarded as any other business and, in theory at least, is left to the self-regulation of market forces.  In Moldova, for example, the Press Law of 1994 does not include the concept of owner, but instead refers to founders and co-founders of media publications, meaning that the law does not address the issues of ownership and media concentration. 

The process of privatisation in Moldova is somewhat typical of the region, as is the government’s recent and controversial financial involvement in certain privatised publications.  The process of privatisation in the country began in the early 1990s, with the state slowly relinquishing its stake in the press.  Some publications remained in state hands until 2005, and while not all of those under state control were necessarily oppressive and staunchly pro-government, some did use their influence for pro-government propaganda. 

In 2005, the public dissatisfaction with the state of the media started a process of transforming the remaining state press into public institutions.  Two of the most important state publications, Nezavisimaia Moldova and Moldova Suverană, were liquidated, and all journalists working at those papers were legally dismissed.  However, the newspapers continued to be published with the same name, and employing the same journalists, but now operating as a new Limited Liability Company (LLC).  The change from state to public ownership was therefore merely nominal. 

In addition, no information was provided as to how the newly created LLCs obtained the right to publish the newspapers under the same names.  By 2007, the government was still providing direct and indirect financial support to Moldova Suverena and Nezavisimaya Moldova and the papers continued to cover the government’s activities in much the same way as before, acting as mouthpieces for the ruling party.

Moreover, the government continued to provide the two papers with financial assistance. In December 2006, the Moldovan government allocated 276,800 lei (about 17,400 Euros) to Moldova Suverena and 81,300 lei (5,100 Euros) to Nezavisimaya Moldova as a one-off “unique financial support”, allegedly to pay off debts to the Universal Printing House.   Then, in June 2007, the government transferred a total of 84,000 lei to the two papers.  These funds were to be transferred to the Bureau for Interethnic Relations and were to be used for subscriptions for non-governmental organisation in the Moldovan diaspora.  The government then continued to conduct itself in a way that would subsidize the supposedly private newspapers indirectly, thus discriminating against other private publications.  The government’s conduct was also inconsistent with its commitments in the Moldova-EU Action Plan, which stipulated that “financial support by the state to media outlets should be provided on the basis of strict and objective criteria applied fairly to all media institutions.”

In Estonia, the process of privatising state-run media was spontaneous, and lasted until 1996, with an insignificant number of specialised and children’s publications remaining in state control by 1997.  There was, however, a marked difference between the privatisation of the national papers and that of local and regional ones.  Having initially left regional periodicals to be managed by local government, the privatisation of regional press took place later on in the process, and proved to be more problematic.  Local politicians openly interfered with journalistic practice and the privatisation process, and occasionally appointed local politicians as editors-in-chief.  Local media are, generally, more likely to succumb to external pressures due to their lack of financial stability and often close connection with, and dependence on, local politicians and businesses.  

Monopolisation

A free media environment presupposes certain level of media pluralism – that is, the existence of multiple media sources the citizens can receive their news from.  From this perspective, monopolies – either achieved through the power of the state, party or market – are an obstacle towards media freedom. Media pluralism can only be guaranteed by plurality of ownership.   There is a very clear relationship between media ownership and media freedom, with media diversity a prerequisite for freedom of expression.  However, this issue is much more palpable on the national than on the local level, where the market is often not strong enough to support more than one newspaper or broadcaster.  In many countries local newspapers operate as a chain of local monopolies, which might be problematic from the point of view of media pluralism, however it is sometimes the only way to secure the existence of outlets which otherwise might cease to exist.

Private monopolies remain a significant issue in media ownership, and are an obstacle to freedom of expression.  Lack of transparency is a real problem, as government authorities and politically active oligarchs may use other owners as a front for their enterprises.  In Ukraine, for example, there is no way to legally prove that a certain politician has a significant share in a given media outlet, a fact made possible by inadequate access to information legislation.  The problem of legislation is a significant factor in enabling monopolies, and the issue recurs throughout the region.  Reform of access to information legislation in Ukraine, as in many other countries, would therefore be a significant step towards ensuring freedom of expression and plurality in the press.

According to Denis McQuail,  media concentration raises three different issues: pricing and distribution (the more monopolistic the market, the greater the power of the owners to set prices), competitors (who might be driven out by high production costs), and the quality and diversity of products.  An obvious effect of unchecked media ownership is, potentially, the “Berlusconi effect,”  with an individual or party creating a media empire and enjoying widespread and unchecked political influence.  One of the biggest dangers for a successful privatisation in this case is the acquisition of press by investors who are not interested in the actual media business but in using the media outlets for their other business interests or for political PR. 

The Slovenian newspaper market is somewhat unique in the region because unlike most others, the country saw an insignificant level of foreign investment, with newspapers mostly bought by local companies during the period of privatisation in the 1990s.   Slovenia is a positive example of a system where anti-cartel and anti-monopoly laws have gone some way to ensuring a plural media environment.  A key instrument in fighting monopolies is always the national media regulation system, and legislation which protects newspapers from companies assuming a monopolistic position.

One of the most often used measures to safeguard media pluralism have always been laws prohibiting media concentration beyond certain limit, beyond which free competition in a particular sector could be endangered, as well as rules against cross-media ownership, i.e. prohibiting single media owners from having interests in media outlets in more than one national media sector. Within the CEE countries, perhaps the best example of an effective implementation of such laws is Slovenia, where the Mass Media Act of 1994 attempted to protect the media against concentrated ownership and nationalisation by stipulating dispersed ownership. Until its recent amendment, the Mass Media Act had gone some way towards safeguard the Slovenian media market against monopolies as it limited foreign investment to a maximum 33 per cent stake in a company, with no investor allowed to own more than one third of any given company.   The Mass Media Act of 2001, too, addressed the issues of media plurality and diversity, treating anti-concentration provisions inside a wider framework embracing the protection of media pluralism and media diversity.  Under the new Act, a publisher of a daily newspaper, person or group of related persons, who had more than 20 per cent interest in the capital or assets of that publisher, or more than 20 per cent of management or voting rights, may not be an owner or co-founder of a radio or television broadcaster, and may not engage in radio and television activities.  The same law applies in reverse, as a radio or television broadcaster may not be a publisher of a newspaper.

In Moldova, the problem of ownership is partly due to lack of transparency.  The public has little detailed knowledge about the owners of media companies, and inadequate access to information legislation allows the governing part to take advantage and purchase print media through intermediaries.  As in Ukraine, it is impossible to have reliable information as to who owns the privatised newspapers, and the name shown in documents is often proved to be a front for oligarch owners.

Foreign Investment

As with the problem of monopolisation, there are also concerns that the presence of foreign ownership and the subsequent aggressive commercialisation and tabloidization of the media may have contributed to the lowering levels of professionalism emerging in some countries.  According to a 2003 report by the European Federation of Journalists, there were “strong indicators that aggressive commercial policies are being pursued at the expense of journalistic standards, threatening pluralism and undermining journalists’ professional and social rights.”   While foreign investment certainly meant progress in terms of resources, they did not positively influence the quality of journalism as a whole.   There is also the concern that due to lack of legal pressure to do so, media groups from Western Europe do not pay enough attention to training, pay and status and independence of journalists working for them, and deny the rights of journalistic organisations and unions. 

Foreign ownership can become a threat to freedom of expression and free media, as it simply replaces one form of monopoly (in most cases, state monopoly) with another, and there are strong indications that aggressive commercial policies by foreign investors have been pursued at the expense of journalistic standards.   In Poland, Hungary and the Czech Republic, for example, the influx of foreign capital has threatened media pluralism, and the dominance of foreign companies may stymy democratic media.  The domination of the German print media group, Westdeutsche Allgemeine Zeitung (WAZ), across the CEE region, is a cause for concern, as the company’s ownership of local and national media in large parts of the region raises some questions over conflict of interest and plurality.  Large media also takes advantage of the fact that employment law, particularly in the ways that is applies to media workers, is weak in most of the region. 

On the whole, the influence of European media groups rests in regional press ownership.  As the key democratic issue with local and regional newspapers is that they are rooted in their locality, and report on local life, the fact that they are owned by large foreign-owned groups means that key decisions about investment and staffing are likely to be taken by owners in another country.  This weakens their credibility and results in commercial considerations prevailing over professionalism and ethics.     In some cases, foreign investment can have an effect on professionalism and the quality of journalism in their outlets.  This depends on whether foreign investors have made the effort to provide their domestic employees with expertise, offering them training programmes.  In this, the situation varies across the region as well as across different owners.  However, as a result of the global financial crisis, existing training programmes were significantly reduced for financial reasons, and for lack of political pressure to include them as a priority. 

In countries of Central and Eastern Europe, the effect of foreign investment has probably been more significant in terms of providing financial stability and means to improve the material base of media production (including the transfer of know-how), rather than in terms of building a professional journalistic culture that would emulate Western media.  Some companies were indeed interested in educating the journalists and implementing the core journalistic values such as professional integrity, objectivity, separation of facts from opinion etc., but most of them have perceived their operations as a “pure business”. Nevertheless, it has to be acknowledged that the media owned by foreign investors have generally been more financially secure and therefore better equipped to withstand local political and business pressures.

The process of privatisation in Estonia began with journalists buying up shares and claiming joint ownership of their publications.  The process of market concentration began in 1995, when local businessmen started to buy up journalists’ shares.  By 1997, there were five major local media companies dominating the press.  The process was not, however, a transparent one, and it is still impossible to legally determine the owners behind the conglomerates.  The first significant foreign investment in Estonia began in 1998, with two Scandinavian companies, Bonnier and Schibstead, buying up regional dailies.  Until recently, only one newspaper, AS Maaleht , a regional daily, survived as a joint stock company, but it too was eventually bought by a local conglomerate.  All print media are now shared between two conglomerates, the Postimees Group and the Ekspress Group. 

Slovenia appears to have comparatively effective legislation regarding foreign investment in the media.  Despite privatisation, media companies are not, legally, considered in the same terms as all other businesses, and special ownership laws apply.  While foreign ownership is present in the market, investors are limited and local owners continue to control important sections of the market.   The Mass Media Act of 1994 effectively regulates the media, allowing foreign ownership but keeping it tightly controlled by regulators.  The conviction that private media must remain in the hands of Slovene owners in order to protect “national interests”, and the fear that foreign owners would impose their own political will, led to restrictions on the proportion of ownership shares in media companies.  Under the existing legislation, the foreign ownership stake in a media enterprise cannot exceed 33 per cent. However, this policy resulted in the press becoming concentrated in the hands of a small number of local owners, not necessarily without their own political agendas. 

Self-censorship

The general trend in the region is that journalists who work for private newspapers generally earn more, and are better satisfied with working conditions, than their colleagues at nationalised periodicals.  The separation of state and media is, then, seen as having a positive effect on the journalists’ level of professionalism.    In the early years of independence, and in a healthy economic climate, self-censorship was not a major issue for journalists at privately-owned publications because there was little competition for jobs and advertisers. 

Media ownership is undoubtedly a significant factor of journalists’ professionalism and working conditions, and self-censorship appears to be a worrying trend even in countries where the media are considered ‘free.’  A media environment dominated by a few major conglomerates means that all journalists are employed by one or two organisations – a potentially problematic situation. 

The domination of the press in Estonia by two major corporations has indirectly resulted in self-censorship by journalists.  According to Epp Lauk, Professor of Journalism at the University of Jyväskylä, there is an unspoken, unofficial ‘black list’ for journalists, and those who were dismissed from their jobs over ‘loyalty issues’ may be prevented from getting a job at another publication owned by the same media company.  This makes it almost impossible to find new employment.  Coupled with the impact of the global financial crisis and the inadequate laws protecting journalists (and, more broadly, employment laws as a whole), the pressure to appear loyal to media owners is a strong factor in self-censorship. This suggests that there is a lack of adequate employment law to protect journalists from being dismissed off-hand, and though low job security is not a problem confined to the media sector, it certainly affects journalists’ professionalism in a weak economy, and has led to increased self-censorship.  No special legislation exists for the press, and only general laws such as copyright and access to information directly influence journalists.  Though the government is not directly linked to media ownership, and no political force influences the media financially, personal loyalties and indirect political control is certainly a reality. 

In Moldova, the problem rests with political parties rather than foreign investors.  The ruling parties there can openly use public funds to buy broadcasting time and space in newspapers.  The parties usually prefer to advertise in public rather than private papers, as they charge below market prices.  In return, public newspapers respect the unwritten rule not to criticise parties that provide financial support.  As a result, private newspapers find themselves subject to unfair competition for advertising, while journalists working for national newspapers find themselves under pressure to censor their views to remain afloat. This can in part be solved by monitoring from civil society, proper self-regulation mechanisms, advocacy action for fair competition, and permanent improvement of the laws on competition and public acquisitions.  

Recommendations

Due to the low levels of transparency in Ukraine, there is a concern that privatisation, were it to take place, would be conducted in a corrupt manner under the current administration.  For example, valuable assets could be sold off at below market prices to well-connected oligarchs, as happened when Victor Yanukovich was Prime Minister in 2004. Ukraine’s resistance to foreign investors also suggests an unwillingness to allow outside (and non-political) investors into the market.  The state’s existing access to information laws do not lend themselves well to a successful and transparent privatisation process, with the real owners of companies are often kept hidden, with no legal way to trace the real owners. Currently, the pluralism of Ukrainian media is seen in the quantity of media outlets rather than a variety of views expressed.  The lack of transparency in media ownership is a key factor in this. 

According to Peter Bajomi-Lazar, Senior Research Fellow at the Department of Politics and International Relations at the University of Oxford, ‘the transparency and openness of the privatisation process is certainly a must, and a mechanism for public scrutiny over the process need to be ensured.’   While there does not seem to be a viable alternative to privatisation as a way to improve the media freedom in Ukraine, the experience of other countries in the region have showed that merely a change in ownership by no means guarantees a democratised press.  Similarly, merely anti-monopoly and anti-cartel laws, or laws limiting ownership, are not enough to guarantee true plurality of the media, and space needs to be created for truly independent voices.  Perhaps the most significant danger of privatisation in Ukraine may be the possibility that publications will become concentrated in the hands of a media mogul, whether local or international, leaving no room for plurality of opinion in the media.  Perhaps the only way to safeguard against this would be a transparent privatisation process, putting in place mechanisms for public scrutiny and adequate freedom of information legislation. 

There is also a need to organise media campaigns through which the necessity of denationalization of the press would be argued, explained both to the public and media. The process needs to be transparent and open, with accessible information about the revenues, expenses and circulation of the publications that are to be privatized.
Moldova is perhaps the closest comparison for the situation in Ukraine, as the completion of the privatisation process there took place relatively recently.  The few state media that were in government hands were privatised in 2005 in a non-transparent process, and public funds were transferred to private hands, namely those of the ruling party.  The privatisation of two major newspapers was therefore merely nominal, as the staff, offices, and the political position of the publications remained the same.  Part of the solution for Ukraine would be to make issues of media ownership and government involvement a part of the electoral programmes of government and opposition candidates, constantly discussed by the media and civil society as a central issue affecting freedom of expression in the country.
Along with free access to information, effective legislation regulating and restricting media concentration can have a positive impact on media freedom, and is a way of ensuring a successful privatisation process in Ukraine.

Ensuring the existence of independent sources of circulation and readership figures, and independent distribution is also a crucial factor in ensuring successful privatisation practice.  Until recently, in Moldova, for example, the state held the monopoly over the press distribution system (through the state company, Posta Moldovei), managed the kiosks and dictated prices.  In June 2009, a new press distribution network, Megapress (a joint-stock company), was established, promising not to discriminate on any grounds, particularly political affiliation, language, or country of origin.

It could be argued that current system of funding outlets on the basis of party loyalties is the result of, and is being maintained by, the lack of state subsidies systems and by high taxes imposed on distribution.  Only the establishment of transparent and politically neutral state-subsidies system can change the situation, but the political will for this in post-Communist states is lacking.

It is necessary for Ukraine to restructure print media in a way that would enable newspapers to be funded by private rather than public means, encouraging journalists to report freely on the authorities towards which they are supposed to have no bias.  This is one of the reasons why the issue of media ownership should be a central one in Ukraine.