Analysis

Analysis: Print media moves on S.E. Europe
United Press International - July 28, 2003 Monday
By CHRISTOPHER DELISO

SKOPJE, Macedonia, July 28 (UPI) - Tuesday, Westdeutsche Allgemeine Zeitung (WAZ) will officially take over Macedonia's 3 largest newspapers -- "Dnevnik," "Utrinski Vesnik" and "Vest" -- for an undisclosed sum agreed earlier this month. Inside speculations peg the figure at somewhere between 1-5 million euro ($1.2-6 million).

This would be peanuts for Germany's second-largest media empire, which owns over 130 newspapers and magazines and dominates Balkan markets. Last week it announced co-investment plans with Lambrakis DOS -- Greece's industry leader, with total consolidated assets of over ?500 million. Any partnership would give the two EU countries a north-south chokehold over the Balkans.

Media concentration is becoming a greater concern in Europe. An exhaustive report by the European Federation of Journalists last month charged WAZ and its peers with monopolistic tendencies, questioning whether their pawns "...can become representative of public interests and civil concerns when key decisions about investment and even editorial attitudes towards political issues may be decided elsewhere." In the 1990's, market saturation in the West forced large publishers to expand east and diversify. The current advertising recession and poor economy have exacerbated this trend. A recent Radio Free Europe/Radio Liberty analysis avers that "...it is complicated to acquire titles, and very costly to launch new ones" in the West. Since title acquisition in the East is relatively cheap, and negotiations hassle-free, investments there can cushion against poor company performance on more volatile domestic markets.

Germany's Axel Springer Verlag is the largest newspaper conglomerate in Europe, and also publishes the continent's best-selling daily, "Bild." Springer's strategy of nationalizing popular German magazines has built its stable of titles abroad. However, like other giants Passauer Neue Press and Switzerland's Ringier, this company hasn't really penetrated the Balkan interior, having small joint ventures in Bulgaria and Romania.

Since most companies have concentrated on the usual destinations -- Hungary, Poland and the Czech Republic -- these markets are also becoming saturated. More determined investors are heading southward.

Excepting Bosnia and Albania, Balkan countries have received considerable attention since the mid-1990's. Take Romania, an underdeveloped but promising country of 10 million.

Here the trend has been limited liability joint ventures. In 2002, Switzerland's Edipresse and Antonios Liberis from Greece created, with Springer Verlag, the Romanian Publishing Group (RPG), publishing 8 magazines. Germany's Burda meanwhile took an 80 percent share in Burda Verlag Osteuropa (BVO), established with Italy's RCS Editori (Burda's strategic partner throughout Central Europe).

Switzerland's largest magazine publisher, Ringier owns 10 Romanian magazines and is strong in the Czech Republic and Slovakia. It is now leading Romania's "promising" business publications sector, according to the EFJ analysis.

Romania's other major foreign investment was made by Finland's Sanoma Magazines International, Europe's fifth-largest consumer magazine publisher, and Hearst. The subsidiary, Sanoma-Hearst Romania (SHR) publishes four titles, including the Romanian edition of "Cosmopolitan."

Sanoma used the same strategy in Croatia, a well-developed Balkan media market. Here, the Finnish company holds 65 percent of a subsidiary established in 2001, Sanoma Magazines Zagreb. At the end of 2002, Sanoma started the Croatian edition of another leading fashion magazine, "Elle," the second in the Balkans. (The first, in Romania, is owned by Springer Verlag's RPG). Croatia's biggest daily newspaper, "Vecernji List," is run by Austria's Styria Media Group.

However, when it comes to the Balkans, there's no one quite like Westdeutsche Allgemeine Zeitung.

Active in Romania, owning a third of Croatian newspapers and dominating the market in Bulgaria, WAZ is now focusing on Serbia, Macedonia and Greece.

In 1997, WAZ acquired "24 Chasa" and "Trud," Bulgaria's two largest and most influential newspapers, investing 50 million euro ($60 million) by 2000. Today, it controls regional newspapers and magazines through joint ventures Bulgarian News Group, the 168 Chasa Media Group and Media Holdings. To judge by the number of local competitors bankrupted, Bulgaria has been a very successful operation for the German giant.

In 1998, WAZ spent 16 million euro ($19.2 million) for a 50 percent share in Croatia's Zagreb EuropaPress Holdings, including two daily newspapers and 11 magazines, such as the weekly news magazine "Globus" and the Croatian editions of "Playboy," "Cosmopolitan" and "OK." WAZ controls between 35-37 percent of the Croatian newspaper market. The company also has majority participation in two Romanian dailies.

Although Serbia already had German investment, WAZ last year made a key purchase with Belgrade's "Politika," the Balkan's oldest newspaper. Heavily indebted, technically dilapidated, "Politika" has required heavy investment. WAZ also purchased 50 percent of Podgorica's main daily, "Vijesti," and soon will swallow up Novi Sad's "Dnevnik."

The 25 million euro ($30 million) deal made by WAZ and the Serbian owners created a joint venture to administer "Politika" and several smaller publications. According to RFE/RL, the contract includes a "distribution of authority": Belgrade retains editorial control, while WAZ handles new investments.

Although foreign media acquisitions in Southeastern Europe have understandable economic justifications, their ramifications are less clear.

Potentially, such investments may indicate a high-level European confidence in future South Balkan stability. The fact that one of WAZ's four managing directors, Bodo Hombach, is the former coordinator of the Stability Pact for Southeast Europe indicates insider knowledge. WAZ wouldn't be investing if it considered another Balkan war likely.

Even so, investors face endemic problems with the Balkan media industry. Cronyism, a limited advertising base and low wages mean that critical reports about big businessmen -- that is, big advertisers -- are rare.

Yet for their part, self-proclaimed independent publishers generally exist outside the rules of the free market. Certain glossy magazines, which have long received lavish funding from the U.S. Government, George Soros and others, needn't rely on newsstand sales. Regional muckrakers too have received donor funding openly, and in one murky case involving a well-known Western NGO, secretly, as reimbursement for services rendered. In Macedonia, media participation has become a useful tactic for laundering international aid money on dubious conferences and seminars.

Overt, old-fashioned afflictions remain. The EFJ report describes mafia intimidation against journalists -- and even mob ownership of newspapers -- in Bulgaria. Politically-motivated clampdowns are also common.

But the biggest fear is monopoly. Czech and Croat interests complain the Germans have exiled them from their own market. After bankrupting its first two Bulgarian acquisitions in order to save them, WAZ was hit with a monopoly lawsuit. However, though it was forced to divest some of its holdings, WAZ continues to wage overpowering price wars. According to the EFJ, local WAZ editions have eliminated many local Bulgarian newspapers.

Ironically, Western, capitalistic monopolies have often merely resuscitated the carcasses of Communist-era ones, as the Czechs and Bulgarians know. Macedonia's media resurrection failed last September, when the state-run Nova Makedonija house was almost sold to a Slovenian interest -- allegedly, just a front company for the then-ruling VMRO-DPMNE party. After considerable labor unrest and confusion, Nova Makedonija is now under government forced management. Hopes are this albatross can be unloaded early next year.

There also remains the question of media takeovers and editorial policy. In Macedonia, "Utrinski Vesnik" leaned to the left-wing SDSM, "Vecer" (part of the Nova Makedonija house) towards whoever was in power, and "Dnevnik" took a centrist-nationalist position.

Assuming that "Vecer" dies off, WAZ will be left holding the only two competing papers. Will this work? It has in Bulgaria -- albeit a much bigger market. Ominously for Macedonia, Bulgarian critics complain that the Germans have killed serious content in favor of sensationalism, celebrities and nudity. If WAZ can't fit enough entertainment into the tabloid "Vest," will it look to "dumb down" the others?

"Dnevnik" employees were apprehensive enough in May, when what looked to be a "capitulation treaty" was signed with the Germans. But they really started sweating last week, when the WAZ-Lambrakis DOL partnership was reported. They feared a Greek-dominated subsidiary would take over, and "modify" editorial policy. Since Greece does not officially recognize Macedonia by its constitutional name, this was an alarming thought indeed.

However, the German-Greek venture, if it happens, will be devoted to consolidating the Greek market, where Lambrakis DOL has invested over 145,000 euro ($174,000) since 2000. Operating in Macedonia would be politically embarrassing for Lambrakis; besides, any suspicions of Greek editorial propaganda would no doubt hurt the newspapers' sales.

UPI has learned that the new company, named "MediaPrint Makedonija," will have 350 employees and a total combined circulation of 120,000 (half of which is due to "Dnevnik"). The company's new president, Srdjan Kerim, was a long-time ambassador to Germany and friend of WAZ director Bodo Hombach. Currently, Kerim is Macedonia's UN ambassador.

The sale has subtle political ramifications. A "Dnevnik" figure told UPI that Tuesday's issue will outline the finalized deal -- and reassure citizens that the Greeks aren't taking over. However, in his weekly column, powerful presidential advisor Ljubomir Frchkovski will attack this idea tomorrow -- for purposes murkily known.

"This tactic -- of spreading hysteria about some Greek takeover -- seems to be an organized campaign," said the source. "A-1 Television (Macedonia's biggest) will also be pushing it."

This station received start-up money from the U.S. Government several years ago, and its owner previously imported frozen American chicken. The office of President Boris Trajkovski is especially close with the Americans. And, on 16 June, the editor of "Forum" magazine, Sasha Ordanovski declared the need to fight 'the new monopolies in the information industry.' Note that he was cited in the Pentagon-funded "Southeast European Times." "Forum" has received generous U.S. Government funding, and its manager is intimate with Trajkovski's people, as well as with American governmental and NGO leaders. There are fears within this closed circle that the looming German menace will threaten a U.S.-enabled media mafia grown fat and happy from years of grants and international donations. WAZ, as a champion of the free market, is of course utterly indifferent to their plight.

"It will be interesting to see these two conflicting blocks in action," the Skopje newsman told UPI Monday. "From tomorrow, the fight begins." No doubt, the recriminations soon will fly. But the arrival of WAZ may well bring a breath of fresh air to a tired, lackluster local media. Must a monopoly be all bad?