The company operating commercial radio network Neo FM requested bankruptcy protection on Monday after not being able to pay its licence fee. In response the media authority cancelled its contract and is threatening to shut down the station in 30 days. Meanwhile direct competitor and similar-sized channel Class FM is flourishing.
One for you, one for me
To find a possible reason for the seemingly unexplainable difference, the clock has to be turned back to 2009, when Hungary’s then-media regulator – the ORTT – decided not to renew the broadcasting rights of Danubius and Sláger radios. After ORTT chair László Majtényi – who complained of political pressure – and delegates of the Alliance of Free Democrats abstained from voting, the award of the frequencies was settled by four remaining delegates: two from the Socialist Party (MSZP) and two from the centre-right Fidesz.
The bitter political opponents displayed what many saw as a rare display of unanimity in awarding the broadcasting concessions to newcomers Class FM and Neo FM. Press reports at the time suggested that the two political sides struck a deal, with Neo owned by businessmen close to the Socialist party and Class by companies close to then-opposition, but now-governing, Fidesz.
Doesn’t make sense: CEO
“Anybody who says that a radio station can be kept alive without state spending is lying,” Neo FM CEO Ádám Földes told a press conference on Monday. “There isn’t a single cent coming to us from state-owned companies and this keeps corporate advertisers away as well. Our market share and the number of our listeners do not explain that.”
Authority not listening
As a result the station has been unable to pay the licence fee and certain other costs, and eventually racked up a HUF 750 million (EUR 2.59 million) debt towards the National Media and Infocommunications Authority (NMHH), he said. While Földes contests the estimate of NMHH, he confirmed that they are behind on payments. “We believe we owe HUF 587 million (EUR 2.03 million). We put a number of proposals forward on how to settle this but the authority declined them all. There was no other option but to request protection from an independent organisation, the court.”
Földes is fudging it with the latter statement because the NMHH relieved the station from having to pay the default interest and drew up a schedule of payment, which was supposed to begin with a HUF 200 million (EUR 691,800) instalment on Monday. The counter-offer from Neo FM was essentially a “note payable” worth HUF 483.9 million (EUR 1.67 million) with an undisclosed collateral.
The authority declined to accept the offer, saying: “It is nothing but a piece of paper and if the collateral is indeed real, the owners of the station have a chance to cash it themselves.”
On Wednesday, an ordinary session of the authority decided to cancel the licence of Neo FM, which means the radio station could disappear from the airwaves in 30 days. This is the deadline for filing an appeal and according to the NMHH, bankruptcy protection will not prevent the authority from shutting down the frequency. “Their two options are to shut down the broadcast or appeal, but the decision is final in a sense that it will not be revoked even if the station decided to pay its debt,” NMHH spokeswoman Karola Kiricsi said.
All lawyered up
Subsequently Neo FM published a statement on its website noting its disagreement with the NMHH decision and saying that it will be up to lawyers to settle whether bankruptcy protection can prevent the broadcaster being forced off air. But even if the court will allow the station to continue its transmission, bankruptcy protection is about trying to reach an agreement with creditors. Since practically all of the debt is toward the authority, a solution to Neo’s problems seems rather distant.
High price to pay
In November 2010 US firm Emmis Communications, owner of Sláger, announced that it and Danubius (also American-owned) planned to sue the Hungarian state for USD 50 million apiece through the World Bank’s International Centre for Settlement of Investment Disputes.
After losing the bid in 2009 managing director of Sláger Rádió, Edina Heal, told reporters that the bids made by the two winners were unrealistic: Class bid the minimum HUF 200 million yearly fee plus 55 per cent of annual revenue. Neo offered HUF 355 million per year until 2011 and 50 per cent of annual revenue thereafter. At the time Heal said that the level of payment for the right to broadcast is “very clearly the highest in the world”, and said she would not be surprised if the terms were renegotiated some time after the newcomers start broadcasting.
State lotto draw stacked against them
CEO Ádám Földes explained the problems of the station as due to not receiving any money from state spending. An article published last week by weekly news magazine HVG – based on the data of advertising spending researcher Kantar Media – revealed that the biggest state spender in 2011 was gambling organiser Szerencsejáték, which bought HUF 707 million (EUR 2.46 million) worth of radio ads. Eighty-two per cent of this went to Class FM and only HUF 8 million (EUR 27.800) was spent at Neo FM. The data of Kantar Media suggests that state institutions and state-owned companies have not placed a single ad on the airwaves of Neo FM in 2012. An April survey of researcher GfK Hungária said that Neo FM had a daily average of 1.414 million listeners and Class FM had 1.457 million people tuning in.