Central Europe Review: politics,
society and culture in Central and Eastern Europe
Vol 2, No 11
20 March 2000

Jan Culik Č U L Í K ' S   C Z E C H   R E P U B L I C:
Vladimir Železný: "CME are the real thieves"

Jan Čulík

Železný's Motto:

I want to say that this is a situation where the thief is shouting: 'Stop Thief!' These are the people who were trying to steal here, to strip assets, to remove, to take possession of a television station which did not belong to them, a television station which you know very well and one which you have supported from its very inception - you have been the ones with us since 1994 and you know what kind of television this is - these are the people who are now shouting: 'Stop Thief!'

So stated Vladimir Železný in his programme Ask the Director, on Nova Television, Saturday 18 March 2000

It can be said, with only slight exaggeration, that if the Czech Republic did not have Vladimir Železný, and his special brand of television enterpreneurship, he would have to be invented. As it is, the man never disappears from the news.

Towards the end of last week, the news services of the Czech News Agency were full of various reports on Železný's ongoing international legal controversies. But before we get on to those let us first briefly recapitulate the history of Železný, Nova TV, and his conflict with the American firm Central European Media Enterprises [CME] for those who are not familiar with Mr Železný's particular brand of enterpreneurship.

Background history

When it started broadcasting in February 1994, Nova Television was the first really successful commercial television station, to be launched in the Czech Republic. It was set up with the help of Ronald Lauder's Central European Media Enterprises, which provided 66 per cent of the required start-up financing . A group of six Czech and Slovak citizens, collectively called CET 21, were holders of the actual broadcasting television licence. The licence was awarded to them in 1993 by the Czech Council for Commercial Broadcasting on the basis of a proposed highbrow project, a proposal which was then abandoned the moment CET 21 received its broadcasting licence.

Since its launch, Nova TV (also know as CNTS, the "Czech Independent Television Company") has been an extremely low-brow station, using the basest, most manipulative, tabloid techniques to attract audiences. CME encouraged this policy because it was highly lucrative and supported Vladimir Železný, who soon emerged from the six members of CET 21 as a highly capable, although controversial, manager. Amongst other things, Železný became notorious as a result of his regular Saturday lunchtime "self-promotion" television programmes entitled Call the Director, where he furthered the aims of CME and Nova TV by offering the public highly manipulative lies and half truths. Soon it became obvious that Železný would willingly perform any number of dizzying U-turns if, and when, it suited him.

Gradually, CME increased its share of CNTS to 99 per cent. CME loved Železnu. It was CME that made it financially possible for him to acquire a majority stake in CET 21 the company holding the broadcasting licence, some 60 per cent in all,on condition that he would always vote according to CME's wishes. This probably broke Czech law, since the Czech media law says that a TV licence, once awarded, is non-transferable.

For several years, the CME - Železný arrangement seem to work. CET 21 had become a shadowy, theoretical entity somewhere in the background. All attention was on Nova TV (CNTS) and on its director, Železný. Nova TV successfully degraded the Czech cultural environment with its programming, which was avidly watched by more than 50 per cent of Czech TV audiences, and CME was able to siphon off relatively large profits from the Czech Republic, which they then used to finance similar television ventures elsewhere.

But in 1998-1999, it became apparent that CME was not doing particularly well and might have to sell out to another media company, the Scandinavian Broadcasting System. At this point, conflict arose between Železný and CME. CME accused Železný of asset stripping and fired him from his post as Chief Executive of Nova TV in the spring of 1999. Železný retaliated by saying that he actually "owned" Nova TV because he was the holder of 60 per cent of the broadcasting licence.

He began to argue that what CME thought was actually Nova TV (i.e. CNTS) was, in fact, only an insignificant "service company", providing programming to Železný's "real" TV station, the licencee - CET 21, and that he could use any other company to provide such services. In August 1999, he did just that. He pulled the plug on CME's Nova Television (CNTS) and started broadcasting using his own, "Nova TV Mark 2," which he had set up using finance from several Czech enterpreneurs.

Not surprisingly, CME feels it has been the victim of some very sharp practices, especially since Železný sold his and his friends' shares in Nova TV Mark 1 (CNTS) to CME for some USD 28 million as late as 1997. CME is now suing Železný and the Czech Republic for damages. International arbitrators will have to decide whether Železný broke his loyalty agreements, which he had signed with CME, and whether the Czech Republic has failed to protect CME's investment in that country in accordance with the international treaties it had concluded with the United States and the Netherlands. Most recently, Železný has formally relinquished all his control over Nova TV Mark 2 to his friends in an attempt to ensure that if he loses in his fight with CME, the courts will not be able to obtain anything from him: he has now formally divested himself of any property in this area.

The current state of affairs

On Friday 17 March 2000 an international arbitration tribunal met in London to deal with the complaint lodged by Ronald Lauder, chairman of CME, against the Czech Republic. CME accuses the Czech Republic of changing the broadcasting law in 1996, thereby retroactively depriving CME of an exclusive contract with the CET 21 licence holder to provide Nova TV with its programming. He is seeking USD 500 million in damages. The Czech Republic sides with Železný and argues that the CME contract with CET 21 was never exclusive. Last Friday, the tribunal only had time to deal with procedural aspects, and the crux of the matter will be dealt with at a later date.

Observers point out that the very fact that such an arbitration is taking place has quite seriously damaged the Czech Republic's investment reputation. This arbitration process is also expected to be rather costly for the Czech taxpayer, regardless of whether the Czech government wins or loses.

On Thursday, 16 March 2000, the second bout of arbitration between Ronald Lauder and Železný started in Amsterdam. As I have pointed out above, CME is unhapy that Železný sold them his 5.8 per cent stake in CME's Nova TV for USD 28 million in 1997 and then made the share worthless in 1999 by taking the television station off the air. In a previous round of these negotiations, which took place in Stockholm in November 1999, Železný was ordered to return to his previous exclusive contract with CNTS. He has simply ignored this order.

The CME's offical spokesman in Prague, Michael Donath, said on Thursday 16 March 2000, that the company CME Czech Republic B.V., which owns 99 per cent of Nova Mark 1 (CNTS), is due to start arbitration procedures against the Czech Republic according to the terms of an international treaty protecting Dutch investment in the Czech Republic.

On whose side is the Czech public?

So far, the Czech public has not been fully exposed to all the various complexities of these debates. Moreover, the Czech media are generally not impartial. At the same time, they are not very good at explaining complex issues clearly and rationally. Since the fall of Communism, a nervous, restless, titillating culture has come into being through the Czech media. As a result of this, as several commentators have already observed, people have quickly evolved a very short attention span. If you need more than thirty seconds to explain something, then forget it - the audience has already gone. Thus those demagogues who can put across their points speedily in easily digestible soundbites, with a large helping of subliminal emotional content, win.

Železný has had much practice in manipulating the Czech public in this respect and he is very good at it. In addition, several Czech newspapers seem to be in collusion with him on this matter: certainly the (allegedly) left wing daily newspaper Právo has run full page adverts for Železný's Nova TV "Mark 2" that have blurred the difference between advertising and independent editorial copy.

Most of the Czech media will not criticise Železný because he is very powerful within the social and political context of the Czech Republic. His television station can easily destroy any politician's career if it wanted to.

It would appear that this is why Czech politicians, both from the ruling Social Democratic Party and from Vaclav Klaus's Civic Democratic Party (which supports the Social Democratic government through an "opposition agreement") wish to reach an accomodation with Železný. Unlike Ronald Lauder, who is just a shadowy, insignificant, almost unreal figure when viewed from Prague, Železný is here and now, he is a figure made of flesh and blood and his manipulative ravings, regularly broadcast on Nova TV are lapped up by at least half the Czech nation.

The Czech Republic lacks a fixed, well established set of principles of behaviour to be used in the public and the business spheres. Relativism rules. People's behaviour is not judged according to a fixed set of civilised standards. In this post-Communist free for all it is the one who shouts loudest and is the most brazenly insolent (and earns the largest amount of money)who is right and must be admired.

According to some cynical observers, the Czech courts do not make decisions on the basis of independent, objective, valid and moral laws, but on the basis of expediency. These same people predict that the side which will win the CME - Železný conflict will be the one that is th most shrill and therefore appears strongest. Not necessarily the one which has justice on its side.

Having said that, there does not seem to be alot of difference between Železný and CME. CME was perfectly happy to work with Železný for several years in the Czech Republic, although they knew full well that he was an untrustworthy character, someone who was likely to betray anyone if he saw that it was expedient for him to do so in the short run. During the years that CME ran Nova Television in the Czech Republic, it aggresively exploited all the loopholes in Czech media law and all the weaknesses in the feeble Czech television regulatory system in order to maximise its control over Czech commercial TV broadcasting and its profits. Thus, it could be said that CME created its' own monster. It created Vladimir Železný in its own image, gave him money and influence and encouraged him to twist and change the existing rules, regulations and agreements. It should not have come as a big surprise to CME to find out that Železný eventually decided to turn all these techniques against them .

Everybody ignores the real issue

The Czech government and the Czech public are now worried about how much the current arbitration proceedures and lawsuits with Ronald Lauder might cost them. Various alternative ways of placating Lauder are being proposed, in linewith the prevaling post-Communist principle that it is necessary to come to an agreement with whoever shouts the most and is the most brazenly insolent.

The real issue is different. This whole mess would not have happened had the Czech Republic been effective in its regulation of commercial television broadcasting from the outset. When CET 21 won their license on the basis of a highbrow project, which they never implemented, the government should have immediately withheld that licence until the orginal contract was honoured.

When it became obvious that CME was behaving aggressively, trying to change the terms of the broadcasting licence and wanted to give Železný a majority stake in CET 21, the Czech government should have immediately rapped CME across the knuckles. This would have resulted in an immediate boost of the government's authority - and it would have sent a clear message to both Železný and CME not to mess with the regulations.

People in the Czech Republic are now obsessed with the threatening end-results of the problem,
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not with the underlying causes. The outcome of the Železný-CME conflict may now be twofold. If Železný wins, he will continue to further damage the Czech cultural environment with his unspeakably inferior television station. Equally, if Lauder wins, he will continue to further damage the Czech cultural environment with his unspeakably inferior television station, either under the name of Nova TV or something different.

But what the Czech Republic really needs is proper regulation of its commercial television channels to ensure that, in the drive to maximise profits comapnies do not disseminate inferior, manipulative and mendacious programmes and do not act as giant, monopolistic bullies in the Czech public arena.

The Czechs are on Železný's side

Since Železný pulled the plug on CME's Nova TV in August 1999, with the exception of a handful of intellectuals, the Czech public has on the whole been on his side against CME - this applies especially to his viewers, whom Železný can easily manipulate through broadcasts on his television station. So far CME has not been able to present such convincing arguments to the ordinary Czech television viewer.

However, toward the end of last week, CME made an attempt to present its case to the ordinary Czech in easily understandable terms. On Thursday, 16 March 2000, CME informed the Czech public in adverts published in the daily newspapers, Právo and Mladá fronta Dnes, that, as a result of the CME-Železný conflict, the Czechs will not be able to see their beloved annual ice-hockey championship on television this year. The broadcasting rights for the championship are held by CME, but CME's Nova TV has been switched off by Železný. The CME advert stated:

In ice-hockey, fouls are punished by referees, in business relations, regulatory organs are to make sure that the principles of fair play are adhered to. The Czech referees - the Council for Radio and TV Broadcasting - have not had the courage to punish [Železný's] unfair play.

Železný: "CME are the real thieves"

On Saturday 18 March 2000, Vladimir Železný responded to this "advertising offensive" by CME in one his regular Ask the Director programmes, where he answers (alleged) questions from the public. Here is a verbatim English translation of the relevant section of the programme:

Viewers questions: What is your view about this huge CME advertising campaign about the broadcasting of the ice-hockey championships?

Will you be broadcasting the ice-hockey championship?

Explain your conflict with the American company and the [Czech] Republic. Why should we, the taxpayers, be paying for it?

Director, could you please explain why we are supposed to pay for your conflict with some English people?

Železný: I don't know of any conflict with any English people.

Viewers questions:You are a private television station and we, the viewers, have nothing in common with all this.

Železný: Well, we do not want anything from you. What has happened to you yet? So far, absolutely nothing has happened to anyone. We are in private conflict with our former partners from one service organisation and you know that we are not blowing this conflict out of proportion. We will not be blowing up this conflict.

Our views on these various adverts is clear. We will not be using similar adverts. Let anyone use any adverts they like to slander the Republic or its state authorities, we will not join in with this feud. Not at all. They will not be able to drag us into it.

I want to say that this is a situation where the thief is shouting: 'Stop Thief!' These are the people who were trying to steal here, to strip assets , to remove, to take possession of a television station which did not belong to them, a television station which you know very well and one which you have supported from its very inception - you have been the ones with us since 1994 and you know what kind of television this is - these are the people who are now shouting: 'Stop Thief!'

Of course it suits them very well to put all these complaints together, including their arbitration against the Czech Republic, with which we have absolutely nothing in common. Of course, it is suitable for them, because the messier it becomes, the easier it is to shout about it.

We will not be reacting to this in this programme, we do not want to react to this. To put it simply: read the adverts.

Jan Čulík, 18 March 2000

The author is the publisher of the Czech Internet daily Britské listy.

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