Central Europe Review: politics, society and culture in Central and Eastern Europe
Vol 1, No 7, 9 August 1999

television in Hungary C S A R D A S:
"No one's jamming their transmission..."
TV broadcasting in Hungary

Episode Two: Privatisation and scandal

Gusztav Kosztolanyi

(Link to part one of this series on Hungarian television)

RTL Klub launched a striking advertising campaign with the slogan "A little excitement coming soon" emblazoned across huge posters depicting a woman's eyes staring wide in terror or suspense. In the light of subsequent events, the horror in her face was to seem strangely appropriate.

On 30 June 1997, the ORTT (National Television and Radio Corporation) announced the winners of the call to tender issued as part of the privatisation process. (See last week's article or the Hungarian daily HVG, 4 October 1997). General jubilation was accompanied by the popping of champagne corks in the customary act of celebration. Three new channels had been selected to hit the small screen in Hungarian living rooms, two broadcast terrestrially and one by satellite. TV2 (owned by MTM-SBS, with Scandinavian Broadcasting System holding 49%, MTM Kommunicacios Rt 38.5% and Tele Munchen GmbH 12.5% of the shares respectively) and RTL Klub (operated by Magyar RTL Rt, with CLT-UFL holding 49%, Matav 25%, the Pearson Group 20% and Raiffeisen Unicbank 6% of the shares) would each be accessible to approximately 86% of the population, whereas TV3 (Budapesti Kommunikacios Rt, with Central European Media Enterprises holding 71%, Hypo Securities Hungaria 18%, Alliance Hungary 10% and Peter Buzasi 1% of the shares - see also below), which could only be picked up via cable or the AM microsystem would only be available to 30-40% of potential viewers.

Controversy dogged the whole enterprise of privatisation from the very start. To begin with the most innocuous aspects: MTM-SBS' TV2 faced the unenviable prospect of wrangles and possibly litigation with MTV (the Hungarian public service broadcasters) over the name of the new channel, which could legitimately be considered an act of plagiarism. It was certainly designed to confuse the unwitting viewer, who might expect to tune into the traditional state-run MTV2 only to find gaudy soap operas in the place of serious debate.

Then there was the matter of when the channels would actually start broadcasting. TV2 would, according to the original plan, begin on 4 October, broadcasting 19 hours a day. RTL Klub was not to prove so punctual, kicking off on 7 October with a meagre eight hours (three Hungarian films, a news programme and games), switching to the full whack of 18 hours (and only starting from then on the basis of a finalised schedule) from 27 October. RTL's managing director, John Harrington, was immediately on hand with a glib explanation for the delay: the transitional period would allow the channel to test whether the programmes were indeed being received by everyone throughout the parts of the country that were to be covered. Only once it had been firmly established that this was the case was it worthwhile for RTL to put its full package on offer.

A slightly less charitable motive was ascribed to RTL by certain parties, however. The transitional period would allow the channel to observe and acquaint itself with the schedules of its competitors and it could adapt its own in such a way as to give itself the edge on them. If RTL were seen to be indulging in such a dirty tricks campaign, it could easily backfire on the company, as it was well within the ORTT's powers to penalise the delay by slapping a fine on RTL equivalent to a thousandth of the broadcaster's fees, to wit, of HUF 800,000 (USD 3300) per day. TV3 was to begin on 26 October.

The third complaint concerned the yawning gulf between the original draft programme schedules and the final ones. To say that they bore precious little resemblance to one another is to be very generous indeed. The compulsory public service content, trumpeted from the rooftops before privatisation became a reality was now surrounded by an ominous silence. TV2 was successful in its efforts to poach stars from MTV, though it had to wait until the end of the year before their contracts with the state channel expired. This could go some of the way towards accounting for the schedule differences. Instead of the promised debate/interviews staple for the morning, a magazine-style programme was to greet the bleary-eyed over their breakfast coffee. Similarly, serials replaced the Europe magazine that was to be shown at the peak slot of 10 pm (and repeated the following morning). On Saturday afternoons, films were to be shown instead of football matches.

In defence of TV2, Dezso Pinter, chairman of MTM-SBS, claimed that nothing more sinister than a slot reshuffle was afoot. As far as RTL was concerned, a chat show was to replace a Europe magazine, cartoons instead of a science programme, Hip TV ousting Our Country and a detective series elbowing out Public Service Magazine. Clearly, this bland fare was intended to please the crowd, or, as the more highbrow critics would have it, pander to the insatiable appetite for escapist pap. Cries of cultural degradation could be heard from the wings: mass-produced, glossy, sugar-coated moralising American tripe was to be paraded before the youth of Central Europe, free from all the subtlety and ambivalence the region had boasted as its trademark. Whatever was the world coming to! Mind-rotting entertainment would shed its gaudy light into even the darkest corners of the melancholy souls of Hungarians.

All of these teething troubles paled into insignificance later on, when a genuine public outcry was triggered by the Supreme Court's verdict on the ORTT's handling of the privatisation bids. The commercial channels, meanwhile, busied themselves establishing a niche in the market.

That a more youthful audience was being targeted became apparent not only from the contents of TV schedules but also from the profiles of the presenters and news readers. Although cost-cutting was a factor (as RTL put it, it is easier to create a new star in the desired mould than to buy the services of an established one), fresh faces could create a quite different image, free from the connotations of the staid, the stodgy, the traditional, the earnest and the worthy that clung to MTV. So it was that RTL could crow over its coup of having the most beautiful weatherwoman. That she possessed absolutely no meteorological qualifications whatsoever caused no clouds to gather on the channel's horizons: she was a former beauty queen, so what more could the punters ask for? The new channels were anxious to portray themselves as upbeat, dynamic, exciting, fun to watch, the "in thing", and all because the lifeblood of commercial channels is advertising revenue.

In the advertising stakes, TV3 was clearly facing an uphill struggle, with a considerably smaller starting base. Undaunted, its chiefs calculated that the households that they reached represented 60-66% of purchasing power in Hungary. In October 1997, TV3 was charging HUF 170-200,000 (USD 700-830) per minute for advertising. In that month, MTV1's slice of total advertising revenue was somewhere around 60%. Not only was the public service bastion required to cut its advertising time, but it also had to compete for advertising, something it had never had to do before. Would it be able to go on charging astronomical fees? For a 30 second slot at peak viewing time, MTV1 could command HUF 2.1 million (USD 8750), for the off-peak, but still well-viewed hours, the corresponding charge was HUF 975,000 (USD 4060) and the cheapest fee HUF 90,000 (USD 375). RTL charged HUF 870,000 (USD 3625) for 30 seconds at peak time, between HUF 330 and 450,000 (USD 1375-1875) during off-peak hours and HUF 60,000 (USD 250) for the rest of the day. TV2's scale of fees was similar, ranging from HUF 800-900,000 (USD 3330-3750) for 30 second ads shown before and after popular series and evening films as well as those that interrupted films, HUF 280-550,000 (USD 1160-2300) for the slots around Wheel of Fortune and the news, and HUF 50-75,000 (USD 200-320) during the breakfast magazine, Good Morning, Hungary. The amounts involved may sound excessive, but have to cover operating and production costs, the broadcaster's fee - in excess of HUF 800 million (USD 3.3 million) per annum, three years' worth of which had to be paid in a lump sum advance - and the transmission fees payable to Antenna Hungaria - some HUF 1.5-1.6 billion (USD 6.25-6.70 million) a year.

By January 1998, the effects of privatisation could be discerned in modifications to the scale of charges (see HVG, 10 January 1998): MTV had lost around a third of advertising trade by the end of 1997 and this was expected to drop further to 50%. To stem losses, it decided to reduce its charge for peak time to HUF 1.5 million (USD 6250) for a thirty second ad. RTL followed suit, with the highest rates set at HUF 630-750,000 (USD 2625-3125). TV2, by contrast, was able to hike its prices: for ads around the Wheel of Fortune, it was now able to ask for HUF 1.2 million (USD 5000)during the week and HUF 1.5 million (USD 6250) at weekends for the 30 second slots. TV3's fees also increased considerably, with HUF 450,000 (USD 1875) becoming the norm for 30 second ads interrupting the films. (The difference between the system applied by TV3 and that applied by the others is that TV3 sells advertising time on the basis of ratings rather than set slots, which means that an ad is shown until the ratings fall below the level ordered by the advertiser).

The loser in the whole process was Elso Magyar Kereskedelmi Televizio (First Hungarian Commercial Television), more popularly known as Irisz TV. Down, but not out, Irisz, the property of Central European Media Enterprises, bought 71% of the shares of Budapest Kommunicacios Rt on 16 September 1997, thereby taking over TV3. CME's representative, Gyorgy Balo, set out the company's reasons for failing to re-christen the channel: partly because Irisz's name was linked to the failed bid, and partly because the company did not wish to create the impression amongst viewers that Irisz would have been no different to what they were watching (the Irisz bid was for nation-wide cover, not for the 35-40% cover available to TV3). The result of the call to tender had put Irisz's nose so out of joint that the company decided to contest it in court. This led to a scandal that rocked public faith in the ORTT, in spite of the bold pronouncements of the corporation's lawyer, Edit Roder, when the matter was first broached as part of Irisz's civil action. "It took its decision in the interests of 15 million Hungarians," she announced.

In the meantime, the ORTT went about its daily business, blissfully unaware of looming disaster - as in the best tradition of the soap opera. It gave a report to Parliament concerning its activities in 1997 in February of this year. This was to be followed in swift succession by another cataloguing its actions during 1998. Its President, Mihaly Revesz, gave an interview to Magyar Nemzet (18 February), in which he assessed the ORTT's role: "I feel that it is one of the most important and complex institutions in the Hungarian system of democratic institutions. The reason why it is so important is that it monitors a field from which information reaches people's minds and spirits. We are aware that, in the era of the electronic media, we in this house can do a great deal when it comes to creating cultural values. I cannot, however, deny that I perceive the presence of politics in our work, and politics has an influence on our tastes and on our choice of values."

On the subject of how to establish good relations with the ORTT, he was clear: "...I would advise everyone to endeavour to abide by the law and to maintain good relations with the Hungarian public. If these two aims can be attained, then good relations with the ORTT will already have been established" (author's emphasis). These words would come back to haunt him.

The substance of the legal action taken by Irisz was to dispute the decision taken by the ORTT when it came to awarding licences valid for ten years to commercial TV channels. Irisz regarded the decision as unlawful. Whereas TV2 and RTL had won the right to broadcast on the basis of bids to the tune of HUF 8 million (USD 33,000) or so, the Irisz consortium, headed by Gyorgy Balo, had offered HUF 12 million (USD 50,000) for one of the frequencies, but had not been awarded a licence. Nor had Irisz fared considerably worse than its rivals in terms of the number of points scored in the course of evaluation of the bid. The key legal issue, however, was to clarify whether the German Bertelsmann group owned more than the maximum permitted 25% share in the winning consortia. If this were the case, it would be up to the court to decide whether to declare the 1996 tender null and void. Irisz was interested in the "restoration of the original status" - in other words, reversing all the changes that had taken place since privatisation had become a reality. Clearly, this would rock the foundations of the Hungarian media market, necessitating an entirely new call to tender. In a letter sent to the court at the end of January 1998, the ORTT actually admitted that the bid submitted by RTL Klub did not comply with the stipulations of the call to tender. This could mean that RTL's licence would be revoked (For this and the following sections on the court case see Magyar Nemzet, 15, 16, 23, 25, 26 and 27 February, and 1 and 6 March 1999 and HVG, 27 February and 6 March).

The plaintiff's legal representative stated Irisz's accusations in greater depth a few days before the Supreme Court gave its verdict (the case had been referred there on appeal): the ORTT had breached competition rules by revising the decision taken by the committee acting as jury and accepting RTL's bid. The jury had deemed RTL's bid technically (or formally) invalid. This meant that the ORTT had moved the goal posts when the procedure was already in full swing. It had gone on to exacerbate the situation by holding a single vote to determine the outcome of the two bids instead of dealing with them separately.

In the course of proceedings, the ORTT claimed that it had been misled by RTL and that it had not become aware of this until 5 February, when it examined the auditor's report. Interestingly enough, a total of HUF 140 million (USD 583,000) in fees was paid to the experts called in to help assess the bids. These experts included lawyers from Janos Martonyi's office (Martonyi is now the Hungarian Foreign Minister). This feeble defence was the first clear indication that the corporation was on the retreat, anxious to leave open a bolt hole that would allow it to pass the buck on to RTL, should the final verdict prove unfavourable.

The problems with RTL's bid were of a formal nature: the declaration concerning ownership of the companies forming the group was supposed to have been attached to the original application, which was lodged on 10 April. The date on the declaration was 28 April, well beyond the deadline, which meant it could only be considered retroactively, if at all. Furthermore, the Bertelsmann group (which has a majority stakeholding in Hungary's most popular daily newspaper, Nepszabadsag as well as a minority holding in Delmagyarorszag, a major regional paper) had too big a stake in RTL Klub according to the rules set out in the call to tender. This should have disqualified RTL.

TV2's lawyers were particularly dismayed about these disclosures, accusing their opponents in Irisz of leaking confidential information and cashing in on the adverse publicity. TV2's future had also been put on the line because of the case: since their award had been handled jointly with RTL's, if the "original status" were to be restored, the plug could be pulled out on TV2 as well. Turning back the clock did not appear to be the best means of righting a wrong. Irisz protested, pointing out that the case had been taken to court before the successful commercial stations had commenced their operations, and Irisz had called for their broadcasting rights to be withdrawn. This had not been done, and therefore it would be unfair to base arguments on what had happened since.

In rejecting Irisz's request, the Metropolitan Court (to which Irisz had originally turned for redress) drew attention to the fact that contracts had already been signed, and that annulling them would do a disproportionate amount of damage to the defendants compared with the disadvantages suffered by the plaintiff. Even at this stage, it emerged that calls to have RTL's application thrown out due to lack of supporting documents from the adjudication committee within the ORTT had been ignored by the corporation. The ORTT maintained that the committee had overstepped its mandate and ordered that the missing documents be supplied. The Metropolitan Court agreed that RTL's bid should have been excluded because it had not complied with the rules as set out in the call to tender, but conceded that the ORTT had a right to call for the missing documents to be furnished. Indeed, it was the media law itself which allowed for this possibility. Moreover, the business of the number of points awarded to each contender in the course of assessment of the bids was handled by the court in a similar way. Scrutinising the minutes of the ORTT's meetings could not allow the court to reconstruct the decision-making process, nor could deliberate breaches of competition law be discerned by such means. All of which left Irisz with the impression that justice had not been done, hence the appeal.

The results of the appeal sent shock waves through Hungarian society. Although the Supreme Court did not accede to Irisz's request that the original status be restored and although it did not see fit to award any compensation to the plaintiff, Irisz still won a moral victory. In its statement of reasons for the judgement passed, the Court argued that the laws on unfair competition did not apply to the TV bids, since the media law had gone into the procedure for the call to tender in great detail (thereby quashing earlier speculations that the Court might decide to refer the entire case to the Competition Office as a matter outside its own sphere of competence). Legal consequence was only relevant to the ORTT itself, which meant that the plaintiff was only entitled to turn to the ORTT to determine whether a breach of the law had taken place. The Court, therefore, had no power vested in it to revoke the licences. Nor could the Court take account of new evidence produced in the course of proceedings (this referred to the information that had come to light since the case was brought before the Metropolitan Court concerning the size of the Bertelsmann holding in the consortium).

As regards the conduct of the ORTT, the Court did not spare the rod: the ORTT, it pronounced, did not have the right to modify the conditions set out in the call to tender between the two rounds of assessment. RTL's bid should have been disqualified on grounds of formal invalidity. The ORTT had, however, seen fit to revise the decision taken by the adjudication committee and to ignore the notarial document. Because of the formal invalidity of the bid, the ORTT did not have the right to call for the missing documents to be supplied later on. Because the ORTT annulled the notarial decision to exclude the invalid bid, it had contravened the principle of equal treatment, which had to be given to all applicants.

The Court therefore called upon the ORTT to dissolve its contract with RTL with immediate effect. The ORTT, however, could not be legally bound by the Court to comply since the media law states that the ORTT acts as a public authority in this sphere. It would be up to Parliament, to which the ORTT is accountable, to take the relevant steps to ensure that the ORTT lives up to its legal responsibilities should the corporation be disinclined to pay heed to the Court's instructions. Here the distinction between civil and administrative law is crucial: the ORTT's actions are subject to the general rules of state administration, whereas the Irisz case was pursued under civil law. Ne'er the twain shall meet, hence the Supreme Court could do nothing to force the ORTT to take the matter further.

The ORTT's reaction can perhaps best be understood in the light of the following: its mandate ends in a year's time, and its members cannot be recalled by Parliament. The only way to remove them from office would be for them to stand down voluntarily (which, to the minds of many Hungarians would be the decent thing to do, as it would be a way of respecting the verdict). Mihaly Revesz, the ORTT's President, was speaking from a secure position when he held a press conference the day after the judgement was made public. Far from reeling from the blow delivered, he appeared his usual picture of confidence. He announced that he was sticking to his guns, that the ORTT had committed no wrong-doing, and had respected the rules fully. Only once the corporation had received a copy of the Court's verdict in writing would it decide what responsibilities were incumbent upon it as a result. The ORTT had 60 days at its disposal for the new administrative procedure to determine what the fate of the contract would be. The corporation did not feel it was necessary to resign. The appeal court had endorsed the original court's findings in all points save one, that of the formal invalidity of RTL's bid, which meant that the ORTT was not required to enter into a contract with Irisz TV (this was Revesz's way of claiming that the ORTT had been vindicated rather than damned by the verdict).

Janos Weber, another member of the ORTT, held out the prospect of the current situation being assessed in the framework of a public administration procedure. According to the rules, he added, if the contract could not have been concluded and the breach continued to persist, then the ORTT would have to revoke the broadcaster's contract. The ORTT's decision on that issue would be contestable in court, and the action would have delaying force.

Gyorgy Balo, director of Irisz TV, spoke of his mixed feelings at the verdict. He reckoned he had won a battle in spite of the opposition of seven political parties (represented in the ORTT) and the two most influential TV channels. He recalled Revesz's words on the day after the results of the call to tender had been made public. The President of the corporation had declared that there could be no appeal against the decision taken by the ORTT (which now smacked of overweening arrogance). As to whether Irisz would sue for damages very much depended on the ORTT's response; on whether, for example, a new call to tender would be issued.

RTL's reaction was also low-key. Its spokesman did not believe that the channel would be forced to suspend transmission in the meantime. The company had just moved into its new headquarters and studios and had no intention of putting further investments on hold. Company management had changed since the award of the licence. John Harrington had been replaced and Ferenc Partos, who had done the lion's share of the work preparing the bid, had likewise left. If Antenna Hungaria were to cease transmitting RTL's programmes on the ORTT's instructions, the company would certainly consider suing for damages.

Politicians were initially reluctant to comment on the outcome of the Supreme Court's deliberations, though a general consensus that the contract with RTL should be annulled did emerge (the Prime Minister, in his customary Wednesday radio interview agreed with this). The deputy head of the MSZP (Socialists), Ildiko Lendvai, was glad that some progress had been made, as it was in everyone's interests for the polarised media market to function within a legally clear framework. The ORTT ought to make up its mind how to respond as soon as possible.

Istvan Csurka, leader of the MIEP (Hungarian Justice and Life Party, extreme right-wing), rubbed his hands in glee at the prospect of one less commercial TV channel bringing the country to rack and ruin. He did not mind that the verdict showed up the ORTT as his party was not represented in its ranks.

The head of the FKGP (Party of Independent Smallholders) group, Attila Bank was not ashamed at the condemnations of the ORTT, since the representative of his party in the corporation, Gabor Nahlik, had voted against the decision to allow the RTL bid to be declared admissible. in the minutes of the meeting concerned, he is quoted as saying "I feel that, in taking its decision, the ORTT allowed the objective criteria to be relegated to the background in an unacceptable manner and that subjective convictions were given greater weight than they ought to have received."

Meanwhile, a storm of protest had been unleashed amongst the public at large. The ORTT's high-handed behaviour had touched a raw nerve, as the implications of the wrangles were not lost on Hungarians. What was at stake was not the disheartening prospect of a protracted fresh call to tender and the absence of RTL from the ether until the merits of its new bid were reassessed, but the rule of law itself (See Magyar Nemzet, 23 and 25 February and 6 March). The ORTT is an institution charged with the task of monitoring the entire spectrum of media production, of enforcing compliance with law, yet it itself had ridden roughshod over that law, exploiting its own (as it thought unchallengeable) supremacy, taking decisions on behalf of millions of Hungarians, power-drunk and believing itself to be above the law.

The ORTT's members could not be ousted, nor could they be called to account in the framework of civil proceedings for their deeds. True, they are accountable to Parliament, but what could Parliament do? It could organise hearings to listen to their reports, it could vote on the corporation's annual budget, but it could not bring any influence whatsoever to bear on its workings. Ironically enough, this sorry state of affairs was Parliament's own fault: the Parliament had, after all, voted in favour of the very media law that created the ORTT and, indeed, 89% of votes cast were for the motion. This chronic lack of democratic control coupled with the unabashed exercise of power on the part of the ORTT smacks very much of the sins of the past, a state of affairs that was supposed to have been overcome with the collapse of the Communist regime.

The ORTT did in fact report to the Parliament's Cultural Committee, stating that it had received the written copy of the Court's findings that it had been waiting for (or playing for time, as some commentators put it). The corporation was considering review proceedings, but still had 25 days left before the deadline for lodging an application expired. The administrative procedure would be used to determine whether the contract was to be annulled, and this satisfied the requirement to implement the call for action as set out in the verdict. The review procedure would not have delaying force, but RTL would enjoy the right of appeal against the ORTT's decision. Annulment of the contract could not take place without a verdict having been reached in these proceedings and that whole process could take years to resolve (certainly it would not be clarified before the ORTT's mandate expired).

According to the terms of the broadcaster's contract, it remains in force unless the TV company commits an error or both parties agree on an annulment. The Committee did not decide to set up a sub-committee to pursue the matter further, making do with a Committee position. Taking the Supreme Court's judgement as its starting point, the Committee decided that the ORTT had breached the provisions of the law, and called upon Revesz to determine what action the corporation had to take and inform the Committee of the results.

The ORTT then decided to take the matter of the RTL contract to the Constitutional Court within a fortnight instead of dealing with the issue by means of the administrative procedure. The legality of this move was also open to contestation. The Constitutional Court is not obliged to give this case precedence over all the other cases pending (allowed for in matters of urgency by a special procedure). The apparent stalemate could be overcome at any stage by any of the interested parties by bringing an action before the Metropolitan Court again.

The Chairman of the Culture Committee, Szilard Sasvari, informed Magyar Nemzet (1 March) that the six-party Sub-Committee on the Media would resume its work in mid-March with a view to preparing amendments to the discredited media law. The Prime Minister, Viktor Orban, had already written to the Committee in November of last year in conjunction with a reopening of the debate. He had proposed that the Committee request that the point be put back on the agenda. Any modification of the media law would have to be supported by a two-thirds majority. Sasvari reported that the Committee had consulted some 40 organisations as well as the ministries involved since November and not one of them had cast doubts on the need to change the law.

Gusztav Kosztolanyi, 6 August 1999

Next week: Episode Three - The Trials and Tribulations of MTV.




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