Dirk Gerkens Explains How the Hungarian Advertising Tax Threatens Freedom of Media
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week 25 / 19 June 2014 OPEN CONTROVERSY Dirk Gerkens explains how the Hungarian advertising tax threatens freedom of media Luxembourg United Kingdom France What did the Britain’s Got Talent M6 wins prize Employee Survey enjoys record-breaking for a report on the 2013 change? digital campaign! family life of gay couples week 25 / 19 June 2014 OPEN CONTROVERSY Dirk Gerkens explains how the Hungarian advertising tax threatens freedom of media Luxembourg United Kingdom France What did the BGT enjoys M6 wins prize Employee Survey record-breaking for a report on the 2013 change? digital campaign! family life of gay couples Cover Dirk Gerkens, CEO of RTL Hungary Publisher RTL Group 45, Bd Pierre Frieden L-1543 Luxembourg Editor, Design, Production RTL Group Corporate Communications & Marketing k before y hin ou T p r in t backstage.rtlgroup.com backstage.rtlgroup.fr backstage.rtlgroup.de QUICK VIEW What did the Employee Survey 2013 change? RTL Group p.9–11 Britain’s Got Talent enjoys record-breaking digital campaign! FremantleMedia United Kingdom Dirk Gerkens: p.12–13 “Every Euro spent on advertising means M6 wins prize 4.7 Euros for the economy.” for a report on RTL Hungary the family life p.4–8 of gay couples M6 p.14 Big Picture p.15 SHORT NEWS p.16 PEOPLE p.17 On 11 June 2014, the Hungarian Parliament approved a tax bill on “EVERY EURO SPENT advertising revenues. RTL Hungary’s CEO Dirk Gerkens outlines the ON ADVERTISING characteristics of the Hungarian media landscape and explains how this law MEANS 4.7 EUROS will have a negative impact on the Hungarian economy. FOR THE ECONOMY.” Hungary – 19 June 2014 RTL Hungary Dirk Gerkens, CEO of RTL Hungary 4 What are the characteristics of the Hungarian TV Hungarian media company, we would be the only market? ones subject to this unseen amount. The law has been designed in such a way that it mainly damages Hungary has a very competitive television market RTL: our group in Hungary represents about 15 with 90 per cent multichannel homes, four satellite per cent of the total Hungarian advertising market, platforms. The market is already fully digital, the while we would have to pay about 65 per cent of the analogue switch-off happened last year. The total tax. This is completely absurd. This extra tax advertising market has seen some tough years. is charged on revenues, not on profi ts and would Since 2008, the market has decreased by 50 per theoretically wipe out all of RTL Hungary’s profi ts. cent, and 2014 is the fi rst year where we are seeing It is totally clear that there are specifi c business some slight growth. circles behind the governing party who suggested this law in order to interfere with normal business procedures using non-market tools. The law has nothing to do with balancing state accounts, since it has a very small total volume compared to the size of the state budget: the total sum expected from the whole market would not be more than about 11 per cent of the annual cost of the public-service media. RTL Group’s Hungarian family of channels is the market leader in Hungary 38 All day Prime time 30.2 RTL Group’s Hungarian family of channels 18.3 15.6 What position RTL Hungary has in the current 9.2 media landscape? 8.6 RTL is the leading television group by far. RTL Klub Hungarian TV2 Group Public channels RTL channels is our fl agship channel and has been the market- leading channel for 15 years as well. We have seven Audience share of the top three channel groups in Hungary Target group: 18-49 cable channels featuring all kinds of genres from music to cooking. The country’s two biggest cable channels are also part of RTL Hungary: Film + is How has RTL Hungary contributed to the growth the biggest movie channel in the country, while Cool of the Hungarian economy in the last 17 years? mostly has US series and movies as well. These two channels together with RTL II, which was launched A recent study in Hungary indicates that every in October 2012, are part of our commercial offer, Euro spent on advertising means 4.7 Euros for the RTL 3. It means that these three channels operate economy. So our contribution is really big. Hungary in a mirror break system, which – after RTL Klub – is had one of the highest license fees of any country the second biggest commercial offer on the market. even before the analogue switch off, so besides all our taxes, we also contributed millions of Euros How will the new law affect the current media in license fees to the state budget. RTL as the landscape and what are its short- and long-term biggest media group has become a real institution consequences for RTL Hungary’s operations? in Hungary with various public-service activities and charity actions. We support a variety of cultural According to the law, the companies will have to pay events in the country and have raised signifi cant ad tax on that part of their tax basis which is above funds for many different goals. Our political and half billion forint. Up to HUF 5 billion, the tax rate informative magazines have been on the air for would be 1 per cent, but for the part above HUF 20 many years and have won a number of prizes for billion the media companies have to pay 40 per cent journalistic excellence, including, just recently, the tax on ad revenue. Given that we are the biggest Pulitzer Memorial prize. We are always among Next > 5 the top winners of the annual television awards in What is RTL Hungary’s action plan and has it Hungary, with a wide range of shows like X-Faktor, joined forces with other entities of the media I Am A Celebrity – Get Me Out of Here and Való industry in raising its protest? Világ, to mention just a few. Obviously we are one of the biggest commissioners of local productions, This is the fi rst time in the last 17 years that the and have also coproduced a lot of movies in the last whole industry has unanimously protested against, 17 years. And obviously we have created hundreds regardless of individual political standpoints. This is of jobs in the country, at RTL and indirectly at our a big thing. Obviously we will make sure this topic subcontractors. stays on the public’s agenda and will use all legal possibilities both inside and outside Hungary to challenge this law. In 2014, RTL Klub dedicated airtime to raise money for the ‘Bátor Tábor Foundation’ How does the new law harm the independence and freedom of the media? RTL Klub’s info magazine Házon Kivül In recent years there have been many, many changes in the Hungarian media landscape. The sold circulation of printed publications has decreased drastically. The public-service media have always Background been under the infl uence of the governing party in Hungary, and the new media law increases this The new tax will be progressive, with the top 40 per infl uence further. The state news agency gives its cent levy imposed on annual advertising revenue of news free to any and all media, which means that more than 20 billion forints (about €65 million). It was smaller radio stations that can’t afford their own news introduced as a matter of urgency by the Government production will use the government-produced news. and is supported by the far-right opposition party. A ProSiebenSat1 has sold TV 2, our biggest competitor few days after its adoption by Hungary’s legislative – offi cially through a management buyout, but it is body, Hungarian President János Áder ratifi ed widely rumoured in Hungary that the real owners the Act on Advertising Tax, although there were behind it are closely associated with Fidesz, are widespread protests against the law. in fact in its main background business circle. The same applies to the only national commercial radio RTL Klub is the only company in Hungary with station. So RTL is practically the only independent enough revenue to be taxed at the highest tax mass media left in the country. If our independence rate, that is to say 40 per cent. Under the new law, were to be broken, there would no longer be any half of all taxes on advertising would be paid by media at all without the infl uence of Fidesz. RTL Hungary, while its share of the total advertising market is only around 15 per cent. This situation not only contradicts the principles of proportionate sharing of the public burden and neutrality of competition, but also shows that the idea behind the new legislation is to silence the country’s biggest independent TV channel by wreaking havoc with the profi tability of RTL Hungary’s operations. Next > Hiradó presenter D.Tóth András. Since 1997, RTL Klub’s news programme Hiradó reports objectively on current affairs and social issues 6 Unprecedented action The overwhelming majority of the Hungarian media and advertising world have expressed their strong concern about the tax impact on the freedom of WHAT DO HUNGARIAN POLITICIANS press and independent media. At the beginning SAY? of June 2014, more than 130 TV channels, radio stations, newspapers and websites jointly protested State Secretary János Lázár: “RTL is the law by switching to a black screen or blank front threatening the country and blackmailing pages – an unprecedented and unique action in the viewers and politicians.