Bulgaria’s media movements and muddles

Written by on December 7, 2012 in Bulgaria, Business, News, Perspectives - No comments

A great game is being played out in Bulgaria’s media market that can be as baffling as trying to think straight while standing without earmuffs next to a thundering press or to discern the headlines as the newsprint flashes past.

It has provided ample fodder for conspiracy theorists who see in the several episodes of a drama that has dominated the months of 2012 a grab for a media monopoly by forces close to the centre-right GERB government ahead of the national parliamentary elections to be held about six months from now.

It is also taking place in the context of a Bulgarian media market which, like its somewhat more significant equivalents elsewhere in the world, is troubled not only by the body blow dealt by the financial crisis but also by uncertainty about how to proceed amid rapid changes in media communications technology. Just one of these is the defection of people away from “traditional” forms of media (and in these swiftly evolving times, even the relatively recent invention of news websites are numbered among that beleaguered pantheon) to direct communication through social networks. In the face of these latter challenges, managers of Bulgarian media seem no wiser than their counterparts anywhere.

Add to the mix in Bulgaria the dominating figure in national discourse, Prime Minister Boiko Borissov, widely perceived as deeply interested in his image in the media, and it is little surprise that the conspiracy theorists interpret what has been happening as part of a wider power play.

This is the story of three sets of changes and developments in the course of this year, one the tale of a straightforward change in a section of the broadcast media that appears to be growing in influence, the other two involving battles for control of two print media houses, Media Group Bulgaria Holding and Economedia.

The first story is that of the changes regarding the ownership and management of television stations TV7 and BBT. Allowing for the fact that several broadcast industry insiders have private doubts about the validity of television viewership ratings, it seems that TV7 has been on the rise in a field of television stations which for more than a decade has been dominated by two commercial channels and the public broadcaster, with a gaggle of minor cable channels bringing up the rear. As of mid-2012, TV7 says it has the third-highest viewership in Bulgaria.

Crown Media, a Cyprus-registered company and the owner of TV7, this year acquired BBT, installing in July Nikolai Barekov as BBT’s chief executive. Barekov, who became well-known to Bulgarian television audiences on the breakfast show of another TV channel, is seen as generally supportive of Borissov. TV7 itself had changed ownership in October 2009, to an Austrian-registered fund with Tsvetan Vassilev, chairman of the supervisory board of Corporate Commercial Bank, as financial adviser in the development of the investment. As has been widely and regularly reported in the Bulgarian-language media, notably those that are not close to or supportive of the government, Corporate Commercial Bank is in turn seen as being close to the government.

The development of the investment appears to have paid off, with the announcement in late November 2012 that a British company, Allegro Capital, had acquired 100 per cent of Crown Media. Allegro Capital managing director Patrick Martin, at a news conference about the deal, expressed optimism about a return to positive growth in the advertising market in Bulgaria and said that this was the company’s first deal in the media sector in South Eastern Europe. Local media quoted Martin as saying there was “great potential for the development of media in the region and the country”. It was an undramatic episode, a seeming success story of an investment developed to attract a foreign investment, compared to what was going on in the print media.

Hold the line
As The Sofia Globe reported at the time in June 2012, a battle royal was being conducted over the future of Media Group Bulgaria Holding.

Under attack were Lyubomir Pavlov and Ognyan Donev, since 2010 the owners of mass-circulation dailies 24 Chassa and Trud. Plovdiv-born Pavlov’s background is in centre-right politics and he has headed Municipal Bank; Donev is majority owner of Sopharma, the pharmaceutical and property interests company, and currently heads the Confederation of Employers and Industrialists in Bulgaria. At that stage of the early summer, the Media Group Bulgaria Holding publications were involved in strident exchanges of negative stories with the other side, including media magnate Irena Krasteva, owner of – among others – Telegraf, Monitor, Politika, Meridian Match and television station TV7; with her is her son Delyan Peevski, a member of Parliament for Ahmed Dogan’s Movement for Rights and Freedoms; and Corporate Commercial Bank’s Tsvetan Vassilev and chairman of the board of Victoria FATA Insurance.

Without rehearsing the details of each individual allegation that appeared in the rival groups’ media coverage, it is sufficient to say that various allegations were made, and all denied.

Matters deepened when it was announced that Pavlov and Donev were charged with large-scale money-laundering and Pavlov with tax evasion (all allegations in this line are also denied) in a move that their camp let it be known that they believed was all part of the campaign to bring them down, not merely as part of a conventional business war, but mainly because of their mass-circulation newspapers’ generally sharply critical coverage of the government and of Vassilev. Amid the pre-trial proceedings, the two owners’ shares in the holding were attached, while Pavlov’s shares were also subject to a distraint over a debt to a former business associate, Nedyalko Nedyalkov.

(In this paper war, Economedia’s publications in effect stood with Pavlov and Donev, publishing an article that, to put it mildly, called into question the credibility of the two men’s accusers. The same article was reposted in full on the websites of 24 Chassa and Trud. In the same way, after a split in the publishers’ association, Economedia and Pavlov-Donev stayed together in the membership of one body while a rival association was formed around the other camp.)

In online forums, the theory was posited that the prosecutions of Pavlov and Donev were intended to force them out of their media business so that control of the editorial content of their publications could move elsewhere. This theory was aired publicly on the internet by website bivol.bg (no relation to Alex Bivol of The Sofia Globe) which said in late August that Pavlov was being pressured to sell the media holding in return for his troubles going away.

Pavlov stepped down as chairman of the Union of Publishers, saying in an open letter that “those for whom media monopolies are more important than media freedom are hindering us and taking up our time…I believe that the cause of free media in Bulgaria is higher than everyone, including me”.

In September, it emerged that control of editorial content of the holding’s newspaper was being transferred to an editorial board and that Venelina Gocheva, previously editor of 24 Chassa and deputy head of the holding, was becoming general manager in place of Pavlov. Gocheva also became head of the newly-announced editorial board.

As to the question of ownership, there was a brief flurry at the end of August when media reports claimed that 24 Chassa and Trud were to be bought by First Investment Bank, owned by Tseko Minev and Ivailo Moutafchiev. The bank swiftly rejected the stories as untrue, saying – among other things – that its status as a bank would not allow it to embark on endeavours not directly linked to its financial activities.

In the first week of December, meanwhile, it emerged that Investbank had undertaken a 10 million euro loan granted in 2011 by UniCredit Bulbank to Pavlov and Donev, who received the loan in the name of Media Group Bulgaria Holding. The cession agreement was concluded on November 22, according to the Commercial Register, which also listed Gocheva as being the manager of the holding. Media reports said that the previous week, the distraint on Pavlov’s shares that had been obtained by a debt collector in relation to his obligations to Nedyalkov had been lifted, although the one levied by prosecutors because of the money laundering and tax evasion allegations remained in place.

Alpha and Omega
Among Bulgarians, Economedia is best known for weekly newspaper Kapital and business daily Dnevnik. Its print portfolio has shrunk during the crisis, and the owners’ venture into broadcasting, Re:TV lasted about a year before failing in November 2009.

The company traces its roots back to 1993 and from 2005, was part of Germany’s Verlagsgruppe Handelsblatt but that association ended towards the end of 2007.

In 2011, it was given three million leva (about 1.5 million euro) for the November 2011 – November 2014 period by the America for Bulgaria Foundation. The same year, the company effectively absorbed a former rival business daily.

From outside its stable, however, there has been negative reporting about the alleged financial position of majority owner Ivo Prokopiev, who has other financial interests, including in finance, property and minerals and is the honorary consul of Canada. Among those particularly keen on attacking the “oligarch” – an appellation that the 42-year-old Razgrad native is on record as disliking – were the media around the Krasteva-Peevski axis. Daily Standart, not owned by Krasteva, posted a story in March 2012 detailing what it alleged were Prokopiev’s debt obligations. Prokopiev responded to what he called the smear campaign against him in a blog written as an open letter in June 2012, entitled “Hunger Games”.

Media speculation about the future of Economedia dates back some time; in May 2009 the company rejected as unfounded reports that it was to be sold to wealthy businessman Hristo Kovachki. The story, citing no sources, appeared in Klassa, a daily routinely hostile to Economedia and to Prokopiev.

This is part of the background to the flurry that broke out after daily Presa (whose owner is a member of the rival publishing association to the one that Economedia remains a member of) said at the end of November 2012, quoting official records, that Alpha Bank had seized the assets of Economedia, including its newspapers, websites, headquarters, vehicles and equipment, because of an alleged failure to service a loan. Alpha Bank, according to the record, intended putting its own manager in place. Economedia reportedly was mortgaged for 9.5 million euro.

Economedia  rejected as untrue the allegation that it had not kept up its payments, with its publications reprinting records of transactions.

Comments by readers of the company’s websites on forums underneath stories about the affair were dominated by those who saw the move by the bank as part of a wider conspiracy for the government to hold the company’s publications in thrall. The story got scant attention in foreign media but one Austrian site described the Economedia publications as “critical” of the government.

Economedia’s board, in a statement, said that it was “at a loss” as to why Alpha Bank (a subsidiary of the eponymous Greek bank, which is the second-largest in that country and which recently acquired Emporiki Bank after calling off a merger with Eurobank EFG) had taken the step it had. It said that behind the action appeared to lie an attempt to capture Economedia and to subjugate its editorial policy, an attempt that the company said it would resist with all its “legal and public” resources.

Teodor Zahov, 49 per cent owner of Economedia, said in the days after the Alpha Bank move became public that free speech was not an item that could be bought, that being a media publisher in Bulgaria was a tough and unrewarding job, “particularly when publishers and journalists strive to be as independent and objective in their work as possible”. Speaking to public broadcaster Bulgarian National Radio, he said that the bank probably would seek a buyer in the “free media market, so to speak”. He declined to say who this potential buyer could be.

On December 3, a Bulgarian court issued a ruling barring Alpha Bank from taking control of Economedia. The court said that the dispute about the loan should be resolved in court.

Three days later, Bulgarian-language media quoted Alpha Bank chief Evangelos Litras as saying that the bank did not want to run Economedia but if the bank was granted the shares of the company, it could seek a buyer. The bank had acted in its interest and what would happen from now on would continue to be in line with standard business practice, Litras was quoted as saying.

Post script
This, as they say, is the story so far. One thread to watch as it continues to unfold will be whether, indeed, the coming months hold a consolidation of media ownership in Bulgaria. Another will be to observe whether, and if so which, Bulgarian media can surmount serious financial worries, losses of readership, defections to social networks and alternative news sources and, according to some opinion polls, declining credibility of the media itself.

In the context of the media generally, estimates of just how much influence the media exercises tend to be excessive (this is a vice not only of journalists and publishers but also of politicians). In the context of Bulgaria, external voices from the South Eastern Europe Media Organisation to the European Commission’s Neelie Kroes to compilers of press freedom indices have expressed concern about media freedom in Bulgaria, and that is further in the context of media standards in Bulgaria hardly being the highest in the first place.

Perhaps all of these stories above are simple business stories, about competition for market share, strategic moves to maximise advertising revenue, the awkwardness of dealing with debt and the potential consequences of default. But it is clear that many Bulgarian readers are unlikely to believe that, just as some of the cast of characters do not.

If you are Bulgarian and there are changes of ownership of media companies or individual companies or titles go under, see if you discern changes to the media diet that Bulgarians are offered. If you are not Bulgarian, ask your Bulgarian friends whether they believe that the government really is on a quest to control every last square inch of the media space (and do not forget to ask where they get their news from and how much they believe what they read, see and hear).  In the end, the fate of a media is in the hands of its readers, and just one of the golden rules that every owner and editor should know is a simple one – underestimating the intelligence of a reader tends to produce a former reader.

(Photo: Brano Hudak/sxc.hu)

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About the Author

Clive Leviev-Sawyer is the Publisher and Editor-in-Chief of The Sofia Globe. He is the author of the book Bulgaria: Politics and Protests in the 21st Century (Riva Publishers, 2015).