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RTL Klub CEO: We'll stay and fight

Deals

The following story, by Florence La Bruyère, is from the July 18 print edition of the Budapest Business Journal.

If you are just back from a long trek to Nepal and haven’t watched the evening news on RTL Klub for a month, be prepared for a shock. Where Hungary’s largest commercial channel previously concentrated on crime stories and light news, its evening news is now twice as long as it used to be. The first part is still light but the second half is full of investigative reports that are highly critical of the government. “Our audience rating is going up,” says RTL Klub CEO Dirk Gerkens (pictured).

For its part, government officials see RTL Klub as waging a “war of revenge” against the advertising tax. Adopted on June 11, the tax hits Hungarian media companies’ annual advertising revenues in several steps, rising to a maximum rate of 40% on revenues above HUF 20 billion. Prime Minister Viktor Orbán has justified the tax, saying it was targeted against “companies who make large profits”, like earlier levies imposed on banks, telecoms and utility companies.

But RTL-Klub, a subsidiary of RTL group, which is 75% owned by the German company Bertelsmann, believes it is specially targeted.

“No other company has the turnover we make, so we’ll be the only one to be taxed at 40%. This is clearly designed as an anti-RTL tax,” Gerkens said on July 15, at a press briefing with the Hungarian International Press Association.

With €100 million turnover and a €15 mln profit in 2013, RTL Klub has been profitable. Its main competitor, privately owned TV2, is not. In 2013, TV 2 lost HUF 6.7 bln. Already this year it has lost HUF 10.8 bln. Last December, German owner Pro Sieben Sat 1 sold TV2 to the channel’s CEO and CFO, two persons said to be close to the ruling party.

That was when RTL Klub’s problems started. The channel lost big advertisers, like pharmaceutical companies Richter-Gedeon and Teva. Teva, one of RTL’s most faithful clients, shifted in December to TV2 without an explanation, Gerkens said.

“We know clients and agencies have been approached by circles close to Fidesz. Pharmaceutical companies, for example, have being offered state benefits if they shift to TV2,” Gerkens said. On top of that, TV2 was exempted from paying advertising tax – this year only – thanks to a special amendment.

“The tax’s goal is either to kick us out of the market or to buy us cheap,” says Gerkens.

Since RTL changed its news format, it gets tons of emails and messages from its growing audience, according to Róbert Kotroczó, head of news at the station.

“Some people are even sending us stories, with lots of information and documents, so our journalists can start working on it. We have hired new staff and have started cooperating with the investigative website Atlatszo,” Kotroczó says.

But why wait for the tax to become critical of the government? Kotroczó, who has been with RTL Klub for 14 years, says it is the result of a business strategy rather than a political one. 

“We had a political profile before, but things changed in 2008. Hungarians were not curious about politics any more and we were losing audience on the prime-time slot whereas TV2 was doing well with its crime stories and light news,” he said. “So we chose the same format as they did. Then, before the elections, we realized there was a renewed interest in politics. Last year we launched a political news program on our cable channel RTL 2. The test proved successful; that is why we now go deeper into political coverage.”

RTL Klub says it will pay more than €9 mln in advertising tax this year. But according to the CEO, “we will not cut costs on news production. On the contrary, we will invest in investigative journalism. I would rather save money on American fiction.”

Asked whether RTL’s shareholding company would sell if it got a decent offer, Gerkens said the issue was not on the agenda. “The shareholders are fully committed, and leaving Hungary would be a bad precedent,” he explained.

Fortunately, he added, RTL Klub only represented 1% of the German group’s profit, so its losses would have a limited impact on the mother company. “It is better that such a crazy story happens on a small-size market like this one,” he said.

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