The battle over the Third Program of HTV is ongoing, behind firmly closed doors and under a great veil of secrecy. Considering the Law has limited ownership of the new concession to 33%, no single company or individual will be permitted to buy the station in its entirety. Also, there are few people or companies in Croatia with sufficient money available to invest in such a media project, which will certainly require some 20 million Euro to begin operations, which would be only enough in the beginning to take on HTV and the ever expanding Nova TV.

No single company will be permitted to buy the HRT Third Program, as the largest share allowed by law is 33%, and now all domestic aspirants are seeking to form partnerships with experienced and wealthy foreign companies: here we present the five leading world media companies in the privatization race for the Third ProgramForeign Partners

Only with a high quality program will the new station be capable of attracting advertising clients, the bread and butter and commercial television. This suggests that all the serious domestic aspirants wishing to be involved in the race for the Third Program will have to find a strong foreign partner, with both money and experience. Without that, TV dreams will become just an illusion.

According to Nacional’s findings, 22 companies have purchased the bidding documentation, which alone costs 15,000 kuna. Of the 22 requests, five are large multinational companies which will participate in the privatization of the Third Program: News Corp, owned by the controversial Rupert Murdoch; Mediaset, owned by Italian Premier Silvio Berlusconi; the RTL group situated in Luxemburg; CME, owned by heir to the Estee Lauder fortune Ronald Lauder, and the powerful Scandinavian network SBS. The SBS representative was the only person to confirm for Nacional that his company will be competing, while the remaining companies responded that it is not their typical practice to comment on potential acquisitions. However, that response is more than confirmation of their intention to bid on the Third Program.

Berlusconi and Bertelsmann

The Scandinavian company SBS is not well known in Croatia, as it is primarily present on the wealthy markets of northern Europe. Its strongest foothold is in Scandinavia and the Benelux countries, with a strong presence also in Eastern Europe. The corporation includes 11 television and 19 radio stations throughout Europe, with 140 million people daily following the SBS programs.

Evidence of the respectability of this company is the fact that it is listed on the New York Exchange – an exchange not open to companies that have not passed the due diligence process and that is not completely clean in terms of ownership structure, management and finances.

In the mid 1990s, SBS expanded into the Benelux countries, and the eastern European countries, a trend which continues today.

The greatest strength of SBS is that its market is young and poorly developed: the time spent by the population watching and listening to the programs as well as the share of those media in total advertising is smaller than on the mature markets, such as the American one. That means that they will continue with their sensational growth to date (65% annual growth from 1990 to today), particularly since SBS wants to continue expanding in Eastern Europe. Last year, SBS saw 700 million Euro in revenues. SBS’s senior advisor Martin Lindberg, commented for Nacional, saying “SBS is very interested in the HRT Third Program. We are currently negotiating with several companies in Croatia because, as you know, ownership is restricted to a 33% share, however at this time I cannot reveal which companies we are talking with.”

The Italian company Mediaset is well known to Croatian viewers, particularly those in Istria and Dalmatia who for years have been following its programs Canale 5, Retequattro and Italia 1. The company is owned by Fininvest, a corporation owned by Italian Premier Silvio Berlusconi, and is considered to be among the largest media corporations in Europe. It was established in 1980 when Fininvest took over the two year old TV station Telemilano from Milan, and renamed it Canale 5.

Through acquisitions, Mediaset took over another two stations: Italia 1 in 1982 and Retequattro in 1984. The Mediaset channels received national concessions in 1992. Thanks to an attractive program comprised of domestic quizzes and spectacles, combined with foreign films and series, Mediaset continued to attract advertisers and growth was constant. In 1995, Berlusconi permitted the entry of foreign investors, among them Kirsch, British Telecom and Canal Plus. The next year, Mediaset went public on the Milan Exchange. It entered onto the Spanish market in 1997, where it holds 40% of the private TV station, Telecinco.

The RTL Group is a division of the German media concern Bertelsmann. With 4 billion Euro in revenues last year, the RTL group is the leading European company for the production and broadcasting of television programs. Last year, the media company WAZ attempted to take over control in RTL, making a massive offer. The leading figures in WAZ (which owns 50% of the Croatian publisher EPH) were so certain that they would succeed in taking over RTL that they even announced it was a done deal. In the end, great resistance arose in Germany concerning the takeover, and RTL was able to hold out and push WAZ out of the running.

The main activity of RTL is television, with 24 stations in numerous European countries. A significant portion of revenues, over 20%, goes to the production of television programs for a third station, and radiostations and Internet sites participating in the revenues.

Bertelsmann’s roots lie in the publishing company Carl Bertelsmann Verlag, established in 1835, which evolved into today’s business empire. The publisher developed for decades, and the first signs that it could operate outside of Germany appeared with the restructuring following the Second World War. At that time, business was decentralized, which even today continues to be one of Bertelsmann’s key characteristics. The company began to spread into other media in 1958, when it founded its own music production company, Ariola. Growth continued in the 1960s, when Bertelsmann entered onto the first foreign market, Spain, and took over Berlin’s film production company Ufa and the publisher Gruner+Jahr.

It became a joint stock company in 1971. In the 1980s it made a strong appearance on the American market where it purchased several significant book publishers and music companies. By fusion with the company CTL from Luxemburg and Ufa, the RTL Group was formed, in which Bertelsmann originally had 40% of the stock, but with time, purchased more and took a controlling package. The American expansion was completed in 1998 with the purchase of the publishing company Random House, and RTL has been listed on the stock exchange since 2000. Today the RTL group is present in ten European countries, with over 18 radio and 22 television stations, and its production companies create 11,000 thousand hours of programming for 35 countries each year.

However, even Bertelsmann seems tiny and poor in relation to the fourth potential buyer of the Croatian Third Program. New Corporation is a multinational media corporation worth over $40 billion ad with annual revenues of $16 billion. It is best known for its founder, the controversial Australian, Rupert Murdoch. The corporation has branched into various activities on all continents, dealing with film, publishing, television and the Internet. Also part of the News Corporation is the film company 20th Century Fox, which has produced three of the five most successful films of all time: ‘Star Wars’, ‘Star Wars: The Phantom Menace’ and ‘Titanic’.

Rupert Murdoch

The publishing sector of News Corporation is particularly strong , particularly since Murdoch built his entire empire on the foundations of the Sydney daily newspaper, The Sydney Times, which he inherited from his father. In addition to owning one of the largest world book publishers, Harper Collins, many very influential newspapers are also under News Corporation. The best selling British tabloid, iSun, in addition to the traditional British paper, The Times are under Murdoch’s control, together with tens of other papers in Australia and Britain, and the best selling American magazine, TV Guide. Among other activities, Murdoch also owns the Australian Rugby League.

Few can compare with News Corporation in terms of size and influence. The final and most impressive deal Murdoch struck was with the Chinese Communist government. He was permitted to launch a branch of the Asian commercial television network Star, under the condition that they respect certain limitations to freedom of speech which the Chinese Communist leadership demanded. Murdoch consented, though otherwise a very conservative and right-oriented man, who also insists that the editorial policy of all his media be similarly inclined.

General Frenzy

The most controversial and most mysterious candidate for the sale of the Third Program is American tycoon Richard Lauder, son of Estee Lauder and heir to the cosmetic giant’s fortune. He is owner of the company Central European Media Enterprises, registered in Bermuda. He began meddling in the media relatively recently: in the early 1990s he was American Ambassador in Vienna and he saw the significant social changes taking place in Eastern Europe, and he likely decided that it was time to invest in those countries. He began in the Czech Republic where, with the help of Vladimir Zelezny, a local intellectual, he found a Czech partner and won the concession for a national TV program.

The result was Nova TV, a TV station which in only 4 months time picked up between 70 and 90% of the Czech viewers and attracted enough advertisers to become profitable. The formula was simple: during the day they showed American TV series ten years old and older, with Hollywood films and soft porn in the evenings. It is interesting that the program scheme was met with fierce reactions from the Czech public who opposed the trivialization of something they believed to be for the public good. However, the weather forecasts, given by chesty meteorologists were watched in increasing numbers, as were other programs and Nova TV began to earn big money fast.

Soon afterwards, in 1999, Lauder tried to fire Zelezny, on accusations that he had taken bribes and was stealing from company coffers. However Zelezny took advantage of the complicated ownership structure, necessary for limited foreign capital in the media, and instead threw Lauder out of the company, leaving Nova TV all to him. That marked the beginning of a lawsuit in which CME has sought 700 million Euro in damages from the Czech Republic.

It is estimated that in no more than one month’s time that the various consortia will be formed from domestic and foreign partners. The situation was the same in the concession for the second GSM network, which had a combination of foreign and domestic partners. However, this time, the issue is not simply pure business activity as it is with mobile telephony.

Taking over the third national TV Channel is the last opportunity for all those wishing to gain power over this media which will play a great role in the formation of public opinion and in making political decisions. Croatia has no other frequencies on which to grant a national concession, which has resulted in the aggressive battle for this channel: lobbying on all sides, everyone in negotiations with everyone else, weighing out strengths and contacting banks, with marketing agencies aiming to get as good a position as possible with the new owners as possible.

Considering that bids for the new concession can be submitted by 20 May, the composition of the new consortiums could already be known next month. It can be expected that the domestic companies which picked up the bid documentation will join together with the foreign companies, and that a total of five complete bids, lead by these five foreign companies, will be submitted. In order to more easily consider the possible combinations, here we list the names of the domestic companies which purchased the bid documentation: NetTV, Croatian roads, Croatian Olympic Committee, Croatian Musical Union, Croatian Telecom, Toncica (including Croatia Records), TDR, CCN, Pinta Programs, SIM, Transmitters and Relays, Camera and two law firms representing the interests of private clients. More about the domestic aspirants for the Third Program in next week’s issue.

Berlusconi’s empire: Mediaset

During 2001, Berlusconi’s Mediaset saw over 2.3 billion Euro in revenues, with growth in advertising revenues, despite the fact that this sector saw losses throughout the world. His strong points are in creating a program interesting to advertisers, precisely defining the public and exceptional experience in producing programs, in particular entertainment shows.

Murdoch’s News Corporation

Murdoch’s Fox Broadcasting in America is the most watched network among young viewers, though it was an outsider that had to break through the powerful hold that CBS, ABC and NBC had over television for decades. In Britain the company holds BskyB, a digital satellite network with hundreds of channels, which began operations in the early 1980s. Fox Entertainment produces an exceptional number of programs which are run around the world, from the ‘Simpsons’ and ‘Futurama’ to ‘Malcolm in the middle’.

Ronald Lauder and CME

Ronald Lauder is heir to the queen of cosmetics, Estee Lauder, and through his company Central European Media Enterprises, he established the very successful Nova TV in the Czech Republic in 1994. In the meantime, his local partners pushed him out and he is currently suing the Czech government for 700 million Euro. The suit is expected to be completed soon.

In addition to the Czech Republic, Lauder’s CME also owns the station Markiza in Slovakia, PRO TV in Romania, controlling rights in Pop TV and Kanal A in Slovenia and the Studio 1+1 Group in the Ukraine. Lauder was mentioned earlier in Croatia as a potential buyer of the former TV Mreze.

Bertelsmann: Largest European media group in music, television and publishing

The television division of Bertelsmann is called the RTL Group and owns tens of radio and television stations throughout Europe.
The RTL Group is comprised of the newspaper publisher Gruner+Jahr, which publishes Stern and the Financial Times Deutschland.
This group also includes the music producer BMG, which releases artists such as Elvis Presley, Christina Aguillera and Avril Lavigne, and the book publisher Random House, which releases titles from Danielle Steel, John Grisham and John Updike.

SBS and Harry Sloan

The company was founded by and is still run by American Harry Sloan. In the early 1980s, he was a television and film producer in Hollywood. In 1983, Sloan bought New World Pictures, a production house specializing in bizarre exploitation films. After 6 years, he sold the company for $145 million and bought shares in local Scandinavian TV stations.
That was the perfect moment to enter onto the Scandinavian market: market deregulation in the part of the world was just beginning and there were no real private TV stations.