How Government Uses Public Money to Keep Media in Line

Back in 2013, a leaked wiretapped conversation involving the Bulgarian prime minister, a prosecutor and a minister showed how frustrated the premier was with the nation’s critical media. He bitterly complained about how unflatteringly he was covered in the media in spite of all kinds of “technical assistance” that the government provided to those media outlets. By “technical assistance” the premier meant money.

Millions of euros from public coffers are spent in Bulgarian media. To rustle up a mere Facebook page, the government there paid one media outlet some €51,000 (US$ 53,000).

Bulgaria is not an isolated example. Evidence that governments use public funding to buy positive coverage and neuter critical media abounds.

An Open Society Foundations (OSF) study from two years ago found that in 31 out of 55 countries worldwide, the government used state funding to manipulate media. In nine of them, there was no hard evidence showing that this was happening, but that did not rule out government manipulation. In particular, media outlets in countries from Eastern Europe, former Soviet Union and the Middle East are the most affected by discriminatory disbursement of public funds. But it happens on other continents, too. Examples range from Argentina, Colombia and Peru in South America, Guatemala and Nicaragua in Central America, Indonesia and Malaysia in Asia, or South Africa.

But how do governments achieve that result?

By financing media and journalists willing to toe the government line and by not funding independent, critical media, authorities manage to suppress large parts of the media sector. There are four financial mechanisms and strategies that authorities use to dominate the media sector: public funding allocated to state-administered media, state (or official or public) advertising, state subsidies, and measures, legal or of other nature, aimed at disrupting the market logic.

Public Media, a State Soldier

Public funding for state-administered broadcasters, including state-owned media or public service TV and radio channels, is effective in capturing media chiefly in countries with anemic commercial media. It comes in the form of either license fees collected from households or government budget allocations.

Public media in some western European countries have built a solid reputation for high-quality programming, including news output. Therefore, public support, including people’s willingness to fund them, is strong. In Britain, for example, BBC is identified by large parts of the public with quality drama and objective news reporting. Nonetheless, outside western Europe, the public service media is far from being a successful project. In eastern Europe, these broadcasters became (or remained) a form of state propaganda.

Budgets of public media have generally declined in recent years. In 2015, funding for the public media was lower compared to the year 2011 in roughly 40% of the countries members of the European Broadcasting Union. That was a combined decline of approximately €1.78bn (US$1.87bn). Nonetheless, in spite of these cuts, public service media continue to be high-budget operations. In some countries, their finances are disproportionately higher than the budgets of most private media. In Romania, for example, the government approved in January 2017 a budget of nearly €300m for the country’s public media operator, the Romanian Radio and Television (SRTV). The whole advertising market in Romania, a country of 21 million, is worth some €350m annually.

State Advertising: Buying Favors

State advertising is probably the most insidious form of government funding in the media. Governments use money from their own budgets or from state-owned companies to run social campaigns or advertise products and services offered by companies they own. In reality, they use this money to basically buy favors from media and journalists.

Martijn de Waal wrote in 2014 that, “of all the means that states have to support media, state advertising is arguably the least transparent and thus the most problematic.” This phenomenon has no borders. Quid-pro-quo state advertising arrangements are rife in countries as diverse as Pakistan, Uruguay, Georgia, Argentina, Thailand, South Africa, Colombia, Kenya, Pakistan, Hungary, Moldova, Macedonia, and Spain.

The situation is particularly bad in dysfunctional markets where the advertising industry is generally dominated by clientelism and political pressures. In Malaysia, the government was the largest advertising spender during the period 2011–2013. Most of the advertising space that state institutions in Malaysia bought in the media during those years was in outlets directly owned by or overtly friendly to the ruling coalition Barisan Nasional (BN).

In Europe, governments regularly use funds from the European Union (EU) to pay for advertising campaigns. During the period 2007–2012, the Bulgarian government spent some BGN 71.6m (€36.6m) on communication campaigns promoting EU operational programs. How that money was distributed remains a mystery.

State Subsidies: Gifts for the Dearest Ones

Preferential allocation of funding directly from state coffers has long been an effective method to tame critical media or keep supportive media in business.

In the Balkans, local media that massively rely on state funding are vulnerable to state pressures. A 2011 survey from the Balkan Investigative Reporting Network (BIRN) found that 21 of 33 local municipalities in Serbia paid subsidies to local media companies. In Montenegro, a European nation of some 621,000 people, state subsidies are included in a bigger “state aid” package. In 2014, some €28m were disbursed from this coffer, but the media outlets and other institutions that received the cash were not identified by name.

In Russia, the state has nearly institutionalized the practice of covering the expenses of those media outlets that are openly supportive of state authorities. The government, for example, used to cover all of the distribution costs incurred by the Rossiyskaya Gazeta newspaper.

There are examples of countries where the system of state subsidies for media is working fairly well. Sweden, for example, has a particularly well-designed subsidy system that was created back in the 1970s.

But those are rarities.

Kill the Market Logic

Disrupting the market logic is a complex, highly effective form of media capture strategy. Financial in nature, this form of capture consists of either incentives or penalties devised to coerce media into adjusting their editorial coverage to orders from authorities and businesses close to them. Such indirect pressure takes oodles of forms ranging from legal provisions aimed at hurting the financial health of specific media companies to underwriting unpaid taxes or debts to the government.

Back in 2013, the Hungarian government announced plans to introduce an advertising tax, which was devised in such a way to financially cripple one TV station in particular, the German owned RTL Klub, then known for providing impartial news. The government refuted those allegations. The tax led to a decline in the net profit of the Bertelsmann group, RTL Klub’s owner, from €885m in 2014 to €573m the following year.

In 2011, the A1 TV station in Macedonia folded due to inability to pay taxes. Its owner was imprisoned. But MRTV, the Macedonian public broadcaster got away with €1.5m in unpaid taxes, which made MRTV one of the worst tax offenders in Macedonia. Ironically, the public broadcaster was awarded at the same time some €4m in state subsidies.

Small outlets in particular are extremely vulnerable to tax-related pressures. Kikindske, a tiny local newspaper in Serbia, saw its accounts frozen because of a difference of €5,000 in owed taxed.

What all the media organizations targeted by tax bureaucrats have in common is their critical editorial line. In contrast, media outlets that are not targeted by tax auditors, in spite of sometimes even larger unpaid debts to local tax offices, are unstinting government supporters.

Solutions, Anyone?

Criticism of unfair, distorting spend of state money in media abounds. For example, The European Commission in 2014 slammed the Macedonian government for securing “indirect state control” over media content through government advertising strategies.

But can anything be done?

Solutions-based, policy-oriented advocacy is needed particularly in these dire times for independent journalism. The public funding used by governments to finance media would be more than sufficient to solve the financial predicament independent journalism finds itself in many countries worldwide. Equitably spread among more media outlets, all that money would help revive independent journalism today.

But that requires a volte-face from authorities as well as concerted advocacy work of civil society. Policies and regulation of state spending in the media need to be revisited. New rules, ensuring transparency and equitable spending of public money in the media, should be put in place.

As authorities seem firm on hiding information about how they spend state money in the media, this will not be a cakewalk.

Hence, aggressive advocacy by civil society groups and concerted coverage of these issues in the independent media are needed.

This is a problem concerning the whole society as it involves taxpayer money. People should know where their money goes and be asked about that.

This article was written by Marius Dragomir, director of the Center for Media, Data and Society at the CEU School of Public Policy. It is part of a longer paper recently submitted for a planned special issue of Journalism (published by Sage) on media capture.