Flash Report 5: Bosnia and Herzegovina

Flash Report 5: Bosnia and Herzegovina
New series of flash reports on advertising and media integrity in SEE region.
Sanela Hodžić: "The advertising market in Bosnia and Herzegovina in the last several years has been on a bumpy road of uncertainty and impoverishment."
It is estimated that the annual value of the advertising market in the last few years amounted to around 45 € million, dropping hugely since 20081, mostly as a consequence of the economic crisis. Contrasting the huge fall of advertising revenues, the number of media over the past ten years has, against all odds, practically remained the same.2 Available data shows that the top income group of 7 TV stations holds 87.3% of annual advertising shares, while the remaining 39 media are left with 12.72 percent overall. 
Further penury is caused by the flow of advertising revenues into foreign markets. This might be a common issue across the region, but some of the key BiH players in the advertising industry especially point out that advertising contracts between Croatian and Serbian channels and international advertisers count in the audience from BiH, which is why international advertisers lose interest in advertising through broadcasters from BiH, damaging the market and consequently the state budget. 
Competition between public and private media
There are two types of broadcasters, private and public. Public local broadcasters (12 out of 44 TV stations and 62 out of 140 radio stations) are founded and directly financed by municipalities and cantons,3 in addition to three PSB channels (BHRT, FTV and RTRS) financed through license fees. Unsurprisingly, the commercial broadcasting sector often points out that public broadcasters’ practices constitute illegitimate competition and for example include dumping of advertising prices. The fact is that despite the limit of advertising to 6 minutes per hour for public media, in comparison to private stations which are allowed double, the three PSB channels hold major advertising shares, while two major cantonal TV stations are also placed high among lower-income TV stations4.
According to a Communications Regulatory Agency report published in 2013, all three PSBs are among the top income group and they hold 35.31% of overall revenues, while the FTV public broadcaster has the single largest share of revenues on the market of 22.16%, just above the commercial TV station OBN that holds 17.04% (source: Analiza tržišta emitovanja 2013). Concern about the overt commercialization of PSB was the basis of a decision of the Council of the Communications Regulatory Agency (CRA) in September 2013 to reduce the advertising limit for public service broadcasters from 6 to 4 minutes, which sparked a lot of controversy. The decision raised many concerns about the future of PSB, already suffering financial troubles due to low collection of RTV license fee. In fact, both the decision and the preceding analysis by CRA were even claimed to be orchestrated by major private broadcasters. After a new Council of the CRA was appointed, it changed the limit back to 6 minutes per hour, in April 2014. 
Shortly after things cooled down regarding the advertising limit for PSB, an audit report on the public service broadcaster RTVFBiH pointed to unwarranted reduction of advertising prices: “Most revenues were generated by providing advertising services through the marketing agencies Ujedinjeni mediji d.o.o. Sarajevo and Media group d.o.o. Sarajevo, which are given agency advertising discounts (24% and 18% respectively)… In addition to agency discounts, they enjoy other discounts as well (loyalty discount, advance payment discount, etc.)… Considering the amount of the given discounts which ultimately affect the amount of services invoiced and RTV FBiH’s reported revenues, we cannot confirm the justification and reasons for approving them, nor the amount of the discounts approved” (p. 15). Such sources raise doubts about the legitimacy of contracts between some media and advertising agencies.
Controversies concerning audience measurement
Another area of dispute is audience measurement. For years audience measurements for print media and radio broadcasters were based on a diary method that lacks quality in comparison to other, more advanced, measurements. And while for radio stations it has been common believe that limited budgets are the primary obstacle, for print media it is suspected that the main reason is the lack of readiness to disclose low circulation numbers.5
A mix of different measurement tools is used by online media. The majority rely on Alexa and Google analytics data and just some use additional data from Gemius Audience measurements. One might expect that debate on online audience measurement is yet to come with the further increase of online advertising shares in BiH. 
Measurement in the most profitable sector – TV, has been a subject of major controversies and has undergone significant changes in recent years. Since 2006 Mareco Index Bosnia (MIB) was the sole provider of TV audience data for UMI. In 2011 some commercial media started publishing reports questioning the reliability of these data and over the years UMI lost its role as the owner of the audience data and a new company Audience Measurement Ltd. (AM) started providing services alongside with MIB. Some sources question the motives of AM and suggest that its ownership is connected with certain commercial media owners in BiH6. In addition, a new policy introduced by the Institute of Metrology of BiH in 2012 that requires certification of audience measurement equipment was also seen as preferential treatment of AM7. And while MIB filed several complaints regarding the certification process, AM deems these speculations indecorous claiming that they suffered business losses in efforts to complete all procedures and satisfy all legal requirements. They also officially commented on concerns regarding their ownership structure after the publishing of a Media Integrity report. According to a written response sent to the author, the AM owner is an investment fund which is common for the Nielsen group system and the model of starting their operations in new markets. 
In 2014 MIB suspended their TV audience measurement service, but their complaints are still pending before the Council of Competition of BiH and Prosecutor’s Office. AM, on the other hand, has taken over the exclusive position as the audience measurement provider in the market. 
Questioned criteria for advertising practices
Besides big advertisers such as Procter & Gamble, Henkel and Coca-Cola8, the role of local9 advertisers in the BiH market is quite significant. Unsurprisingly, their practices are suspected to be utterly instumentalized for particular business interests, as well as for the achievement of certain political goals. The public telecommunication companies BH Telecom and HT Mostar are believed to be closely affiliated with political parties and acting primarily in their interests. For example, the reduction of an advertising investment by BH Telecom in the daily Dnevni avaz in 2010 and afterwards10 is possibly related to the fact that the owner of the daily previously affiliated with the SDA party became politically engaged in 2009 when he founded the SBB party.  
Public institutions and political parties are also relevant sources of advertising revenues for media. With the 2012 campaign “Buy Domestic”, the Ministry of Agriculture, Water Management and Forestry became the 17th biggest advertiser in the TV sector, spending approximately 3.28 million Euro, as well as 87,831 Euro for advertising in print media (MIB AD Index, FRC values). Not only was this spending criticized for disrespect for public procurement procedures, but the campaign was overall seen as a mere pre-election promotion of a political party at the expense of public funds11. Similar examples of misuse of public funding for political promotion were seen in the campaign “It is not late for better life” by the Ministry of Energy, Mining and Industry of FBiH in 2010, as well as in the promotional movie “Proud of Srpska” by the Government of the Republika Srpska. Now that BiH is approaching general elections, one should not fail to mention the issue of advertising by political parties. For example, available sources suggest that the last general election campaign of 10 political parties in 2010 brought at least 1.75 million Euro to print and TV outlets.12 Election campaign expenditures by political parties remain non-transparent, including the practices of paid advertising. For lack of information, one can only stress that misuses are possible since the exact amounts of advertising invested in specific media outlets are not monitored by the relevant institutions, while specific practices of media, advertising agencies and political parties in negotiating these advertising contracts remain largely unaccounted for. 
There are also speculations about financial abuses of advertising contracts. Slobodna Bosna magazine published a series of articles accusing the telecommunication company HT Mostar (and advertising agencies from Zagreb and Sarajevo) of excessively high fees for marketing contracts, misused for money laundering. Another source puts the story in a different context, indicating that particular interests can be behind such media reports, as part of “the media uproar orchestrated by OBN television… aimed at channeling the advertising budgets to its own television…” (Anonymous source, Media Integrity Matters, p. 146). 
In sum, in the background of the overall decline of the advertising market, government institutions and other political entities have become the sources of the larger portion of revenues for media. Government funding and advertising is considered to be misused for particular political and financial gains, while data on political advertising in the media remain unavailable. The fight for advertising revenues seems to have become fiercer in recent years and there are suspicions about money laundering through advertising contracts, suspicions of attempts to influence media policies, as well as to influence audience measurements to best suit particular interests. 
What strikes the most is the absence of any serious and strategic policy deliberation in the scattered media market. There have been practically no policies to consolidate the market, to protect the domestic market from the outflow of revenues, no tax breaks for especially endangered media (arguably the print media), nor any specific support for journalism with some kind of public service role. Public media are overly reliant on advertising income (in case of FTV especially), while the commercial sector is increasingly aligning with particular political and economic centers of power to avoid marginalization in the advertising market. Media also increasingly depend on government funding and government advertising. All this expectedly compromises editorial independence. In the chase for advertising revenues, most media chose mutual confrontations rather than common efforts to set things in order and to advocate for policy measures that would regulate and protect the market.
1 It is hard to make a precise comparison, since the estimates are based on different indicators, but some sources suggest there was over 200 million in advertising revenues in 2008. Previously it was made based on the official price-lists, while in recent years different discounts of advertising prices were taken into account, making a huge difference in the overall amount. The estimates we use here come from the advertising agency Fabrika. They indicate that the revenues in 2013 were even much lower than this – just a little over 25 million.
2 Other sources of revenues are public grants, mainly provided by the Governemnt of the Republika Srpska in previous years, and to some extent by cantonal and municipal governments. The Public Broadcasting Service is financed additionally through collection of licence fees. 
3 According to some sources, 7.87 milion Euro is allocated from municipality and cantonal budgets for these media (see http://www.media.ba/bs/magazin-medijska-politika-regulativa/majmuni-na-j...).
4 Tuzla Canton TV holds 1.56%, while Sarajevo Canton TV holds 1.34% of overall annual advertising shares, which is over one-fourth of the overall advertising shares that 39 low-income TV stations make annually.
5 There are only a few print media included in Audit Bureau of Circulations (ABC) measurements.
6 In research on Media Integrity in 2013-2014, we did not find the company from Cyprus which owns AM in available databases. 
7 See more on this in Media Integrity report for Bosnia and Herzegovina, available at: http://mediaobservatory.net/radar/media-integrity-bosnia-and-herzegovina...
8 These three are the biggest advertisers in BiH, according to the advertising agency Fabrika, in recent years. 
9 Commercial, but also public institutions and political parties in election periods.
10 From 118,959 Euro in 2009 to 78,391 Euro in 2010 and 4,028 Euro in 2011 (AD Index, MIB).
11 Transparency International BiH filed a complaint with the Central Election Commission of BiH which was later dissmissed by the Court of BiH (http://www.cin.ba/presuda-u-korist-narodne-stranke-radom-za-boljitak/ and http://www.cin.ba/transparency-podnio-prijavu-protiv-ns-radom-za-boljitak/). 
12 Data provided by Transparency International (TI) as part of independent election monitoring of ads of 10 key po
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