Flash Report 5: Serbia

Flash Report 5: Serbia
New series of flash reports on advertising and media integrity in SEE region: Serbia.
Advertising revenues - efficient means for exerting influence on the media.
The Serbian advertising market cannot sustain all of the existing 1300 media. Most of them operate at a loss. Being among the poorest ones in Europe, with about 170 million euros for several years, the advertising market shrank to 155 million in 2013,1 putting the media into an even more difficult economic position and increasing their dependence on advertising income to the point of survival. 
Media outlets fight fiercely for advertising revenues. Their competition is taking place in a highly non-transparent, unregulated and uncontrolled environment, which harbors many opportunities for exerting influence on the media. Media outlets have no efficient mechanisms to defend their integrity against powerful actors in the advertising industry. 
Chart 1. Estimated net value of the total mass media advertising market in the last 10 years in millions of euros (according to Nielsen measurements, Broćić, 2014)
The number of active advertisers is not known, but is estimated to be small, about 250 companies.2 The lack of a multitude of advertisers makes the media dependant on a small number of large advertisers and also on media-buying agencies that act as intermediaries between advertisers and media outlets. There is ample evidence by journalists that both big advertisers and media-buying agencies use their position to exert influence on media content.
Data on advertising market largely unavailable, kept secret or partially published for purpose of self-promotion
Both in terms of financial value and media consumption the Serbian media market is still largely non-transparent. The only publicly available estimation of the net value of the advertising market, encompassing all media, comes from the agency Nielsen Audience Measurement (formerly AGB Strategic Research and AGB Nielsen Media Research).3 The Nielsen agency follows the advertising practices of a little over 30 (out of about 100 registered) TV stations.4 It also monitors TV audiences on a daily basis using the people-meter methodology. Although not fully examined, the television market is thus the most transparent one. 
The radio market is a highly neglected part of the media scene and, according to Broćić from Nielsen Audience Measurement, there is only a rough picture of the situation on the market. There is no regular monitoring of advertising on radio and no relevant system of audience measurement for more than 300 licensed radio stations - radio audiences are tested only periodically (by Ipsos Strategic Marketing and Nina Media). 
Print media advertising is monitored by Ipsos Strategic Marketing for more than 100 (of over 500) daily and other publications. This database (PrAdex, i.e. Print Ratings & Advertising Expenditure) is not publicly available. Print media circulations have been measured according to a uniform methodology only since 2007, but not all media are covered. Measurement is carried out by the audit agency ABC Srbija and its data is accessible to members only. The public learns about print circulations, which their publishers keep as a business secret, only in incident situations when some media partially reveal data in order to present themselves in a better light over their main competitors. 
From time to time, the reliability of data on audience shares provided by marketing agencies is questioned. In 2012, the tabloids Informer and Kurir led a campaign against the audit agency ABC Srbija, claiming that the agency intentionally inflated circulation figures of some daily newspapers close to the government and underreported the circulation of these two tabloids in order to secure higher advertising income to media favorable of the government. The campaign stopped as suddenly as it started and the public was left uninformed whether there was any ground in the fraud allegations. In 2014, the authors of two very popular TV shows5 raised doubts about the credibility of Nielsen data on the low ratings of these shows in contrast to the high rating of another show known by its open favoritism of the current government, but this incident remained unsolved as well. 
Some successful businesses, others struggling for sustainability and in position of excessive dependence
Commercial unsustainability, a problem shared by the majority of media, is particularly felt hard by local media outlets. Local media have complained for years that they have ever growing difficulties to get advertising contracts because most local economies are underdeveloped and local advertising markets are exceptionally poor and because big advertisers are focused on national media. In 2012, for example, the largest domestic advertiser at the time, the telecommunication operator Telekom, did not place a single advertisement in any local media. Local media manage to earn 30-35 percent of revenues from advertising, which puts them in strong dependence on the major financial source – local governments. The media policy has never addressed this problem.
The distribution pattern of advertising budgets for different media types has been rather steady for years. The bulk goes to television, the press gets less than a quarter, and other types of media receive lower advertising shares (see table below).
How much particular media outlets earn from advertising is not known. Their annual financial reports submitted to the Business Registers Agency, which are the only publicly available source of information on their economic performance, do not differentiate between advertising and other kinds of income. There are some estimates that the largest advertising revenues in 2013 were earned by the two largest commercial TV stations (TV Pink and TV Prva), followed by a public service - RTS, and another two TV stations with national coverage - TV B92 and TV Happy. This distribution of advertising funds corresponds with audience ratings, taking into account that advertising slots on public broadcasters are limited to half of the slots allowed for commercial stations. In recent years, there has been a growth of advertising revenues of cable channels (primarily the channel group FOX, international channels and cable channels owned by the largest cable provider Serbia Broadband (SBB, Srpske kablovske mreže).  
Suggestive links between political actors and advertising market intermediaries 
It is estimated that between two thirds and three quarters of the total funds spent on advertising goes through professional media-buying agencies. A characteristic feature of the Serbian advertising market is a close connection between political parties and leading agencies that purchase media advertising space. This link between political and economic interests is an efficient channel for exerting influence on media content. In 2011, the Anti-Corruption Council revealed the mechanism of political and economic influence intertwined in the functioning of advertising agencies that are run by politicians. Its clients on the advertisers' side hope for a possibility to protect their business interests by dealing with the agency whose owner has a high position in decision-making bodies. The agency owner, on the other hand, can act in the interest of his party by giving advertising contracts to individual media outlets that produce a favorable image of his party and withholding them from those with critical views. 
The intermediary market in advertising has grown into a typical oligopoly, controlled by very few agencies. Until 2012 the most successful among the agencies was Direct Media, led by Dragan Djilas, former mayor of Belgrade (2008-2013) and vice-president of the Democratic Party while it was in power (2008-2012) and since 2012 its president in opposition. In 2012, Djilas’ agency was the market leader in terms of revenues (EUR 46 million) and profits (EUR 7 million). The next most successful among 17 agencies had half the revenues of Direct Media and only one generated profits over 1 million EUR.6   
After the change of government in 2012, some dramatic changes occurred on the advertising market, in which a significant role was played by people close to the Serbian Progressive Party. BIRN Research shows7 that in the last two years, at least four companies, whose annual advertising budget is between nine and ten million euros, left Direct Media and signed new contracts with a group of agencies gathered around Srđan Šaper (once a member of the Presidium of the DS). The agency Sekond which was founded in 2012 joined this group of agencies. According to the same BIRN report, the agency was established by Goran Veselinović, member of the Central Committee of the Serbian Progressive Party and former employer of Aleksandar Vučić, now Prime Minister of Serbia.
Lack of regulation, especially blatant in government advertising 
Advertising is poorly regulated. Print and online media are exempt from all rules. Broadcast media fall under the rules of the Law on Electronic Media adopted in 2014. Two relevant provisions prescribe a limit of 12 minutes of advertising slots within one hour of broadcasting for commercial media and a 6 minute limit for public service broadcasters and civil sector media. Although this differentiation is seen in other countries as well, the largest commercial broadcasters still consider it unfair and have lobbied for a bigger difference in their favor. No other aspects of the advertising market are regulated. 
Conspicuously absent is appropriate regulation of state advertising. The amount of state advertising in Serbia is quite large and the manner in which it is used is potentially threatening to media freedoms. In 2011 professional media organizations estimated that state advertising amounted to about 20 million euros (RSD 2 billion), which corresponded to around 12 percent of the whole advertising market. The abuse of state advertising for exerting influence on editorial policies was first documented by the Anti-Corruption Council in its “Report on Pressures and Control over Media in Serbia” in 2011. The report documented that 50 of the most important state bodies and large public enterprises spent at least 15 million euros (RSD 1.4 billion) for advertising and promotion purposes in 2009, led by no other criteria than their own (political) will and considerations. 
No piece of legislation contains rules on how to use public money for state advertising. The only law dealing with state advertising is the Advertising Law from 2005, with only one article (out of 111) concerning state advertising. It does not specify any rules regarding the scope, criteria or manner of allocation of state bodies’ advertising budgets, release of data or control against abuse. Such lack of regulation of the financial aspect of state advertising allows decisions to be made in a non-transparent and arbitrary way. Arbitrariness refers to the volume of advertising contracts, their economic rationale, selection of media for distribution of the government advertising budget, as well as the advertising content.
As shown by the Anti-Corruption Council, state bodies do not refrain from using uncontrolled advertising as a channel for exerting political pressure on the media. By either including or excluding specific media from their advertising budget plans, they can easily elevate the financial performance of media to their liking and punish editorial policies of their disliking. 
Given the large number of media outlets and the poor commercial advertising market, many media outlets are today financially unviable to the degree that they are structurally dependent on state advertising. Arbitrariness of criteria and suspected misuse of government advertising budgets have a significant impact on the media sector, undermining free competition on the media market and putting media loyal to the government structures in a favorable position. 
In 2011, by adopting the Public Information System Development Strategy until 2016 (the Media Strategy), the Serbian government promised a thorough reconstruction of the media system, including a new regulation on media financing. The first concrete moves in the implementation of the Media Strategy were made as late as August 2014 with the adoption of three new laws on media. However, these changes do not include anything new regarding advertising. There has not yet been any attempt at regulating the advertising market or formulating the media policy to prevent advertisers or intermediary actors from abusing their financial power for influence on media. The new Advertising Law is in preparation. At least it can be expected to make new rules on state advertising.
1 Broćić Darko, 2014, Media Advertising Market in Serbia (Tržište oglašavanja u medijima u Srbiji), available at: http://www.novinarska-skola.org.rs/sr/?p=3574
3 All data on market measurements used in this report come from Darko Broćić, managing director of Nielsen Audience Measurement. The estimations are based on Full Rate Card prices, while the real values of advertising contracts are lower.
4 Databases includes information on each advertisment (advertiser/brand, time and place of broadcasting, length, position in a block, audience size). 
Media Integrity
Media Ownership and Finances