ECONOMY

Most media companies in Greece are loss-making

The mass media sector in Greece increasingly appears to be an ailing sector of economic activity, with most companies already in the red, while several are also dealing with the accumulated losses of previous years, requiring huge funds to cover them. With the exception of only two or three companies, Greek media enterprises on the whole appear in the «gray» danger zone and are trying to survive either with rev- enues from di- rected state advertising or by publishing announcements that are compulsory by law for companies, local authorities and public corporations. For their part, governments seem to favor helping to maintain media companies doomed to failure in order to influence those who form public opinion. Problems are growing bigger due to a subdued market, which results in declining advertising revenues and the perpetuation of distortions. This is largely the outcome of attempts to preserve a multitude of companies in trouble, and a state of complete anarchy in the broadcasting sector. Instead of ensuring payments for the use of radio or television frequencies, the state provides special tax treatment for ailing media enterprises. The most recent such occurrence is the decision to gradually decrease the special tax imposed on advertisements on television until it is eliminated. A clause included in the new property taxation bill provides for this particular tax to drop from 20 percent to 10 percent. According to some estimates, this will reduce the tax revenues of the state by about 80 million euros per year. The main beneficiaries, of course, are the strongest TV stations as this tax is imposed on advertising revenues. As a result, the search for accuracy and credibility in the mass media is soon lost in the ocean of entangled interests. The very market that is supposed to operate under absolute law to safeguard information and transparency is today dominated by complete deregulation, with most players operating «in the red.» Data from the first nine months of 2005 show that only one in four stock market-listed publishing groups is profitable. Losses At the end of 2004, just one in five major TV stations did not have accumulated losses, while in most companies debts were at least twice as high as their equity capital. Furthermore, only one in four daily financial newspapers had an attractive balance sheet for 2004. The daily press almost in its entirety reported huge losses last year, while at least half of the companies operated with negative equities and accumulated losses of several million euros. Again, almost all afternoon newspapers, with the listed groups excepted, recorded losses last year. In fact, most publishing corporations write off their losses every year through the gradual reduction of their equity capital (hence these appear negative at times). They actually already know they will not show any profit, so they simply have to live off their own flesh. Subsidy In a highly fragmented market and with their share of the advertising pie decreasing, most newspapers survive – or just linger on – thanks to the privileges they have secured from the state and because they are subsidized by their proprietors’ other activities, such as state procurements or public works. Favors for the media, such as special tax treatment or through the compulsory publication of financial reports and public sector announcements, create further distortions. It is estimated that companies spend about 30 million euros per year in the publication of financial reports and statements. Many people are asking whether this requirement should continue at a time when there are alternative ways of informing the public, such as the Internet. What is more, the specific market is plagued by a strong monopoly of newspapers and by government decisions based on criteria that have nothing to do with their presence in the media market. Another case in point is Presidential Decree 261 of 1997 «concerning transparency in the advertising of the state and broader public sector,» which determines percentage limits in the distribution of state adverts among newspapers, broadcasters and the local press. The pie is doled out by the state, and works as a lifeline for a large number of publishing enterprises which would not have existed otherwise.