Newspapers on the Verge of Collapse

AIM Zagreb, 19 January, 1999

Croatian newspaper publishers united forces in order to force the biggest state distributer of the press, Tisak enterprise, to pay its accumulated debts for copies of newspapers it had sold a long time ago. There have been occasional delays in payments for a year now, but in the past two and a half months, payments stopped altogether. The debts rose to about 35 million German marks threatening all thepublishers with bankruptcy. That is the reason why they - after the already forgotten short union of a year ago provoked by introduction of the value-aded tax - gathered again and warned Tisak that they would stop delivering newspapers if it failed to pay its debts to them.

Although the announcement that delivery of newspapers would be interrupted was calculated to attract attention of the public to the problem more that it is a real threat, the publishers seem to have seriously looked into the problem seeking solution. Vjesnik, Novi list, Vecernji and Jutarnji list, Nacional, Globus, Feral Tribune... representatives of regime and opposition jurnals, and both privately-owned and state-owned written media are negotiating all together with Tisak and the government. They also started talks about other ways of distribution in order to evade Tisak which sells about 75 per cent of dailies and periodicals in Croatia. Tisak was one of the most successful Croatian enterprises with a daily income of more than a million German marks in cash. The problem of Tisak is in the fact that it is one of the group of enterprises owned by Miroslav Kutle until recently well protected entrepreneur close to the ruling HDZ. Thanks to loans which were granted to him via his connections in the party and bankers linked to it, he built an empire which is estimated to 20 billion marks.

But the circle is now complete, because time has come to start paying back the loans. Kutle had partricipated in the scandal in the Dubrovacka Bank which he had intended to take over through a secret contract on partnership with the bank manager, secret policemen and politicians from the HDZ. It was revealed that he owes the bank more than 300 million marks. Kutle was granted loans for new enterprises by taking out mortgages on his sound companies and reallocating their profit. Creditors were becoming impatient. Because of pressure of the public and rival economic and political lobbies, Kutle was forced to give daily Slobodna Dalmacija back to the state, after he had pushed it into debt and drawn fresh capital from it. Cooperants and business partners of his enterprises started to run over to the competition, and trade unions established salvation staffs in almost all his enterprises. Even state media which used to leave him alone started criticising Kutle's business operation. He has simply become a burden for the HDZ.

Suddenly the almost forgotten criminal charges raised by workers against him for embezzlement in privatisation were re-activated. One can increasingly hear that Kutle has been chosen by the authorities again, but this time to be the "tycoon" victim in the pre-election period. In such a situation, prime minister Zlatko Matesa agreed to receive the publishers to hear their demands and proposals for finding a way out of the crisis. A few solutions are in the game: the government might mediate in favour of Tisak with the banks, its creditors and convince them to reschedule debts. In that case the current income would first be used to settle debts to newspaper publishers and manufacturers of cigarettes. Tobacco industries form one third of creditors of Tisak and for some time now it is not possible zo buy cigarettes at the newsstands of, for example, the Rovinj Tobacco Industry, which refuses to deliver new goods before old debts are settled. Lack of cigarettes implies reduced profit of the Tisak, which creates difficulties for it. Even Zagreb public transportation company stopped selling bus and tram tickets through Tisak.

Among the publishers there are supporters of the idea to force Tisak into bankruptcy and take over its ownership. It would not be possible to collect the outstanding debts, but new payments could start arriving almost immediately. It is hard to expect that Kutle would give up so easily and accept to be deprived of the necessary source of money. Rumour goes among the publishers that the government will in the end propose a model in which claims would be transformed into shares in Tisak. It is assumed that the publishers would get a minority share, so the agony if haggling with Kutle would continue. Small publishers were especially affected by the debt of Tisak, because they have no income other than the one from sale of copies of their newspapers, and the income made in marketing is quite limited in Croatia. For instance, Feral Tribune appeared at newsstands with very great difficulties: Tisak owes it 350 thousand marks, so it has no money to pay neither printing nor the journalists, although its circulation is quite sufficient for normal publication.

United publishers are negotiating about a joint project of an alternative distribution network. For the beginning they would like to replace the mediating role of Tisak in supplying minor distributers with copies of their newspapers who then deliver copies to shops, privately owned newsstands and other places where the press is sold. Although the publishers are so far united in this intent, the project of alternative distribution could disperse the publishers again in different, rival directions. Large publishers such as Vecernji list or Europapress Holding (Jutarnji list, Globus, Arena and another ten odd journals) have planned their own distribution systems for quite some time. They have different reasons for that: after a game for the readers with rich prizes, last week Vecernji list was published in the record million copies - but has not received a single kuna for it from Tisak. Manager of Vecernji list publicly confirmed that a few months ago he had already elaborated a system of an auxiliary distribution network. People from Vecernji list could organise minor distributers and colporteurs around the country, but they admit that they would still miss newsstands of Tisak in order to achieve 100-per cent coverage of the market.

Their bitter rival Jutarnji list has also started a similar prize-winning game. On days when a card needed for the game is in the newspaper, it is printed in about 350 thousand copies. Europapress Holding, which Jutarnji list is a part of, was recently privatised for 40 million marks, the money of the German publishing company called WAZ. This company owns developed sales chains in Austrai and Germany, especially for direct sales via subscription and delivery to the doorstep or via self-service boxes. That is the way to avoid high distribution margin and enable price discounts which can be used as a good advertising trick.

But all such jobs need some time to run in, and demand large investments. All the publishers are aware that the most important thing now is to come up with an agreeable solution for Tisak to continue working and achieve more or less regular payments. Regardless of the fact that they have serious complaints about its business operation - lack of control of the number of unsold copies, establishment of the circulation in certain places where newspapers are sold, etc. - the publishers know that for some time, with its network of newsstands and organization, Tisak is indispensable for them in order to regularly reach their readers.

IGOR VUKIC