Oligarchs spark debate on press freedom in Slovakia

He stepped down last September over the entry of the Penta investment group into the newspaper's ownership structure.

Three months later, on 5 January, Kostolny along with the over 30 reporters who also quit, introduced the online N-daily.

The N refers to the Slovak word for independence ( “Nezavislost”). Its paper version is due to start next month.

The Penta investment group is just one of several financial groups doing business in Slovakia and the broader region.

But it has become a symbol of bribery and state corruption due to claims in the “Gorilla file” – an unverified transcript of conversations between Penta's partner Jaroslav Hascak, and senior officials and politicians allegedly recorded by the Slovak Intelligence Service in 2005-2006.

The file was published on the internet in December 2011 and became the subject of a police investigation which has so far resulted in no formal accusation against any of its main participants – allegedly meeting to discuss provisions from privatisation and similar state business activities.

The Penta group strongly denies its involvement in the affair but former SME journalists also point to the company's major impact in the heavily regulated sectors of energy and health care in Slovakia, saying this is a reason for concern over its future editorial policies.

Media blues in Central Europe

The purchase of SME and other news publications by the private equity and real estate firm with assets estimated at €6.5 billion stirred up as heated a debate in Slovakia as the media acquisitions of the second richest man and current finance minister Andrej Babis did in the Czech Republic.

Babis, a businessman of Slovak origin, at the time in the process of setting up his new political party, took hold of two key dailies in 2013 which resulted in a departure of their leading journalists.

He openly admitted he had entered the media business to prevent the newspapers from “writing lies” about him.

“Looking back, I think it was a mistake,” the Czech finance minister commented in October, indicating he had not expected such a negative reaction.

Babis has reportedly refrained from directly meddling with the content – except for one early “citizen” phone call to protest against a too-brief note on his party's press conference.

But several journalists suggested that writing for serious newspapers owned by such a high-profile politician and businessman raised integrity questions for themselves and their readers.

The shifts in media business in central Europe came as a result of radical losses in advertisements and readership following the financial crisis of 2008.

Until then, most media were owned by their local founding investors or big western media groups. With the drop in profits and shift by readers from papers to online publications, the German, Austrian, or Swiss owners rushed to sell off their media outlets to local players.

Good and bad investors?

Just like their foreign counterparts, the Penta financiers said they viewed the media on their shopping list as any other type of business.

“We want to actively exploit the current momentum on the media market. We see business opportunities in the consolidation of the whole sector and new profits from synergies in print and advertisements,” said Martin Danko, the firm's spokesman.

“Penta had never invested in media in the past and so no Slovak journalist can suggest – on the basis of their relevant experience – how the group will behave as the owner,” Penta's partner Hascak stated, stressing that the firm would do nothing to infringe on journalistic freedom and independence.

Several weeks after a surprise transaction between the former German shareholder in the SME daily, RBVG publishing group, and the Penta via an intermediary, Penta agreed to withdraw to a 45-percent minority share and leave the controlling package to the original founder of the publishing house, abstaining from any influence over editorial content.

However, for Matus Kostolny and over 30 of his colleagues the move made no difference.

“I just don't think I could work as a free and independent journalist with Penta behind my back, no matter if they own 7 or 30 percent of share," he said.

Right after their resignation from the SME daily, the group of journalists worked to set up a new publication, financed primarily by selling content.

Addressing their readers with a slogan “only dependent on you,” they received payments for subscription from almost 4,000 people before its actual launch.

On top of that, in late December, the reporters received a capital injection of €1 million to kick off the N-daily as a personal contribution from six partners of Slovak IT Eset company.

“Eset's co-owners support several business and philanthropic projects in Slovakia and abroad off the firm's portfolio. There is no contract between Eset and N-daily,” the company stated.

Meanwhile, SME's published has been trying to maintain quality content as journalists leave.

And as the new N-daily becomes a competitor for SME, the issue has become the subject of general debate among reporters about freedom and independence.

Peter Schutz, senior commentator at SME last week explained his reasons for not shifting to the N-daily.

“I am dying to find out how Penta wants to influence this paper. I can't wait to hear Hascak telling me what to write or not," he said.