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The book market is moving in the same direction as the record market, over 70 percent of which has been acquired in recent years by five multinational record labels (BMG, EMI, PolyGram, Sony, Warner), after the botched privatisation of Hungaroton (the Hungarian state record company). Up to 20-25 percent of all Hungarian book sales are realised by the Magyar Könyvklub (Hungarian Book Club), part of the huge Bertelsmann group; another 15 percent is accounted for by a Hungarian affiliate of the US Reader's Digest and the Dutch Wolters Kluwer has 25-35 percent. Their share is growing. With the partial privatisation of Nemzeti Tankönyvkiadó (National Textbook Publishers), which currently leaves the state with only a marginal majority holding, a further 10-13 percent could pass into foreign ownership. As a result, 70 percent of the Hungarian book market could become concentrated in the hands of four or five financial groups. The remainder will then be fought over by several hundred small publishers, all seeking foundation grants and sponsorship, a bellum omnium contra omnes which might leave as few as fifty, and eventually even only twenty publishers.
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Wolters Kluwer is truly a big fish with an annual turnover exceeding 4 billion guilders and 12,000 employees all over the world. Three years ago they looked into the former socialist market and now they have eleven companies in the region: four (for the time being) in Hungary, two in Poland, and one each in the Czech Republic, Slovakia, and Russia. They are likely to make further investments this year in Romania and Bulgaria.
According to data available from the Court of Registration, Wolters Kluwer's Frankfurt branch invested $27,000 in Mûszaki Könyvkiadó in July 1994, which bought it 40 percent of the company. In November 1995 it increased its holding to 92.5 percent as a result of a further $65,000 investment, this time by Wolters Kluwer's Amsterdam headquarters. The Amsterdam group also bought $20,000 worth of shares from the EPOS organisation of Közgazdasági és Jogi Kiadó in March 1994. In May of that year, Dutch ownership increased to 51 percent and was purchased in December by the Frankfurt branch; as of October 1995, Wolters Kluwer's holding stood at 91 percent and there are plans to increase it to 100 percent.
The fact that the Dutch publisher - specialising in reference books, academic books, and higher education textbooks - obtained ownership of these companies in the course of only eighteen months points to a rapid and purposeful expansion strategy. Akadémiai Kiadó, a larger company than the other two, fell into Wolters Kluwer's lap astoundingly quickly and, according to some, almost in a fit of absence of mind. They could hardly have wished for a better catch in the Hungarian book market: with 1,200 titles published annually Akadémiai Kiadó is one of the biggest publishers in Hungary. Now 74 percent of its shares had been acquired by a foreign company, despite being established by law as the property of the Hungarian Academy of Sciences. Akadémiai Kiadó had to be sold to pay back the debts incurred after the $40,000 loss on the Hungarian Encyclopaedia, as well as other loss-making publications.
Wolters Kluwer will not go ahead with the publication of the Encyclopaedia because it would require too much investment and the involvement of external resources, a risky move at a time when inflation is running high and the future is so uncertain; besides, the Encyclopaedia was not included in the package offered to Wolters Kluwer. Moreover, they say, "it does not fit in with our strategic plans: we do not publish books for the general public, our market is much more technical, demanding textbooks and dictionaries." Recently, the public has begun to take an interest in the Encyclopaedia affair, and the new President of the Hungarian Academy of Sciences, Ferenc Glatz, outraged over the sell-off of Hungary's most prestigious academic publishing house, is more than likely to ensure that the issue does not die down quickly.
In the medical reference book market, Mrs Frigyes Farkasvölgyi, Director of Medicina which is in competition with the German-owned Springer Hungarica, angrily dismisses rumours that Wolters Kluwer has bought or has plans to buy Medicina. Willem Van Zanten (the company's Hungarian representative) could not comment on this (leaving the interviewer with the impression that something was brewing), but in connection with Nemzeti Tankönyvkiadó he expressly acknowledged the interest of Wolters Kluwert: inquiries have been made with the Hungarian textbook publisher, correspondence with the competent officials are under way, and negotiations have taken place with "senior people" (no names mentioned) at the Ministry of Culture and ÁPV Rt., the State Privatisation Holding.
This deal would be more difficult to pull off, but only slightly more.
Under an Amendment to the Privatisation Act, 50 percent of Nemzeti Tankönyvkiadó plus one vote must remain in the hands of the state. In December last year, a US consultancy firm commissioned by ÁPV Rt. - which currently owns 100 percent of the publishing house - conducted a study on Nemzeti Tankönyvkiadó. It was decided that a privatisation tender would be announced in January 1996 but in the end this did not happen. Although István Ábrahám, the publisher's managing director, claims not to know why, he might hazard a guess: a Government Decree adopted in April classified Nemzeti Tankönyvkiadó as a company of prime importance for the national economy in view of its strategic position within the country's public education structure. A decision by the Board of Directors of ÁPV Rt. is not sufficient to authorise even the announcement of its privatisation tender: this would require the consent of the Government. Both Gábor Fodor and Bálint Magyar, two successive Ministers of Culture, asked Privatisation Minister Tamás Suchman to exercise special care in the implementation of the publisher's partial privatisation. All we could learn from ÁPV Rt. is that its proposal concerning the privatisation tender has not yet been completed, but that a tender would be announced by the end of 1996. There can be little doubt that Wolters Kluwer will be involved.
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According to Péter László Zentai, President of the Hungarian Publishers' and Booksellers' Association, EU norms should be applied to prevent the formation and penetration of huge monopolies. In his opinion, in the Dutch or the German book market there is not the slightest chance of foreign ownership becoming as dominant as it has been in Hungary. Judging by the Czech Republic, where strong publishers were successfully kept in Czech hands, VAT on books was not allowed to rise above 4 percent, and a large-scale sell-off of bookshops did not take place, events in Hungary could have taken a different turn.
Furthermore, as a result of the amendment to the Fair Trading Act, the criterion of market dominance, hitherto fixed as 30 percent ownership, will be defined only verbally. Judge András Bodócsi informs us that if Parliament were to approve of the amendment, this category of market dominance would apply to all those who are able to operate largely independently of other players. An important consideration in this regard is the access of newcomers to the market.
With the rapid advance of the multinationals, some have concluded that it is too late to intervene. Péter László Zentai believes that while what has already happened cannot be undone, in order to prevent the Hungarian book market from splitting up completely into a large and profitable segment and a small segment living from hand to mouth, 15-20 Hungarian book industry units of proven viability should be chosen, which would receive all subsidies, grants, sponsorship, etc. The best must be given a chance to make a living on the open market, with all that this involves by way of risk and criticism. Zentai believes that a return should be made to larger sum project subsidies, in place of the current system of fragmenting subsidies into minor sums awarded for individual publications. Zentai's proposal would allow some units at least to become competitive.
This could also provide Hungarian authors with a more solid publishing background, a very important consideration: most of Springer Hungarica's publications, for instance, are translations from German or English; and only 20 percent of the authors on the Hungarian Book Club's list are Hungarian. According to János Gyurgyák, managing director of Osiris, a small and viable private publisher of high-quality books, foreign dominance in the textbook and academic as well as reference book market might easily lead to a dominance of translated works.