Paper recaps on history of Russian mass media and major players
The Russian newspaper Kommersant-Vlast on 9 August carried a summary of the history of Russia’s mass media from the year 2000, recapping on the changes in television, radio and newspapers and their ownership, and adding a brief account of the main players. The following is the text of an article by Arina Borodina and Konstantin Vorontsov «The mass media»; subheadings as published:
The History: 2000 — 2004
The last four years have been marked by growth of the market for print products, a search for a new listenership for radio stations, and the emergence of new TV channels. However, the main result of Vladimir Putin’s first presidential term is the end of the era of oligarchic television, which had lasted since 1995.
The Television Story
During Vladimir Putin’s first presidential term, two of the biggest Russian oligarchs, Boris Berezovskiy and Vladimir Gusinskiy, who owned two of the leading TV channels, ORT [Russian Public Television] and NTV [Independent Television], ceased to be their owners.
In the case of ORT, where 51 per cent of the shares of stock belonged to the state and 49 per cent was under the control of Boris Berezovskiy’s structures, it all began in August 2000 with the Kursk submarine disaster. The TV channel criticized the actions of the authorities and President Putin personally. The Kremlin never forgave Berezovskiy for this, and the TV anchorman Sergey Dorenko was off the air just a month later; his programme was cancelled by the channel’s director-general, Konstantin Ernst, without an explanation of the reasons. The directors of the management of ORT’s news programmes, Tatyana Koshkareva and Rustam Narzikulov, were fired after Dorenko. All the «resignees» were the main conductors of Boris Berezovskiy’s policy at ORT.
There never was any official information to the effect that Boris Berezovskiy ceased to be the holder of 49 per cent of ORT’s shares of stock. But in early January 2001, a report appeared in the press to the effect that the oligarch had been forced to sell his block of stock in ORT to structures close to Roman Abramovich. In fact, the television company’s shares of stock reverted to the state’s control.
After this, Konstantin Ernst became the channel’s all-powerful director. A year later the ORT television company started to be called Pervyy Kanal [Channel One]. At present, the television company’s board of directors consists entirely of state representatives; and to the question who now owns 49 per cent of Pervyy Kanal’s shares of stock Konstantin Ernst evasively responds: «Private shareholders» (officially the shares of stock are listed with two companies registered in offshore zones).
The problems of Vladimir Gusinskiy’s media empire began back in late 1999; tax structures and Vneshekonombank [Foreign Economic Bank] filed financial claims against Gusinskiy’s media companies. Vladimir Gusinskiy himself was arrested in June 2000, but he was released after spending three days in Butyrskaya Prison, and he left Russia. As in the case of ORT, NTV’s treatment of the Kursk submarine disaster greatly irritated President Vladimir Putin. A struggle for the transfer of controlling blocks of stock in the television company and other Media-Most media assets to Gazprom’s control (and actually the state’s) transpired against the backdrop of the authorities’ displeasure with NTV’s news policy.
In April 2001, after a year-and-a-half court case, Gazprom-Media director-general (at that time, a minority shareholder of NTV and Media-Most) Alfred Kokh managed to transfer control over Vladimir Gusinskiy’s entire media empire into the hands of Gazprom. And a schism occurred at NTV in April 2001. The majority of the journalist collective, headed by Yevgeniy Kiselev, accepted Boris Berezovskiy’s offer and transferred to the TV6 channel. The rest remained at NTV under the subordination of the TV channel’s new director-general and simultaneously the head of Gazprom-Media, Boris Jordan.
In late October 2002, the treatment at NTV of the hostage seizure situation in the theatrical centre at Dubrovka aroused the Kremlin’s sharp displeasure. This was one of the main reasons why Boris Jordan was forced to resign by the shareholders in early January 2003 without an explanation of the reasons, despite successes in the development of NTV and Gazprom-Media. The head of Gazprom, Aleksey Miller, appointed the unknown pulmonary physician Nikolay Senkevich as NTV’s director-general in February 2003, and Aleksandr Dybal assumed the position of Gazprom-Media’s director-general. On 5 July 2004, the former deputy chairman of VGTRK [the All-Russian State Television and Radio Company], Vladimir Kulistikov, was appointed director-general of NTV, and Nikolay Senkevich moved to the chair of Gazprom-Media’s director-general. NTV’s shareholder Gazprom-Media made not a single announcement about the reasons for replacing the management of NTV and Gazprom-Media. At present nothing is known about the plans to establish a media holding company with the participation of Yevrofinans [Eurofinance] and Gazprom-Media.
The NTV schism was largely the cause of the disappearance of two TV channels where some of NTV’s journalist collective from the times of Vladimir Gusinskiy subsequently worked. The TV journalists who left the channel, headed by Yevgeniy Kiselev, continued their work at TV6, another channel of Boris Berezovskiy. TV6 was mainly an entertainment channel until 2001, and the former NTV staff radically changed the channel’s face and broadcast policy and noticeably improved its rating and economic indicators.
However, one of TV6’s minority shareholders, the LUKoil-Garant non-state pension fund (it held 15 per cent of TV6’s shares of stock, another 10 per cent belonged to the Moscow Committee for Science and Technologies, and 75 per cent was controlled by Berezovskiy’s structures), filed a suit in arbitration court for the television company’s liquidation in September 2001. The court upheld the suit on 27 September. TV6’s broadcasting was terminated in January 2002 by a decision of the head of the Ministry for the Press, Radio and Television Broadcasting, and Mass Communications, Mikhail Lesin, after numerous judicial processes.
After the abolition of TV6, Vladimir Putin personally promised that TV6’s journalist collective would participate in a competition for the channel’s frequency (although as before the license for the broadcasting right belonged to MNVK [the Moscow Independent Broadcasting Corporation]). The competition took place in March 2002. The TVS channel was established by a journalist collective headed by Yevgeniy Kiselev in an alliance with the biggest Russian entrepreneurs Anatoliy Chubais, Roman Abramovich, Oleg Deripaska, Aleksandr Mamut, Oleg Kiselev and others, as well as with the participation of the Media-Sotsium nonprofit partnership (it in particular was represented by Yevgeniy Primakov and Arkadiy Volskiy).
TVS’s broadcasting on TV6’s frequency began on 1 June 2002. However, TVS ceased to exist a year later due to numerous disputes between the owners and chronic underfinancing. On 22 June 2002, Mikhail Lesin ordered them to cut off TVS’s broadcasting, and the company was bankrupted. However, as before, the situation with «the sixth button» remains rather complicated. In the summer of 2003, Boris Berezovskiy sold 75 per cent of the shares of stock in MNVK. No one knows with certainty who now is the real holder of these shares. The shares of stock are registered to five legal companies, which according to media data front structures connected in one way or another to quasi-state companies and individuals. And meanwhile the federal channel Sport broadcasts on the sixth TV channel’s frequency.
At present the largest player in the TV market is VGTRK. Its structure includes the Rossiya [Russia] and Kultura [Culture] TV channels, the Sport channel (however, formally the channel has a complex ownership structure: Its shareholders are VGTRK, the Moscow government, and the Rosmediakom nonprofit partnership in the person of state banks and the very same VGTRK), the Mayak and Radio Russia radio stations, as well as more than 80 regional television and radio companies. Apart from the main federal channels Channel One, Russia TV, and NTV, so-called commercial channels also have a presence in the market. The most noticeable players are STS [Television Station Network], Ren TV, TNT (it is part of Gazprom-Media’s structure), and DTV (the former Daryal-TV).
A management shake-up occurred at STS in April 2002, and the founder of one of the largest Ukrainian TV channels, 1+1, the famous film and TV producer Aleksandr Rodnyanskiy, became the head of the channel. A certain time later, Roman Petrenko, who prior to this had headed STS, received an offer to head the TNT channel. STS and DTV are the only TV channels in which the controlling block of stock belongs to foreign shareholders. In the case of STS they are StoryFirst Communications (SFC), which owns a 75 per cent minus one share holding. The TV channel’s other shares belong to Alfa-Grupp. Despite a minority block of stock, it is Alfa that determines the channel’s policy. In particular, Rodnyanskiy’s candidacy for the post of STS’s director-general was proposed by the Alfa-Grupp company.
The DTV channel, whose controlling block of shares is held by the Swedish media company Modern Times Group (MTG), has far more modest rating and economic indicators. According to various data, another 25 per cent of the shares belong to the founders of the Daryal-TV channel: the writer Arkadiy Vayner and his daughter Natalya Daryalova. At present the TV channel is headed by a representative of MTG, Mart Luyk. DTV’s frequency was put up for auction in 2003: The channel had had several warnings from the Ministry for the Press, Radio and Television Broadcasting, and Mass Communications. In the end, a concept for an entertainment channel presented by MTG won out, and DTV received a new five-year licence.
Ren TV stands out among the network channels. Unlike the other network channels with an exclusively entertainment concept, Ren TV’s broadcasting has a rather large quantity of news and public policy broadcasting. The television company has existed in the market for about 10 years; its founders are Irena Lesnevskaya (president) and her son Dmitriy Lesnevskiy (director-general). They hold 30 per cent of the television company’s shares. Seventy per cent of the shares have belonged to the company LUKoil since 1997. This holding was bought up by the Russian Joint-Stock Company Unified Energy Systems of Russia in October 2000. Subsequently, according to media data, a holding in Ren TV was registered to Unified Energy Systems of Russia’s subsidiary companies and a number of individuals, including its head, Anatoliy Chubais.
Information to the effect that Irena and Dmitriy Lesnevskiy are conducting negotiations for the purchase of 70 per cent of the shares of stock from Unified Energy Systems of Russia has repeatedly appeared in the press during the last year. The bank Yevrofinans and a certain foreign investor figure among possible purchasers of this holding in Ren TV. True, the company’s management is not reporting whether such negotiations are in fact being conducted.
The Press Story
Strange as it may seem, the crisis of 1998 was in many ways beneficial for the publishing industry. After it, a considerable number of the subsidized publications launched in haste in order to accomplish current political objectives, to satisfy ambitions or simply because there was nowhere to place extra money ceased to exist, especially in the regions. Publishing houses and independent publications oriented towards market work survived (with certain exceptions of course). Now the market for print periodicals has grown to a quite decent volume, approximately 2.5bn dollars. In 2003, Russian print media earned approximately 1.5bn dollars from circulation sales at retail and through subscription and slightly more than 1bn dollars on advertising.
The process of business concentration began in the new but already shaped market, and foreign publishing capital appeared. True, this pertains primarily to the magazine segment of the market. As before, foreign publishers and investors consider Russian newspapers too politicized and therefore a risky asset and are in no hurry to invest resources in them.
The trepidations are not groundless. A typical example and the clearest example of concentration of the publishing business during the last four years is the transaction between the owners of the Interros publishing house, Prof-Media, and Independent Media, which took place in February 2003. At the time, Prof-Media bought 35 per cent of Independent Media’s shares (for 35 to 40 million dollars according to various data). Both the transaction’s participants and the experts regarded this purchase as one of the phases of a merger of two of the publishing market’s leaders; however, further steps towards unification have not yet ensued. According to unofficial information, the merger was prevented by a political decision deeming it undesirable for representatives of the formally Dutch Independent Media to appear in the management of the nationwide newspapers Izvestiya and Komsomolskaya Pravda, which Prof-Media publishes.
However, there were also successful examples of consolidation of the publishing business. The unification of the Hachette Filipacchi Shkulev publishing house and the Intermediagrup group of companies was completed in June 2004; 85 per cent of Intermediagrup’s shares of stock wound up in Hachette’s ownership. The unified company became one of the largest market participants after becoming second for the volume of advertising revenue (almost 80m dollars last year) and third for the numbers of readers.
Promsvyazbank also expanded its publishing assets in the summer of 2003. Until then the holder of the controlling block of shares in the Argumenty i Fakty publishing house, the bank purchased a large holding in the Trud publisher. The largest Russian advertiser, the Video Interneshnl (VI) group of companies, also took up the publishing business. In August of last year, VI acquired the controlling block of stock in the largest subscription operator and a major retail distributor of periodicals, the company Rospechat [Russian Printed Matter] from Bazovyy Element [Base Element], and in September it announced the purchase (through the Russian Media Ventures investment fund) of the OVA-Press publishing house, which was joined by the recently purchased magazine Ogonek.
While concentrating their business, large publishing houses are going into related sectors. In 2003, Burda and Independent Media founded a joint venture that took up the retail distribution of periodicals, and the Prof-Media publishing house and the Ekstra M publishing house are involved in building printing presses.
Naturally, the growing Russian market for periodicals could not help but interest foreign publishers, especially European ones, for which things have not been rosy in their own native markets in recent years: Circulations are falling; revenues from advertisements are declining. The first wave of foreign companies (among which were Burda, Gruner+Jahr, and Hachette Filipacchi) arrived in Russia even before 1998. But for a long time the crisis frightened off those who were planning to follow the first comers. The first issue of the Russian Vogue by the large US Condenast publishing house came out in September 1998. But the next large international publisher arrived in Russia only in 2002. This was one of the largest German publishing houses, Henrich Bauer Verlagsgruppe, which established a joint venture with the Russian Logus publishing house. It was followed by the Swiss Edipresse (the company bought 52 per cent of the shares of stock in the Russian KON-Liga Press publishing house) and the German Axel Springer.
The launch of popular foreign magazines under licence by Russian companies became a separate area of concentration of the publishing business. One of the most well-known worldwide magazine brands to arrive in Russia during these years was National Geographic (it is published by the AST Group). The OVA-Press publishing house enlarged the list of publications in the spring of 2004; it began the publication of the magazine Hello on celebrities. The Petersburg publishing houses SPN Publishing and Sobaka [Dog] concluded an agreement on the publication of the Rolling Stone and Time Out magazines.
The first examples of portfolio investments in the sector are also indicative of the fact that the market has been taking shape. The Mint Capital international investment fund acquired 20 per cent of the shares in the Gameland Russian publishing house in the spring of 2004. In the history of the domestic print media market, this was the first example of investments in the publishing business by a company in the same line.
The newspaper segment of the market has remained rather passive all these years. The readership of newspapers, primarily dailies, is slowly but surely declining. Advertising revenues are growing more slowly in newspapers than in magazines. The only exceptions are specialized advertising newspapers and advertising-and-information newspapers. But, taking into account their advertising revenues, next year magazines will earn more or at least no less than newspapers. Therefore, foreign publishers are in no hurry to come to Russia with international newspaper projects or to participate in the publication of existing ones (the exceptions are the newspapers Vedomosti and Delovoy Peterburg). The publishers themselves feel that the situation may be rectified by modernization of the printing industry, which will enable the majority of newspapers to switch to high-quality colour printing, which will attract large advertisers.
It is obvious that consolidation of the publishing business will continue in the near future. The establishment of multifaceted media holding companies containing, apart from the publishing business, television and radio broadcasting and cinema and theatre business is the way of the development of the majority of transnational media companies. Such examples already exist in Russia: Gazprom-Media and Prof-Media. Apart from these companies associated one way or another with the state, as the advertising market develops and competition steps up, more and more weight will be acquired by private publishing holding companies, which will be able to strengthen their positions through takeovers of less powerful players. The intervention of Western publishing brands will slow down: The majority of magazines published worldwide have already come to Russia.
The Radio Broadcasting Story
In Russia, radio proved to be the mass medium most removed from politics. Since the early 1990s the FM band has been dominated by entertainment radio stations, which determined the situation in the market by controlling the main advertising flows. An important event occurred in the autumn of 2003; the rating of the FM band’s leader, the entertainment-oriented Russkoye Radio, surpassed the rating of the wire communication Radio Russia’s, which is part of the VGTRK holding company. This persuasively indicates that the Russian radio market is developing according to global canons. The most successful ones in it are proving to be music stations intended for a broad listenership.
However, there are differences. A few talk and news projects always exist in developed radio markets, apart from music format stations. As history shows, these formats do not take root in Russia. Ekho Moskvy, which makes a small but steady profit, has operated successfully during all four years of Vladimir Putin’s presidential term. Other radio stations that attempted to operate in the news or discussion format suffered failure. Although it continues to operate, the state’s Mayak-24 has a low rating; the on-line radio in the Prof-Media holding company ceased to exist and was turned into a disco radio station in the spring of this year. An expensive news radio station is still too burdensome for not overly strong Russian radio holding companies.
But then market diversification and the search for narrow, niche formats in radio fit quite well into global trends. «Love radio,» which is oriented towards the female listenership, jazz radio, and «chanson» radio appeared on the radio air waves within the last four years and are feeling quite confident. The struggle for separate niches did not come about without losses. It was particularly fierce in the rock format, where as of now the winners proved to be Maximum, Nashe Radio, and Ultra. As a rule, niche radio stations are inexpensive to operate, have a small but loyal listenership, and operate with a profit ratio unattainable for other mass media (up to 100 per cent).
The business concentration characteristic of other mass media is also observed in radio broadcasting. Whereas at the turn of the century only the tandem Yevropa Plus and Retro Radio as well as Russkoye Radio and Radio Monte-Karlo could at a stretch be called holding companies, today there already are six holding companies in the market: Russkaya Mediagruppa [Russian Media Group] (Russkoye Radio, Monte-Karlo, Khit-FM, and Maximum), the Prof-Media broadcasting company (Avtoradio, Energiya-FM, and Disko), the Gazprom-Media group of radio stations (Pervoye Populyarnoye Radio [First Popular Radio], Troika, Sport-FM, and Do-Radio), Yevropa Plus (including «retro» radio), the News Corp group of stations (Nashe Radio and Ultra), and the radio stations of the Arnold Prize holding company (Nashe Vremya na Militseyskoy Volne [Our Time on the Militia Wave], Dzhaz [Jazz], and Klassik).
There are few loners in the market, and even fewer will probably be left in the near future. The main market players are contesting the few remaining unoccupied frequencies. For example, the last competition was won by two bids from the company ARS («love radio»), one bid from Prof-Media, and one from VGTRK.
During these years, radio broadcasters’ desire to expand their listenership also became obvious, primarily by attracting older listeners. Nashe Vremya na Militseyskoy Volne, Russkoye Radio-2, and Retro-FM, which are intended for listeners over 35 years old, came onto the air waves. Such attempts are easily explained: As global practice shows, this listenership is highly attractive for advertisers (and advertising brings radio 90 per cent of its revenues), and stations oriented towards it operate quite successfully.
Obviously there are not enough advertisements for radio broadcasters. Their share of the advertising market is less than 5 per cent (115 to 120 million dollars in 2003); the rates of increase of advertising revenues are lower than the average market rates. In the years 2002 and 2003, Moscow radio stations, which ordinarily compete fiercely in the struggle for the advertiser, were even able to agree on the performance of a joint drive under the slogan «Advertising on radio is very effective and very profitable». However, the drive had no noticeable success. However, it has not been ruled out that the situation may change in the near future. With the formation of large holding companies (Russkaya Mediagruppa for example now controls about a third of the market), radio stations will gain an opportunity to dictate their own terms to many advertisers.
They departed from the scene
It is not quite correct to say that Boris Berezovskiy left the Russian media scene during Vladimir Putin’s first presidential term: As before, the oligarch owns the Kommersant publishing house. However, Kommersant remained the last of Berezovskiy’s large Russian media assets. Since the end of 1999, Russian authorities have rather systematically taken away everything in the country that belonged to the London emigrant. This includes the holding in Russian Public Television and Nezavisimaya Gazeta and the TV6 TV channel. The Russian state and its allies derived no benefit from the confiscation. However, the design obviously was not a monetary one. The only motivation for the confiscation of Berezovskiy’s property in Russia, unlike Vladimir Gusinskiy’s, was his political outlook, not his activity as an entrepreneur in the media sphere.
Aleksandr Vainshtein parted with the entire media business literally within six months without indicating the reasons. After selling his 50-per-cent holding in Radio Maximum to Russkaya Mediagruppa and the rights to the Moskovskiye Novosti brand to Otkrytaya Rossiya, Aleksandr Vainshtein remained the owner of the MN building on Pushkin Square, which he plans to make into a hotel, according to unofficial information.
Director-general of Prof-Media, one of the largest media holding companies in the market, since 1997, Vadim Goryainov was dismissed from the position at the start of 2004. During that period he managed to build a printing press for Prof-Media, establish a radio holding company, and buy several regional TV stations. Obviously he left because of the dissatisfaction of the holding company’s shareholders (Prof-Media belongs to Interros) with the incompleteness of a merger transaction with the Independent Media publishing house. When he was departing he planned to take up film producing, which is a very far-sighted decision, considering the latest data on Nochnoy Dozor’s [Night Patrol] takings.
The largest co-owner of the Most group, Vladimir Gusinskiy is the biggest and brightest representative of the media business of the mid-1990s, having lost all the more or less significant media assets in Russia during Vladimir Putin’s first presidential term. It would be dishonest to say that Vladimir Gusinskiy’s Media-Most holding company vanished into oblivion only because of a political conflict with Russia’s president. Although this conflict undoubtedly did play the main role. This is almost directly recorded in the «sixth protocol» signed by Vladimir Gusinskiy in prison. In it Gusinskiy gained freedom in exchange for the sale to Gazprom’s structures of the majority of his Russian media assets, including the NTV and TNT TV channels. However, an entire business vanished from the Russian reality together with Gusinskiy located in political emigration; after the Gusinskiy affair, no-one in Russia is any longer venturing to build media financial holding companies basing their financial wellbeing on aggressive media political activity.
Boris Jordan became the head of NTV in April 2001 at a very difficult time for the company; the channel was burdened with large debts; there practically was no programme product, and the majority of journalists whom it was customary to consider NTV people left the television company. And the train of «the oppressor of freedom of speech» accompanied Jordan himself at first. But his team was able to achieve very high results almost within two years: restructuring the debts of NTV and all of Gazprom-Media, an increase of the channel’s viewership share, and the creation of new TV projects, which primarily include «Namedni» (the programme was cancelled by Nikolay Senkevich two months ago). And in September 2002, Gazprom head Aleksey Miller publicly announced the extension of the contract with Boris Jordan for another three years, thereby declaring approval of the course of the management of NTV and Gazprom-Media. Then they announced the establishment of a new media holding company with Yevrofinans, which was to include all of Gazprom’s media assets.
However, the situation at NTV changed abruptly a few months later. In late October 2002, NTV’s treatment of the hostage seizure situation at the Dubrovka theatrical centre aroused the Kremlin’s displeasure. Then Gazprom sharply changed its position; political loyalty prevailed over economic effectiveness. Jordan was forced to resign.
The co-owner of the Feniks Kholding [Phoenix Holding Company] energy company purchased Obshchaya Gazeta for 1.5m dollars in 2002; he immediately shut it down and began publishing the newspaper Konservator, in his words a «calm, restrained, conservative, and smart medium», in place of it. However, Leibman did not succeed in becoming a media magnate; the newspaper’s financing was discontinued less than a year later; Konservator closed down. One way or another, in the end Leibman was known more as Kseniya Sobchak’s boyfriend, not as the publisher of a weekly.
They came onto the scene
The chairman of the board of directors and later the director-general of the company Prof-Media, Rafael Akopov, came to the publishing business from NTV. Apparently Prof-Media’s shareholders suggested to him that he replace the strategic management of the holding company with a flexible one for speeding up negotiations on a merger with Independent Media. However, there has not been a merger yet, and apparently one is not foreseen; for political considerations it was «not recommended» to Akopov that he merge Komsomolskaya Pravda and Izvestiya with a Dutch publishing house. Akopov’s next task after the merger should have been to float Prof-Media on the stock exchange. However, an initial offering of shares of stock is for now being postponed for the same considerations as the transaction with Independent Media.
The president of Russkaya Mediagruppa went into business in earnest and for the long haul, all things considered. During the last four years, the largest radio holding company in Russia, controlling a third of the Moscow radio market, was created from two small radio stations. The revenues of RMG, which includes a magazine, an advertising agency, a news service, and an audio recording studio as well as the radio stations, are estimated at 20 to 30 million dollars per year. Meanwhile, the group remains active in the market and is constantly in search of new assets for purchase.
Arnold Uvarov quite independently created the «premium» media holding segment Arnold Prize with the fashion magazines Apriori and Arnold Style Magazine (as well as Ona [She], Parad [Parade], and XXL), the very successful niche radio stations Dzhaz and Klassik, and the TV channel Style, which is no less fashionable than the magazines. The holding company’s radio station Nashe Vremya na Militseyskoy Volne does not exactly blend into the picture, but this is not strictly an Arnold Prize radio; the holding company manages this station on a frequency belonging to the Ministry of Internal Affairs.
[Tables giving comparative figures for advertising revenue in various media omitted]
Source: Kommersant-Vlast, Moscow, in Russian 9 Aug 04