Billionaire Exits High Risk Media

Michael Hedges December 2, 2013 Follow on Twitter

Consolidation is a matter of course. In market economies, tough times force companies to expand cash-flow by acquisition. Better times encourage new entrants and new ideas. But where the media sector is viewed through a different prism consolidation is simply a matter of control.

An even bigger media holding company in Russia will be created as Gazprom Media announced last week an agreement to acquire from investment house Interros the broadcasting assets of ProfMedia. The deal was not totally unexpected as Interros principal and billionaire Vladimir Potanin had previously indicated a preference for the mining and metals sector. Russia’s media sector has been marked this year by dizzying consolidation.

ProfMedia operates national television network TV3, animation channel 2x2 and entertainment channel Pyatnitsa (Friday). Radio holdings include national network Avtoradio, the NRJ franchise in Russia, regional network Humor FM and Moscow station Romantika FM. The Pyatnitsa channel was launched in June to replace MTV Russia. A film and television production house is included in the deal. Enlargement will “open up new opportunities for content and advertising,” said ProfMedia CEO Olga Paskina in the joint statement.

Already the biggest Russian media house, Gazprom Media operates national television network NTV, satellite channel NTV Plus, TV channel TNT plus radio channels Ekho Moscvy, Relax FM, Children’s Radio and Comedy FM as well as Moscow station City FM. It, too, operates a film and TV production house as well as an advertising sales house and publishes daily newspaper Izvestia. Gazprom Media is wholly owned by Gazprombank, held by State owned energy giant Gazprom and Russiya Bank. “The combined structure will take us to another level,” said Gazprom Media general director Mikhail Lesin, who joined the company October 1st and continues as a special advisor to Russian president Vladmir Putin.

The companies expect the deal to close in the first quarter 2014 after examination by anti-trust authorities. As usual, financial details were not disclosed though financial analysts expect the acquisition price at or below RUB 35 billion, roughly €775 million. According to its 2012 financial report, ProfMedia lost RUB 1.1 billion, about €25 million. In 2010 Interros planned to float ProfMedia on the London Stock Exchange but the IPO was cancelled.

“Owning a media company is a minefield,” observed RAI Novosti media analyst Vasily Gatow (November 30). “There is a high risk of stepping on a mine and (Vladimir) Potanin cannot do it by himself, not always knowing whether something said on the air or written… will cause an attack from the Kremlin or the Investigations Committee. He does not need assets that potentially cause a crisis.”

Other Russian media watchers suggested Gazprom Media will benefit from ProfMedia’s stronger management team, particularly on the radio side. Gazprom Media outlets, notably NTV and Izvestia, are considered “political assets” and the acquisition is seen as opening its commercial side. ProfMedia’s broadcasting outlets, while marginally profitable, a considered more creative and market driven. Where program offerings overlap, spin-offs might occur.

Mr. Lesin is no stranger to broadcast advertising nor television, co-founding sales house Video International in 1997 and, reputably, designing State-owned international English-language TV channel Russia Today (RT) in 2004. Video International is the biggest seller of advertising in Russia and recently took on ProfMedia as a client. Russia Today is creative in its own regard, offering news, sports and conspiracy theories.

See also in ftm Knowledge

Media in Russia

Media in Russia is big business and big politics. Media companies are consolidating as they move into new media and new territories. At the same time independence is still questioned. It's all changing. ftm looks at media in Russia and its neighbors, includes Resources, 124 pages. PDF file (January 2012)

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