A Big Squeeze Releases The Juice

Michael Hedges October 12, 2015 - Follow on Twitter

Politics and the media business are often at odds, more so it seems in recent years. Some see an information war. Others see comedy in attempts to reign in the insatiable appetites for all the goodies media offers. Perhaps it’s a moment for creativity, acrobatics or a good laugh.

The Russian Federation government has stepped up moves to severely limit foreign involvement in the media sector. Amendments to the Law on Mass Media and Code of Administrative Offences introduced to the State Duma last week will require all media outlets to promptly report funds received from foreign sources, reported Vedomosti (October 7). Included are grants and prize awards but not, unsurprisingly, money from foreign media buyers for advertising with Russian outlets.

“The main idea… is that people need to know whose money (supports) the press they read,” explained the bill’s co-sponsor Vadim Dengin, deputy chairman of the State Duma committee on information policy. “When a grant comes, it comes directly from someone, and this grant must be understood. Let's face it: it’s the information war.”

An 2014 amendment to the Law on Mass Media restricting foreign shareholdings in Russian media outlets to 20%, also co-sponsored by MP Dengin, has chased several European media houses out of Russia. Danish media house Egmont Media Group, publisher of children’s magazines and books in Russia, will spin-off the magazine business to Egmont Russia deputy general manager Mikhail Morozov, reported The Moscow Times (October 5), but will continue in the educational book publishing market. Ownership restrictions come into force at the first of January 2016 though a one year grace period was added in a later amendment.

Axel Springer, Edipresse and Modern Times Group (MTG) have announced exits from Russian media assets, all citing the impending ownership restrictions. Finnish media house Sanoma quickly disposed of its holding in the publisher of respected business newspaper and online portal Vedomosti and English-language Moscow Times but was prevented from selling its stake in the fashion magazine subsidiary publishing Cosmopolitan and Esquire to a joint venture involving US publisher Hearst.

MTG has been the largest single shareholder in Russian television broadcaster CTC Media and its exit - along with US shareholders - is a bit more complicated and costly. All non-Russian shareholders are selling to Alisher Usmanov, owner of the Kommersant publishing house and TV broadcaster UTH, for US$ 255 million, reported Bloomberg (September 24). MTG’s 38% share of CTC Media was valued at US$ 834 million, according to the company’s 2013 annual report.

Russian minority shareholder Yury Kovalchuk, holding a 25% stake in CTC Media through Cyprus-based Telcrest, is on the US Treasury Department and European Union lists of prominent Russians sanctioned after the annexation of the Crimean Peninsula and unable to receive proceeds from the stock sale. Shortly after the MTG et.al. exit from CTC Media was announced VTB Bank, principally owned by the Russian government, acquired, roughly, a one-third stake in Telcrest, reported Vedomosti (September 29). CTC Media will exit legal domicile in the US State of Delaware as well as trading on the NASDAQ exchange. When that is completed US and EU sanctions will no longer prevent further transactions.

Hubert Burda Media, publisher in Russia of Playboy and dozens more titles, appears trying to keep hold of the business, according to Bloomberg (September 21), by limiting capital exposure to licensing and distribution while ceding editorial control, as proscribed by the Russian law. Another piece of creative law writing by MP Dengin would stop publication of material that strays from a media outlet’s legal remit. Religious newspapers should stick with religion, he said. Draft rules to halt government employees using Google and social media portals like WhatsApp are being pushed by PM Dengin.

The television licensing business, important for ratings and copyright conscious Russian television outlets, stumbled when BBC Worldwide would not license reality gymnastic show Tumble to Russian producers, reported Forbes Russia and quoted by finanz.ru (October 7). The problem was that the Russian production company - Red Square - is owned by Arkady Rotenberg, under EU sanctions, and the intended broadcaster - Channel One - is partly owned by the aforementioned sanctioned Yury Kovalchuk and partly owned by the Russian State. Tumble is in that popular competition reality show category like Strictly Come Dancing and appeared on BBC One for six episodes in 2014. Format rights are held by BBC Worldwide.

In the program description submitted to BBC Worldwide, the host selected for the Russian version of Tumble was Olympic gold medalist Alina Kabaeva with Russian national rhythmic gymnastics coach Irina Viner as a judge. Last year Ms Kabaeva was named board of directors chairperson of National Media Group, the State company principally owning newspaper Izvestia, Channel One and Ren TV. Ms Viner is married to the aforementioned not-sanctioned Alisher Usmanov. Channel One is going ahead with an original production - Without A Safety Net - more oriented toward acrobatics.

Sitcoms being quite popular in Russia, Sony Pictures Television licensed to CTC Media rights to multiple Emmy-winning scripted comedy Roseanne. It will be adapted for the Russian market and retitled Katia, reported Variety (October 1). The original Roseanne, staring comedians Roseanne Barr and John Goodman, ran nine seasons in the US. The Russian version will be the show’s first licensed adaptation. CTC Media channels offer Russian adaptations of several, mostly old, US sitcoms including Everybody Loves Raymond and Married With Children.

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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