The Hubris Of The Meteorically Risen

Michael Hedges January 5, 2015 Follow on Twitter

The meteoric rise of media executives always attracts considerable attention, adding to the enduring narrative of success in this highly visible arena. Big ideas, working hard or having the right connections most often illustrates the careers of these winners. That light is also visible, however briefly, when media stars fall back to earth.

Unexpectedly in some respects, Gazprom Media Group (GMG) CEO Mikhail Lesin tendered his resignation in mid-December, “due to family commitments,” said a statement from parent company Gazprom (December 19). GMG is the largest media holding company in the Russian Federation with several national radio and television channels, several publications, ad sales-house, production houses, movie theatres and a printing house and Mr. Lesin had been CEO since October 2013. In the heady early 1990 he was instrumental in the founding of media sales-house Video International, now known as VI, which brought advertising sales in Russia to scale. He was rewarded, from the mid-1990, with several high-level positions within State agencies and the presidential administration, including Press and Information Minister. He is credited for designing the notorious Russia Today (RT) television channel.

Shortly after Mr. Lesin resignation was accepted, personally by Russian Federation president Vladimir Putin said business news portal Vedomosti (December 22), Dmitry Chernyshenko was named as replacement by Gazprom CEO Alexei Miller, who serves as board chairman of Gazprom Media. Mr. Chernyshenko is experienced in advertising and sports marketing, recently becoming president of the Kontinental Hockey League. He is widely credited for organizing, administering and generally taking care of business for the Sochi 2014 Winter Olympic Games. In the interim Mr. Chernyshenko was rewarded for that success by being named chief executive of Volga Group, the personal investment house of multi-billionaire Gennady Timchenko. Whether or not Mr. Chernyshenko will retain the positions with either Volga Group or the hockey league are unclear.

A combination of recent challenges may have precipitated Mr. Lesin decision to resign. Perhaps most visible, certainly among international media watchers, has been the relationship with radio channel Ekho Moskvy, two-thirds owned by Gazprom Media and one-third by the channel staff. Mr. Lesin attempted in November to sever the employment contract of a reporter/talk show host over, allegedly, “inappropriate” use of social media. Echo Moskvy co-founder, chief editor and representative of the minority shareholding Alexei Venediktov went into something of a rage reminding everybody, including Mr. Lesin, of his sole power over editorial staff contracts under the shareholders agreement. Mr. Lesin then threatened to fire Mr. Venediktov, not without friends in high places, and the whole episode moved, in seems, up stairs.

Ekho Moskvy General Director Ekaterina Pavlova, appointed by Mr. Lesin to replace 20-year veteran and staff favorite Yuri Fedutinova, was apparently overwhelmed by the adept Mr. Venediktov. She was removed less than a week after Mr. Lesin departure and replaced by Mikhail Demin, who had been serving as an advisor to Ms Pavlova since the end of his last job as PR chief for the Sochi 2014 Winter Olympics, relationship to the aforementioned Mr. Chernyshenko noted. Mr. Venediktov and staff wanted Mr. Fedutinova returned as general director but, in the end, supported Mr. Demin because Ekho Moskvy is currently running a deficit, reported daily tabloid Moskovskij Komsomolets (December 23), and Gazprom Media has access to plenty of money plus Mr. Demin promised to rehire Mr. Fedutinova as chief economics editor.

The Ekho Moskvy editorial staff promptly agreed to a social media “code of conduct,” reported Russian media portal roem.ru (December 27).& In it the staff agreed that social media postings might be improperly mistaken for “positions of the publisher” and that “journalists shall refrain from public criticism of editorial policy, colleagues, shareholders and guests.” The social media “code of conduct” becomes part of the radio station charter.

On the channel fiscal situation, Mr. Demin called for an “optimization,” reported news portal lenizdat.run (December 23). New “sources of funding” will be sought and staff reorganization a possibility. “We have to reduce the wage bill,” he said, free-lance positions in particular jeopardy.

Mr. Venediktov was quick to the money question. “We have reduced the salaries of all staff, the entire leadership of the radio station,” he said on Kommersant FM (December 30). “My deputy, my assistant and I will take a 20% pay cut. “We have decided to reduce the salaries of the highest paid journalists 10% to 12%. No one was fired.”

Ekho Moskvy is a small but visible part of Gazprom Media. Its news and talk programs have been noted, inside Russia, and praised, outside, for independence and critical reporting. Pressure from authorities has long been its operating environment, to the degree that some Russian media watchers believe it has been allowed to carry on symbolically to quell criticism of the government control over nearly all media. A symbolism, too, was not lost to Russian media watchers that Mr. Lesin was fired on Mr. Venediktov birthday.

Competitive issues, in a Russian sense, may have doomed Mr. Lesin. Laws banning ads on pay-TV channels and creating a federalizing single TV ad market system, swiftly passing from the State Duma to President Putin signature, were widely attributed to Mr. Lesin lobbying skills and universally unpopular with Russian media executives. Reportedly distressed with Mr. Lesin “initiatives” were Konstantin Ernst, general director of Channel One, and Oleg Dobrodeev, chairman of All-Russian State Television and Radio Company (VGTRK), noted Forbes Russia (December 18). Channel One is principally owned by the Russian Federation (75%), National Media Group holding the rest (25%). Mr. Ernst directed the Sochi 2014 Winter Olympics opening ceremony.

Complaints eventually reached Yuri Kovalchuk, Bank Rossiya board chairman and major shareholder who co-owns with the aforementioned Gennady Timchenko National Media Group. Mr. Kovalchuk and Mr. Timchenko are close to Russian Federation President Putin. The “industrial committee” set up to organize the ad sales scheme dropped into oblivion in early December, first postponing then canceling a tender for an operating company, the result of which would have had significant impact on Video International (VI). Shortly thereafter the committee chairman resigned without replacement.

The law striking ad revenues from pay-TV channels, due to come into force January 1st, certainly caused CNN International to withdraw from Russia but the country cable operators howled in despair, accompanied by Mr. Dobrodeev who planned further ventures into pay-TV.  Events moving quickly as the deadline approached, President Putin will come to the rescue. “There is a strong likelihood that our legislators and relevant ministries will take the necessary steps within the next few days,” said presidential press spokesperson Dmitry Peskov, quoted by lenizdat.ru (December 30). "The difficult financial situation of cable channels is well known in the professional environment. It can be assumed that Vladimir Putin instructed the relevant authorities to study the question.”

In the meantime, VGTRK and majority State-owned long-distance telecom Rostelecom formed a joint venture to push forward on pay-TV development. The first step is a private placement in VGTRK Digital Television unit, proceeds going to Rostelecom, which then will acquire a minority (25%) stake in Digital Television swapped for equity in the Rostelecom NKS-Media subsidiary.  It seems a deal just waiting for a signal.

Mr. Lesin is also credited - or blamed - for drafting a law passed in September limiting foreign ownership in Russia media sector, noted the Financial Times (September 23 2014). While not taking effect until 2017, several foreign investors moved to limit potential losses. International media watchers condemned the law as another signal of government intention to control dissenting media, primarily in the print sector. The big television victim would be CTC Media, publicly traded on the US NASDAQ stock exchange with large stakes held by Swedish broadcaster Modern Times Group. The significant Russian shareholder is the aforementioned Yury Kovalchuk.

Afoul of well-connected billionaires Mr. Lesin career has been winding down for months. But the “family considerations” mentioned in the Gazprom statement for his resignation may have been a deciding factor. President Putin has called on the country most wealthy, in recent weeks, to bring that money back to Russia and avoid ostentation as the rest of the country endures austerity. Mr. Lesin caught the attention of US authorities during the summer for owning quite large Los Angeles homes, presently occupied by family members. His son, Anton Lessine, set himself up in Hollywood as a film producer in 2011, joining all the right polo clubs, living large.

The younger Mr. Lessine and his wife are facing a trial in March for violating California labor laws brought by a former child-minder, reported LA news portal westsidetoday.com (October 20 2014). LA sources also suggest the real estate purchases were facilitated through the Russia Today (RT) television company, where Mr. Lesin daughter, Ekaterina Lesina, is a Hollywood-based producer. A US Senator has asked the Justice Department to review circumstances of the home buying spree for potential violations of the Foreign Corrupt Practices Act (FCPA); i.e. money laundering.

hubris of the meteorically risen attributed to legendary music business executive Don Sundeen

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