Local authorities are not the biggest threat to the independence of regional media. A detailed analysis of the history of regional media magnate’s business showed that the main threat they face is the possible expansion of Moscow television networks.

Alexander Mansilya-Kruz

Regional media magnates, in contrast to their disgraced federal colleagues, have managed to keep control of their holdings, which has given considerable independence to the media outlets that belong to them. Regional rulers of the airwaves, however, do not like the term freedom of the press abused in the era of Media Most. They prefer to use the expression “company self-sufficiency.” Self-sufficiency is the result of financial success. Commercial success is the result of a reasonable comprehension of the medium. When and where they have to, they accommodate. When and where they can, they push the envelope.

Arbitrary beginnings

The media magnates in question entered the media business in the late 1980s when it still did not exist officially. They began their careers without any previous experience in the media. They were energetic and ambitious, around thirty at the time. They mastered the specifics of media management as they went along. The first programs they were involved in producing were broadcast on small cable networks. In 1990, Moscow was the first city to give private business access to the airwaves and to real audiences. Over the next two years, private television company appeared in practically every major city in Russia. They grew out of post-Soviet television traditions and at the same time in opposition to them. Many in Russian media went to study in the US, preferably at one of the three biggest national channels (NBC, CBS, or ABC). “We took most of our cues in terms of creating content from American broadcasters, because there were no good models in Russia,” says Andrei Grigoriev. “Stuart Lurie at CNN said he was jealous,” Mishin recalls, “because we had a huge unclaimed market at our disposal. He was sure that we would soon be able to make millions.”

Growth spurt

They didn’t have to wait long for their millions. The demand for advertising grew rapidly. In only two years from 1992 to 1994, the size of the Russian advertising market expanded from 10 to 15 times according to various estimates. Higher quality programming soon forced pirated shows into the background. By the middle of the 1990s, the media magnates began to expand their empires. Production, sales, and advertising departments broke off to form their own independent agencies. Television companies bought new equipment and moved into their own office buildings, some even with their own television towers and broadcasting centers. They even set up or bought companies in other media markets, like newspapers, magazines, and radio stations. They expended most of their energy on strengthening their position on the airwaves. However, the higher their earnings, the tougher the fight. Being number one was not easy, but the rewards were great. Companies who succeeded in becoming leaders on fairly large markets turned into large, vertically integrated and diversified media holding companies in a matter of 5-7 years. This gave their companies a significant degree of stability, which local authorities began to test, only to be followed by other media companies from Moscow.

At home among politicians

In Moscow, many think that local authorities are the biggest threat facing regional media companies. Governors, mayors, and other local big wigs want to shape public opinion. One way to do this is to create your own media outlets. However, regional state-funded television and radio rarely outperform commercial channels in terms of ratings.
Not surprisingly, the more popular private television companies are confronted with pressure from local politicians, both in its crudest forms (prohibiting filming, threats, cases in criminal court) and its subtlest. “There was this one time,” Yakov London recounts, “when a channel had been broadcasting for ten years and then suddenly the railroad informs the company that it is interfering with their radio system and threatening passenger safety and will have to shut down. Isn’t that a really elegant solution?”
While in the early 1990s media managers hoped that as democracy flourished they would not have to deal with local authorities, today they have long given up such dreams. Media magnates now know that demands from regional and municipal officials come with the territory. They are used to pressure and have learned to negotiate. Today, Mishin, London, and others in media are not inclined to see the government as the biggest threat to their independence. “Governments are always getting into other people’s business,” London states. “Moreover, state pressure on the media means that our opinions matter. And generally speaking this is a sign of democracy at work.”
Of course, companies have to stay flexible to stay afloat. In Russia’s regions, where politics revolve around two or three antagonists, the independent media have learned to maneuver between them. Where power is in the hands of single politician, they try to keep good relations without being tied hand and foot. With this balanced attitude toward the authorities, regional television magnates nonetheless do not distance themselves from politics. Quite the contrary, they are extremely active players in local politics, though the majority of media companies see their political activities as an aspect of their business. They do not use their media potential to gain political power. Rather, they try to defend the interests of the commercial media via local elected assemblies. As deputies, they gain both a clear picture of the situation at hand and the ability to improve conditions for local media, for instance via tax breaks. However, the closer we look at local media, the clearer it becomes: they will not be able to keep their independence by managing local politics. Regional media leaders face a far greater threat from expanding national media giants.

Caught in the network

In 1997, new players hit the regional media markets. In January, Ren TV began broadcasting, and a month later, so did STS. Over the course of 1997, Russkoye Radio appeared in cities across Russia. Vladimir Gusinsky’s team launched an active and at the same time very successful search for partners. By autumn 1997, Ekho Moskvy could be heard in other cities and by the end of the year, Media Most used its financial resources, considerable even by Moscow standards, to buy controlling stakes in several local television companies, laying the foundation for the TNT network.
Television networks took the general outline for their business plans from their American colleagues. These plans involved a fairly simple division of labor. The network puts together a programming package, either produced in-house or purchased in the West, but does not do the broadcasting itself. The programs are handed over to local partners with licenses to broadcast in their local area. In Moscow and environs, these partners are network subsidiaries, but in the majority of regions, they are independent companies. Along with network programs, these companies broadcast a certain amount of advertising, the network’s main income source. In exchange for these services, the remaining ad time is left empty for regional broadcasters to sell. They can also make use of any time not filled by network programming. The mutual benefit is obvious. Local broadcasters get highly rated programs, while the network expands its audience. In addition, regional partners saw Media Most as a wealthy investor. However, in time it became clear that Moscow partners had no intension of limiting their role to that of supplier and investor.
In practice, this kind of partnership leads to serious conflicts of interest between networks and regional television stations. The first point of contention is dividing up airtime between network and local programs. The second and just as important apple of discord is ad time. According to the Law on Advertising, it cannot take up more than 20% of broadcast time, or in other words twelve minutes per hour. The network, of course, fights to increase its ad blocks and tries to give as few as possible of those twelve minutes to regional broadcasters. Finally, the network is trying to develop its brand name, and local broadcaster logos distract viewers and muddy the network’s image.
According to Roman Petrenko, yet another reason networks want to strengthen their position is competition between regional broadcasters. As the number of networks increased, viewers had more choices. In the next few years, cable networks and digital TV promises to increase the number of channels exponentially. Thus, regional television companies will find themselves working with networks under even tougher conditions. Network pressure today is threatening the existence of even the strongest regional holding companies.
One can’t help but ask, so who cares? Let TNT, STS, and other technologically advanced, focused, and aggressive companies take over everywhere. Of course, feelings of regional pride are understandable, but hey, we live in an age of globalization, right? We should remember that it was regional stations under network pressure that came up with shining examples of American mass culture like Star Trek, Wheel of Fortune, and the Oprah Winfrey Show. This kind of example might help local broadcasters in Russian learn to fight back.
Today, the regional companies in the best position are those who have their own broadcasting technology and are merely retransmitting national programming. The networks are not going to infringe on their interests so that they loose their partners, and local stations make a little money and have a couple hours of local programming a day. However, big regional magnates long to fill the airwaves themselves. Some are even considering working together via syndication. This approach to program production has benefited (and continues to benefit) American “independent” television stations, allowing them to compete effectively with the big national networks.

More in Russian>> www.expert.ru