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Russia: The Origins Of A Media Empire

By Floriana Fossato and Anna Kachkaeva

Moscow, 13 March 1998 (RFE/RL) -- January 27, 1997, will be recorded in the history of Russia's television as the day marking the official creation of the first information empire in the country. On that day, banking and media magnate Vladimir Gusinsky officially quit his post of chairman of Most, the bank he had founded in 1992, to become the general director of "Media-Most," a holding company created to oversee the packets of shares in Russian media, belonging to the "Most" group.

About 70 percent of shares in "Media Most" belong - not to the bank or to the associated financial-industrial group - but personally to Gusinsky. Among the holding's shareholders are also three of the founders of the "NTV" television network, Russia's main commercial channel: Igor Malashenko, Yevgeny Kiselyov and Oleg Dobrodeyev.

Gusinsky's media empire developed rapidly.

"NTV" was founded in 1993. In the same year, Most Bank financed the creation of a political daily "Segodnya," launched by some of the leading print journalists in the country, who were leaving the declining daily "Nazavisimaya Gazeta."

In 1994, Gusinsky revived a weekly publication devoted to television programs. The name of the entertainment weekly, "Sem dney" (Seven Days) also became the name of a publishing house controlled by "Media Most" (Sem Dney Publishing House, which included the daily "Segodnya," the political weekly "Itogi," and entertainment magazines "Sem Dnei" and "Karavan").

In 1995, "Most" acquired a controlling stake in the popular Moscow radio station "Ekho Moskvy." In 1996, the holding financed the creation of the weekly "Itogi," obtaining from the American weekly "Newsweek" the right to use its logo on the cover page.

In 1996, following the re-election of Russian President Boris Yeltsin, whose successful presidential campaign Gusinsky's media and employees had helped craft, "NTV" was granted the right to broadcast nationwide, on the frequency of the fourth broadcasting channel.

Gusinsky has not altered his strategy: his publications aim at being widely popular and commercially successful. The goals are clear and attainable. Currently, "NTV"s audience has already topped 100-million viewers. About 100,000 clients in Moscow, St Petersburg, Yekaterinburg and other big cities are paying to see the broadcasts of "NTV Plus," a new satellite network started at the end of 1996.

This year, Gusinsky's "Media Most" will finance the launch of his own satellite, in what is estimated as a $130 million project. Plans also include increasing to 20 the number of television channels under the holding's umbrella

A new step in the development of Gusinsky's information empire has been the creation of "NTV Holding" at the end of last year. It was created within the frame of "Media Most," as a management branch of this joint-stock company.

"NTV Holding" includes "NTV" and "NTV International," broadcasting the network's programs outside Russia. Israel's cable network has broadcast "NTV Int" program since last year. "NTV Int" has filed broadcasting applications with authorities in Germany and France.

The holding also includes the satellite network "NTV Plus," and a radio station, "Ekho Moskvy." There's also a company studying the movie-market, purchasing broadcasting cinema rights and acting as a distribution company, "NTV Kino," as well as a company dealing with cinema production and film/video-rental, "NTV Profit."

"Bonum-1," one of Russia's biggest satellite operators, at the moment makes possible "NTV Plus" operations, and rebroadcasts in European Russia the programs of radio "Ekho Moskvy." It also services clients not belonging to the holding, for instance, the entertainment "Radio Serebryanny Dozhd" and others. "NTV Design" develops a unified design style for all the programs of companies belonging to the holding.

The regional television network "TNT Teleset" ("TNT-Telenetwork"), also part of the holding, started broadcasting in January 1998. The official cost of the project is $100 million. More than 70 commercial television stations in some of Russia's main cities (for instance Yekaterinburg, Novosibirsk, Tomsk, Krasnoyarsk) have signed partnership agreements with TNT (also see feature on regional television developments). Among them are stations in which "Media Most" owns controlling packets of shares. An example is the St Petersburg-based "Channel 11 Russian Video." Early last month, the 35th channel of "TNT" connected with the Moscow city television network, and the potential audience of "TNT" reached and estimated 30-million people. The number of stations affiliated with the network is expected to increase to 100 by September, and to 150 by the end of the year.

As "NTV Holding" is simply the management branch of the holding "Media Most," the controlling packet of shares of each of the "NTV Holding" companies belongs to "Media Most."

At the end of January, the cinema branches of "NTV holding" ("NTV Profit" and "NTV Kino ) announced the start of a "Media Most"-sponsored reconstruction program for Russian cinemas. The project is worth $120 million.

The holding's plans for this year and 1999 include the launching of a number of satellites. The first, "Ritm Most," to be launched in September, is being made in the U.S., reportedly with credits from American banks. Further plans include the launch in January 1999 of another satellite, to be used by "NTV Plus," and with capacity for 16 other channels, which could be leased. "Media Most" is also financing the production of a satellite, "GalsR16," that is being made by a Russian company in the city of Krasnoyarsk.

Those projects will give "Media Most" the satellite potential to enlarge the broadcasting bounds of "NTV" in the European part of Russia and in Western Siberia. The satellites will have digital technologies for the transmission of the signal, allowing a significant increase in the number of programs broadcast.

Gusinsky, quickly realizing the value of consolidation in the information business, consciously focused his main pursuits on this field. The media assets included in the holding "Media Most" have created an integrated publishing, radio and television consortium, carrying out a unified information policy.

PART TWO: Gazprom Media
See table and chart

Russia's giant natural gas producer "Gazprom" announced on December 27, 1997 the creation of a new subsidiary, "Gazprom Media" holding. Viktor Ilyushin, the new structure's president, explained the move saying the holding intended to "legitimate our close ties with a number of media." He added that "Gazprom's" media empire would not "wage propaganda wars and political campaigns."

Ilyushin, previously in charge of relations with the media for "Gazprom," was appointed to his new post following a recommendation of the company's chairman, Rem Vyakhirev. Until Summer 1996, Ilyushin had been President Boris Yeltsin's top aide. He then served as First Deputy Prime Minister from August 1996 until March 1997, when he was dismissed in a Cabinet reshuffle. Ilyushin has pledged to run "Gazprom Media" in the interests of "Gazprom's" shareholders, of which," he notes, "the state is the main one."

In February, Ilyushin, representing his company, became a member of the new Board of Directors of Russia's Public Television (ORT). "Gazprom" has a three percent share in ORT, the first channel of Russian television. The state controls 51 percent of ORT. Other shareholders include tycoon's Boris Berezovsky's LogoVaz, with eight percent and a consortium of four banks, widely considered loyal to Berezovsky, holding 38 percent of ORT.

"Gazprom" also has a 30 percent share in Russia's biggest commercial television "NTV." However, the shares are managed by the holding "Media Most," that controls "NTV."

The new holding's structure naturally includes the electronic media controlled by "Gazprom." One of them is the television and radio network "Prometei." It is based in Moscow and, for the time being, is only a production structure. However, some observers say "Prometei" could soon start broadcasting on the frequency of one of the capital's channels.

"Gazprom Media"'s regional projects also look promising. It was created on the basis of a network of more than 20 small television stations located in regions traditionally linked to the oil-and-gas sector. The enterprise was believed to be a project of "Gazprom," developed jointly with the oil company "LUKoil." However, it now seems that Gazprom intends to develop its own network of stations. Based on the corporate communication system belonging to "Gazprom" - located in more than 20 Russian cities - receiving-broadcasting centers were created in the Soviet era for the necessities of the oil- and-gas sector. More recently, the centers have been developed to become technically well-equipped television stations, broadcasting their own programs.

The audience of those stations can be considered quantitatively negligible. For instance, "Nord" television broadcasts in the Western Siberian city of Yugorsk, where fewer than 30,000 people live. Furthermore, the quality of the stations' production has been considered poor.

However, these "sector television stations" do not have financial problems. They can invite specialists to advise, send their employees to specialized courses and, as a result, they are rapidly developing.

According to some observers, the development of "sector" Gazprom television stations is a peculiar Russian occurrence. They say it is still unclear how profitable the investments made in their development will eventually prove. For the time being, only one possible advantage clearly appears: their existence increases the visibility and the popularity of the company in the regions in which it operates. The presence of the stations also adds to the already considerable political weight of the company. This consideration is important before electoral campaigns to national and, in particular, local offices. According to "Gazprom Media" chairman Ilyushin, "for us, it makes quite a big difference who will govern in the regions, who approves legislation and, in general, which government we have."

Sources in Moscow say that the state news agency "RIA Novosti" could also join "Gazprom Media" in the future. "RIA Novosti" still has a considerable network of correspondents in Russia and abroad, inherited from the Soviet past.

"Gazprom" and one of the banks close to the company, "GazpromBank," have reportedly also decided to invest in the development of Federal communications. In the frame of a tender to be held by the State Committee for Communications and Russia's Space Agency, one of Russia's main specialized design agencies, "Energya," will prepare four new-generation satellites, paid for by "Gazprom."

The satellites are expected to replace several "Gorizont" satellites, whose life-expectancy has already been exceeded. The replacement of the old satellites is essential, and not only for "Gazprom." They are the functioning base for the television system "Orbita," that supports the reception of programs broadcast by the nationwide television networks all over the territory of the Russian Federation. Sponsoring their production, "Gazprom" further strengthens its position in the telecommunication sector, even without having control of a nationwide television network.

"Gazprom" and "Energya" have also formed a joint-stock company, "Gazkom," that will create and operate the new satellite system, "Yamal." An existing "Yamal 100" satellite was created for "Gazprom"'s corporate system of communications and broadcasting. The new-generation satellites are based on old technology. However, they will be much more powerful, allowing coverage of the European part of Russia, Western Siberia, and also eastern Europe. Two "Yamal-200" satellites will have 44 transponders (receiving-transmitting channels, usually encoded), and two "Yamal-300" satellites will have 46 transponders. According to the current schedule, the satellites will be launched starting in mid-1999, with six-month intervals between each launch.

"Gazprom Media" also includes a number of publishing operations. The publishing house "Gazprom Press," founded by "Gazprom" with the cooperation of a German gas company, publishes a specialized magazine, "Gaz Industry," and its new political supplement "Faktor."

"Gazprom Media"'s press assets also include a controlling stake in the daily "Rabochaya Tribuna," subsidies given to the daily "Trud," and two weekly publications, "Profil" and "Kompanya," published respectively with the financial support of Bank Imperial and National Reserve Bank. Both banks are close to "Gazprom." All those publications are based in Moscow, but "Gazprom" also finances about 100 regional publications.

In February, "Gazprom" chairman Vyakhirev signed an agreement with the international public relations agency "Hill and Knowlton." The company is expected to be in charge of creating a strategy for the improvement of "Gazprom"'s image abroad.