Post-Soviet Media Law & Policy Newsletter

Issue 35 Benjamin N. Cardozo School of Law February 27, 1997

What Will Become of the Moscow TV Channel?

An Interview with Anatoly Lysenko
By Sergei Grigoryev

    Moscow’s channel 3 must make a change by the middle of next year. Today, its new image is a matter of guesswork, although there have been various hints and leaks. Anatoly Lycenko, a well-known figure in the TV business, is a founder of the Russian TV and Radio Company. Fairly recently, he left this company and took up Yuri Luzhkov’s offer to head the Moscow government’s TV Communications and Mass Media Committee.
    MN: Anatoly Grigorevich, your decision to leave Russian television caused quite a stir. You are long-time friends with Eduard Sagalayev. Did you have a falling out?
    Anatoly Lysenko: Our parting was not touchingly idyllic, but it is not worth dramatizing either. Eduard Sagalayev advocates strict one-man management. He came into the Russian TV Company as the owner, the boss. Who knows, his methods may have better long-term prospects, but I know for a fact that they have been very painful to the people involved and are completely incompatible with the principles on which the company was built in 1991. That is why I left.
    MN: Now the Moscow channel is your main concern. . . .
    AL: The Moscow channel is in need of decisive changes. In essence, it still does not exist as a single broadcasting unit. It is made up of three channels. The commercial “2x2,” the “Podmoskovye” programs (whose quality I will not even comment on), and the Moscow channel itself (whose programs present show-room scenes and commercials, interspersed with some news). The Moscow channel’s programs often come across as some sort of formal report before the Moscow authorities: we have covered this important holiday, or our cameras were present at this event in the city. . . .
    But, you see, Moscow is a multiethnic “state within a state,” with a population of 10 million people. A channel needs to be created which would accommodate this huge diversity of interest, taste and tradition. To a certain degree, I see the Moscow channel as a conservative channel. One with a basically constructive attitude, which is incompatible with the endless “puffing up” of various bloody street crimes.
    The channel must, in a manner of speaking, advertize the future. And Moscow’s future is primarily associated with business, free enterprise and the strong municipal authority which Yuri Luzhkov and his team personify today.
    MN: There are so many wonderful, instructive and alarming things which can be said about Moscow! It is our capital’s fate to be the focus of everything brought by the reforms. Surely this gives a TV channel the potential to be interesting for the whole country?
    AL: Both the city and the patterns of its life have changed over the past five years. For many of my friends and coevals, the “people of the 1960s,” this change has taken a dramatic turn with the loss of official positions, the old way of life, the special intimately shared spirituality, which we were accustomed to. However, many, especially those in the younger generation, have found their niche in this new reality. Or are trying to find it. Their efforts are being directed at building a Moscow with all the characteristics of a modern European city. Moscow television must learn to talk about this with respect, honestly and, of course, without pomposity. But, it cannot close its eyes to the horrible criminal background on which all of these changes are taking place.
    MN: When will we see the “new” Moscow TV channel?
    AL: I hope that the viewers will see noticeable, substantial changes on their TV screens by April.
    MN: Anatoly Grigorevich, you understand, of course, that many will begin searching for the initial signs of Luzhkov’s presidential campaign on the revitalized channel. Some are already saying that this is the reason behind the channel’s reformation, and that you, if you will pardon my saying it, were invited to take part in it?
    AL: I’ll give you a direct answer. Yes, I like what Luzhkov has been doing for Moscow. And I like Luzhkov as a person. I think that he has a bright political future. But I did not agree to this job in order to further anyone’s political career. Moreover, I am sure that by the next presidential election I will be working on some humble individual project, completely unrelated to politics. But right now, I have come to create an interesting television channel. My main customer is neither Luzhkov, nor the city authorities. It is only the viewers.

Moscow News, January 30, 1997

War for Channel Five Looms:

Russia Banks Get Set to Battle for Control of National Broadcaster
By Nick Holdsworth

Powerful financial groups with top Kremlin connections are squaring up in a battle for control of Russia’s last unmodernized national broadcaster. State-owned Channel Five, based in Russia’s second city and former capital, St. Petersburg, has been starved of funds and run down in the years since the collapse of the Soviet Union in 1991. Heavily over-staffed and hamstrung by an advertising contract that gives it little freedom to generate extra revenue, the station is being eyed eagerly by four big Moscow-based financial groups. The attraction of Channel Five is that it is capable of reaching virtually the whole of Russia and has a potential audience of 90 million. Banks Uneximbank, Menatep and MOST Bank have emerged as the key potential bidders for the station likely to cede a possible 49% share of its current 100% state control in 1997. MOST Bank head Vladimir Gusinsky has a controlling interest in Moscow-based NTV, Russia’s leading commercial channel, and Gazprom, the country’s massive gas, natural resources and financial group. St. Petersburg’s recently elected governor, Vladimir Yakovlev, has proposed a $150 million price tag for the minority share and entered into talks with the four financial groups. Observers question his authority, since the station is federally owned. But as the last unexploited national channel, private investors are keen to grab the station, which could be turned into a lucrative and influential asset. The staff at the station is proud of the independent role it played in informing the public of the August 1991 failed Moscow coup when hardliners tried to oust elected President Boris Yeltsin. Channel Five was the only national station to broadcast news during the tense days of the attempted coup, and for a brief time was the only outfit to report on the street fighting of 1993 in the Russian capital. As a station based in Russia’s second city, it developed its own key characteristics during the period of Glasnost, or freedom, under former Soviet leader Mikhail Gorbachev. Channel 5 gained a reputation both for being slightly more daring and reflecting St. Petersburg’s strong cultural and artistic heritage. “It is very important that there is a national television channel outside of Moscow, because all the Moscow channels are monopolized by the government,” said Nikolai Petrov, an analyst with the Moscow Center of the Carnegie Endowment for International Peace. Channel Five producers concur. Marina Chudina, the station’s deputy art director, said there was agreement among the younger staff that change and investment in the station was sorely needed, but not at the cost of losing control to Moscow. “Every capital giant of the new Russia wants to have his own TV channel,” said Chudina. “Gusinsky of NTV and Berizovsky of ORT (Russian Public Television) are rumored to be combining soon, so now Potanin, VP of Uneximbank, wants Channel Five.” There was little reliable information available on precisely what direction the channel would go in, she said. She emphasized that the exclusive advertising contract set up two years ago by Sergei Lisovsky’s LISS ad agency, which has a further three years to run, was likely to influence the outcome of any privatization bid. Lisovsky ran Yeltsin’s youth-oriented campaign prior to last summer’s presidential selection and was one of two men arrested, and later released, after being found leaving a federal building in Moscow with a box containing $500,000 in cash. “Channel Five has been run down,” Chudina said. “The situation is getting worse and worse, to make it like a ruined leftover to be picked up by those who are rich.” The station badly needed investment, but the creative staff feared that Moscow control would mean losing all but a technical presence in St. Petersburg. “If that happened it would be a tragedy, reducing us in effect to the status of little more than any other provincial broadcaster,” she said. The preferred option of those who worked in the station, she added, was a combined operation, with the main production base in St. Petersburg supplemented by news and programming feeds from Moscow. One unpalatable outcome is likely to be certain: mass redundancies will follow any takeover. The station currently has a massive payroll of 2,500, with many senior staffers dating back to the 1950s, when Stalin still ran Russia. Chudina reckons that a private operation would reduce this to a core of about 300 managers, editorial directors and technicians, with everything else bought from freelancers. But with current salaries averaging 300,000 rubles ($60) a month compared with the $2,000 a correspondent for NTV in Moscow earns, many young and talented staff would welcome a change.

The Hollywood Reporter, January 7, 1997

Council Questions Law in CME-TV Nova Deal
By Jiri Kominek

    The Czech Council for Radio and Television Broadcasting is hopping mad at the possibility that 93 percent of TV Nova’s capital will be foreign-controlled?
    More than 80 percent of the popular station is already controlled by American capital, and the amount is set to increase through the activities of TV Nova chief Vladimir Zelezny, council members say.
    “I challenge you to show me one example of a television station on this continent that broadcasts to an essentially national audience and is 90 percent foreign-owned,” said Petr Stepanek, council spokesman and deputy chairman. “We will become an absolutely unique example in Europe.”
    Stepanek also criticized the parliamentary commission for the media for creating the conditions that have enabled the flood of foreign capital into TV Nova.
    “I have nothing against foreign investment, especially American; however, this is not an automobile plant,” Stepanek said.
    Stepanek says Zelezny intends to purchase additional stock in CET 21, the company that holds Nova’s broadcasting license, using money provided by the U.S.-backed Central European Media Enterprises (CME). CME’s influence in the channel would then exceed 93 percent.
    Nova officials were not commenting on the transaction, pending Zelezny’s return from New York, where he was meeting with CME officials. The channel is by far the country’s most-watched, drawing 70 percent of the nation’s TV viewers with sensationalist news shows and popular U.S. sitcoms and melodramas. Last year it reported that its gross profits had quadrupled due to its popularity and its ability to charge premium advertising rates.
    Since Parliament passed an amended law on radio and television broadcasting that took effect in January, there is little that the broadcasting council can do to stop the foreign takeover of Nova.
    If it were not for the amended law, the council could hold Zelezny and CME liable for not informing it of ownership changes. Instead, members say they heard of the change in ownership through an Internet posting from the U.S. Securities and Exchange Commission Nov. 18.
    “Something like this could only happen here, where there are numerous loopholes in the legal system thanks to inadequate legislation being passed by Parliament,” said Zdenka Hulova, another member of the Broadcasting Council.
    CME confirmed that it had provided Zelezny with a $4.7 million (126.9 million Kc) loan last August to purchase shares of CET 21 from the company’s other shareholders. According to the Czech weekly magazine Tyden, Zelezny reportedly received $100,000 for his role in the transaction. He effectively acted as middleman for the Bermuda-based CME.
    Stepanek, however, does not blame CME for the move.
    “One cannot blame the American businessmen; after all, they are just trying to make money,” he said. “Whom I do find culpable are members of the Czech Parliament who have allowed this to happen.” He added that politicians have become hostages of the television channel they helped create.
    Stepanek accuses Zelezny of being a master manipulator and lobbyist par excellence in his dealings with Czech politicians, who in the deputy chairman’s opinion, are terrified of the power of TV Nova.
    “Now this channel, which has the attention of (more than) two-thirds of the country’s audience and which is the single most effective instrument shaping public opinion, has them running scared.”

The Prague Post, January 22, 1997