Post-Soviet Media Law & Policy Newsletter
Issue 35 Benjamin
N. Cardozo School of Law February 27, 1997
The Russian Financial Elite as Media Moguls
Introduction
The problem of owners’ influence upon the media
is regarded as one of the most difficult to study. In modern Russia,
it is also complicated by the uncertainty of the legal status of media
proprietors. The concept of “founder” defined by the Russian Mass
Media Law as a person who starts the media company, and subsequently is
legally responsible for all its activities, including both market operations
and contents—does not necessarily coincide with that of “owner.”
As a result, many figures unknown to the general public not only define
the market strategy of Russian media enterprises, but also directly determine
media contents and political line.
After several years of radical and unexpected economic
transformations, the Russian media economy has achieved a kind of stability
and even predictability in its development. The increasing interest
of some private industries in the media as a field for investments might
be mentioned among the first signs of change. It is widely argued
that the dependence of the Russian media upon the financial and banking
sphere is growing. This paper attempts to demonstrate how the modern
Russian financial elite, together with a number of state financial-industrial
groups, are trying to establish new modes of ownership within the Russian
media. The paper also describes new Russian media proprietors in
terms of a “media mogul” concept, and discusses their potential to expand
their financial power over the content and performance of the media they
control.
1. Russian Media Moguls: A Re-definition
The concept of the media mogul introduced in early
19901 has become very popular in many post-Socialist countries.
This might be easily explained by both economic conditions characteristic
of transitional societies, and theoretical paradigms popular among scholars
in the region. On the one hand, the political liberation and democratization
of the media has changed, and in many respects improved relationships among
the media, the society, the state and business. On the other hand,
new economic problems have highlighted still unknown laws of the media
economy. It should be kept in mind that even those editors and managers
who dared already at early stages of transition from the socialist to market-oriented
economy, to accept media as a business, were brought up and trained by
the old regime. Therefore, many shortcomings associated with the
daily operations of the Socialist media have remained even after radical
social changes. The centralized style of management and the long-standing
tradition of political control over the contents and values of the media
are primary examples.
From a theoretical viewpoint, a media mogul in post-Socialist
societies was regarded as an agent of the states’ authoritarian power over
the media. While the positive sense of the definition (e.g. owner’s
prominent entrepreneurial abilities, managerial skills, his perfect knowledge
of the market and enthusiasm, etc.) was practically ignored, negative aspects
of this definition such as owner’s decisive influence over the contents,
his often eccentric, autocratic and even violent behavior within the media
company, strong relationships with politicians in power and abilities to
achieve desired political and economic decisions through these relations,
were often exaggerated. Therefore, in many of the post-socialist
societies the concept of media mogul been used justify an increasing media
dependence upon the private business. It is worth noting that in
more developed Central/Eastern European countries (Czech Republic, Poland,
Hungary) the concept of media moguls has been often used to describe activities
of “traditional” Western moguls (R. Maxwell, R. Murdoch, R. Hersant).2
On the contrary, media markets in less developed post-socialist states
were not very attractive to the Western capital, and this explains the
emergence of national “moguls” who obviously differ from their Western
patterns.
Do Russian media moguls resemble Western ones?
Certainly not. Strictly speaking, those entrepreneurs who are qualified
in Russia as media moguls have clear distinctions from Western media proprietors
closely involved in their media business. At present, the scale of
activities of Russian media moguls is limited by the national boundaries,
the turnover of their media companies is relatively small in comparison
with the Western ones, the level of concentration and the factual influence
over audiences fall behind in comparison with the Western data. Similar
observations can be made concerning the economies of Russian and Western
media companies. While Western moguls consider the media not only
the major, but even the only industry to bring profits, media companies
owned by Russian media moguls are in poor economic shape and often loose
money. The activities of present Western media moguls are totally
included in the mainstream of the capitalist production and profit-making
process.3 On the contrary, the motives of the Russian
media moguls to increase their presence in the media might be found not
only in the economic domain.
However, there are some important factors that demonstrate
similarities between new Russian and traditional Western moguls.
One could point to moguls’ close relationships with politicians and the
political power. Even if we admit that incentives of Western and
Russian media proprietors are different, their search for association with
the political power is of the same character in both cases. Attempts
by Murdoch or Hersant to approach the political elite in their countries
have been always targeted to the achievement of political and legislative
advantages for their media empires. From the economic perspective,
Russian situation might be better compared with the early stage of development
of the French press in the late nineteenth century or the postwar state
of the Italian media.4 In these countries, the investments
into the media industry were made in order to acquire means of political
influence. This was the reason why many bankers, politicians and
businessmen owned newspapers and other media enterprises.
On the whole, the current Russian phenomenon of building
media empires by new media moguls in order to enter the politics and to
establish themselves as the political elite without immediately achieving
visible economic results, cannot be considered as a purely national development.
This should be qualified as fairly general trend which emerges in particular
during transitional periods within the specific national context and under
the influence of peculiar journalistic traditions.
2. The Russian Media as an Industry
One of the reasons why the Russian media still cannot
be compared with its Western counterparts is the differing economic conditions
within the media industries themselves. At present, quite a few Russian
media enterprises are currently profitable. Even fewer are recognized
by their owners as a way to make profits. Moreover, a new approach
to the media identified as the source of profits is starting to emerge
in the Russian media market only now. Vladimir Gusinsky, the Russian
banker who controls one of the most powerful media groups, recently proclaimed
that his ultimate goal would be to make his media enterprises super-profitable.
However, in Gusinsky’s view, there are only two possible ways of making
media enterprises profitable, and these are the sensationalism and commercialism.
The idea of the proprietor was perfectly implemented by one of his publications.
In a few days, the profile and even the staff of the oldest Russian TV-weekly
“7 dnei” which had been bought by the Gusinky’s media group, was modified.
The family publication compiled of television programs, essays and family
reading was turned into a sensational weekly which covers events in the
show business and private lives of Western and Russian celebrities.5
The Western economic theory of the media stipulates
that the media act in three overlapping markets—those of information, advertising
and opinion (e.g. intellectual). The objective for media owners and
managers is to meet both private and public needs in order to maintain
a special place in society while making profits.6 Understanding
media demand in the three markets guarantees both profitability (an adequate
media behavior at the advertising market) and responsibility (the ability
of the media to respond to the demands of the information market and to
provide diversity and pluralism at the intellectual market). The
awareness of how media should serve both advertising and contents markets
developed by the media owners is the intrinsic quality of the relevant
market behavior. As a consequence of this awareness, traditional
Western media moguls concentrate their efforts on the media production
excluding themselves from active political life.
The still existing separation of contents and advertising
markets in Russia is likely to explain why the media owners are so deeply
involved in the political life. Rather than investment, media ownership
is for many of them a means to gain political profits and simultaneously
guarantees or tools to secure the existence of the market economy and the
political and social system. The lack of “pure” media owners among
Russian media moguls is also a meaningful indicator of the bad stance of
the Russian media industry. For the same reason, it can be also stressed
that the main type of concentration in the Russian media is cross-ownership.
This does not mean that independent newspaper companies, radio stations
or cable networks could not be found in local markets. Nevertheless,
if one needs to give as an example of a prosperous or at least profitable
Russian media company, it would certainly be a diversified company supported
by the financial capital.
3. Misalliance à la Russe: Banks Buy the Media
Among all popular Moscow media, it is hard to find
even a few that have no direct or indirect links with banks or the financial
sector of the modern Russian economy. It should be argued that currently
only part of Moscow banks are involved in the media business, and national
financial groups are not yet known as investors or sponsors for the media.
Nevertheless, the trend might be also found at the regional markets where
regional financial elites are merging with the industrial capital and the
media business on a large scale.
Of Russian financial media moguls, the most noticeable
are the MOST-group personified by V. Gusinsky and the LogoVAZ-company associated
with B. Berezovsky. The two conglomerates have diversified structures
including strong financial companies such as the MOST-bank and the Ob’edinenniy
bank. Besides, both groups own several insurance and trust companies
as well.
The MOST-group has its main activities in banking and
real estate, but also controls Russian national television channel NTV
(MOST owns 51% shares, state-owned industrial giant Gazprom owns 30% while
the staff of the company controls no more than 11%) and “7 dney” publishing
company which publishes the daily “Segodnya,” the news magazine “Itogy”
(jointly with the Newsweek), the TV-weekly “7 dney.” The group also
has interests in radio business (including the popular political AM radio
station “Echo Moskvy”).7 The latest and the most ambitious
media project of the MOST-group is the satellite TV-channel “NTV+” which
will eventually cover the whole territory of Russia. The channel
was launched in autumn 1996, and along with the reorganization of the NTV
terrestrial channel it demands enormous investments. As a result,
a new alliance with the state-controlled gas monopoly Gazprom was formed.
Gazprom bought about 30% of NTV’s shares for the price $170 million and
made an outstanding investment into the highly technological project of
the MOST-group. Furthermore, this investment seems very important
in view of the long-term strategy of the MOST-group which is currently
expanding into the telecommunication sector.8
As compared with the MOST-group, the LogoVAZ company
has more open and more close links with the state. Until December
1996, it used to be the largest private shareholder of the Public Russian
Television ORT (16% stake together with the Ob’edinenniy bank owned by
the company) while the state owns ORT’s 51% stake. The head of the
LogoVAZ, B. Berezovsky, was one of the most active businessmen who started
the privatization of the ORT. The LogoVAZ conglomerate is built on
the car dealership, but this is only the basis of Berezovky’s empire.
In the media field, LogoVAZ controls quality political daily “Nezavisimaya
gazeta” (through the Ob’edinenniy Bank) and popular news weekly “Ogonyok”
(directly). Besides, LogoVAZ owns 26% of shares of the MNVK television
company which operates one of the largest Russian channels, TV-6.
Berezovsky is also involved in the advertising business, particularly with
his advertising agencies at ORT channel.9
Together with these well-known examples of the
financial elite involvement in the media business one could find other
remarkable illustrations of the general trend. From this point of
view, last year was the most significant.
The Uneximbank, headed by the present first deputy Prime
Minister V. Potanin, has bought the majority shares in the business weekly
“Expert.” The deal was accomplished with the condition that weekly’s
shares would never be sold to any other bank. The pension fund “LUKoil-Garant”
controlled by the Russian oil giant LUKoil, has bought 19.5 percent of
shares in the most influential Russian newspaper “Izvestia.” Although
the newspaper’s employees have a controlling stake in the publishing company
(about 30%), one more bank, Mezhdunarodny Promyslovy Bank, owns 15 percent
stake of the newspaper. The financial conglomerate Menatep Group
has agreed to form a publishing partnership with an intellectual weekly
“Literaturnaya Gazeta.” In a newly formed joint company, the newspaper
is likely to own 30% and the rest 70% are to be in hands of Russky Izdatelsky
Dom which will represent interests of the Menatep. The latter has
promised to secure the independence of the newspaper, but since the conditions
of the deal had not been announced, there are no real guarantees of the
newspaper’s independence.10
In fact, Menatep Group might be also described
as the emerging center of concentration within the Russian media.
Through its various holdings the group is getting involved in the media
business. Rumors say that Menatep is supposed to become the major
investor of the modernized Moscow Television channel which is currently
owned by Moscow City.11 After buying the minority stake
in the Independent Media Publishing company which is in hands of Dutch
publishers and owns a number of newspapers and highly profitable Russian
editions of Cosmopolitan, Playboy, Good Housekeeping, Menatep has become
one of the leading financial groups of the Russian media industry.
It is true that currently Moscow has become the financial
capital of the country and accumulates more than 80% of Russian financial
resources. However, the interest of the financial elite in the media
industry cannot be understood only within the framework of the above-mentioned
development. It is important to notice that in many regional centers
the similar interest of regional financial groups might be easily traced.
In Yaroslavl, the oldest Russian city on the Volga-river, a regional TV-station
was bought by the regional Georgievsky bank which had simultaneously invested
in the regional motor-producing plant. In the northern part of Russia,
in Vologda, the most powerful regional bank jointly with the largest metallurgical
plant owns controlling stakes in three city newspapers, five local TV-
and two local radio-stations.12
To generalize the development one needs to present
a comprehensive overview with a number of data and figures. Since
the transparency of the Russian media market is far from perfect, we often
have to rely on random publications or even rumors. According to
some press reports, the Kommersant Publishing house which had grown from
the small business information agency into the diversified information
conglomerate, has strong ties with the Stolichny bank.13
In fact, rumors say that the bank consistently finances the publishing
company. Although the managers of both “Stolichny” and “Kommersant”
deny the existence of these relationships, rumors reveal the interest of
the bank in the media. Late in December 1996, the shareholders of
the Public Russian Television ORT have reorganized the council of ORT founders.
The shares are kept still divided between the public and private sectors,
but currently the state is represented by the State Property Committee,
ITAR-TASS news agency and the Technical Center. Private shareholders
come both from industry (LogoVAZ and Gazprom) and financial sphere.
At present, banks which own 38% of all ORT shares have set up the joint
consortium to represent their interests. Two of the three banks which
have formed the body have been already mentioned above. They are
the Ob’edinennyi bank (e.g. Berezovsky) and the Stolichnyi bank.
The head of the latter, A. Smolensky, is elected to be the chairman of
the consortium. Does this really mean that a new banker is going
to join the growing team of Russian media moguls?
4. A Working Hypothesis: A New “POLITBURO”
On October 30, 1996, soon after the appointment
of B. Berezovsky as the deputy secretary of the Security Council, the Financial
Times published an interview with the well-known Russian media mogul who
just started his political career.
“Business realized that if business is not consolidated,
and if we are not strong and decisive, we will not have a chance,” he told
the newspaper.14 The idea put forward in this interview
was, however, not formulated in a very rough way. As Berezovsky stated,
heads of six top banks and businesses—the LogoVAZ-group, the Unexsimbank,
the Menatep-group, the Alfa group, the MOST-group, the Stolichniy bank—had
formed a united team to prevent communists and nationalists from taking
power in the summer presidential campaign. Moreover, this happened
to be only the initial action of the group, and after the successful election
campaign the members of the group came out into open. Two of them,
V. Potanin and B. Berezovsky, entered the political elite as the first
deputy Prime Minister and Deputy Secretary of the Security Council.
According to Berezovky’s interview, the group controls about 50% of the
Russian economy, and makes practically all the decisions in Russia.
It has become almost a truism that in market-oriented
economies the most influential financial leaders of the country work closely
with the Government. In transitional societies, the role of the financial
capital is really crucial since restructuring national economies regularly
demand significant investments. At the same time, intentions of the
financial elite, especially formulated in such a straightforward manner,
are seldom announced publicly. One might only speculate on Beresovsky’s
intentions in the above mentioned interview, but in it the strategy of
emerging Russian media moguls has become particularly articulated after
all. However, there are many doubts as to whether Berezovsky has
presented the reality in a reliable way.
In the attempts to transform the financial capital into
power, particularly, political power, Russian media moguls build their
media empires. In the long run they are likely to expect the media
to make financial profits, but in the short run media are undoubtedly used
to promote their views and even to legitimate their search of political
power. The most visible example is the support to President Yeltsin
during his presidential campaign organized by banks and carried out by
their media. Of six banks mentioned by Berezovsky in his interview,
almost all have interests in the media (see above), and the contribution
made by their media in Yeltsin’s election campaign had been the most valuable.15
It is natural that the financial elite is expecting
the payoff for its investments into the politics. The problem in
Russia is that the payoff is often obscene and cynical. The group
of leading banks which, in Berezovsky’s opinion, played a crucial role
in President Yeltsin’s reelection, was rewarded by the Government in different
ways—by acquiring new ownership, economic advantages for transactions of
capital or even new positions in the government.16 Payoffs
to the media are also fairy remarkable. The transfer of the right
to broadcast from Russian educational channel to the NTV television channel
should be mentioned first. However, this was not even enough for
the media supported by the financial capital. At the end of last
year advertising tycoon S. Lisovsky who has close links with Beresovsky’s
media empire through its advertising agencies, proposed a new broadcasting
law. His proposal lays down new rules for licensing and broadcasting,
especially in regions.17 Not satisfied with the Law on
Broadcasting which is still under discussion in the Parliament, Russian
media moguls are ready to step in with their own legislative initiatives
concerning the media.
It is hard to believe that new Russian media moguls
would stay away from legislative work since some attractive media markets
are not yet decided. If their influence upon the national economy
and their control over the national media are to be as powerful as B. Berezovsky
has declared, the laws and regulations they need would certainly be adopted.
As a consequence, the idea expressed by G. Yavliskiy, the former Presidential
candidate and the leader of the liberal party Yabloko, might come true:
“The name [for the new Russian regime] is not just banks and television:
It is oligarchy and mafia.”18
Whatever one might name the influential group
of banks involved simultaneously in the media—oligarchy, mafia or “politburo,”
it is evident that the new elite possesses considerable power in two key
domains of the modern Russian society—finances and the media.
Conclusion
Present discussions on the involvement of Russian
banks in the media industry contain a good deal of speculation. You
may open certain Internet pages and find sensational information on how
a few well-known Russian bankers, through their personal friends such as
Anatoly Chubais, the head of the President Yeltsin’s administration, or
Tatiana Dyachenko, the President’s younger daughter, control the most influential
media.19 Although this information is often based on various
rumors and gossip, there are many reasons to believe that the present relationships
between the financial elite and the media are becoming crucial in Russia.
Russian banks are steadily increasing their investments
in media. By building financial-media empires the Russian financial
elite enters politics, thus suggesting a Russian model for the concept
of media moguls. New Russian media moguls who have mostly come out
of the industrial-financial sector openly defend the existing political
power. For these purposes, the media owned by moguls are used as
promoters of the market-oriented philosophy in general, and several wealthy
Russian enterprises in particular. As Mr. Igor Malashenko—the head
of NTV which used to be the first independent channel in Russia—stated
as an excuse for the direct support that his channel had given to President
Yeltsin, “There is quite a specific political and economic model emerging
in Russia. It is an oligarchy, which is actually not a bad definition.
. . . The Russian market is simply divided by several powerful players.”20
As far as the industry-finances-media relationships are concerned, several
additional considerations should be taken into account. First, different
models of relations might be found at different regional markets.
While the Moscow media market provides us with examples of the dominance
of the financial capital and simultaneously its competition with the industrial
capital interested in the media (Gazprom, LUKoil), regional markets are
characterized by the ongoing merging of the three sectors. Secondly,
it is impossible to predict with certainty the further development of
Russian media, as it is still in a transitional state. Too many factors
of political, economic and even international origin are having effects.
From this point of view, the likely involvement of the financial elite
will be an important, but not the only, characteristic of Russian media
development. And, thirdly, the position of Moscow and still all-national
media and regional media would certainly change as the relative economic
position of Moscow and the growing regional centers change.
Elena Vartanova
Faculty of Journalism
Moscow State University
References:
1. J. Tunstall & M. Palmer, Media Moguls (London-New York
1992), pp. 105-107.
2. See more: D. Paletz, K. Jakubowich & P. Novosel (eds.),
Glasnost and After: Media Change in Central and Eastern Europe (New Jersey:
Hampton Press 1995); S. Splichal, Media Beyond Socialism: Theory and Practice
in East-Central Europe (San-Francisco: Westview Press 1994).
3. C. Nerone (ed.), Last Rights. Revisiting Four Theories of the
Press (Urbana: University of Illinois Press 1995), p. 195.
4. J. Tunstall & M. Palmer, Media Moguls (London-New York 1992), p.
258; J. Chalaby, Press Baronage in France, Great Britain and the United
States: A Comparative Perspective (London: The London School of Economics
1996), pp.3-5.
5. I. Petrovskaya, “Kosheliok ili svoboda,” Zhurnalist, 1996, No
9, pp.8-9.
6. S. Lacy & T. Simon, The Economics and Regulation of United
States Newspapers (New Jersey 1993), p. 51; R. Picard, Media Economics:
Concepts and Issues (Sage 1989), p. 9.
7. E. Vartanova, “Corporate Transformation of the Russian Mass Media,”
Media in Transition, Issue 1 (Moscow 1996), pp. 23-24.
8. Kapital, Dec. 4-10, 1996.
9. Kommersant-Daily, Nov. 2, 1996.
10. Moscow Times., Nov. 12, Dec. 5, 1996; Kapital, May 15-21, Dec.
4-10, 1996.
11. Moskovskiye Novosti, Nov. 10-17, 1996.
12. Zhurnalist, 1996, No. 1, p. 17; Izvestia, Oct. 30, 1996.
13. Y. Zassoursky, “Politika, den’gi i pressa v sovremennoi Rossii,”
Svobodnaya misl, 1996, No. 10, p. 16.
14. Financial Times, Oct. 30, 1996.
15. Y. Zassoursky, “Freedom and Responsibility in the Russian Media,”
Media in Transition, Issue 1 (Moscow 1996), pp. 5-16.
16. Kapital, Dec. 4-10, 1996.
17. Moscow Times, Dec. 4, 1996.
18. Moscow Times, Nov. 2, 1996.
19. A message on the Internet, Nov. 12, 1996.
20. Nezavisimaya gazeta, Dec. 16, 1996.