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News

54 Russian TV Channels at Risk from New Media Law

ST. PETERSBURG, Russia — Up to 54 television channels in Russia could close as a result of a new federal law that bans pay TV operators from carrying advertising, which comes into force in January.

Delegates at the St. Petersburg Intl. Media Forum, which wraps Friday, were told by Alexey Volin, Russia’s deputy minister of communications and mass media, he would welcome any closures, which had been forecast by Yana Belskaya, editor-in-chief at trade magazine Cableman. “Most of them are half-dead anyway,” Volin said. “It is about cleansing the market.”

Volin said the legislation, which also centralizes control of media buying through a single agency, had been brought in to address a crisis in the advertising market. It would consolidate the market, stop dumping of ad space, which was driving down the price of ad spots, and strengthen the pay TV subscription business, which had been undermined by cut-price operators.

Regional channels would be hit hard by the new law, said Sergey Isakov of the National Assn. of Broadcasters. “A whole class of regional cable companies will be destroyed,” he said.

Alexander Akopov, president of leading pay TV operator Amedia and co-chair of the Film and TV Producers‘ Assn., applauded the government’s actions. “I love this law,” said Akopov, who has deals with most of the Hollywood majors and is also a leading producer of Russian TV shows.

He said that high-quality TV series from HBO, Showtime or Starz, like “Game of Thrones,” cost a lot of money to produce, and had to be paid for either through subscription fees or advertising. Advertising revenue was limited but more revenue could come from subscription fees. “Russia is not a poor country,” he said.

Russian pay TV earned 54 billion rubles ($1.35 billion) from subscriptions last year, according to researcher iKS-Consulting. Some 33.5 million Russian households, more than half the country, pay for premium cable and satellite channels, with 9% more Russian households signing up for subscription channels last year.

The pay TV sector has been growing steadily in the past decade, which has hit the top three free-to-air channels, all of which are controlled indirectly or directly by the government. In 2003, 58% of Russian households watched Russia’s top three channels, while only 40% do now, according to consultancy TNS. The share of households that watch cable and satellite channels has risen to 12% over the same period.

Advertising revenue for pay TV channels rose 20% last year to 4 billion rubles ($100 million), according to Russia’s Assn. of Communication Agencies, while free-to-air channels earned 152 billion rubles ($3.8 billion).

Mikhail Silin, vice-president of Assn. of Cable Television of Russia, said that it was too late to stop the law so cable channels would have to develop new business models and strategies.

“We are in a new reality now where all of us have to rethink how we do business,” he said.