Is Modern Times Group (MTG) a victim of its own success in Russia?
A number of years ago, Hans-Holger Albrecht, the company’s then president and CEO, told me in an interview how it had benefited from having first mover status in the country. While other western media groups had displayed caution, MTG chose to commit to Russia early on and was now reaping the benefits of its strategy.
Yet fast-forward to today and the company finds itself in a somewhat different situation. While still the main international player in Russia’s TV industry, it has recently had to close down a DTH platform (Raduga TV) it 50% owned and is struggling to find a solution to the future ownership structure of CTC Media, due to the inability to secure a licence and controversial amendments to the Mass Media law respectively.
The latter, which are due to come into effect at the beginning of 2016, will, as MTG points out in a just-released 2014 annual review, impact not only CTC Media but also the company’s pay-TV businesses. Neither currently complies with the amended law, which will limit the level of direct or indirect foreign ownership in Russian media companies to 20%.
Besides having to reduce its shareholding of 38% in CTC Media, MTG is grappling with the fact that the EU and US have imposed sanctions on named parties in Russia that have ownership interests in Telcrest Investments Limited, which holds a stake of around 25% in the broadcaster. This “could limit the potential outcomes for CTC Media”.
Jørgen Madsen Lindemann, MTG’s current president and CEO, says in the report that the company is “working with a range of potential solutions, in order to best protect the interests of the stakeholders in these entertainment businesses that we have built into some of the most popular in Russia”.
He also notes that the ban on advertising on pay-TV channels, which came into effect at the beginning of this year, is now being rolled backed.
Indeed, just days ago President Putin signed off an amendment in the law, rushed through the Duma (parliament), allowing advertising on pay-TV channels that allocate at least 75% of their airtime to Russian content.
While there’s little doubt that this amendment was brought about by pressure from the Russian TV industry, it also probably offers hope for MTG and its future involvement in the country.
The company’s commitment to the market is clearly demonstrated by its decision to launch five new HD channels this year. Despite the difficulties, it will surely also find a solution to the CTC Media ownership issue.
While these may not be the best of times for MTG in Russia, the likelihood is it will remain an important player in its TV market for the foreseeable future.
