#15 - JRL 7243
June 27, 2003
RUSSIA'S TVS: ANOTHER FAILED EXPERIMENT IN PRIVATE TELEVISION
By Laura Belin
When the Russian Media Ministry pulled the plug on TVS on 22 June it demonstrated that arbitrary rule, rather than the rule of law, still governs the Russian media sector. The team of television journalists headed by Yevgenii Kiselev was forced off the air for the third time in three years. Different forms of legal and financial pressure helped bring about the management changes at NTV in April 2001, the shutdown of TV-6 in January 2002, and this week's action against TVS, but the underlying political dynamic has remained the same. The Media Ministry's often brazen interference in the internal affairs of private broadcasters has sent a clear message: Journalists who lack the trust of the Kremlin and the government will not be allowed to broadcast news on national television.
The struggle for control over NTV in 2000 and 2001 pitted the Media-MOST holding company of oligarch Vladimir Gusinskii against partly state-owned gas monopoly Gazprom, a minority shareholder in NTV and a major creditor to Media-MOST. President Vladimir Putin, Media Minister Mikhail Lesin, and other state officials denied pulling strings on behalf of Gazprom. Those denials were not convincing, especially after it emerged that Lesin had promised to have criminal charges against Gusinskii dropped if Gusinskii sold a controlling stake in his media properties to Gazprom. But there was no disputing that Media-MOST was unable to repay the huge dollar-denominated loans Gazprom had guaranteed on its behalf. Gazprom obtained a court ruling awarding it a majority stake in NTV. While some evidence pointed toward political pressure on Gazprom managers and cast doubt on the fairness of the judicial process, Gazprom's decision to replace Kiselev as NTV general director did have a legal basis.
During the final months of TV-6, it became more obvious that legal action by a shareholder was just a fig leaf for a political campaign to shut down an alternative voice. When Kiselev and hundreds of other former NTV employees joined TV-6 in the spring of 2001, their position looked promising. True, relations had soured between the Kremlin and Boris Berezovskii, the tycoon who owned a controlling stake in TV-6. But unlike Gusinskii, Berezovskii had not saddled TV-6's parent company with large debts to state-controlled banks or to the network's minority shareholders. Living in self-imposed exile, Berezovskii was out of reach for Russian prosecutors who had issued a warrant for his arrest.
TV-6's ratings and advertising revenues improved immediately upon landing some popular shows formerly aired on NTV. But the new state of affairs did not please the LUKoil-Garant pension fund, a minority shareholder in TV-6. The pension fund, which is affiliated with partly state-owned oil company LUKoil, immediately filed lawsuits seeking to replace TV-6's new management. When those failed, LUKoil-Garant filed suit to liquidate the television network, citing a little-used point of law. Never mind that that provision, if consistently applied, would lead to the liquidation of virtually every company in Russia. Never mind that shutting down TV-6 could only hurt LUKoil-Garant's finances, since the pension fund was not a TV-6 creditor and could not profit from its liquidation. Never mind that during the autumn of 2001, Berezovskii offered to pay LUKoil for LUKoil-Garant's stake in TV-6. LUKoil managers chose to force TV-6 off the air rather than get a return on the investment in the network. LUKoil-Garant's lawsuit moved through the courts much more quickly than do typical business disputes in Russia, and in January 2002 the Supreme Arbitration Court ordered TV-6's liquidation.
The Media Ministry soon took TV-6 off the air, allowing a sports channel to broadcast in its place and scheduling a tender for the Channel 6 broadcast license. Media watchdogs rightly complained that there was no legal basis for the ministry's action, but Lesin and others could at least point to a court ruling against TV-6 and its parent company, Moscow Independent Broadcasting Company (MNVK).
While MNVK's management challenged the Media Ministry's action in court, Kiselev quickly formed an alliance with a group of businesspeople and political heavyweights who were on good terms with Putin's administration. As expected, their Media-Sotsium consortium won the March 2002 competition for the license to broadcast on Channel 6. TVS went on the air in June 2002, employing Kiselev as editor in chief and most of the journalists who had worked with Kiselev at TV-6.
TVS's revenue flow did not keep pace with its business plan. Two leading figures soon emerged among the network's shareholders -- Russian Aluminum head Oleg Deripaska and Unified Energy Systems head Anatolii Chubais -- but they could not agree on a strategic plan. Their differences exacerbated the network's financial troubles in 2003. Having exhausted a $46 million loan from state-controlled Vneshekonombank, TVS fell behind on payments to television producers, several of which pulled their programs off the air in the spring. TVS staffers went without pay for months as the two main shareholders failed to reach consensus on future plans. Citing unpaid debts for signal distribution, the Moscow city authorities cut off TVS transmissions to most residents in the capital in early June. Within days, Chubais agreed to sell his stake in TVS, leaving Deripaska as the dominant shareholder.
Still, the money to pay debts was not forthcoming. A frustrated Kiselev sent an open letter to shareholders on 17 June, warning that TVS would stop broadcasting the following week unless "normal funding" was resumed. The Media Ministry then used TVS's financial problems to justify cutting off transmissions. In a statement issued on 22 June, the ministry asserted that its decision to replace TVS broadcasts with a "socially important" state-run sports channel was "aimed at protecting the viewers' interests."
At first glance, the demise of TVS appears to be only marginally connected to state officials. Couldn't the oligarchs in charge of the network have come up with the cash to save it? Kiselev certainly seems to think so. In an interview published in the daily "Gazeta" on 18 June, he complained that "A year ago, the richest Russian people came to us and said nice words that there must be at least one independent, private TV channel in the country, and they promised to help us to make such a channel." He predicted that "the Kremlin will thank [the TVS shareholders] for eliminating a team of willful journalists who dared open their mouths against the authorities from time to time, criticize them and utter alternative opinions."
Kiselev has grounds to feel betrayed, but it is important to remember that TVS's financial situation, desperate though it was, did not provide any legal justification for what the Media Ministry did on 22 June. Russian law stipulates that broadcast media can be taken off the air only by court order. There was no such order against TVS. In addition, a double standard was evident: In recent years, fully state-owned Russian Television (RTR) has owed debts for signal distribution, and 51 percent state-owned Channel One (ORT) has been late repaying a loan from a state-controlled bank, but the Media Ministry has not taken either of those networks off the air.
A strong case can be made that the Media Ministry itself, along with Video International, an advertising firm with close ties to Lesin, helped undermine TVS's financial position. Appearing on NTV on 22 June, Deripaska's close associate Konstantin Remchukov revealed a little-known fact: In 2002 the Media Ministry issued Media-Sotsium a temporary broadcast permit for Channel 6, rather than an ordinary broadcast license with a five-year term. Remchukov noted that a temporary permit cannot appreciate or be used as collateral for a loan.
TVS's claim to the broadcast rights for Channel 6 became even more tenuous in April 2003 when a court ruled that the Media Ministry acted unlawfully when it shut down TV-6. The ministry then rescinded its order suspending the license of MNVK, TV-6's parent company. Who in their right minds would invest millions to rescue TVS when that network had only a temporary permit to broadcast, especially once a court had affirmed that the broadcast license for Channel 6 belonged to a different company?
During his 22 June appearance on NTV, Remchukov also charged that TVS's advertising revenues had been artificially depressed by Video International's virtual monopoly on the television advertising market. Media Minister Lesin was one of the founders of Video International, which handles the placement of commercials on the other major Russian networks. Though Lesin claims not to be involved in managing the advertising agency any longer, the consensus in the media community is that Lesin still exerts considerable influence over Video International.
Kiselev has vowed not to participate in any new auction for television broadcast rights, according to gazeta.ru on 23 June, and one can hardly blame him. The disappearance of TVS from the airwaves is not the end of private television in Russia. There is still Gazprom-backed NTV, as well as entertainment-oriented networks such as STS. But the fate of TVS will further diminish pluralism in broadcast news and will probably deter investors from funding alternative perspectives on daily events.
Since national television is the leading source of national news for most Russian citizens, and parliamentary and presidential elections are coming up soon, the Media Ministry's action against TVS could hardly be less geared toward "protecting the viewers' interests."
Laura Belin has written extensively on Russian politics and media issues since 1995.