Market Insight

Russian broadcasters launch joint production conglomerate

November 06, 2014  | Subscribers Only

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Three of Russia’s largest TV companies will collaborate on a large-scale joint production venture. Beginning next year, the company, called Sozdavayemaya  (The Creator), will make TV entertainment and films. Each of the three companies - Russia State TV and Radio Broadcasting Company (RTR), CTC and National Media Group (NMG) - will hold an equal share of the new company, with management holding 10%.

Between them, these three broadcasters run five major national channels as well as a large suite of niche, pay, radio and regional offers.NMG and CTC run some of their channels with the Russian state, and CTC is listed on the New York stock market and as has another minority foreign stakeholder in the form of multinational broadcaster MTG. Non-Russian influence is due to be reduced because of an amendment to the 'On Mass Media' law last month limiting direct foreign investment in TV companies to 20%. Another European broadcaster, RTL Group, sold its small stake in NMG at the end of last year.  

Our analysis 

The creation of a single production entity grouping the three leading broadcasters in Russia certainly seems to raise questions on competition grounds and implies an increasing move to state control of media. However, there is an economic rationale for the combination of production assets. As in many markets,channel fragmentation and the high cost of premium foreign content acquisitions are driving greater investment in original production. Programming costs almost always go up – for instance, CTC’s main channel reported a 9% rise in these costs last year, mostly due to acquired foreign content.

But Sozdavayemaya  is also undoubtedly oriented to production for the major channels run by its broadcaster shareholders. Here, the advantage is simply scale. Having more resources can protect a business which has in some countries become increasingly low-margin against the risks a smaller company would face.

While this move will concentrate power in the production sector, Russia’s taste for international formats, particularly in scripted programming, has proved prolific, with several of the majors setting up local production companies. Warner Bros. International Television, Sony Pictures Television and Disney are all active in the territory, with regional divisions co-producing with Russian partners. Sony acquired a majority stake in local producer Lean-M in 2007. These companies have produced originals and fiction formats including Married with Children, Everybody Loves Raymond, Without A Trace) for channels like CTC and TNT.

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