Market Insight

CNN to leave Russia in December

November 12, 2014  | Subscribers Only

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Turner Broadcasting System Europe, a subsidiary of Time Warner, has decided to stop the distribution of CNN International in Russia by the end of December in response to recent legislation which limits foreign ownership in media companies. On 15 October Vladimir Putin passed an amendment to the media law, which had previously been approved by the Russian parliament on 26 September, preventing non-Russian companies from owning more than 20%. The new rule will come into effect in 2016. Russian owners who have holdings through offshore companies have until January 2017 to comply.  At present there is no cap on printed press and a cap of 50% on radio and television companies.

CNN International is included in many cable, satellite and IPTV packages offered by Russian pay TV operators; Akado and VimpelCom have acknowledged being notified about the termination of the distribution of the channel.

Time Warner is not the only major foreign conglomerate which is affected by the new law. The Modern Times Group has a 50% stake in pay TV platform Raduga TV and a 37% stake in broadcaster CTC Media. The other television companies which will be hit by the legislation include the BBC, Bloomberg, Discovery, Disney, Viacom and Sony.

Our analysis 

The departure of CNN International from Russia is neither a massive financial setback for Time Warner, the world’s third largest television network, nor a blow for those viewers who would like to watch non-Russian news channel, mainly because the Russian version of the BBC World News channel reaches 3.9 million people a week. However, it is the first notable event which happened as a result of the 20% foreign ownership cap on media companies.

The amendment to the law is quite clearly politically motivated: during the ongoing Ukrainian crisis, Vladimir Putin is trying to make sure that his approval ratings remain high. The vast majority of local terrestrial channels are influenced by the government and foreign media is the only possible outlet through which the domestic political consensus can be undermined.

The amendment is likely to hurt a number of domestic television companies such as Raduga TV, CTC Media and channels such as Animal Planet, Eurosport, Nickelodeon, MTV, Paramount Comedy, Sony Entertainment Television, TV100, TV1000 and Viasat History. At the very least there will be a very large number of legal and corporate finance costs associated with the restructuring of the existing assets which is necessary in order to comply with the new law. Alternatively, the foreign stakes in such companies will be reduced by partial asset sell-offs to Russian companies which may make them less competitive. Besides the Russian pay TV market is the fourth largest in the world (by the number of subscribers) and it is still growing; the likes of the Modern Times Group and Discovery would not want to reduce their exposure in Russia.

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