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Foreign media companies rush to relinquish Russian assets

September 23, 2015

A new Russian law limiting foreign ownership of media has upended the sector, forcing companies to scramble to comply and throwing into doubt the fate of TV channels, glossy mags and news dailies.

Adopted swiftly in an atmosphere of increased distrust of the West fuelled by the Ukraine crisis, the law signed by President Vladimir Putin last October orders media companies to have no more than 20 percent foreign ownership as of January 1, 2016.

The legislation was allegedly needed to prevent “foreign meddling” and its patriotic undertones are forcing international media groups to relinquish Russian assets by the end of the year or leave the once-booming market altogether.

German publishing giant Axel Springer announced last week that it had sold all of its Russian assets including GEO, OK! and the Russian version of Forbes, to local publisher Alexander Fedotov.

The owner the Bild tabloid, Germany’s most-read newspaper, said that it has to leave Russia because being limited to a minority stake was “not acceptable”.

“When we entered the Russian market (in 2004), we believed in the further economic development and liberalisation of the country,” president Ralph Buechi said in a statement last week. “We regret that we now have to leave.”

Finland’s Sanoma media group sold its 33 percent stake in Vedomosti business daily in April to Russian businessman Demyan Kudryavtsev.

The newspaper is one of Russia’s few remaining independent publications with op-eds frequently critical of the government’s policies.

The fate of the remaining shares in Vedomosti, which are owned by the Financial Times and The Wall Street Journal, is yet to be determined.

The legislation has sparked fears that the independent and liberal-leaning Forbes and Vedomosti publications, as well the Ekho Moskvy radio station, could be stifled and face increasing pressure to tow the Kremlin’s line.

Columnist Andrei Babitsky said the law stripped private media outlets of their “last defence against arbitrariness”, and market experts predicted it would decrease the number of publications, including entertainment magazines.

The law “is a political declaration: we want to be sovereign, we want media outlets to be controlled by patriots”, said Yekaterina Schulmann of the Russian Academy of National Economy and Public Administration.

– Growing market –

Russia’s RBK news site reported in June that authorities were pondering softening the law — especially for apolitical entertainment outlets — fuelling uncertainty among industry observers.

The Nasdaq-listed CTC media, a Russian independent broadcaster, has yet to decide on a July offer by UTH holding of Russian billionaire Alisher Usmanov to acquire a 75-percent stake in the company.

Pushed to the wall with few options, many foreign-owned media groups will be forced to accept knock-down prices to comply with the law before it comes into effect as the country grapples with a crippling economic crisis.

Media companies have hurried to reduce their stakes or get rid of their Russian assets in recent weeks.

Swiss publisher Edipresse parted with 40 magazines in the country, while US-based Disney and Discovery decided to remain on the Russian market, reducing ownership to required levels, with the remainder of shares going to local partners.

American mass media giant Viacom could also be forced to relinquish its control of 12 television stations that broadcast in Russia, including Nickelodeon, to a conglomerate belonging to Russian billionaire Viktor Vekselberg, RBK reported.

“Russia is the fourth largest market in the world for pay television in terms of the number of subscribers,” said Olga Paskina, head of Discovery for North-East Europe, in an interview with RBK.

“The market is growing (in Russia), as opposed to the United States where it is on the decline, or in Europe, where it is practically not growing at all.”

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Dispatches from AFP concerning freedom of information, censorship and news coverage in regions where independent media is under threat.