Russia media challenge for Western firms

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BERLIN -- To be successful in Russia, you have to become Russian. That was the message at today's "Media investments between Russia and Western Europe" panel at Berlin's European TV Dialogue conference.

On the panel, Vitaly Schub of Russian multimedia conglomerate Sistema Mass Media, Michael Schlicht of 20th Century Fox Russia and consultant Alexander Mackat managed to entertain their fellow media professionals with many anecdotes of Western-style ad campaigns for brands such as M&Ms and Marlboro gone awry, leaving the distinct impression the Russian market is a hard nut to crack, with success only reserved for those who go native.

Talk of such difficulties had a timely backdrop with European network group RTL's recently-announced agreement with Luxembourg-based Continental Finance Group to acquire 50% of Content Union, a group which already owns four Russian thematic channels. The move strengthens RTL's position in Russia and the neighboring Commonwealth of Independent States (CIS). RTL already holds a 30% stake in Russian commercial channel REN TV.

But with more international companies eager to get a piece of the new Russian media market come cautionary tales.

Fox's Schlicht pointed out that Russian viewers prefer homegrown fare, with U.S. series not even being considered for prime time. And South American soaps, a guilty pleasure of many Russians in the past, have vanished completely.

Sistema's Vitaly Schub provided the most telling example of Russian unwillingness to bow to Western taste, sensibilities and financing by slyly answering questions about media investments in Russia with answers that only referred to his company's willingness to buy Western product for the "right price." He also pointed out that his country's media market was quite self-sufficient in regards to financing and technology.

The only positive examples mentioned by the panel were for companies that financed and bought Russian films, leaving the distinct impression of a new economic and cultural iron curtain certainly remained. 20th Century Fox Russia, for example, makes more than 30% of its revenues off Russian product theatrically and 40% in home video. And Nestle only succeeded after buying up Russian brands,

As for the flip side of the coin -- aggressive Russian companies buying up media entities in Europe -- Schub's answer did little to allay common fears.

"Why not?" he said, referring to his responsibility to his shareholders to make purchases in Western Europe, should they be financially beneficial.
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