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Putin Bans Advertising on Pay Channels Amid Ukraine Tensions

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July 22 (Bloomberg) -- Russian President Vladimir Putin banned advertising on pay-television channels, part of what Reporters Without Borders deemed an “attack” on the media as the conflict with the U.S. and Europe over Ukraine intensifies.

The law bans ads on pay-TV channels from January 2015, according to copy posted on the Kremlin website today. The State Duma, the lower house of parliament, said the rules would make competition between on-air and pay television more fair.

Putin has reined in Russian media and called on the government to tighten control over information flows through the Internet. He has backed laws making popular bloggers as liable for what they publish as media outlets, requiring Internet companies to such as Google Inc. to locate servers handling Russian traffic in the country and introducing jail terms of as long as five years for online calls to action deemed extremist.

“Coming at a time when control of information is at the heart of the conflict in Ukraine, these laws constitute a grave attack on media pluralism, Internet freedom and the constitutional right to freedom of expression,” Johann Bihr, the head of Reporters Without Borders’ Eastern Europe and Central Asia desk, said in a statement.

The law signed yesterday will give on-air channels, dominated by state-run television, a further advantage over the country’s almost 300 pay channels, according to the advocacy group.

Subscription, Survival

Russian on-air television channels earned 152 billion rubles ($4.4 billion) on advertising last year, according to Russia’s Association of Communication Agencies, or AKAR. Russian pay TV was three times smaller, earning 54 billion rubles on subscriptions, according to researcher iKS-Consulting.

“In Russia’s pay-TV market, subscription revenue per user is much lower than in Europe, and a lot of channels used to get additional revenue from advertising,” Mikhail Silin, vice-president of Association of Cable Television of Russia said by phone today. “Once this possibility is gone, they may find it hard to survive.”

Advertising revenue of pay-TV channels rose 20 percent last year to 4 billion rubles, AKAR data shows. About 300 country-wide pay-TV channels will be affected by the ban, while small local channels are set to suffer more than global channels such as Discovery and Eurosport in Russia, Silin said.

“The advertising ban is an additional threat to Dozhd TV, the independent station that has already been throttled by its exclusion from most cable and satellite TV offerings,” Reporters Without Borders said. It “will reinforce the hold of Gazprom-Media and another giant, VI, over the advertising market and increase their ability to pressure TV channels.”

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Torrey Clark, Ville Heiskanen

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