Moscow's Media Czars

The business elite is buying up powerful properties

Moscow's elite turned out in force on a snowy January night to toast the third anniversary of Russia's first independent television network, NTV. Among the first to congratulate NTV head Igor Malashenko was President Boris Yeltsin's spokesman, Sergei Yastrzhembsky. Also flitting around the Radisson-Slavyanskaya Hotel's Tchaikovsky Hall was businessman Boris Berezovsky, who put his money behind Yeltsin in last summer's presidential election and later won a government post. Bankrolling the event was Most Group executive Vladimir A. Gusinsky, founder of NTV and the first Russian executive to make a big media investment.

Three years after Gusinsky led the way, Russia's business leaders can't get enough of media companies. Driven by a desire for prestige, political power, and profits, Russia's top companies are scooping up assets--from the newspaper Izvestia to Russian Public Television (table). Like many of their Western compatriots, the heads of such companies as Lukoil, Gazprom, and Menatep are lured by the glamour and credibility that come with owning a TV network or newspaper. Says Gusinsky: "Every large financial-industrial group wants to buy into the media. It has become a status symbol."

And a key to political influence, too. Gusinsky and Berezovsky, who control two of Russia's three national TV networks, financed much of Yeltsin's campaign. They also used their networks to promote Yeltsin and demonize his rival, Communist candidate Gennady Zyuganov. Gusinsky even donated Malashenko to the cause, granting him a leave to serve as Yeltsin's media adviser.

Yeltsin was quick to reward both Berezovsky and Gusinsky for their support. Shortly after the election, Berezovsky was named a deputy chairman of the National Security Council. Gusinsky's NTV won the right to double its broadcasting time, to 12 hours a day. "Gusinsky turned his media investment into political capital, then converted it back into economic capital," says Yasen Zasursky, dean of journalism at Moscow State University.

EASY PREY. Such back-scratching is just one illustration of an important shift of power: A coterie of well-connected executives is exerting increasing influence in Russia. Media acquisitions are placing the press into many of the same hands that already control much of Russia's business and government. The concentration of power in this oligarchy threatens to erode public trust in capitalism and in Russia's democratic institutions. Warns Iosif M. Dzyaloshinsky, chairman of the private Commission for Free Access to Information: "Business and power are coming together to create a new Russian `Establishment."'

But politics and status aren't the only motivations for Russia's moguls. As the economy stabilizes, media assets are more attractive financially than they were a few years ago. Says Leonid B. Nevzlin, first deputy chairman of holding company Rosprom: "Up to now, people only put money into the media for political aims because other sectors were more profitable. It's our view that media in the long term may be more profitable than industrial investment."

Often, the target publications are easy prey. In fact, many editors-in-chief are courting business partners because they can't attract enough advertising to make up for the government subsidies they lost when the Soviet Union collapsed. "A lot of journalists said they wouldn't sell out. But they've had to come to terms with reality," says Vitaly T. Tretyakov, editor-in-chief of Moscow daily Nezavisimaya Gazeta. Tretyakov himself approached Berezovsky in 1995 for financial aid. Now, a bank linked to Berezovsky controls the paper and finances its operations.

Hard-pressed media in the provinces also have been desperate to find financing. In the Urals city of Ekaterinburg, for example, independent station AVS TV offered a local bank a controlling stake when it ran into financial trouble. Says Zhanna M. Teleshevskaya, president of the station: "We have a good relationship with the bank. They give us a special rate and don't impose political conditions on what we do." Now, she adds, other local banks want to get into the business.

But stations such as AVS face a difficult fight maintaining their independence. Vulnerable to the whims of local politicians, many operate under five-year licenses that expire this year. Journalists fear that local bureaucrats will use their clout to prevent relicensing of independent stations and steer licenses to their political backers. The process is already unfolding in Moscow, for example, where Mayor Yuri Luzkhov is trying to snare all the broadcasting hours of the local Channel Three for a new national channel controlled by a city-run corporation. The city now shares the channel with 2X2, an independent.

MUZZLED WATCHDOGS? These developments cause some to worry that the Russian press is losing the independence it so proudly displayed in the years after the Soviet regime's demise. Until the 1996 elections, when the media abandoned any pretense of objectivity and threw its weight behind Yeltsin, Russian journalists took their watchdog role seriously, uncovering corruption and exposing government lies about the war in Chechnya. But private ownership of the media is also an inevitable result of Russia's shift to a market economy. "Ninety-nine percent of the Western media belong to private companies or families. I think Russia is going the same way," says Mikhail Berger, a columnist at Izvestia.

He may be right. Gusinsky appears to be on his way to building a private media empire. He sold part of NTV to Gazprom so he could finance the creation of NTV-Plus, a group of pay-TV entertainment channels. And he has transferred most of his personal wealth from Most's banking and real estate units to a new media and entertainment division, Media-Most, which he now heads. Says Gusinsky: "There's now a real market in the mass media, in which all are taking an interest, and it extends into entertainment." By yearend, Gusinsky hopes to expand NTV-Plus from four to 20 stations in a bid to become a Russian-style Rupert Murdoch. That would be a nice achievement for an entrepreneur once trained as a Soviet-era theater director.

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