Russia’s Duma has passed a bill banning advertising on pay-TV channels in an attempt to prop up the businesses of Russia’s state-owned TV networks, which have been losing market share to newer channels.
In 2003, 58 per cent of Russian households watched Russia’s “big three” channels, owned by the state and Gazprom Media, while today only 40 per cent do, according to Russian consultancy TNS. The percentage of households who watch cable and satellite channels meanwhile has risen to 12 per cent over the same period.
Today 33.5m Russian households, or more than half the country, pay for premium cable and satellite channels, with 9 per cent more Russian households signing up for subscription channels in 2013 alone.
In comments to the media, the bill’s author Igor Zotov, a deputy for the Kremlin-friendly A Fair Russia, said the legislation was meant to create an even playing field for the country’s basic cable channels, which are free to users, and cable channels, which make money from both advertisements and subscriptions.
One Russian TV industry executive argued that the principle of the bill was not entirely wrong: in the US, for instance, cable channels must choose whether they want to live off subscription or advertisements.
But he added that bill was seriously flawed in its current form as it did not differentiate between bigger cable channels such as Discovery which collect money from both advertisements and subscription, and smaller cable channels that are free for viewers and rely solely on advertisements.
The bill was passed after just two weeks of discussion on the last day of the Duma’s spring session, and will now go to Russia’s upper house of parliament, the federation council, before being signed President Vladimir Putin. The legislation is set to take effect next January.
Ilya Ponomarev, a Duma deputy and member of the anti-government opposition, said he believed the legislation had been drafted for commercial rather than political reasons, nevermind that the vast majority of advertisers work primarily with the basic cable channels.
According to the Association for Communication Agencies in Russia, the advertising budgets for all Russian Pay-TV channels is equal just Rb4bn ($116m), or 2.5 per cent of the entire Russian TV advertising market.
“I think they [the government] just want to monopolise the advertisement flows that are going through cable networks,” Mr Ponomarev said. “It’s not large but it’s growing.”
The law would have serious effects on big-name foreign channels, including Discovery Channel and National Geographic, and more worryingly could force many of the country’s smaller cable operators to shut down completely, experts said.
Alexander Vinokurov, a shareholder of Russia’s main opposition channel Dozhd, said he was confident his own channel would survive after it was forced to move to a subscription model earlier this year after temporarily losing its main cable and satellite subscribers during a political spat.
“I think it’s correct to stay that due to certain circumstances we are more prepared than other pay-TV channels for this anti-market law,” Mr Vinokurov told Interfax news agency. However, he noted that the law would still hit Dozhd hard and force it to significantly increase its subscription costs.
In 2013, the channel relied on advertising for 70 per cent of its budget needs.
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