Advertising Magazine, October 1, 2003

Yury Rovensky, "Reality is better than our business plan"

The Russian TV market is seeing the emergence of more niche products. Some of them can be characterized as having unique outlooks and others are just puzzling. According to RBC General Director Yury Rovensky, business TV channels in Russia should be paid back several times faster than ordinary channels that are just beginning to break even.

Could you give an overview of the RBC group at present?

In 1999, RBC was split into two basic directions, IT and media. The latter embraced the news agency and online projects, such as Ytro.Ru and RBC-Daily online newspapers, feature Internet editions CNews and AutoNews, the educational portal 5ballov, the Tourist gateway and more than ten other projects. RBC's tactics stipulates working with a clearly defined target audience. We believe the time for "all in one" projects, such as vertically integrated horizontal portals, is in the past. Overwhelming information has a depressing effect on users while any structured information is accepted with gratitude.

In fact, a television channel that we started to prepare for launch last year is niche-oriented as well, although it targets not only the business community. We hope to find among our viewers economic students, families of businessmen, analysts and researchers, in particular, those digging into businesses and its interactions with the civil community.

Could you give us more details about your project?

We were involved in strategy development for more than a year; we were working out our business plan and saw how much we could invest in the project. We never aim at something we cannot afford and we have never lived on credit. At least, this policy was justified earlier when credit resources were too expensive. Our project is planned to break even two years after the launch.

RBC TV is a 100% subsidiary of RBC with no equity participation. We did this on purpose because we understood that any participation would be not only in financial matters but also in management, including the defining of some principles for information policies. No one can accuse RBC of being biased. We have learned to work online on the Internet and now we are transferring these skills to our television project. We offer live coverage of all important events in domestic businesses and foreign economies between seven in the morning and one o'clock at night.

This must be very costly.

No. We worked out the information-flow logistics over a long period of time and now we have everything necessary for success. Firstly, there is "an information producing factory" represented by RBC. I doubt it is possible to create a project like this from scratch even with a lot of money because it involves not only jobs and professionals but also information policies and technologies providing for prompt information processing and supplying it to end users. It also involves contacts with newsmakers who are used to working with RBC that has long been a well-known brand for them. It involves technical capabilities that RBC implements for its online broadcasting. We have launched a new gigabit channel for Internet access allowing for broadcasting our digital signal without a loss of quality and significant expenses. In addition to our central and guest studios in the center of Moscow we have several studios that can provide live broadcasting. We have also installed 28 remote stationery video cameras for urgent reports and commentaries from market players at the largest banks, investment companies and state agencies that, in the first place, regulate and coordinate economic processes. We also have mobile TV cameras enabling us to make live reports. Business requires quick reaction and not just activity. Earlier, only online news agency provided information practically without delays but this is a new format of broadcasting for television and it has a much stronger emotional perception, and you know that business is not emotionless.

What makes you so sure that this project will have demand on the Russian market?

It would be thoughtless to think about the launch of a business TV channel only several years ago. At that time, the critical mass of Russia's business community had not been formed. However, the present tendencies set us on the road for success. Moreover, when we created our agency in 1993, and in 1995, when we were the first Russian news agency to go on the Internet, these steps were made ahead of the market's development too. At that time, only several hundreds of people were using the Internet and we were the first in this niche. And now we have more than 2 million users a month and these figures are comparable with the audience of a TV channel.

One-time viewers and permanent viewers are two different things. Are your estimations based only on those visitors?

There is a paradox: the information market is top-heavy but there is still a lack of objective, up-to-date and reliable business information. Print mass media sources focusing on business information can be counted on one hand… News agencies pay enough attention to business matters but TV channels devoted less than 1 percent of their airtime on average to such issues. Why? Is this something indecent? Why when they speak about businesses they highlight only conflicts? Why do they focus on business when there is some social tension and the rest of the time we hear nothing about it? One cannot afford not to speak about what is going on in business life or speak about its achievements. How can we discuss the granting of an investment rating to this country if all television channels and the whole press talk only about scandals around Russian businesses? We studied the experience of our foreign colleagues, such as Bloomberg, CNBC and Germany's NTV, and understood some principles of their work, learned about their projects and took all this information into consideration. On June 30 we started test broadcasting (18 hours a day) and we launched full-fledged around-the-clock broadcasting on September 2.

Will you have cable broadcasting?

The channel's broadcasting has been diversified. One the one hand, we will have cable broadcasting via cable networks in Moscow. I would not want to underestimate the volume of cable broadcasting in Moscow. For instance, residential buildings erected in Moscow over the past four to five years are completely equipped with cables. You know, I don't understand the skepticism of many journalists who say "Well, but you are a cable TV channel!" Then what is CNN? It is Cable News Network! In addition, apart from cable broadcasting, we use Kosmos-TV and NTV-Plus, Comcor-TV and Divo-TV along with regional cable and terrestrial networks and the Internet.

Then what is the potential audience of RBC TV?

Taking into consideration the fact that we will broadcast in Moscow, St. Petersburg and twelve other cities with populations of more than a million, our potential audience is 17 million people. We expect to attract between 3.5 and 4 million viewers during the first year of broadcasting.

Are you going to buy TV programs from western television companies?

We receive information and videos, in particular, from CNN, APTN and Reuters.

Who did you hire to your TV staff?

We hired professional economists because, unfortunately, one cannot find people with the necessary skills in the journalist community. We have had to organize large castings, invite bank employees and brokers, employees from exchanges and investment companies. We need understanding and dialogue with guests in studios or analysts talking via a direct communication line. I think the team of professionals that we have created is one of our major achievements.

Have you created your channel's structure on your own or took after western TV channels?

Of course we made no attempt to re-invent the wheel. At the same time, we realized we would not just duplicate an existing concept, no matter if it is Bloomberg, a financial and information channel, or CNBC, an analytical business TV channel. That is why our television has no complete analogues in the world, that is information and analytical broadcasting aimed at a rather uneven Russian business audience. I believe a lot of people will find information they are interested in on our channel.

What is this unevenness about?

RBC TV is not only financial figures and layouts… Stock traders are interested in one aspect while managers and decision makers need another aspect, i.e. opinions of experts defining market trends, they are interested in analysis, forecasts and the like. That is why our channel consists of both information and analytical broadcasting, we have presentation forms typical for a magazine along with industry reviews, industry development trends, their impact on the market, mergers and acquisitions. Our TV channel will also devote its airtime to things that accompany businesses. For instance, at least once a year members of our audience think about where to spend a vacation. So we will present reviews of new offers on the tourist market, we will dwell on where to spend a weekend and what new clubs or restaurants were opened in the TV program City Sites & Activities, and so on. We have statistical data and layouts analyzing factors necessary for a business day and the corresponding programs will be on the air during working hours. Finally, when people are leaving for work in the morning, they need special presentation of information, that is short and more dynamic reports on what should be expected during the day.

Do you really expect that there will be so many businessmen who will watch your programs during the day like pensioners or housewives?

In fact, we are trying to offer additional conveniences to businessmen so that they will not have to address any other sources or search for more information. Naturally, there will be neither entertainment programs nor soap operas on RBC TV. In our news reports we will not ignore serious political events that are of importance for businessmen but the main focus will be on events related to macroeconomics and important processes in domestic businesses.

You used to say that the TV channel would break even in two years. When will it pay back completely? The usual time frame named in such cases is between five and seven years.

We clearly understand how much we will be able to earn from selling advertising on RBC TV. Based on these estimations we calculated how much we could spend. A total of $15m were invested in the TV project, including $10m allocated by the parent company RBC Information Systems and another $5m coming in loans. The channel's operating costs will reach between $5 and 7 million during the first year. We are very careful with resources, we have great responsibility and a serious approach, so we cannot say that the channel will pay back in five years. Probably we would feel quieter but we are used to setting the bar higher, and that is three years. I am certain it is realistic. Judging by contracts (for advertising) we have already reached by now and I can say that our estimates are rather pessimistic. Reality is better than our business plan.

What is your optimism based on?

We know this market very well because we have been engaged in business-oriented advertising for a rather long time. Last year, RBC earned about $13m on advertising, and about 72 percent of advertising orders were received by our own sales departments. This means we know how to sell advertising targeted at the business community and how to build an advertising campaign to make clients satisfied with its results. We always position ourselves not as simply an advertising agent but as a consultant who advises how to make it better. Currently, 84 percent of our advertisers make repeated orders, and this is a unique achievement. We made pre-sale offers to our advertisers with a discount for loyalty to our new project and trust to the existing brand. We already have formed a database of advertisers who are ready to expand their advertising budgets, including orders on our business television channel. We have already reached contracts worth several millions of dollars for the first half up to the end of the first year of broadcasting.

Well, this is not that much compared to more than $20m to be invested in the TV project by the end of this year.

RBC TV is expanding its market of advertisers. Targeted advertising for a business audience is becoming interesting for a lot of advertisers who never considered the possibility of TV commercials earlier. If we take auditing firms alone, it is hard to imagine them advertising on a public and political TV channel. It is also hard to imagine commercials of banks providing credits to industrial enterprises. In addition, there is advertising of luxury goods that targets a very narrow audience with high incomes, and this is the audience of RBC TV by definition.

Correspondingly, this means a high price for such advertising?

Before September 2, we offered so-called pre-sale prices. They enabled advertisers to try our commercials and see their effect. Prices will be changed later. We would say that our pricing policies, including those for the Internet, were always characterized as competitive. We never exaggerated our prices to offer an 80 percent discount later as they often do in the advertising world, and since we sold most of our advertising independently, we gave reasonable discounts. Prices for commercials will be reasonable too, that is between $600 and $3,500 per minute, and they will not shy away advertisers. At the same time, we are not interested in dumping because advertising is our only source of revenue.

Does it mean that you will sell advertising on your TV channel independently?

We have divisions that successfully sell advertising on the Internet and we increased our staff of sellers. At the same time, we do not rule out that advertising agents will be interested in offering their clients an opportunity to advertise on our channel, but it is too early to speak about collaboration with them, as no one has seen our product so far except for ourselves.

And how is it going to be estimated later? I know the rating will be very low.

Our television has and will have no rating because the principle of this measurement contradicts our concept. By the way, no foreign business TV channels have ratings as seen by our advertising agencies. Let's take the Gallup rating agency as an example. They install people meters with a family, a random family, while RBC TV is an office TV station and we are watched during the day. There is no need to watch us in the evening because all business events happen during the day, and the main advantage of live broadcasting is that you do not have to wait until evening but receive all information about events as they happen. There is another approach used instead of ratings, namely defining the quality of the audience. We will carry out special surveys of RBC's audience and the main parameter of its attractiveness will be its quality and not quantity.

Vera Ushakova