Finans
August 4-10, 2003, pages 38-41
Yury Rovensky: "The most interesting that can be done is television"
Business channel RBC-TV, a new TV project in Russia, starts broadcasting this fall. RosBusinessConsulting General Director Yury Rovensky and RBC-TV General Director Artyom Inutin have told Finans correspondent Ilya Yefimchuk about the financial details of the project.
How did the project of financial and economic channel emerge?
Y.R.: The idea came forward a year and a half ago when RBC founders adopted the decision to enter an exchange. Certainly we thought why we needed this. Having adopted the decision to make an IPO we had to answer the question: "What is the strategy of the company's development? What are the priorities for us? And where should the attracted money be invested?"
We have analyzed completely different directions in the IT sector, which is traditionally developed in the company, and the media sector. Such large funds are not necessary to create new Internet projects. We decided that such projects would be created naturally; they would grow, develop and some of them would probably die; it depends on conjuncture of the demand for interactive services.
A.I.: At the end of last spring, the Board of Directors of RosBusinessConsulting adopted a decision to make a business channel. By that time RBC had two important things already. On the one hand, this is unique economic content, i.e. a large volume of information about finances, economy and politics bound with the economy. On the other hand, our business audience allows us to create new products on this field of economic information.
Why didn't you start publishing printed mass media but started creating a TV channel?
Y.R.: We thought that the creation of printed versions in the media sector would be inexpedient; this market is overly competitive currently and the quality of existing printed business mass media sources satisfy different groups of the business audience. As far as radio is concerned, we believe that it is not the most promising way of developing the media holding, although, when analyzing different approaches, we realized very well that the outlook of RBC's development was based on the variety of ways of delivering information.
The Internet was growing immensely. The number of visits to RBC websites was practically doubling every year. But any active growth starts slowing down sooner or later due to some objective reasons. The issue is that we wanted a new qualitative development. We understood that RBC had to make a qualitative step forward to retain its current competitive advantages. So, according to the overall estimation, according to what we saw, given working practices available abroad, it was clear that the largest and the most interesting project that could be done was a TV channel.
But it turns out that you have chosen a project, which is harder to implement…
A.I.: It is much more difficult because television technologies are very complicated. But why do we think that it is promising? First, we know the economic situation in Russia: this is a country where the fastest growth over the past few years has been performed by the stock market. We know that this is a country where the economy keeps on rising. There is a deficit of economic programs on the market of mass media TV. There are practically no economic news programs, since Russian TV channels devote only 1 percent of their airtime to this issue. So, a vast and promising market is completely deprived of economic information on TV.
If we look at the market of the printed business mass media, we see that there are many respected printed mass media sources on this market; there is no deficit. We can compete there, we can create a magazine but it is not that interesting. This market is already formed, while the TV market does not have so many niche television channels like in other countries. The whole world is following the way of creating niche television channels, although they do not have large audiences, not 100m people. However, this is a targeting audience, an audience of concrete viewers, i.e. businessmen, children, young people. There is no clear division of audiences, division into niche channels in Russia, so far. However, they are being created; a sports channel has appeared.
What will the channel look like in general?
A.I.: It will be a fusion of two concepts. On the one side, it will be the concept of news broadcasting with a lot of news programs and they will not be similar to news programs of basic federal channels that have mainly general political news. We will have news of an economic and political character. These are finance, economics and politics of the federal and world scale. There will be no cultural or entertainment news programs.
As far as the second concept is concerned, this is the concept of analytical television followed by such major companies as CNBC, Bloomberg-TV, the German channel NTV and some others. This television programming provides analytical information. Foreign channels mainly provide information about stock markets. We will have a broader range of information. We realize that the Russian stock market is not as developed as in America or Europe, that is why we will pay attention to all segments and aspects of business like we do it at rbc.ru.
There will also be the sphere of business services such as the banking, advertising, insurance and other sectors and definitely the reality sector. All sectors of industry will be covered including the oil, metal, gas, petrochemical and other sectors.
So, the target audience is managers?
A.I.: Yes, top and middle managers. It is based on surveys conducted at rbc.ru and Comcon. Comcon has estimated our audience at 13m people. Moreover, we rely on the latest data of the Russian State Statistics Committee. According to the Committee, 10 percent of Russia's population receive 30 percent of the income, i.e. it is the middle class and higher. This is exactly our audience. We are considering the most pessimistic forecast and expect that we will cover about half of this audience, about 7m to 8m people, in two years.
RBC-TV is not targeted at the whole Russian audience. It will take the same segment covered by rbc.ru. And certainly these two resources, RBC-TV and RBC, will coexist. There will always be references to each other. The content certainly will not be the same, because different formats envisage different ways of delivering information, however the concept will be similar. And we will try to grow here and there to increase our audience.
We launched test broadcasting on June 30. We started testing all communication channels, a satellite, our regional partners that have signed agreements on broadcasting our channel for 1 to 2 hours a day.
When will test broadcasting finish and real broadcast start?
A.I.: On September 1 we will start broadcasting for real viewers.
In what regions will the testing start? What will be the coverage?
A.I.: Besides Moscow and St. Petersburg, there will be 12 cities with a population over 1m people situated in the European part of Russia and the Tyumen region, thus all the largest cities. The sequence of broadcast will be different. It never happens that something starts everywhere on the same day. Some companies, for example, will test broadcast today, others will test it in two or three weeks. It depends on the problems of broadcasters, whether their facilities are ready and whether all transmitters function normally.
The presentation of the new channel was planned to be held in March. What was the reason for the delay?
A.I.: It was due to the fact that we changed the distribution concept slightly. First, we thought to cover fewer cities. Currently the coverage is planned to be considerably larger. Then, some technical plans were altered. We have restructured the system a bit. We have made it more up-to-date than it was planned initially. Moreover, we have plans to cooperate with large Western TV channels. So, it is necessary to coincide concepts, which also resulted in the delay in March.
It is impossible to establish partnership with large western TV channels without changing programming. It is really necessary to adjust concepts and scheduling with each other. That is why we have introduced some changes in our programming because some Westerns TV channels joined us when our project was launched. They have joined us from the point of view of mutual work on programs and information, not as shareholders.
RBC did not run television earlier. How was the staff formed in a sphere that is new to you? Were experienced TV experts attracted?
A.I.: There is dual specificity here. First, the structure of the personnel differs principally from traditional TV channels. Informational television differs absolutely from usual television where programming consists mainly of movies. Their major expenses are purchases of these movies. Certainly, they have a different personnel structure. We will have 18 hours of live programs and 6 hours of reruns. Practically 90 percent of the live programs will be in real time, not previously recorded programs. This results in absolutely new restrictions. The share of editors, anchorpersons, and reporters is larger than the share of technicians, compared to other TV channels. It is also influenced the structure of the personnel. Second, we fully lean on the shoulders of our strong information agency.
We have attracted professionals from the TV market. They have some experience in information programs. Certainly, they have not had experience in working with economic information because in Russia there are practically no TV programs that provide professional analysis of economic information on financial and other markets.
We hired professional TV personnel and started teaching them all aspects of economy. Moreover, we employed very many people from the market, i.e. from banks and financial companies, finance market professionals, traders and analysts. This is the second niche we have being working in. The third niche we took people from was RBC; they are analysts, editors and correspondents. Certainly, it was necessary to train each group.
In particular, people from banks, financial companies and RBC had to be taught things that TV professionals were able to do, i.e. the way a person speaks to the camera and looks on screen. They are still being trained by experts from the Ostankino TV center. They were taught how to interview a person professionally, to write text for television, since its rules are absolutely different from the rules for texts of the RBC agency.
RBC shares
RosBusinessConsulting placed 16 percent of its shares on Russia's main exchanges, RTS and MICEX, at $0.83 per share in April 2002. This was the first IPO in Russia. As a result $13.28m were attracted.
A year after the IPO, the amount of RBC's free float shares grew to 21 percent. The advance was due to the conversion of pre-IPO bonds into shares. These convertible bonds totaling $5m were issued to finance activities aimed at consolidating RBC assets, including merger and acquisition procedures, before the IPO in order to increase the company's market evaluation. It is planned to raise the amount of RBC shares in free circulation to 25 percent over the next 1 to 2 years. RBC decided not to pay dividends for the 2001-2002 results. Undistributed income was invested in the company's development.
How large is the staff?
A.I.: The staff will consist of about 400 people. It is likely that there will be even more.
Will RBC-TV be concentrated only in Moscow or there will be some regional representative offices?
A.I.: We certainly will have regional representative offices and stringers. There will be a correspondent network of RBC and RBC-TV in Moscow in St. Petersburg. All other cities will have either TV reporters or correspondents of the RBC agency.
What kind of scheduling will there be?
A.I.: There will be special morning broadcast. Then there will be an afternoon broadcast, in an office television format, when it is interesting for managers and authorities. Information that is necessary for their work will be provided. Evening broadcasts will be calmer; they will be analytical.
Did you take into account Western experience when you were working out this project?
Y.R.: We always say that the foretype of our television is the network of Western channels like Bloomberg, CNBC, the German channel NTV and Reuters. But we are not a Russian translation of any channel. It is Russian information for Russian business, first of all. Moreover, these channels specialize either in information programs or in analytical programs.
We are creating a kind of mixture because the Russian audience is not so large to concentrate on anything specific. Even this small audience is not consistent. There are professional dealers, top managers, people who are interested in the economy, in the aspects of some business and analysts. These people, who form the potential audience of RBC-TV, are interested in different things. If they choose a business channel, this is probably a kind of contrast to soap operas, entertainment programs and something else aired in the afternoon.
Did you happen to change the initial business plan, introduce changes during the implementation of the project?
A.I.: The business plan has not been changed substantially. Every part of the plan was specified. At the beginning a business plan is created on the whole; revenues and expenses, some period of implementation and some resources. Then the plan is specified every month.
You mean there have been no global changes in it.
A.I.: There have been no global changes. Certainly, the business plan has been approved. However, there is always a possibility to think something over, to make something more efficient in the future.
How much has been invested in RBC-TV?
Y.R.: We have invested some $16m in the project already. RosBusinessConsulting invested $10m in the authorized capital of RBC-TV, which is our 100 percent subsidiary. Another $6m was attracted by RBC-TV in a form of loans from private investors. We understand that these are not final expenses. The total expenses are likely to exceed $20m.
What is the mechanism of attracting loans for RBC-TV?
Y.R.: Loans have been received from Western investors for three years at a 15-percent annual interest rate. This pretty high interest rate is attributed to the terms and conditions of the deal. According to them, RosBusinessConsulting, the parent company, does not bear any financial obligations on RBC-TV's loan, which is a so-called no-recourse loan. This procedure of financing has enabled RBC to divide risks concerning the launching of the TV project and retain full control over RBC-TV. When the loan is paid off, investors will be given some block of shares in RBC. This will not lead to the dilution of shares that already belong to current stockholders, because the company is not planning an additional issue of shares for this purpose.
When will the project start bringing profits?
Y.R.: We think that current expenses of the channel will be paid back in two years after it starts broadcasting scheduled for September 1, 2003.
What will be the main revenue from?
A.I.: This is only an advertising model. All revenues will be from advertising.
In what way RBC-TV will be broadcasted by regional providers, as a fee-based service or not?
A.I.: We have a principle position, when we broadcast through operators we will be free for final viewers. We will be in a free package. RBC-TV will not be shown on subscription. We will be free for users of all networks. We will get money only from advertising.
What will be the place of RBC-TV in the RBC holding? Will it be equal with the agency or will it outgrow the agency?
Y.R.: It is hard to say. I do not think that some misbalance will occur, because the RBC agency is primary as an enterprise producing information. In any event, a TV channel is a way of delivering information.
A.I.: The matter is that advertising revenues grow every year. The market of TV advertising will advance too. The new agency will also grow. It is difficult to level them. We hope that in the future the TV channel will outgrow the RBC agency.
Y.R.: Let me draw an example. When we launched the company RBC Soft it was just a direction, some additional business. However, it has turned out to be the most rapidly developing RBC business currently. According to last year results, some 47 percent of the holding's consolidated revenues were from RBC Soft. So, initially we considered it as additional business, but it developed so rapidly that it turned into an independent direction. What will be with RBC-TV? It depends not only on the channel but also on macroeconomic conjuncture in the country. Will soft continue developing actively? Or will media grow?
