The Billionaires Are Back

Michael Hedges March 22, 2010 Follow on Twitter

In the first truly welcome sign of economic recovery, Forbes magazine says there are now more billionaires than ever. And billionaires like the media business. Spread the word. The boys are back… with cash.

According to the annual Forbes list of the world’s billionaires, Russia has 62 billionaires. In the 2009 Forbes there were but 27, down precipitously from 72 in 2008. After English football clubs and yachts, media businesses continue to be a favored adventure.

Steelworker turned engineer Vladimir Lisin is, according to Forbes, Russia’s richest person with holdings worth US$ 15.8 billion, ranking 32nd in the world just above Microsoft’s Steve Ballmer. Lisin is chairman of Novolipetsk Steel. He also owns Moscow daily newspaper Gazeta and has radio and TV interests, including participation in the sales-house Europa Plus, Militseisikaya Volna, Radio Roks and Retro FM.

Mr. Lisin bought United Media in June 2009 from former billionaire Arkady Gaidamak, who had slipped from official favor. At the time United Media operated Business FM in Moscow and St. Petersburg as well as 98 Hits and Kino FM in Moscow. Mr. Gaidamak once owned the weekly newspaper Moskovskiye Novosti. It closed in 2008. He’s said to own the name Moscow News though the English-language newspaper appears owned by State news agency RAI Novosti, at least in part. Once upon better times, former billionaire Mikhail Khodorkovsky owned Moscow News. He currently resides in a Siberian prison.

Falling from official favor does seem to affect media ownership in Russia. Boris Berezovsky, who lives in London exile, once owned the newspaper Kommersant. In 2006 he sold Kommersant to Georgian billionaire Badri Patarkatsishvili, a former partner in the automobile import business. The late Mr. Patarkatsishvili then sold the publishing house to another billionaire, Alisher Usmanov, for about US$200 million. Mr. Berezovsky may or may not own two Moscow radio stations with Rupert Murdoch, whose attempt to exit those outlets is being fought in Russian courts.

Mr. Usmanov, according to the Forbes 2010 list, is the world’s number 100 billionaire. After acquiring Kommersant in 2006 he went on the buy stakes in sports channel 7TV and music channel MUZ-TV. Mr. Usmanov’s day-job is chairman of Gazprominvestholdings, the investment arm of Gazprom. He’s also a partner in mining giant Metalloinvest.

Other rich Russians dabble in media investments. Two years ago, National Mediagroup was formed to hold a majority stake in two national television channels, REN TV and Petersburg Channel 5. The principal shareholder in that holding company is Rossiya Bank, its chairman being billionaire Yuri Kovalchuk. Other shareholders include steel and mining company Severstal (billionaire number 70 Alexey Mordashov),  gas and oil producer Surgutneftegaz (billionaire number 400 Vladimir Bogdanov) and insurance company Sogaz, principally owned by Gazprom and Gazprombank. Mr. Kovalchuk once owned the newspaper Izvestia, now part of Gazprom Media.

Taking media investments quite seriously is Vladimir Potanin, 7th richest Russian and number 61 in the world. Mr. Potanin principally owns the diversified media company ProfMedia as well as Komsomolskaya Pravda business newspaper Vedomosti. His day-job is co-owner of Norilsk Nickel.

ProfMedia, arguably Russia’s largest privately owned media, has been taking steps to float an IPO in London this spring. The company expects to raise about US$500 million from a 40% investor stake to buy up heavily indebted Russian media operators. Recently ProfMedia took previously listed internet portal operator Rambler Media private through an internal buy-out.

Some Russian billionaires seem to find the mother country too confining for their media ventures. The aforementioned Mr. Gaidamak, who has had his ups and downs with various governments, once tried to buy financially struggling French newspaper France-Soir. He once owned the weekly Moskovskiye Novosti. It closed in 2008.

But France-Soir was picked up last year by Alexander Pugachev, son of billionaire Sergei Pugachev. A major marketing push was launched and last week France-Soir printed 500,000 copies in an attempt to boost waning circulation, selling them at half price. "I'm not a charity worker or a patron," said the younger Pugachev to AFP (March 16). The purchase price for France-Soir was €50 million.

Russian-born – and London residing – billionaire Len Blavatnik is reportedly a bidder for MGM Studios and Miramax.Both Hollywood institutions are up for sale, MGM floundering under private equity debt and Miramax, owned by Disney, underperforming.

“At the right price,” said Blavatnik to the Financial Times (March 15) regarding MGM, “it's a great property.” Access Industries holds stakes in UK TV company Top-Up TV and Warner Music. “In three to five years I would like to have more media and telecom assets than I do now, particularly in digital,” he added. The 2010 Forbes list ranks Blavatnik at number 93. In addition to Top-Up TV and Warner Music, Access Industries is a majority stakeholder in Russian television producer Amedia and Israeli television producer R-G.E Group.

One of the most daring media deals from a Russian billionaire was Alexander Lebedev’s take-over of the London Evening Standard. Though he paid only a symbolic 1£ for the newspaper, investment in staff, marketing and huge print-runs have been substantial. UK media watchers have been sitting on the edges of their stools waiting for completion of Lebedev’s take-over of the Independent. Both UK newspapers have been wallowing in debt and suffering from shrinking revenue.

Mr. Lebedev has not, at all, forsaken Mother Russia. With former Soviet Union president Mikhail Gorbachev, he owns the newspaper Novaya Gazeta. He’s recently launched two Moscow radio stations. Forbes says he has US$ 2 billion.

Are newspapers and television channels better for billionaires than boats? Russian billionaires seem to like them and, well, they have billions. Mexican telecom billionaire Carlos Slim, tops of the 2010 Forbes list, has a stake in the New York Times. It could be a trend.

See also in ftm Knowledge

Media in Russia

Media in Russia is big business and big politics. Media companies are consolidating as they move into new media and new territories. At the same time independence is still questioned. It's all changing. ftm looks at media in Russia and its neighbors, 72 pages. PDF file (March 2010)

Order Here