Alexander Rodnyansky

June 2008

CTC Media was founded in 1989 by the American entrepreneur Peter Gerwe. It was the year the Berlin Wall came down, marking the end of Communism. But the Russian television landscape was still operating under the Soviet system of state-controlled channels, used as tools by the government to disseminate propaganda.

CTC entered the Russian market as a pioneer. Rather than broadcasting its signal through a superstation, as all the existing channels did, CTC set up a network based on the U.S. model, linking together owned-and-operated and affiliated stations. CTC Network launched at the end of 1996 and targets viewers aged 6 to 54. Its signal is carried by more than 350 stations, reaching around 100 million people. With an average audience share in its target demographic of 11.3 percent, CTC Network is the fourth-most-watched broadcaster in Russia, after the state-controlled networks Channel One, Rossiya and NTV. It offers family-friendly programming and a balance of homegrown and acquired shows. Domashny, a network launched in March 2005, reaches some 63 million people and targets women 25 to 60 with an average share of 2 percent. This year, CTC acquired DTV, which reaches 60 percent of TNS Gallup-measured homes nationwide.

CTC Media also operates stations in Kazakhstan and Uzbekistan and owns two TV production companies. The two major shareholders in CTC Media are Modern Times Group and Alfa Group. CTC was among the first Russian companies to go public on NASDAQ and today it is still the only Russian media company listed on the NASDAQ Global Select Market.

Alexander Rodnyansky has been with CTC Media since 2002 and was appointed CEO in February 2004. He started his career as a documentary filmmaker and movie producer, won numerous awards and co-produced Academy Award-nominated films in 1996 and 1999. He talks to World Screen about the success and strengths of CTC Media.

WS: How is CTC Network positioned in the Russian TV landscape and who do you consider to be your main competition?

RODNYANSKY: We are the leading independent, privately owned media company. The state-owned channels traditionally have been very strong in Russia because they are not economically driven but audience driven. That’s why they invest huge amounts of money into programming. They have been very strong traditionally because of their distribution—these are broadcasters that inherited the Soviet system of transmitting their signal across the whole Russian territory. Given the sheer size of the country, this is quite an advantage.

Therefore, our major challengers would be companies like Channel One [the state-run network previously called ORT].

In terms of business development, we are definitely the only economically driven company at the moment, the only publicly traded [media] company in the former Soviet Union. That’s why we have quite an advantage over all other companies. We have delivered great financial performance for many years. Our margins for the last six years have been 46, 47, 48 percent. This is one of the best companies in the whole industry, for sure.

Even though we are quite ahead of other companies in terms of financial performance, the market is very competitive. There is a huge consolidation process going on in the free-to-air TV market in Russia. There are already six major players, and CTC Media is definitely the largest privately owned one but it’s just one of six. And there are a couple of new companies that managed to acquire television broadcasting licenses. In Russia, there is no lack of money, this is very important, so the competition is very much driven by the quality of the product.

WS: How would you summarize the strengths of CTC?

RODNYANSKY: The brands—since we first launched the company we have been very focused and concentrated on the brands. That’s why CTC is very well known. It is one of the best-known brands across all industries in Russia. It is dynamic, young and energetic and skewed toward a young audience with a very contemporary style. CTC is the only network made after Soviet times. It is completely different from traditional Russian networks. It is very much based on a balance between international and domestic programming. It’s very family friendly. So CTC is one brand and Domashny network, which we launched [in March 2005], is a female-oriented channel with quite a wide range of programming. Domashny is already very well known. It’s very well established and that is why the strength of the company is the premium audience we deliver to advertisers, the loyal audience we have concentrated around our brands, and our ability to monetize this audience into a great financial performance.

WS: Tell me a little about the advertising market. It’s growing faster than in Western European territories, right?

RODNYANSKY: Much more, definitely. The Russian advertising market has grown 35 percent every year for five years. In the last six years it has grown from being the 20th ad market in Europe to being the sixth, just behind the five big Western European countries. And last year it amounted to $4.4 billion and there is ample room for further growth. If you look at the percentage of GDP that advertising accounts for, it’s much lower than its Eastern European peers like Poland or the Czech Republic or Hungary, without even talking about Germany or France, so you can see how huge the potential for growth is.

And you can definitely see how important television is in Russia, because given the sheer size of the country, there is no national distribution for newspapers, for magazines, for radio, so television is the only truly nationwide medium. If you are a national advertiser, and want to launch your brand in Russia, you would definitely go to TV. And if you look at ad prices on a cost-per-thousand (CPM) basis, you would understand why television has such potential to grow even more because it’s cheaper. I know it sounds strange for people from the West, but television is cheaper than radio or newspapers or magazines. It’s a $2 CPM for television and $12 for magazines because television reaches the entire country. It makes television enjoy nearly 50 percent of the total above-the-line advertising pie. And television has the ability not just to sustain but to increase its share, because if you look at similar markets, Brazil or Mexico, also considered to be emerging markets with a similar television [landscape], the television share of the total ad market in those countries is 59 percent and 54 percent respectively, so we believe the Russian market has the potential to grow further.

WS: The programming on CTC is a mix of original productions and of imports. What imported programming are you interested in buying?

RODNYANSKY: Actually, let’s say one very important thing: the Russian market is very much driven by domestic content. If you look at the prime-time schedules of the six leading networks in Russia, you would hardly find an international program. It’s always homegrown shows, but they could be based on proven international formats or original ideas.

CTC is the only network among the leading companies that tries to come up with a mix of international and domestic programming. That’s why CTC has Desperate Housewives, Grey’s Anatomy, Heroes and Smallville. We have House on Domashny. The network we are about to acquire in Russia is very much affiliated with CSI and they just launched Californication. But competition in the market is driven by original productions.

WS: You were the first Russian TV company to co-produce with international companies, particularly with Sony Pictures Television International, right?

RODNYANSKY: Mostly with Sony. We have produced with Sony more than 1,000 hours. We’ve been happy to deliver eight successful series to the Russian audience, like 200 episodes of a Russian version of Ugly Betty called Born Not Pretty. I know this sounds strange, but the Russian audience never liked sitcoms as a genre. We have been successful in delivering many adaptations of sitcoms like The Nanny and Who’s the Boss? to our viewers. They were done with Sony as well as some other series we have produced together—dramas, telenovelas. We have also had a successful cooperation with Disney. We’ve produced the Russian version of Home Improvement. That was quite a developed adaptation to create a specific world. Russian viewers always like recognizable characters in an environment that is natural to them.

WS: You have a good relationship with your audience?

RODNYANSKY: Absolutely, we have a very loyal audience, and that is specifically important if you consider the structure of the audience. CTC is traditionally one of the places for kids’ programming. We are very strong with the young demographic and we have a huge affinity for [them]. We focus on delivering the target audience and we have an affinity [the ratio of ratings in the target demographic to ratings for all viewers 4 and up] of 1.2 for CTC and even higher, 1.4, for Domashny. This is the highest level across the whole industry. That’s why we were able, and are still able, to deliver a market share that is much higher than the audience share.