Will MTV buy out chief rival Muz-TV? Alfa Group has been pondering that question for months. Maybe years.
Ever since Alfa Group assumed full control of the floundering music television station in 1999, it has been searching for a buyer.
After two years of negotiations with several Russian and foreign companies, Alfa says there is one potential customer left standing: U.S. company Viacom, which controls Muz-TV's chief competitor, MTV Russia.
Alfa Bank board deputy director Andrei Kosogov said no formal offer has been made and the pace of negotiations is going slowly, with the two sides now meeting about twice a month, mainly trying to nail down an agreeable price.
"We consider MTV the most serious buyer," Kosogov said.
"We are open to them, tell and show them everything, so they have complete information on how [Muz-TV] works. But so far, unfortunately, they haven't made an offer that we're willing to bargain with."
If a deal fails to materialize, Alfa Bank Holdings Ltd. -- by way of its fully owned subsidiary and Muz-TV founder TV-Service -- would return to the drawing board and continue developing the channel and hope other buyers come calling in a year, Kosogov said.
Alfa bought a 35 percent stake in 1997, but saw the investment going down the drain. So it later attained full ownership, for an undisclosed sum, in order to more easily steer the company.
MTV Russia declined to comment on the possibility of a deal. Viacom, a media behemoth whose subsidiaries include CBS, Paramount Pictures and Blockbuster Video, also would not comment on the status of negotiations.
It's not clear what Viacom would do with Muz-TV, which according to Alfa has broadcast licenses in 19 cities, two transmitters on the Ostankino television tower and plans to plug into a cable network this fall.
One conceivable step for Viacom would be to launch a Russian version of its VH-1 channel, which targets older age groups, using Muz-TV frequencies and other leftover resources. A Viacom representative said that the company has recently launched eight VH-1 channels in other countries.
Muz-TV general director Ruben Oganesov estimated the worth of his channel at $50 million, while Kosogov put it at $20 million to $30 million. They said the channel broke even this year.
With the channel being sold, the mission of the current management would be complete, said Kliment Kolosov, deputy general director of Muz-TV.
Yet there is no hurry to sell, Oganesov said. "It is not like milk that spoils tomorrow. It's getting an increasing market share and is growing, rising in price, and there is no need to rush."
Kosogov made it clear that Alfa is not interested in hanging on to the channel forever: "We are an investment bank. Alfa Group in general doesn't do show business." Alfa does have a 25 percent stake in the CTC television station.
Muz-TV plays in more than 260 cities, compared to around 100 for MTV Russia. Behind Oganesov's desk is an ever-changing country map with flags stuck from east to west, including the Baltics, Kazakhstan and Moldova. Its musical lineup is 70 percent Russian, while MTV plays mostly Western tunes.
One sticky point a new -- and particularly foreign -- owner will have to address is Muz-TV's practice of taking payments from musical groups to play their clips. The result, says music critic Artyom Troitsky, is a playlist of less-talented, little-known artists.
"Unlike MTV Russia and any other civilized music channel, they rotate all videos for money. So it became an outlet for the worst kind of music," said Troitsky, who in 1999 turned down an offer to become artistic director at Muz-TV.
But Oganesov, who keeps Ella Fitzgerald and Glenn Miller playing in the background in his own office, said that faulting the practice of paid-for videos is misguided and that the nature of his business is to help groups and singers promote their music. He said 75 percent of revenues come from advertisements and 25 percent from promos.
"If an artist says, 'Hey, I'm putting an album out. I need PR. I need information support, etc.,' it's called promo. And everywhere in the world promos are paid for," Oganesov said, adding that large Western record labels like Sony Music also pay his channel to promote their artists. "We reflect the public interests of show business. We are an instrument for them," he said. "For that, you need to pay. It's logical."
Taking money for clips is seen as a widespread practice among Russian television stations. MTV and other music television stations in the West consider the practice unethical and pick the clips they air for their quality and the popularity of the performer.
According to Gallup Media statistics, both Muz-TV and MTV Russia have relatively small market shares. From January through August of this year, MTV had a 1.19 percent share of the market compared to 0.57 percent for Muz-TV. The rating was based on viewership in cities with 400,000 or more residents. The targeted age group was viewers older than 4 years.
"We and MTV work for a narrow television group," Oganesov said. "It's people who love music, and we are fighting for that audience." Or, to be more exact, advertising to that audience.
Would that fight end if Viacom buys the company? Muz-TV management insists that, regardless of what any new owner does with the station, whose full name is National Music Channel Muz-TV, Russia will have a country-wide music channel -- whether built by the same team or not. "Everything is developing. If someone wants to pay money and kill this, that's their right," Oganesov said.
Ever since Alfa Group assumed full control of the floundering music television station in 1999, it has been searching for a buyer.
After two years of negotiations with several Russian and foreign companies, Alfa says there is one potential customer left standing: U.S. company Viacom, which controls Muz-TV's chief competitor, MTV Russia.
Alfa Bank board deputy director Andrei Kosogov said no formal offer has been made and the pace of negotiations is going slowly, with the two sides now meeting about twice a month, mainly trying to nail down an agreeable price.
"We consider MTV the most serious buyer," Kosogov said.
"We are open to them, tell and show them everything, so they have complete information on how [Muz-TV] works. But so far, unfortunately, they haven't made an offer that we're willing to bargain with."
If a deal fails to materialize, Alfa Bank Holdings Ltd. -- by way of its fully owned subsidiary and Muz-TV founder TV-Service -- would return to the drawing board and continue developing the channel and hope other buyers come calling in a year, Kosogov said.
Alfa bought a 35 percent stake in 1997, but saw the investment going down the drain. So it later attained full ownership, for an undisclosed sum, in order to more easily steer the company.
MTV Russia declined to comment on the possibility of a deal. Viacom, a media behemoth whose subsidiaries include CBS, Paramount Pictures and Blockbuster Video, also would not comment on the status of negotiations.
It's not clear what Viacom would do with Muz-TV, which according to Alfa has broadcast licenses in 19 cities, two transmitters on the Ostankino television tower and plans to plug into a cable network this fall.
One conceivable step for Viacom would be to launch a Russian version of its VH-1 channel, which targets older age groups, using Muz-TV frequencies and other leftover resources. A Viacom representative said that the company has recently launched eight VH-1 channels in other countries.
Muz-TV general director Ruben Oganesov estimated the worth of his channel at $50 million, while Kosogov put it at $20 million to $30 million. They said the channel broke even this year.
With the channel being sold, the mission of the current management would be complete, said Kliment Kolosov, deputy general director of Muz-TV.
Yet there is no hurry to sell, Oganesov said. "It is not like milk that spoils tomorrow. It's getting an increasing market share and is growing, rising in price, and there is no need to rush."
Kosogov made it clear that Alfa is not interested in hanging on to the channel forever: "We are an investment bank. Alfa Group in general doesn't do show business." Alfa does have a 25 percent stake in the CTC television station.
Muz-TV plays in more than 260 cities, compared to around 100 for MTV Russia. Behind Oganesov's desk is an ever-changing country map with flags stuck from east to west, including the Baltics, Kazakhstan and Moldova. Its musical lineup is 70 percent Russian, while MTV plays mostly Western tunes.
One sticky point a new -- and particularly foreign -- owner will have to address is Muz-TV's practice of taking payments from musical groups to play their clips. The result, says music critic Artyom Troitsky, is a playlist of less-talented, little-known artists.
"Unlike MTV Russia and any other civilized music channel, they rotate all videos for money. So it became an outlet for the worst kind of music," said Troitsky, who in 1999 turned down an offer to become artistic director at Muz-TV.
But Oganesov, who keeps Ella Fitzgerald and Glenn Miller playing in the background in his own office, said that faulting the practice of paid-for videos is misguided and that the nature of his business is to help groups and singers promote their music. He said 75 percent of revenues come from advertisements and 25 percent from promos.
"If an artist says, 'Hey, I'm putting an album out. I need PR. I need information support, etc.,' it's called promo. And everywhere in the world promos are paid for," Oganesov said, adding that large Western record labels like Sony Music also pay his channel to promote their artists. "We reflect the public interests of show business. We are an instrument for them," he said. "For that, you need to pay. It's logical."
Taking money for clips is seen as a widespread practice among Russian television stations. MTV and other music television stations in the West consider the practice unethical and pick the clips they air for their quality and the popularity of the performer.
According to Gallup Media statistics, both Muz-TV and MTV Russia have relatively small market shares. From January through August of this year, MTV had a 1.19 percent share of the market compared to 0.57 percent for Muz-TV. The rating was based on viewership in cities with 400,000 or more residents. The targeted age group was viewers older than 4 years.
"We and MTV work for a narrow television group," Oganesov said. "It's people who love music, and we are fighting for that audience." Or, to be more exact, advertising to that audience.
Would that fight end if Viacom buys the company? Muz-TV management insists that, regardless of what any new owner does with the station, whose full name is National Music Channel Muz-TV, Russia will have a country-wide music channel -- whether built by the same team or not. "Everything is developing. If someone wants to pay money and kill this, that's their right," Oganesov said.