Moscow News No. 15, April 24 - 30, 1997

Big Changes In Store for Russia's Newspapers
Leading mass-circulation Russian newspapers are gradually being acquired by new owners. Glaring political interests and conflicts lurk behind the normal market processes of management change and buying and reselling shares. By Yelena Rykovtseva Moscow News

Igor Golembiovsky Editor-in-Chief of Izvestia	Valery Simonov Editor-in-Chief of Komso- molskaia Pravda	Alexander Potapov Editor-in-Chief of Trud	Timofei Kuznetsov Editor-in-Chief of Rabochaia Tribuna

Big Guys
Valery Simonov, editor-in-chief of Komsomolskaya Pravda, arrived at work one day and discovered that he had a new boss. This final result ("final" mainly for Simonov's job at the newspaper) was preceded by a shady series of events. A while back Komsomolskaya Pravda became a closed joint-stock company and set up a managing board, consisting of journalists and administrators. Vladimir Sungorkin was appointed to head the board (which means all of Komsomolskaya Pravda's financial activities). Fifty-one percent of the newspaper's shares were divided up between its employees - unevenly, of course, depending on one's job - and the managing board was authorized to manage the remaining shares. During a shareholders' meeting last year, a decision was made to allow the council to transfer 20 percent of the shares over to Gasprom; an agreement which they never actually got around to signing. A new decision was brewing in the innermost depths of the managing board (or at least in the corner where Sungorkin was standing): to give the problematic 20 percent to Unexim bank. Only half of the board voted in favor of Unexim, and the deciding vote was up to Sungorkin. The other half of the council members (including editor-in-chief Simonov) were presented with a fait accompli.

It wasn't long before Sungorkin and company secured their position by acquiring a controlling interest in the newspaper. The shares were bought (or, to put it elegantly, "taken in trust") from the employees. Soon Komsomolskaya Pravda plans to hold another shareholders' meeting to adopt a new set of regulations, dismiss Simonov as editor-in-chief, and appoint Sungorkin in his place. The meeting is a mere formality, since its results are already obvious, considering the amount of shares that Sungorkin holds.

When Igor Golembiovsky, editor-in-chief of Izvestiya, learned that he had a new boss, he wasn't surprised at all. Golembiovsky couldn't help but notice that Lukoil was actively buying the paper's shares. Moreover, by acquiring the block of shares from the banks, Lukoil signed an investment program with Izvestiya and promised to do a lot of good for the country's most respectable newspaper.

Unlike Komsomolskaya Pravda, Izvestiya is an open joint-stock company, meaning that nobody needs permission from its shareholders or board to buy stocks - just as long as one has the money. And Lukoil has the money. Shares worth $1 each were bought by Lukoil for $7, and in the end the oil concern managed to buy out 41 percent of the newspaper's stock. But this is another story - the technology of buying, that is, buying back Izvestiya's shares from its original owners. And the result will also be a shareholders' meeting with the same predictable outcome. Lukoil will try to use its shares to take over the paper, and will demand that the managing board include four of the concern's representatives, and only three from Izvestiya. And this arrangement might have worked if Izvestiya hadn't stepped on Lukoil's holy of holies - Prime Minister Victor Chernomyrdin. Izvestiya committed a major faux pas when it printed an article that originally appeared in Le Monde (France's leading newspaper) about the Russian premier's colossal fortune, and its owner, Lukoil, simply panicked. The company's president Vagit Alekperov called one of Russia's top newspapers "yellow," and thus discredited the company in which he had invested dozens of millions of dollars. He also promised to suspend the investment program, which surprised Izvestiya even more, since the program had never even started. He then threatened to sell off his shares in the paper, but his words did not have the desired impact: After all, what makes oil magnate and coowner Alekperov any better than some other businessman? Judging by the way things at Lukoil are going, he's about as capable of running a newspaper as Izvestiya's people are of operating an oil well. Perhaps it just hasn't occurred to Alekperov that after Lukoil's people start censoring the paper (they have many untouchables in the Kremlin, the Russian White House, the Caspian Sea and the Transcaucasus), nobody will even want to read it anymore.

After observing the horrors that befell his colleagues, Alexander Potapov, editor-in-chief of Trud, decided to protect himself. Trud basically put off defining its status on the market to the very last minute. For a long time the newspaper's staff was thought to have been its founder. But it turned out that this concept was not even part of the new labor law! And now it must be determined who exactly owns the publication? Who is the legal owner of the building in downtown Moscow that Trud occupied? They decided not to set up a joint-stock company so as not to "rip the newspaper apart." The publication was given the amusing name of ANO - autonomous non-commercial organization. In April a meeting of the paper's journalists was held, during which the ANO's regulations were outlined and Potapov was appointed its editor-in-chief. Soon the paper's entire staff will be convened at a meeting, where it will vote on appointing the members of the ANO's managing board, which is expected to be one-third newspaper people, and two-thirds "outsiders."

Trud got angry at the NTV television channel for reporting that Gasprom had purchased the newspaper. "We're just starting to look for investors!" says the newspaper's management, cunningly. However, during off-the-record conversation with Trud's management, you can hear the following phrases: "The newspaper is giving 52 percent of its property to a publishing house that it is setting up, and the remaining 48 percent is going to Gasprom." One third of the observational council will also be people from Gasprom. Theoretically speaking, the true state of affairs at Trud will soon become clear: All we need is just one look at the list of candidates for the ANO Trud managing board, which will be submitted to the newspaper's staff conference for approval. Only a month ago, Rabochaya Tribuna, headed by Timofei Kuznetsov, became a closed joint-stock company. This newspaper, which calls itself "national industrial," has been maintaining close ties with major Russian concerns since 1990. At its first meeting, the new joint stock company elected its owner, in a manner of speaking. The block of the company's stocks (which, according to deputy editor Rafael Guseinov, is "substantial," but which other source - essay amounts to 51 percent) was handed over to Gasprom, with the shareholders' blessing.

Little Guys
If a journalist is fighting, with all his might, against some local housing and utilities department in an effort to defend the rights of his readers, this doesn't mean that the roof in his own building isn't caving in on him, or his own tap isn't leaking. If some publications have reputable and competent business inserts, this does not necessarily mean that their employees know anything about business. Not every Komsomolskaya Pravda employee who parted with his shares realized that from that moment onward he was no longer an active participant in the company's management procedures. Really, does anybody really bother to think about the consequences of such a move, when people like Sungorkin are prepared to pay up to $1,000 for a share that was originally bought for 25,000 rubles?! Just imagine the temptation for, say, a member of the editorial board who holds 1 percent (or 80 shares) of the newspaper's stock. And those uncompromising board members who refused to sell their shares for any price were given an ultimatum: either the shares or your job. If he agrees to sell, the employee is promised to be kept on as a board member, albeit in a lower position (the first deputy editor in-chief and section editors will be demoted to political columnists). However, under no circumstances does the new head of Komsomolskaya Pravda plan to keep Pavel Voshchanov or Valery Simonov.

Izvestiya's employees were also urged to sell off their shares in the paper. And over there you can bet that no one will tell you how many shareholders (apart from corporations like Lukoil) will take part in the upcoming fateful meeting. According to some vague sources, the newspaper's shares are currently in the hands of 500 private individuals, although it's hard to say exactly who these individuals are. "This is a common problem with scattered shares!" sigh the newspaper employees. Not every Trud employee is aware of the privileges that come with being a member of the ANO "collective." Some (i.e. the management) were shocked by what happened to Komsomolskaya Pravda, while others (i.e. ordinary employees) realized that a share - a piece of newspaper property - is not an abstract Editor-in-Chief of Komsomolskaya Pravda, Valery Simonov Editor-in-Chief of Trud, Alexander Potapov Editor-in-Chief of Rabochaya Tribuna, Timofei Kuznetsov Editor-in-Chief of Izvestiya, Igor Golembiovsky concept, but that it can sometimes mean real money. Those who were still wavering were assured that the ANO means more lucrative earnings.

The Bigger Big Guys
In terms of civilized market practice, there's nothing wrong with the fact that financial magnates are buying out the media. After all, they're just exercising their right to do what they like with their own money. In one case (Komsomolskaya Pravda) you have the bank buying shares secretly, but through a legal deal with the company management. In another case (Izvestiya), the concern conducts a hostile takeover, which may not be the best option for the newspaper, but is an absolutely legal method of purchasing its shares. In the third case (Trud), the concern is only preparing to become the owner of its publication by acquiring a controlling interest of its shares, like it did with Rabochaya Tribuna. This process even has some advantages, since the periodical's true owners are now oper to public eye. This makes it possible to institute anti-monopoly laws for the press, like in other countries, where one company can have, say, only one newspaper, one television studio and a radio station.

On the other hand, it's obvious that the current purchasing of the printed media isn't about making things easier for the lawmakers; it has more to do with a large-scale plan devised by people who realized how instrumental the media was during the last presidential elections, when it raised a certain candidate's rating from 6 percent to a winning result. After Komsomolskaya Pravda offended Anatoly Chubais, he took it in hand with help from Uneximbank. "We crossed the line with Chernomyrdin, and we were immediately swept away by Lukoil," said a member of Izvestiya's editorial board. And I received direct proof of this only yesterday, when I asked a high-ranking official from the Russian White House if Lukoil, being a semi-state company, had coordinated its plans about Izvestiya with the government. The answer was "Yes."

Incidentally, Lukoil, which some say dished out approximately $35 million for 41 percent of the newspaper's stock (7.5 million shares), has no immediate plans to resell its shareholdings to a buyer, who has already appeared on the scene. And it doesn't look like anyone will let Gasprom's dreams about taking over Trud become a reality either. Moreover, some say that the concern could even lose the Rabochaya Tribuna shares it was promised, especially since the deal has not yet been made official: Gasprom isn't on the Kremlin's list of potential owners.

Nikolai Dolgopolov, the first deputy editor-in-chief of Komsomolskaya Pravda, made the following appeal, from the bottom of his heart: "Colleagues! Beware! We have been taken over in only 48 hours. Other publications are next in line." Too late. The newspapers are already conducting shareholders' meetings. Recall the exultant voice of the radio announcer: "Work collectives are assembling all over the country."