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12 May, 2011  ▪  Lesia Hanzha

Lords of the Air Waves

Major redistribution of radio waves is underway

A new powerful player has come to the radio market, the National Radio and Television Council (NRTC), which granted the state-owned DP Novyi Obriy as much as 55 frequencies, all at once. This is intriguing as 55 frequencies make a powerful FM network, although DP Obriy is an unknown broadcasting company which submitted an unimaginative proposal of musical and news radio for the tender – its 80% music, 20% information and a Superradio logo made a combination which was nothing new to the industry. The frequencies were taken away from a veteran radio station, Radio Melodia. After this decision by NRTC, Radio Melodia is threatened with disappearing from the air. The Ukrainian Week has attempted to come to grips with the radio maze.

What happened?

Notably, none of the biggest radio networks have commented on the situation. Statements by Novyi Obriy also hardly add any clarity. According to company Director Oleksiy Karpenko, he founded Novyi Obriy jointly with TOV Joint Media Group. Mr. Karpenko is a well-known manager, yet he is clearly in a wrong category to quickly win a huge network through a tender. Joint Media Group is owned by Cyprus-based Vancoviar Holdings Limited, but there is nothing more except that we guess about who stands behind the founding company as commercial secrets are kept in safe place.

There are two scenarios as to why they could have received this generous gift from the NRTC.

The first scenario is commercial suggested by Radio Melodia in its public appeal to SBU Chairman Valeriy Khoroshkovskiy. Melodia implied that the founders of the unknown Novyi Obriy could be affiliated with NRTC members and requested the SBU to investigate this. Despite being unpopular on the market, this scenario has certain grounds to be considered truthful: NRTC members were more than once suspected of speculating on frequencies. Earlier, digital multiplex MX-4 which included eight digital channels was tendered in a similar manner to an unknown player. Sometime later, the latter tried selling the channels for a so-called commercial price of nearly US $20mn each.

According to a more popular scenario about the origins of the new super-radio broadcaster, the network went to somebody with powerful political protection. It remains a secret who is the person granted with no hint of doubt or hesitation a ready-made second biggest network after Retro FM after presenting a weak project. There are two theories, both still unconfirmed. One mentions the family of President Viktor Yanukovych; the other involves Rinat Akhmetov, the owner of SCM (System Capital Management). No matter who, sources in the radio business are certain that these individuals are second or third level people in the highest echelons of the state, if not the first.

It would seem that big politicos have entered the radio market injecting cash from outside. This is fairly surprising, though not incidental. It’s surprising because the radio business has never generated windfall profits. It’s not oil, steel or telecommunications. According to the Ukrainian Advertising Coalition, all the radio stations earned a total of nearly UAH 200mn last year. “Now, even this little amount will have to be divided among even more players,” says Kateryna Miasnykova, Executive Director of the Independent Association of Television and Radio Broadcasters (IATRB).

What are the possible prospects of the new network? One would assume, the owners are going to develop it and then use it as a tool of influence. This explains the invasion of Ukrainian political high-fliers into the radio market – obviously, they have run out of TV frequencies.

If the new radio station is really intended for political influence, then it makes sense for the new player Superradio to change its programme concept as the balalaika, the label used for this music format by professionals, cannot exert too much influence. “Arranging talk-radio on these frequencies would make sense,” says Kateryna Miasnikova based on the arguments that mainstream music is well represented at radio stations, whereas the offering of purely musical shows becomes less interesting as listeners prefer “music +” formats.

Yet, another option – build and sell – is much simpler. According to estimates by Anatoliy Yevtukhov from Business Radio Group, an investment of US $1mn into the technical resource of a radio network) now would permit the selling of the the network for US $20mn in a years time.

The last scenario is the easiest and most cynical but “monetisation of political influence,” a diplomatic name for this kind of speculation, is nothing new to the media market.

Waves of influence

Mykola Bahrayev and Viktor Pinchuk, the owners of Tavr holding, have the most political influence in the radio industry today. However, both Tavr, and other media assets owned by Mr. Pinchuk jointly with Mr. Bahrayev are strictly business oriented: they give neither windfall subsidies, nor abysmal cash flows “for resolving issues.” Before Ukrainian Media Holding (UMH) swallowed Nashe Radio, Tavr was the undeniable leader in the market.

Its competitor UMH is not publicising its political links. The official owners of its press and radio assets are Borys Lozhkin and Valentyn Reznichenko who runs the radio group. Yet, the so-called partnership is typical for many UMH projects. For instance, market participants argue that Petro Poroshenko is a partner in some of its radio assets.

The biggest player in the second group is Business Radio Group which includes Shanson, Sharmanka, Music Radio, as well as Kyiv-based Business Radio, Renaissance, and DJFM, run by Anatoliy Yevtukhov. This group has no visible political connections.

The remainder includes TRK Lux which started to slowly expand Primedia, a network of five frequencies in Western Ukraine, and is linked to Lviv Mayor Andriy Sadoviy; Radio Era, the only talk radio among commercial networks which belongs to Andriy Derkach’s Telegraph media holding; and Gala-Radio, a small network of 18 radio stations owned by US citizen Joseph Lemire.   

A special place belongs to Stanislav and Andriy Karpiy’s business holding, which includes Radio Melodia whose frequencies have been tendered out recently, meaning it will disappear soon, and Perets FM. The company has no reliable protection, so it has fallen victim to the typical Ukrainian selection. This is the first case in the history of the media market where the entire network has lost its license when its frequencies were quickly tendered out. The NRTC recommended Radio Melodia to participate in the tender for its own frequencies but eventually gave them to Novyi Obriy.

 There is also the state-owned National Radio Company of Ukraine (NRCU). Last year, the Cabinet of Ministers authorised Taras Avrakhov, former President of Andriy Derkach’s media holding, to run the NRCU. According to market participants, this meant that Era was able to control the NRCU. Nevertheless, keep in mind Avrakhov’s career as between December 2002 – May 2004, he worked as press-secretary for Prime Minister Viktor Yanukovych. The NRCU laid high hopes on the recent frequency tender because it has poor FM coverage and mostly broadcasts through the cable network. Cable broadcasting had almost withered but the sale of cable radio network operator Ukrtelecom to private investors has made its future prospects even less promising. To unwire all of its three channels, the NRCU needs 270 full-scale frequencies. The NRCU’s administration has filed this request both to the Cabinet of Ministers, and to the NRTC. Eventually, the NRCU received only 17 free broadcasting segments on frequencies in small towns but not a single full-scale one even though it had submitted the highest number of applications – 102.

Wasted quotas?

Another big debate on the radio market broke out after parliament attempted to cancel the 50% quota on the broadcasting of Ukrainian music. The radio industry does not deny that it has supported the bill sponsored by Olena Bondarenko, a people’s deputy from the Party of the Regions.

Ukrainian music as understood by music critics and Ukrainian music played on the radio are two different things. Under the Memorandum between radio broadcasters and the NRTC, all music produced before 1991 has been labeled Ukrainian music and is understood as the common heritage of Ukraine. This ruling also covers authors, both performers and composers or lyrics writers, who were born or live in Ukraine and produce their music here. This means, that the Soviet anthem or a song by Zemfira recorded at Yevhen Stupka’s studio are included within this definition.

This approach makes the cancellation of quotas extremely inconvenient for composers who have Ukrainian passports but write songs for Russian pop-singers as they have been the group enjoying the greatest preferences on air from the 50% quota requirement and the highest royalties from the public performance of their songs. Cancelled quotas will also hit hard various pop-bands with glamorous girls, the products of powerful producers who used the quotas as an effective mechanism to promote their bands on radio.

Who owns what?

How the radio market was distributed (without DP Novyi Obriy)

According to TNS estimates of share of radio network listeners throughout Ukraine; 2-3 waves. 2010.

Tavr Media

Russkoye Radio, Hit FM, Kiss FM, Radio Rocks

29.03%

Mykola Bahrayev (PR), Viktor Pinchuk

Ukrainian Media Holding

Retro FM, Evropa Plus, Avtoradio, Radio Alla, Nashe Radio

29.97%

Borys Lozhkin

Business Radio Group

Shanson, Sharmanka, Music Radio, Kyiv-based Music Radio, Business Radio, Renaissance, DJFM

15.71%

MFM

Radio Melodia, Stylne Radio, Perets FM

6.43%

Stanislav and Andriy Karpiy

Lux FM

7.99%

Andriy Sadoviy, Lviv Mayor

Ukrainian Radio-1

7.09%

Cabinet of Ministers of Ukraine

Radio Era FM

2.07%

Andriy Derkach (PR)

Gala Radio

1.71%

Owned by US citizen Joseph Lemire

*no political links seen, as in other cases where political links are not  separately specified


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