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20 Jul, 2007 03:52

Battle for Russian entertainment TV

Russian youth TV is gaining popularity in the domestic media market, with investors willing to pay above market rates for the country's top entertainment channels.

Analysts link the trend to the price hike for television commercials and say youth entertainment channels stand to benefit the most.

Music videos, talk and reality shows are usually what glues young people to the television screen.  And media investors have noticed and acted on this.

Last month, Vladimir Potanin's Pro-Media bought MTV Russia and VH1 Russia for $US 360 MLN. And recently, billionaire Alisher Usmanov bought 75 % of Mus-TV.

While both deals exceeded their market price, analysts say the investment is worthwhile.

“It is obviously not cheap but it still could be profitable. As the new advertising legislation employs which makes TV advertising pricing go higher some of the investors should switch from big federal channels to small ones to the smaller ones,” gave her prognosis Elena Rogovina, an analyst from UBS Russia.

The price hike on state-owned TV channels is linked to new legislation, which will reduce advertising time from 20 to 9 minutes starting January of next year.

And since advertisers have to pay more, they are also likely to be picky about where their commercials air. Channels with large and young audience tend to be their top choice.

Leonid Yurgelas, General Director of MTV-Russia says advertisers sponsor programs that they believe can drive their sales.

“For example Juicy Fruit, they have been sponsoring the 12 interviews, a program that we have, where we invite 12 people that express their opinions on the videos they watch. Right now they are even creating a sort of community of angry buyers of Juicy Fruit after they sponsored this programme. That is why these produces want to target the audience that watches the channel,” explained Mr Yurgelas.

Advertisers on MTV-Russia include large global firms such as Coca-Cola as well as Russia's main mobile operators. The channel's market share for the 11-to-34 age group is 5 %.

More and more Investors bid on entertainment channels but their will depend on how successful such channels are in recruiting new, young and loyal fans. Otherwise, the viewers could simply turn off their TV sets.