Vladimir Putin Explains Ban on Pay TV Advertising

During his annual news conference, Vladimir Putin explained that commercials on pay TV networks recently were banned at the request of large federal free-to-air stations. Meanwhile, cable TV subscribers face higher prices or poorer packages as content providers push to peg contracts to the dollar following the ruble's collapse.

"We didn't come up with the idea," Putin said. "That wasn't the authorities' initiative.

In late July, Putin signed a bill banning commercials on pay TV, which will come into effect on Jan. 1, 2015.

The bill was said to aim at creating equal conditions for pay TV networks that generate revenues from both subscriptions and advertisements and free-to-air stations, relying only on commercials.

Over the months that have passed since then, pay TV networks operating in Russia have raised concerns about profitability of their business, while some, including CNN, said they were pulling out.

"The ad market is shrinking," Putin said during the news conference. "We had to choose whether to support federal [free-to-air] networks from the budget, which is already stretched, or give the networks a chance to take advantage of the shrinking market."

According to Putin, pay TV networks will have to learn how to make money and "persuade viewers to pay for [watching] them."

Meanwhile, on top of having to rely on subscription revenues only, major cable networks say that foreign content providers are putting them under pressure to increase tariffs.

Viasat, owned by Swedish media holding Modern Times Group, which is a key content provider for pay TV networks in Russia, is pushing to tie the value of its content to exchange-rate fluctuations, business daily Kommersant said on Thursday.

Earlier this month the company notified pay TV operators of the need to revise subscription packages or contracts, operators including MTS, Vimpelcom and Rostelecom, told the newspaper.

Options included pegging monthly subscription rates to the dollar or dividing current content offered in one bundle between premium and cheaper packages.

Current consumer contracts are fixed in rubles, meaning providers face bigger bills if they have to pay more for dollar-priced content.

A source at Vimpelcom told Kommersant that it had been in negotiations for some months on revising contracts and was now close to concluding those talks.

Viasat, which broadcasts eight of its 15 cable channels in Russia and the CIS, had not commented on the situation, citing client confidentiality rules. Market observers say the new ban on advertising on pay TV will cost Viasat 500 million rubles next year — more than $8 million at current exchange rates.