Pearson PLC (ADR) (NYSE:PSO) and News Corp (NASDAQ:NWSA) are faced with a tough dilemma of whether to terminate operations in Russia or to follow the strict rules which limit their ownership.
Some of their media counterparts have already made their decision. CNN International resumed its airing in the country but without any advertising. The giant media company returned just a few months after deciding to wrap up protests. Other companies had other ideas up their sleeves. Sanoma Oyj, a media company from Finland, announced that it has already traded its share ownership in Vedomosti.
The media industry did not respond positively to Putin’s new draconian laws. The new regulations dictate that media firms are expected to have 20% ownership in foreign firms. The law will be put into full effect in 2016. Additionally, the law placed a ban on any forms of advertising on Pay TV platforms.
American media house, NBC Universal reported that it was terminating its Russian Pay TV trade following the ban on pay TV advertising. The company justified its decision with a statement that the law was too challenging, and it rendered the economy unfavorable. Most of the media companies were outraged by Putin’s new law.
Sanoma’sspokeswoman Kristina Eriksson reported that the sale of the shares that the company owned in Vedomosti did not have a correlation with the harsh economic conditions. The company, however, confirmed that it is in the process of reviewing the consequences of the institutionalized law.
Some companies are already considering clever ways to go around the situation. Wall Street Journal and Financial Times plan on maintaining a 10% shareholding while the rest will be distributed to the editorial staff. The two companies may continue to get revenues from Russia through Vedomosti if they enter into a contractual agreement for an operating license. The decision by the Russian government will have overwhelming effects on the media industry in the country.
