The Dark Side of Murdoch's Russian Billboard Business
By Simon Shuster
Pieces of Rupert Murdoch's empire continue to fall away. Last month, as British police continued to investigate phone-hacking claims against the News of the World, the media magnate sold off his Russian billboard company, News Outdoor, for around $270 million, less than a fifth of the value it had three years ago. The sale marked a quiet end to one of Russia's oddest corporate sagas, and looking back, the troubles of the British tabloids seem almost tame compared with the murder and corruption scandals in the Russian billboard market, which Murdoch's company dominated for nearly a decade.
By all accounts, the unexpected break for Murdoch in the Russian ad market came in 2002 after the assassination of Vladimir Kanevsky, then the billboard king of Moscow. In February of that year, at an intersection near the Kremlin, a man in a black ski cap walked up to Kanevsky's car and pumped five rounds into his head and chest. Because of a weapons check at the security firm that protected him, Kanevsky's bodyguards happened to be unarmed that day, and the killer managed to escape. But aside from this peculiar detail, the fact of the murder was not extraordinary. Kanevsky had a lot of enemies, and hired hits were still a fairly common way of resolving disputes in Russia, which had not yet tamed the capitalist free-for-all that followed the Soviet collapse. Between 1996 and 2004, at least 11 Russian advertising executives were killed or wounded in contract hits, with car bombs and knifings among the methods used. Only two of those crimes have been solved.
For Murdoch, the killing of Kanevsky presented a surprise opportunity. The media mogul had acquired News Outdoor less than two years earlier, in November 2000, from a group of Russian businessmen, and had given the reins to Maxim Tkachev, a seasoned operator in Moscow's business circles. Tkachev had started out producing and selling bootleg CDs of bands like Deep Purple and Pink Floyd in the late 1980s, and went on with a group of college friends to create the billboard firms that Murdoch would later acquire. Less than two years after the deal, Tkachev had made News Outdoor the leading player in practically every major Russian city except for Moscow, where Kanevsky's company stood in the way.
The two men had known each other since 1995, when both were starting out in the billboard business. "[Kanevsky] was what I would call a hooligan, but a smart one," Tkachev says. "He was always willing to negotiate, and his business earned my respect." But one thing Kanevsky had never talked about was a desire to sell his assets, which included the most lucrative outdoor ad space along Moscow's central drags. His murder meant it would soon go on the market. "I had a revelation that it was time to get out," recalls Kanevsky's partner, Mikhail Lerner, who spoke to TIME by phone from his vacation home in Sicily. "I decided to go into a cleaner business — digital technologies."
But Tkachev was not so easily spooked by the violence in his industry, even after a hit man came for him in June 2002. At the time, News Outdoor's offices were housed in an old Stalinist building on Moscow's Leningradsky highway, a hulking mass of yellow stone adorned with crests of the hammer and sickle. As Tkachev hurried into the entryway one morning, he was met by a man dressed like a newspaper vendor. As Tkachev recalls, the man raised his arm as if to offer a free newspaper, and then fired one round into Tkachev's chest from a gun concealed beneath it. When he tried to fire again, the pistol jammed and Tkachev survived.
Murdoch was furious over the incident. He sent a letter to Vladimir Putin, then Russia's President, demanding a thorough investigation. But it did little good. No one was ever charged with ordering the murder. A few months later, after having surgery to remove part of his lung, Tkachev dove back into the billboard business, and by the beginning of 2003, talks were well under way to acquire two-thirds of Kanevsky's company under terms that were highly unusual for Murdoch's News Corp. There was no time to do due diligence or have a retention period, as would normally take place before a major acquisition in the West. "They wanted the money now, and this was nonnegotiable," Tkachev says.
So News Corp. agreed to lend its Russian company an undisclosed sum of money to buy the dead man's assets. Salim Tharani, who was News Outdoor's financial director in Russia at the time, says the deal was an incredible bargain: "They could have easily paid three or four times as much, because that deal made them the dominant player [in Moscow]. They could effectively dictate pricing after that." Never before had a foreign firm taken such a position in the Russian media industry.