Setting up a proprietary sales house bears the risk of declining bargaining power against advertising clients. VI due to its size and experience could ensure a strong position of the selling side in the powerplay between demand and advertising sales. Screen Digest therefore expects that CTC will initially have difficulties charging the same rates for its inventory as VI could achieve. It will take some time for the new sales house to be able to provide empirical evidence of its effectiveness and efficiency to advertisers and for advertisers to get used to a historical change where the vast majority of Russian TV advertising inventory is not sold via large external parties anymore.

However, whereas we expect CTC to moderately underperform in H1 2011, after an initial adjustment period, we do not see any negatives for CTC. In fact, we expect that regaining sovereignty over advertising inventory is a growth driver in the long-term as it increases transparency both for the broadcaster and advertisers and allows a closer interaction between audience research and advertising planning. Especially as the market matures and advertising prices will not rise near-automatically anymore, it will become harder to convince advertisers and agencies to pay higher rates. Audience research, evidencing advertising effectiveness in particular channel environments, is a crucial determinant. Furthermore, an in-house solution facilitates changes to advertising sales strategies. Currently, advertising inventory for CTC, Domashny and DTV is sold separately. However, an in-house sales solution would allow for easier bundling of these channels.

CTC Media will, however, not entirely end cooperation with VI. The broadcaster has announced it will draft a new contract with VI for use of its software platform, market intelligence and for back-office functions. Also, at least some regional advertising sales may remain in the hands of VI.