Yuri Sapronov / E. Novozhenina / RIA Novosti

"Yuri Sapronov increased his stake in Russian World Studios (RWS) from 49% to 70% of shares, AFK Sistema now directly owns 30% of this production company. Previously, Vladimir Yevtushenkov's holding controlled RWS through its subsidiary Sistema Mass Media (SMM), which reported the restructuring. Sapronov confirmed this information to Vedomosti.

This is a cashless deal that requires approval from the Federal Antimonopoly Service to complete.

SMM's decision to exit the production business is connected with the desire to focus on developing other areas of activity, the company said in a statement. "The production of TV series and films is a rather specific business, tied primarily to a specific producer, so it is optimal if the producer controls it himself and is responsible for the result," SMM President Gulnara Khasyanova explained to Vedomosti. Sapronov also says that as a result of the restructuring, he is receiving much more independence: "The production business requires operational freedom in decision-making, it is associated with high risks and the need to quickly make decisions on projects, rather than justify them through complex corporate business processes. We remain partners with Sistema, I am very happy with this." A source in Sistema also notes that the recently approved SMM strategy is primarily associated with the so-called new media, and content production for traditional distribution channels does not really fit into it.

Yuri Sapronov became a shareholder of Russian World Studios

Business

RWS is one of the well-known production companies, engaged in the production of TV series and films. Its main partner is Channel One. Last year, such RWS series as “Where Does the Motherland Begin” and “Pregnancy Test” were released on this channel. This year, the release of its film “Fighter” is planned, and several more films are in production.

RWS was founded in 1998 by Yuri Sapronov, Andrey Smirnov, and Olga Sinelshchikova. In 2007, Sistema and RWS formed a joint venture, with the holding receiving a controlling stake and Smirnov and Sapronov dividing the remaining shares. Shortly after Sistema merged its media assets into SMM a year later, the RWS studio was fully integrated into this subsidiary of the holding. Smirnov and Sapronov exchanged their RWS shares for a stake in SMM (each controlling 12.5%).

But in 2013, the process began to reverse. After much discussion and maneuvering with its media strategy, SMM decided to focus on the business of new media. RWS, with its production of TV series and films, did not fit well with this strategy. As a result, Sapronov exchanged his stake in SMM for a stake in RWS early last year and received 49% of the shares of the production company. Sistema now controls 96% of SMM shares, the rest is owned by Smirnov.

RWS has been the largest business within SMM for some time now, according to the company's annual report. SMM's total revenue in 2013 was $86.7 million, of which $57.2 million came from the production business. On the other hand, producing TV series and films is not a very profitable business in terms of returning money to shareholders. RWS only made a net profit for the first time in 2013 - $1.9 million. However, a source in the company says that such a low net profit was primarily due to servicing the debt load; the debts are now almost completely repaid.

SMM has not yet published its financial results for last year. A source familiar with the company's business says that SMM's largest business now is the company Stream. It is also more profitable: Stream's net profit in 2013 was $7.6 million with revenue of $11.6 million.

Khas'yanova also points out that without RWS, CMM will lose part of its revenue, but will increase the profitability of the business. In addition, the advertising market is in crisis and TV channels' purchases of content have noticeably decreased, she added.

Sapronov agrees that the situation is difficult, but points out that RWS has many new projects.

AFK Sistema gave Yuri Sapronov control over TV series producer