In September 1999, when Pizza Hut announced its logo would be emblazoned on the side of a Russian rocket, it seemed that a new and potentially lucrative era in Russian "space marketing" had dawned.
Pizza Hut's logo may yet fly, but it will not have been a smooth ride into space. Russian efforts to use spacecraft for marketing purposes have bogged down in a morass of disputes and litigation.
In late 1997-early 1998, the then Russian Space Agency (RSA) decided to use such marketing as a source of extra-budgetary support to the financially strapped Russian space program. Since RSA as a government organization could not be directly involved in commercial activities, it created a company called the Space Marketing Center (SMC) to handle such marketing and advertising.
A troubled history
Another founder of this center was Vladimir Yelagin, the governor of Russia's Orenburg region. Yuri Cherkasov, who had once been an economic adviser to the governor, was appointed SMC’s director.
In January 1998, RSA signed an agreement that gave SMC "control over the international marketing of space products and space services." It stated that "RSA undertakes to never grant any similar authority and functions to any third party on the territory of the Russian Federation and abroad."
In April 1998, RSA granted the center rights to space advertising using the International Space Station's Zarya control module, which was launched in November 1998. "We had full trust in SMC and expected it to do a good job," agency spokesman Sergey Gorbunov said in a recent interview with SPACE.com.
The center, however, according to Gorbunov, failed to meet its obligations to RSA and generated no revenue for the agency.
"What these guys wanted is the agency to find clients for them so that they would just get a piece of pie," said Gorbunov. "But SMC was created just for the opposite reason: the center was supposed to bring clients and money to RSA."
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The agency tried to alter its relationship with SMC. In May 1999, RSA was organizationally restructured and became Rosaviacosmos (Russian Aviation and Space Agency). This restructuring was followed by a reconsideration of all the agreements signed between Rosaviacosmos’ predecessor and its contractors. The new status of the agency also allowed it to conduct its own commercial activity.
"We tried to contact the center several times to clear up our relationship with it. Guess what? We could not even locate it," said Gorbunov. "We could not find neither its address, nor its phones."
According to Cherkasov, Gorbunov had his home number and could always call him. Gorbunov, however, denied this statement, and stated that he would not want "informal relations" with the director of SMC.
Pizza Hut problems
Tensions between the two organizations increased over the prospect of a Pizza Hut logo being placed on the Proton rocket that would deliver the Zvezda service module to the International Space Station. The Pizza Hut deal, which reportedly is worth more than $1 million, was signed directly with the Khrunichev Enterprise, the manufacturer of Proton rockets.
The deal became possible because of the joint efforts of the U.S. company Space Marketing, Inc., and its Russian counterparts, Orion-Space and Planeta-Zemlya. (Space Marketing Inc., based in Georgia, is unrelated to the Space Marketing Center.)
In October 1999, Rosaviacosmos informed Pizza Hut that SMC had no exclusive rights to advertising on Russian spacecraft. At the time, however, the agency's agreement with SMC remained in effect.
The following month, Rosaviacosmos sent Yuri Cherkasov a letter telling him the agency would like to cancel the agreement. According to Gorbunov, the letter was returned to the sender.
In January 2000, Rosaviacosmos informed the SMC that its failure to respond to the previous letter within a month gave the agency right to cancel the agreement and cease any official relationship with the former.
However, SMC continued to assert that it had exclusive rights to space advertising in Russia. On May 30, the center claimed that any display of a Pizza Hut logo on a Proton launch vehicle would be illegal. Moreover, it threatened to sue Pizza Hut.
"Pizza Hut violated…Russian federal law," said Cherkasov in an interview with SPACE.com. According to Cherkasov, SMC’s lawyers will most likely file an official lawsuit against Pizza Hut before the launch of the service module, which has been scheduled for July 12.
Vyacheslav Mikhailichenko, a deputy spokesman for Rosaviacosmos admitted in an interview with SPACE.com that the agency made a number of legal mistakes in its relationship with SMC. "SMC may have a reason to sue Rosaviacosmos, but why is it causing a headache to Pizza Hut?" he said.
According to Mikhailichenko, SMC's threat of a lawsuit is a "bluff," an attempt to get the U.S. company to back away from the project rather than face litigation.
At present, however, Pizza Hut's preparations to fly its logo continue as planned, says Sergey Zhitsov, director of public relations at the Khrunichev Enterprise. He notes that Pizza Hut has already paid Khrunichev more than two-thirds the sum of the contract.
A Pizza Hut spokesperson in the U.S. could not be reached for comment.
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