From Peter the Great to Vladimir Putin, the State of Russia’s mass media has stayed much the same...until now. The 21st Century has seen a series of developments in the magazine industry. Christopher Kenneth reports

To Peter the Great, what was later to become known as the “mass media” was a pet project. After his epochmaking decree “Means of Notification of Foreign and Internal Events,” the Tsar sanctioned the publication – and personally edited the first edition – of Vedomosti, the first official news periodical in the whole of the Russian Empire, on 13 January 1703. It was a government mouthpiece, and, as such, was never short of financing.

In some ways, little has changed. Today, a daily newspaper of the same name, published jointly by the Financial Times of London and the Wall Street Journal of New York in partnership with a Dutch publisher, has a circulation of 40,000, but can hardly be called part of the “mass media” in a country with more than 100 million educated readers. Nevertheless, like its namesake, it’s also not short of funding.

A little over two hundred years after Peter’s enterprise, Vladimir Lenin and his Bolshevik comrades had similar intentions regarding the media when they came to power in 1917. They seized the means of mass communication after overpowering the Avrora warship guarding the Tsar’s Winter Palace in Petrograd (later Leningrad and, now, St. Petersburg) as the October Revolution spread, and the communists used the mass media as propaganda tools against their enemies, until being driven from power in the early 1990s.

In the Soviet Union, nothing in the media escaped the scrutiny of the state: Everything was done in line with the Kremlin’s instructions on how editors should use the right tone to drive home the official message. This trend for the government to try and control the media is still very much alive. Today, most electronic mass-media outlets are either wholly or partly, directly or indirectly, owned by the Russian government; a tendency that has only strengthened since Vladimir Putin became president in 2000.

The media’s oligarchic era

When communism collapsed in 1991, most Russian publishing houses – unacquainted with having to work in a competitive environment and no longer receiving state subsidies – soon became debt-ridden. Consequently, they were easily swallowed up by the budding class of oligarchs in the mid-1990s. Thus began a distinctive era in Russia’s printmedia industry – the era of the oligarchs. They, like the communists before them, saw the mass media only as a means to an end. The oligarchs employed them as a tool for image-making and battles over state assets and politics.

It was the oligarchs who introduced socalled “black PR,” paid-for articles and the now-dreaded kompromat – compromising materials that are capable of damaging opponents’ reputations – in the media. The oligarchs eventually destroyed whatever public trust Russians had left in the mass media after 70 years of communist misuse.

At the peak of this era, holdings affiliated with Boris Berezovsky and Vladimir Gusinsky personified the oligarchy‘s foray into the media. Both have since been forced into self imposed exile in the West, following the Kremlin’s winner-takes-all battle against them, and Gusinsky has been arrested by the Greek police. This has paved the way for others to get into the act, such as Potanin’s Inteross, which now controls a substantial share of the local media market through its affiliated Prof-Media.

The oligarchs’ role in post-Soviet media has had both a positive and a negative impact, but mostly the latter. On the positive side, the oligarchs’ groups invested a great deal of money into the industry, and helped facilitate the development and stability of the sector. On the minus side, however, most of these oligarchs’ investments were motivated by overt politics.

Talking to The Russia Journal, Viktor Shkulev, chairman of Hachette Filippachi Shkulev, whose glossy publications include the Russian-language versions of Elle, Maxim and Marie Claire, said: “Almost everything the oligarchs have done in the mass media has been overshadowed by their political agendas, aimed at satisfying their own, or colleagues, special interests.” Before concluding: “In my opinion, this practice has been wholly detrimental to the industry in general and to its conscientious practitioners in particular.”

On the path to recovery

The industry is still trying to come to terms with the yoke of oligarchy, prompting increasing cases of editors-in-chief who have openly challenged interventions into their editorial lines, often resulting in them being fired or resigning. For example, Andrei Chugunov, the editor-in-chief of Nizhninovgorod Rabochy, a local publication belonging to Inter Media Group, resigned over a disagreement on editorial policy and ‘outside interests’ in 2001. Similarly, Igor Golembiovsky, former editor-in-chief of Noviye Izvestia was fired for speaking out by the paper’s majority shareholder, Oleg Mitvol, in February 2003. Golembiovsky claims that Oleg Mitvol was used by the Kremlin to orchestrate the attack on him over Noviye Izvestia’s harsh editorial line against the government.

Most advertising and publishing executives agree that securing financial independence is the only way to gain a truly independent Russian media. And there have been promising signs that finances “not linked to oligarchs and the government” are gradually coming to market. Financial performance over the past two years has shown that the print media sector has not only recovered from the ruins of the 1990s, but is also able to post one of the world’s fastest growth rates, fetching $590 million in advertising revenue in 2002 alone, according to Russian Association of Advertising Agencies (RARA).

This translates to about $380 million of advertising revenue to newspapers and $210 million to magazines, according to RARA’s president, Vladimir Evstafiev. The sector’s gross turnover for 2002 looks even more impressive after sales and subscriptions figures of $1 billion to $1.3 billion are included. The magazine segment accounted for about 35-40% of the print industry’s gross annual turnover. And RARA is confident 2003’s ad revenues will exceed 2002’s. Some $330 – $340 million were garnered in the first half of the year, an increase of 27% over 2002.

Another aspect of the bullish print media market is an increase in the proportion of local advertisers. Said Hachette’s Shkulev: “Previously, foreign advertisers dominated the print-media advertising market, but today, the market has changed. Domestic advertisers now control over 60% [of the market].”

Magazines see radical changes

“The Soviet print media in general were seen as a means of propagating communist doctrines in society all the way down to the grass-roots level,” said Shkulev. “This means decisions on content, print runs, areas of distribution, target audience and so forth were made at the highest political level.”

In the Soviet era, every magazine targeted a highly specific audience. Rabotnitsa [Working Woman] and Kristiyanka [Farm Woman] were meant mostly for women in villages. Za Rulyom [Behind the Wheel] was for drivers, Zdorovye [Health], was for people interested in health issues, Vokrug Sveta [Around the World] was for travellers and Ogonyok [Spark] was for the intelligentsia. “Today, things are different”, said Shkulev, recollecting his former job as director and, then, ceo of Komsomolskaya Pravda, which was privatised in the early 1990s: “There is not just a variety of publications in different spheres – there are different publications on each subject, providing alternative views and other information for readers interested in such topics.”

In 1999, the growing media industry became a part of the US-Russian Media Entrepreneurs Dialog, a programme initiated by Putin and US President George Bush to help define and execute reforms to attract investors and promote standards in Russia’s media industry. Arnd-Folker Listewnik, general director of ZAO Burda Publishing House and a German citizen, believes that since such initiatives there is no longer the serious division between Russian and German readership. “The tastes and needs of Russian and Western readers do differ in certain aspects, but they both value professionalism and the quality of what they read in magazines.”

Burda Moden first published its fashion magazine Burda in 1987. It has since become a major player in the sector, currently publishing 60 publications in Russia, of which 33 are magazines, including Cool, Lisa, Vot Tak and Playboy – acquired from Independent Media. Listewnik puts much of its success down to adapting to the local market and embracing the changes when they arrive: “Burda Moden is a successful Russian company with only three expatriates in its over-400 staff. Its publications content is therefore mainly defined by the Russian staff.”

Growing pains

Compared to the more mature magazine markets of the world, Russian publishers have achieved massive growth in the last decade – helped by rising disposable incomes, growing literacy rates and the proliferation of advertising. The Russian Press Ministry reports that approximately 12,000 out of every 40,000 registered print publications nationwide are magazines. However, most publishers agree that only 60%-80% of registered magazines are still in operation. Single-copy sales and annual subscriptions account for less than 30% of most consumer magazines’ revenue.

The majority of revenues come from advertising and other, unregulated, sources. The precise number of titles and their circulation figures are unknown and magazine publishers are known to exaggerate print runs.

The current laws regulating sale, distribution and commissions on print products are still viewed as too conservative by many, and an obstacle to business activity. Viktor Shkluv has called for such legislation to be made more transparent and free of restrictions,
saying: “It is time for publishers to pay the taxes necessary for such freedom.”

Advertising

A new problem emerging within the changing market is the practice by some international editions to sell their advertising space ’en bloc’ to major clients. In such cases, advertisements are made by parent companies outside the country, either free of charge to subsidiaries abroad or at very cheap rates. RARA’s Evstafiev has warned that such practices are harmful to the domestic market because it deprives the Russian-based publishers of large amounts of ad spend from local subsidiaries of multinationals, and also negates the chance for sales teams to forge vital contacts.

The Russian advertising market is growing, but it has a long way to go to be on a par with the more developed economies in terms of per capita expenditure. Ad spending is only 0.6% of gross domestic product – about half of what you’d expect in a mature market – and total expenditure represents around $19 per capita, well below the $500 spent in the US.

Ajay Goyal, the owner of Norasco Media, which publishes The Russia Journal, is not a believer in advertising driven growth alone. “Most advertising revenue figures are based on flimsy readership surveys and circulation numbers commissioned by publishers,” he said. “Unless real readership picks up, unless the public buys more copies and until copy sales make up at least 50% of revenue – the whole story of growth could become a disaster…Advertisers need to see real readers and real numbers.”

The good news, according to Goyal, is the growing choice for Russian readers: “There are publications with mass readership and no advertising, and then, there are advertising-saturated consumer magazines with almost no readership.

There is bound to be a shake-up – only publishing quality will survive, and only the reader will decide who wins. Advertisers will also demand value for their money – the oligarchs cannot subsidise consumer magazines forever.”

Goyal highlights improvements in quality and integrity of content, coupled with an increase in the number of retail outlets, as being key to the industry’s sustained growth. “Advertisers will follow where the readers go. Retail in printed products is a bottleneck, but that will get resolved pretty soon to the extent that it has been in the rest of the markets. Then the quality of content will eventually determine the winners. I believe in the mantra of Time Inc’s ceo Anne Moore, who said at the FIPP Congress in Paris: ’I love my advertisers, but I love my readers more’.”

For more information on Russia’s publishing market visit www.russiajournal.com

Industry comment

Dr. Olaf Hengerer, mananging director of Gruner + Jahr ZAO in Moscow

We are optimistic about the health of Russia’s publishing industry in 2004, and about developments at G+J ZAO in particular. As one of Moscow‘s leading publishers, since we launched the reportage magazine GEO in 1997, we have witnessed many positive changes. At the same time, we have also learnt that it pays to be both cautious and, on occasion, sceptical too.

Yes, change is all around; in the advertising sector, in the publishing model, in the reader, and in society at large. But it will take much more time to get it right. While actual figures can vary widely, the Russian advertising industry has certainly experienced unprecedented growth over the past few years, and magazines now command a robust 9% of all national ad spend. At G+J, 60-80% of revenues for our monthly titles are generated from advertising, with copy sales making up the rest. But as far as specific nationwide circulation and advertising figures are concerned, the truth is, no one really knows – and TNS Gallup’s are as dubious as any.

Following the financial crisis in 1998 and the rise in growth rates more recently, there has been a noticeable drop in circulation for low quality products across all sectors. The average Russian has far more disposable money today than he did ten years ago, and is becoming increasingly consumer savvy.

The publishing industry has responded to this socio/economic shift by producing an ever-growing selection of magazines across a widening number of subjects. At G+J we now publish popular titles, such as celebrity-driven GALA, alongside special interest magazines like GEOlenok – for children, and GEOfocus, a knowledge magazine.

Paralleling, and at least in part supported by this growing purchasing power, readers are voting in favour of editorial quality. We are confident this migration will ultimately lead to higher standards. At G+J we always send our editors to be trained in Hamburg, Germany, or Paris, France, and tried to ensure the highest quality of training and skills are attained. However, it is still common for editors with insufficient experience to land themselves an editor-in-chief post on a mass-circulation title with many companies.

There are still many more improvements that need to be made on the editorial side. In our view, our infamous print media distribution system is actually much better than its reputation. However, we suspect it has become the scapegoat for many editorial weaknesses. Journalists are becoming THE bottleneck in Russia.

The Russian publishing market has one of the greatest chances it has seen for many years. At G+J we have a number of interesting launches lined up for 2004 to capitalise on the demand for quality publications. hengerer.o@gjrussia.com

At a glance

Russia:
Land Area: 16,995,800 km
Population: 144,526,278
Currency: Russian ruble (RUR)
Capital: Moscow

THE INDUSTRY IN NUMBERS...
1703 saw the launch of Vedomosti, the first official 
           news magazine in the Russian Empire
13,289 number of officially registered magazines
              in 2003 950 official internet versions of print publications
80% of magazines are Moscow-based
520 million magazines printed last year
75% of revenues for registered publications
         come from single-copy sales and
         subscriptions sales
$1.5 billion sales revenues expected in 2004
$590 million advertising revenues for print
          media in 2002 – Magazines $210 million
         (31% increase over 2001); Newspapers
$380 million (23% increase over 2001)
27-30% increase in advertising revenues
               in 2003 with a further 22-23% expected in 2004
50% of all ad revenues were earned by the 
         seven major Moscow-based publishing
         houses, mostly affiliated with foreign capital
70% of adult population read magazines —
         compared to 57% for newspapers

Sources: The Media Ministry, the Russian Association of Advertising Agencies

Source: FIPP/ZenithOptimedia World Magazine Trends 2003/2004

The government has repeatedly declared its willingness to assist the media in business development and to change media legislation accordingly. Through its minister, Mikhail Lesin, the Press Ministry states that it is ready to gradually cede its regulatory functions and withdraw from the media market.

The media industry has been attempting to consolidate in order to speak with the authorities with a stronger voice and to lobby necessary changes in media legislation and reforms. The Guild of Press Publishers, FIPP member, now serves to protect the interests of b2b and consumer publishers, and works towards a competitive, attractive and investment-worthy magazine market.

For more information visit www.gipp.ru 

Compiled by Arif Durrani

Special thanks to our contributors:
The Russia Journal
G+J ZAO
The Russian Association of Advertising
The Media Ministry IREX (International Research & Exchange Board)

Source: Magazine World, issue 40