Russian Periodical Press Market

Federal Agency for the Press
and Mass Communications
Russian
Periodical Press
Market
Situation, Trends and Prospects
ANNUAL REPORT
2008
Federal Agency for the Press and
Mass Communications
Periodical Press, Book Publishing and
Printing Department
Russian Periodical
Press Market
Situation, Trends
and Prospects
REPORT
2008
The authors wish to express their sincere gratitude for providing
information and assistance in preparing and reviewing this report to:
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The Alliance of Independent Regional Publishers (ANRI)
The Russian Association of Communication Agencies
(AKAR)
The Association of Periodical Press Distributors (ARPP)
The Guild of Periodical Press Publishers (GIPP)
The TNS Russia Group of Research Companies
The Public Chamber Commission on Communications,
Information Policy and Press Freedom
The Interregional Printing and Publishing Association
The Association of Paper Wholesalers
The Russian Postal Service
UNESCO Chair on Copyright and other Departments
of Intellectual Property Rights
Yevgeny Abov, Deputy CEO, Rossiiskaya Gazeta Publishing
House, Vice President of WAN and GIPP
Dmitry Biryukov, President, Sem Dney Publishing House
Sergei Vasilyev, CEO, Video International
Arnd-Volker Listewnik, CEO, Burda Publishing House
Viktor Shkulyov, President of HFS&IMG group
of companies, Vice President of FIPP and GIPP
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CONTENTS:
GENERAL SITUATION
4
MEDIA ASSETS: MERGERS AND ACQUISITIONS
12
NEWSPAPERS: DAILY, WEEKLY
AND FREE
21
MAGAZINES
39
CORPORATE PUBLCIATIONS
55
ADVERTISING IN THE PRESS
59
PRESS DISTRIBUTION
66
THE INTERNET AND THE PRESS
75
PAPER AND PRINTING SERVICES MARKET
85
STATE SUPPORT FOR THE PERIODICAL PRESS
96
3
GENERAL SITUATION
In 2007 the Russian media market grew rapidly and experienced
qualitative changes as the newspaper and magazine industry continued to
develop into an effective business, a process that owes much to the overall
favorable economic situation in the Russian Federation. Investments in the
media, capitalization of media companies, their advertising and sales
revenues have all grown.
Last year the total number of periodicals sold in Russia amounted to
72.64 billion rubles of which 16.763 billion rubles worth were sold by
subscription. Advertising revenues from the media amounted to nearly 52
billion rubles. The production and distribution of free press is put at 15.5
billion rubles.
Investment in the Russian media market in 2007 remained high due to
the favorable economic climate and commercial attractiveness of investing
in practically any media assets. Experts believe that participants in the
market, mainly due to the process of mergers and acquisitions, exceeded last
year’s indicators investing at least 95-96 billion rubles versus 55-60 billion
rubles in 2006.
Russia currently has about ten media companies whose assets include
print media, with a total capitalization ranging from 15 billion to 200 billion
rubles each. They include Gazprom Media, Prof-Media, Hachette Filipacchi
4
Shkulev&InterMediaGroup (HFS&IMG), RBC, Independent Media Sanoma
Magazines and News Media.
Experts predict that investment in the Russian media market will
remain high in the coming years. They point out that investors are attracted
by the significant size of the market, the rapid growth of advertising
revenues and the speed with which new technologies are introduced.
Qualitative technological improvements in turn produce changes in the
market of classical players. For example, Yandex, Mail.ru and other Internet
companies have reported significant growth of capitalization recently.
It would be no exaggeration to say that in recent years Russia has been
turning into a Mecca for the world media, which also attests to the close
attention various media investors pay to the Russian media market. In June
2006, Moscow hosted the 59th World Press Summit, as the World
Association of Newspapers (WAN) is often referred to. It was attended by
more than 1700 publishers, editors, the heads of international and national
press associations from 104 countries and was judged the most successful
forum in the history of that organization. In November 2008, the
International Federation of Magazine Press (FIPP) is planning to hold an
exhibition/fair of magazine brands in the Russian capital. In June 2007,
Moscow was the venue of a World Congress of the International Federation
of Journalists (IFJ), effectively a summit of journalists. That same month the
Publishing Expo-2007, organized by the Guild of Periodical Press Publishers
(GIPP) in collaboration with the Federal Agency for the Press and Mass
5
Communications, attracted the CEOs of leading world publishing
associations: WAN, FIPP and Ifra (International Association of Newspaper
and Media Technologies).
The last two events were held at the International Trade Center on
Krasnopresnenskaya Embankment within an interval of a couple of weeks.
According to those who attended both the first and second summits, it was
as if they were held in two different countries. The journalists’ congress
heard mainly negative assessments of the trends in the Russian press, with
complaints about curbs on freedom of expression and of tacit censorship,
harassment of journalists, etc. The exhibition/conference, on the contrary,
was noted for its mood of dynamic development, the wish to acquire
advanced media experience and use state-of-the-art media technologies.
In reality, as the magazine Strategiya i Praktika Izdatelskogo Biznesa.
Ifra-GIPP Magazine pointed out, both events took place in the same country
which is moving toward the creation of a normal independent press in a
somewhat tortuous way. In the early decade of the new Russian history,
government institutions were infinitely tolerant of media pluralism while the
economic policy made genuine independence a practical impossibility. The
media were pushed into the rich black market of propaganda services which
paid lavishly for the pluralism.
The following decade saw a significant improvement in the economic
terms. The market size increased dramatically. The industry became more
transparent and investment-friendly. That lent new features to its
development. The FIPP President says that the magazine sector in Russia
has achieved world standards and is outstripping other media, whereas the
WAN Director-General notes that Russian newspapers are largely lagging
behind consumers’ demand. And no wonder. Magazines mainly promote a
way of life, entertainment and meet the day-to-day needs of the readership
whereas newspapers as an information medium have far more to do with
politics and have many non-market factors that invade the relationships
between the owner, publisher and reader.
By the way, the founders of most regional and as many as 80%
municipal newspapers in Russia are, as before, regional and municipal
authorities, which leaves an imprint on their editorial policy and their
economic independence because in one way or another they are all
subsidized out of the regional and local budgets.
For example, the Moscow budget for 2008 earmarks 4.8 billion rubles
for the upkeep of the city’s television and 697 million rubles for the city’s
print media. The budget of the Republic of Tatarstan has allocated 3.4
billion rubles in 2008 to finance the mass media, of which 630 million rubles
will finance periodical press. The budget of the Republic of Bashkortostan
6
has allocated 1 billion rubles for the support of the media this year, of which
448 million rubles will go to printed periodicals instituted by the authorities.
In other words, Russia has a huge body of printed periodicals that are
not really part of the market today. That has an extremely negative impact
on the development of the domestic media market, especially its newspaper
sector. The fact of the matter is that to achieve independence, above all
financial independence, the Russian press must follow world trends. Today
it is impossible to publish a newspaper, or launch a program on any radio or
television station based solely on one’s personal likes and dislikes or
experience. Such an archaic product will most likely never find an audience
because the consumer can get the news about events in the world practically
anywhere through the new media. And what is more, he or she can get it
from professional media, from top-notch journalists.
To be successful in the era of high information technologies the
modern press must be more aggressive in breaking into the market, think in
terms of a synthesis of genres, using the opportunities of the multimedia
environment in view of the burgeoning Internet versions and various Internet
supplements to the basic printed product. In the new conditions, the
journalist must be adept at working not only with the text, but also with
sound, photo and video images. Obviously, these tasks are best tackled by
media holding companies which combine newspapers, magazines, radio
stations, TV studios, Internet resources, etc.
One can go along with the opinion of WAN Director-General Timothy
Bolding, who says that over time and as Russian publishers continue to
assimilate advanced newspaper experience of other countries, they will
lament political restrictions less and less and will increasingly concentrate
on making good and profitable newspapers.
Another highlight of 2007 was the second branch conference “The
Mass Media, Book Publishing and Printing: Results of 2006 and
Development Prospects,” held in Moscow on March 6, 2007. Such
conferences are becoming regular affairs and they are important mainly as a
mechanism of constructive cooperation between government bodies and
self-regulating branch entities in addressing industrial problems. The
conference reviewed compliance with the recommendations of the previous
branch conference held in March 2006, identified the main development
challenges and mapped out ways of solving some fundamental issues in the
future. The conference demonstrated the resolve to uphold the interests of
the mass media, book publishing and printing, emphasizing the development
of their economic independence, the creation of a level playing field and fair
competition among market participants. It outlined the complex of measures
to optimize the taxation of media and book publishing connected with
education, science and culture, providing incentives for the domestic
7
printing industry and studying the parameters of the press market in the
country in terms of the actual number of periodicals.
Pursuant to these decisions and with the support of the Federal
Agency for the Press and Mass Communications, the National Press
Coordinating Council came up with proposals to streamline taxation of mass
media and book publishing related to education, science and culture. Printers
have petitioned the Interdepartmental Commission on Foreign Trade
Protection and Customs Tariff Regulation under the Russian Ministry of
Economic Development and Trade for a permanent cut of the import duty on
chalk paper from 15% to 5% or 0%, which would give a powerful boost to
the domestic printing industry. Also with the support of the Federal Agency
for the Press and Mass Communications, GIPP has since 2005 been pursuing
the Mediastat project to create a permanent electronic system for gathering
and processing statistics on print media, printing and selling entities in
Russia engaged in production and marketing. That system has been getting a
trial run since the beginning of 2008.
In addition to the imperfect system of press taxation and shortage of
statistical information on the periodicals market, there are some other
problems that hinder its development. They include the technological
backwardness of the subscription and retail distribution of periodicals, lack
of editorial standards and the outdated design of a many periodicals.
Industry experts are convinced this is one of the main reasons of the waning
interest in print media and the relatively slow growth of its advertising
revenues compared with other media sectors.
At the same time a number of positive changes are afoot in the
Russian periodical market. Publishers are switching en masse to new
business models, technologies and formats, drastically modernizing the work
of editorial offices, revising their marketing policies, being aware that all
that is necessary if they are to adapt the traditional publishing business to the
new conditions of the digital media environment, forge fruitful relationships
with readers and advertisers and position themselves well against the
background of television, radio, the Internet and the burgeoning “new
media”, which enables the leading publishing houses in Russia to preserve
and improve their financial and advertising performance even though the
aggregate readership for any single publication has been shrinking with
many of them.
8
Russia’s leading publishers in 2006-2007
According to AIR* indicator
Publisher
Aggregate readership:
HFS&IMG
Burda
Komsomolskaya Pravda
Bauer Logos
Argumenty i Fakty
7 Dney
Independent Media
Za Rulyom
Moskovsky Komsomolets
Pronto-Moskva
SPID-Info
News Media-Rus
CondeNast
Moya Semya
Media Park
Edipress Konliga
Rodionov Publishers
Forward Media Group
Gruner&Jahr
Kommersant
Rossiiskaya Gazeta
2006
thousands
% of
population
2007
thousands
57089.0
12632.2
11427.7
9130.2
7808.2
7883.3
5444.7
5894.2
3289.0
3137.3
3370.5
2917.5
100
22.1
20.0
16.0
13.7
13.8
9.5
10.3
5.8
5.5
5.9
5.1
2428.0
2314.2
1658.3
1420.7
2953.7
1314.9
1130.8
1418.0
4.3
4.1
2.9
2.5
5.2
2.3
2.0
2.5
56987.9
11564.9
10607.7
8435.0
7355.4
7042.3
5920.9
5841.2
3264.1
3172.3
2855.1
2245.1
2219.1
2176.1
1950.9
1653.0
1381.0
1375.3
1296.1
1195.8
1118.2
335.3
0.6
% of
populatio
n
100.0
20.3
18.6
14.8
12.9
12.4
10.4
10.2
5.7
5.6
5.0
3.9
3.9
3.8
3.4
2.9
2.4
2.4
2.3
2.1
2.0
638.0
1.1
Source: TNS Gallup Media
*AIR – is the average readership of any one issue of all the publisher’s publications
in cities with a population over 100,000
The Russian Press Academy founded on December 19, 2007 intends
to substantially contribute to the solution of industry problems. Pavel Gusev,
the head of the Public Chamber’s Commission for Communications,
Information Policy and Mass Media Freedom and of the Moscow
Journalists’ Union and chief editor of Moskovsky Komsomolets, told the
founding meeting that the new organization is called upon to “ensure social,
intellectual, legal and material support for news agencies and print media”
and to “maintain a high standard of knowledge and wide-scale introduction
of advanced domestic and international experience of training media
personnel.” Among the founders of the academy are: Rossiiskaya Gazeta,
Literaturnaya Gazeta, the newspaper Kultura, the Ogonyok and Zdorovye
publishing houses, the unions of journalists of Moscow, St. Petersburg and
Tatarstan, legends of Russian journalism – Vsevolod Ovchinnikov, Inna
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Rudenko and others. The Director-General of ITAR-TASS Vitaly Ignatenko
has been elected President of the Academy.
The Public Board on Complaints Against the Press created upon the
motion of the Grand Jury of the Russian Journalists’ Union by numerous
media and “non-media” organizations occupies a special place among
branch self-regulating organizations. Among its founders are the Public
Chamber of the RF, the Council of Judges of the RF, the Moscow Bar, the
Federation of Independent Trade Unions (FNPR), the Moscow Patriarchate,
GIPP, the Media Committee, the Russian Journalists’ Union, the National
Association of TV and Radio Broadcasting (NAT), the Media Union, the
Russian Union of Industrialists and Entrepreneurs and dozens of other
organizations. The Board consists of two equal chambers representing
respectively the media community and the media audience. Some household
names are members of the Board: Yevgeny Abov, Mikhail Barshchevsky,
Pavel Gusev, Vladimir Evstafyev, Yasen Zasursky, Vitaly Ignatenko, Viktor
Loshak, Mikhail Nenashev, Mark Rozovsky, Genri Reznik, Eduard
Sagalayev, Nikolai Svanidze, Mikhail Seslavinsky, and Mikhail Fedotov.
The Independent Board on Complaints Against the Press is a
mechanism for alternative dispute resolution which has a great, but still
largely untapped potential, according to Mikhail Fedotov, Secretary of the
Russian Journalists’ Union. The fact that it is an alternative body is
stipulated in its Charter. When filing a complaint the applicant has to sign an
agreement recognizing the professional and ethical jurisdiction of the Public
Board and undertaking not to take the case to court. In the strict legal sense,
a waiver of justice is not valid, but then the Public Board speaks the
language of ethics and not the language of law. If the petitioner does decide
to go to court he/she thereby challenges public morality and the respondent’s
representative will be quick to take advantage of this to argue that the
plaintiff has abused the law.
An example in point is the position taken by the Council of Judges of
the Republic of Karachayevo-Cirkassia in its conflict with the newspaper
Izvestia. Instead of filing a lawsuit against Izvestia Editorial Office the
judges applied to the Public Board on Complaints against the Press, arguing
their position in the following way, “We do not believe it is entirely ethical
for us to take such cases to a court of law to prevent people from alleging
that it is a case of old boys network members helping each other.” There
have been attempts to shed the obligations assumed. Thus Andrei Karaulov,
the author and presenter of “The Moment of Truth” TV program, unhappy
about the ruling of the Board on his complaint against the newspaper
Moskovsky Komsomolets, asked permission to go to court. But the Board
demanded that all the parties in the conflict comply with its ruling. It
explained that compliance with the obligations is assured “not only by the
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decency of the people who have willingly assumed these obligations, but
also by the emerging public consensus that moral obligations cannot be
broken.”
Federal Law No.315-FZ of December 1, 2007 “On Self-Regulating
Organizations” is sure to be instrumental in tackling the industry selfregulation problems in a comprehensive manner, although practical
application of the law is still to be worked out.
11
MEDIA ASSETS:
MERGERS AND ACQUISITIONS
The years 2005-2007 saw the emergence of major media companies
with diverse assets: printing companies, Internet resources, television and
radio channels on the Russian media market. The number of these
companies and their capitalization are growing steadily. Investments run into
hundreds of millions of rubles, which is attributable to the favorable
economic situation in the country, and the sustained and rapid annual growth
of the advertising market, which holds the promise of quick returns on media
investments. The profit margins of Russian media holdings today are 20%25%, according to the Ekspert magazine.
One characteristic is their diversification of assets. For example, the
Ekspert and Kommersant Publishing House holdings are expanding their
online presence (Ekspert is also launching a TV channel of the same name),
while print media remain an important segment. The Prof-Media holding
initially relied on the traditional press, but is now adding television channels
and Internet portals to its product line having scrapped most of its printed
publications. The RBC holding, by contrast, having started with electronic
media (Internet-resources, news agency, TV channel) is moving into the
printed press segment having bought the Salon Press Publishing House (the
magazines Salon, Idei Vashego Doma, Zhenshchina za Rulyom, Kvartirny
Otvet, Nashi Dengi) and regularly adding its own magazines and
newspapers. The ESN group is creating a nationwide network of radio
stations relying, among others, on the branches and Internet resources of its
main print media asset, the Komsomolaskaya Pravda Publishing House.
Diversification can take different forms. Some holdings have a broad
spectrum of media products from entertainment TV channels to popular
science magazines and political newspapers (Independent Media Sanoma
Magazines, Gazprom-Media, RBC). Other holdings remain specialized,
concentrating on business and analytical publications (Ekspert,
Kommersant) or entertainment and glossies (HFS&IMG, Burda, 7 Dney,
Gameland, Conde Nast), seeking to increase their niche projects.
The main feature of the current stage of development in the Russia
media market is that starting from 2006 the number of media investors in the
sphere of mergers and acquisitions has shot up. Major Russian investment
groups, which previously showed no interest in the media business, have
entered the game. The financial scale of media deals is impressive.
In late July 2007, Alisher Usmanov consolidated his media assets into
Kommersant Holding, which acquired 100% of Kommersant Publishing
House (owner of the newspaper Kommersant, the magazines Vlast, Dengi,
Sekret Firmy, Avtopilot, Citizen K, and the online publication Gazeta.ru),
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and is preparing to launch a music and news radio station. Shares in the TV
channels 7TV (50%, acquired in November 2007) and MuzTV (75%,
acquired in June 2007) have been left outside the new holding. The
commercial director of the Kommersant Publishing House, Pavel Filenkov,
puts it down to the structure of asset ownership: only those assets which are
100% owned by Alisher Usmanov are included in the holding.
In the opinion of Viktor Shkulev, president of the HFS&IMG group of
companies, the creation of the Kommersant Holding was necessary to
consolidate the diverse assets of the Kommersant Publishing House, “whose
owner did a very important thing by removing these assets from offshore
zones and properly structuring them.”
A rival version has it that the media tycoon launched asset
restructuring in order to gradually transfer them under the control of another
buyer. The company may also hold an IPO or do both.
The co-owner of the Rossiya Bank, Yury Kovalchuk, has begun
forming a media holding called the National Media Group (NMG),
according to Gazeta.ru and several other sources. Rossiya Bank, the
companies Severstal and Surgutneftegaz, and the SOGAZ insurance group
are expected to consolidate within NMG their 68% stake in the REN TV
channel and 72% stake in Peterburg-Channel Five. Besides, the NMG hopes
to gain a controlling stake in Redaktsiya Gazety Izvestia, which SOGAZ is
currently trying to buy out from Gazprom-Media.
One of the most active players in the mergers and acquisition field in
the Russian media market in recent years has been Prof-Media, created in
1997. In 2007 Prof-Media, which owns numerous assets in the media and
entertainment spheres, added the MTV channel (purchased for 8.8 billion
rubles), the Begun context advertising system and a controlling stake in
Radio Hit (Radio 7) previously owned by the Novosibirsk advertising group
Diapazon. That frequency band is now used by the Yumor FM Radio
station, which is part of Prof-Media. Simultaneously in 2006-2007, the
company sold its non-core newspaper and printing assets: the
Komsomolskaya Pravda Publishing House, the newspaper Izvestia and its
share in the joint business with the Norwegian printing company A-pressen
Eastern Europe AS.
Prof-Media also owns several FM radio stations in Moscow, St.
Petersburg and other Russian cities, including the popular Avtoradio station.
The company’s television block, in addition to MTV, includes the national
TV network TV-3 and 2х2 TV channel. In the print media segment, ProfMedia owns the magazine publishing houses Afisha and b2b Media.
Prof-Media’s recent acquisitions and sales have been prompted by the
rapid growth of the TV/Internet advertising markets and have been part of a
new development strategy based on the consolidation and more effective
13
management of entertainment media resources. The main investor in ProfMedia is Interros corporation, whose goal is to prepare for an IPO by the
beginning of 2008.
Gazprom-Media is also contemplating an IPO, as was first reported in
late 2006, when its assets were valued at 98 billion rubles. But in August
2007, the Gazprom board of directors estimated the company’s worth at 184
billion rubles citing international rating agencies. The current estimate is
even higher.
The Yandex Internet holding recently announced its plans to hold an
IPO on NASDAQ in the fall. According to the newspaper Kommersant, the
IPO is being prepared by the companies Morgan Stanley, Deutsche Bank
and Renaissance Capital, with which agreements have already been signed.
Analysts think the capitalization of Yandex may be in excess of 75 billion
rubles and the floating of its shares will be one of the biggest IPOs of a
Russian news and communication company.
Another milestone in 2007 in the press market was the merger as of
June 1, 2007 of the assets and consolidation of the managements of the
publishing houses Hachette Filipacchi Shkulev (HFS) and InterMediaGroup
(IMG). The companies have introduced the institution of vice presidents and
merged their managements. HFS&IMG believe that the consolidation of
management will make the structure of the companies more transparent and
streamlined.
Since 2007, InterMediaGroup has concentrated on developing
network projects selling its other assets: its stakes in Offset Newsprint
Factory Yekaterinburg, the printing facility in Nizhny Novgorod and two
regional dailies Nizhegorodsky Rabochy and Prizyv (the city of Vladimir).
The buyers were respectively the printing holding A-pressen Eastern Europe
AS and private businesses in Nizhny Novgorod and Vladimir.
Another major event in the market was the establishment of
Moskovskaya Gazetnaya Tipografiya by the Moskovsky Komsomolets
Publishing House jointly with the Moscow government on the basis of the
printing assets of Moskovskaya Pravda. The aim of the project is to create
another newspaper complex in the capital offering publishers previously
unavailable printing services. They include the printing of advertising
inserts, booklets and previews while printing every new issue of a
periodical; parallel printing on newsprint and chalk-overlay paper, and so
on. To this end, the complex will be modernized and provided with new
equipment in 2008. Several new logistics and forwarding projects are to be
launched on the site of the complex.
The RBC holding, which manages the media assets of RBC
Information Systems, is diversifying rapidly. Starting with the investments
in print media in 2006, when it purchased the Salon-Press Publishing House,
14
launched the RBC magazine and RBC daily, the holding last year launched
RBC-Daily St. Petersburg and the St. Petersburg RBC TV, thus greatly
increasing its presence on the business media market in St. Petersburg and
the Northwestern Federal District as a whole. In 2007 RBC also acquired a
major stake in the Marketing and Business Analysis Agency, which
publishes the magazine Nashi Dengi, valued by experts at 50-70 million
rubles. The magazine Nashi Dengi is now published in St. Petersburg,
Yekaterinburg, Nizhny Novgorod, Samara and Novosibirsk with a
circulation of 55,000 copies. Also last year, the company bought the
newspaper Kvadratny Metr from the Rodionov Publishing House for 35
million rubles.
Experts predict that RBC will continue building up its assets because
on December 7, 2007 the company successfully floated 20.74 million
ordinary shares worth about 4.58 billion rubles at MICEX (Moscow
Interbank Currency Exchange) and RTS (the Russian Trading System),
which it is going to invest in new media projects. A decision has also been
made to seek a 5 billion ruble loan for these purposes.
In the latest issue, 17.9 million shares were floated among the
company’s current shareholders and 2.8 million were sold by open
subscription to new investors, with demand for RBC shares exceeding
supply by five times. This is the third time RBC is floating its shares: in
2002 it sold 16% and in 2004 an additional 11.6%. In April 2006 it floated
2.6 billion rubles worth of bonds with maturity in May 2009. Experts think
that RBC is increasing its portfolio of projects in the print media segment to
reach a wider audience of consumers who do not use the Internet.
In 2007, the Norwegian company A-pressen Eastern Europe AS
(AEE) made the decision to build four major printing facilities in Russia
over the next two to three years (in addition to the printing shops in
Novosibirsk, Yekaterinburg, Nizhny Novgorod, Voronezh and Dolgoprudny
near Moscow). The project will cost between 1.5 and 1.8 billion rubles. By
the same token, A-pressen sold its stake in the Komsomolskaya Pravda
Publishing House to ESN. The Norwegians seem to be reluctant to continue
sharing the political risks of newspaper publishing and are going to
concentrate on the printing business, whose profit margins on average
worldwide are 15%-20%.
The Komsomolskaya Pravda Publishing House has announced plans
to build, within roughly the same period, nine printing facilities in major
Russian cities: Krasnodar, Vladivostok, Kemerovo, Stavropol, Ufa and St.
Petersburg. Investment in each project will amount to approximately 75
million rubles. Komsomolskaya Pravda is also negotiating to buy 100% of
the company Novaya Tipografiya, which has assets in Krasnoyarsk, Perm,
Samara and Saratov. Komsomolskaya Pravda is currently the sole owner of
15
three printing presses in Russia – in Irkutsk, Volgograd and Kazan, while
working with partners in other regions. New printing facilities of its own,
according to market experts, may give the publishing house a major
competitive edge throughout the country. Besides, Komsomolskaya Pravda
is negotiating with the Swedish concern Metro International to jointly
publish a free-distribution newspaper Metro (as an addition or to spite the
current free-distribution newspaper Metro published by AFK Sistema) and is
making moves to expand its operation in the Baltic countries and
Scandinavia. It plans to move into these countries with a wide spectrum of
publications as well as advertising and thematic supplements to the
newspaper Komsomolskaya Pravda, and to create a Russian-language
website in the Baltic countries. KP’s potential audience in the region, which
covers Latvia, Lithuania, Estonia, Finland and Sweden, is estimated at about
2.5 million people.
In particular, in January 2007 the company SKP Media, which
represents Komsomolskaya Pravda in the Baltic countries and Scandinavia,
launched a new publishing product in that region, the weekly Perekryostok
backed up by a special partnership program aimed, among other things at
supporting Russian-language publications in Latvia, Lithuania and Estonia.
The partnership formula is as follows: what is good for the partner publisher
is good for KP. The local newspapers involved in the program have not only
got a complete publishing product, but will be able to use it to earn money.
Each of KP’s partners has the right to add its own advertising pages to the
weekly, in which case it can keep the entire proceeds.
In 2007, the process of mergers and acquisitions spread to the b2b
market. Aktion-Media, the biggest publisher of b2b periodicals in Russia
which puts out 33 titles of professional magazines and newspapers,
including the magazines Glavbukh, Finansy, Kadrovoye Delo, Sales-Biznes,
the newspaper Uchet, Nalogi, Pravo and the Glavbukh electronic system,
last year bought Status Kvo, the publisher of the magazines Rossiisky
Nalogovy Kurier, Zarplata, Uproshchyonka and other tax periodicals, as
well as its subsidiary companies: the book publisher Nalog-Info, the
publishing houses Nalogi i Platezhi (Ufa) and Prof-Aktiv, adding them to its
former subsidiaries, the direct subscription for professional literature agency,
the book publisher Vershina and advertising sales company in the
publications of Aktion-Reklama. Experts put the value of Aktion-Media
acquisitions at about 500 million rubles. In exchange for their stakes, the
owners of the company Status Kvo got a stake in Aktion-Media. After the
deal was finalized the financial block, logistics and subscription distribution
were brought together within one media group. The editorial offices of the
magazines published by Status Kvo as well as the marketing and advertising
sales remained part of the company’s structure. The acquired magazines and
16
journals filled the niches previously not occupied by Aktion-Media
publications. After reorganization, Aktion-Media hopes to increase the
circulation of its publications by tapping into existing resources of
subscription, distribution and partnership network, while advertisers hope to
be able to place package advertisements targeting the female accountant
audience.
In mid-2007 the concern Radio Tsentr, the interregional news agency
Vsya Rossiya and the TsIMIR analytical center (Center for Integral
Development Model Research) signed an agreement on strategic partnership
and the establishment of an integrated media group under the Vsya Rossiya
brand. It includes the Radio Tsentr FM stations called Govorit Moskva,
Radio Sport, and Public Russian Radio (broadcasting in 33 cities), the Vsya
Rossiya news agency (specializing in regional news projects) the
www.allrussia.ru website, the regional network publication Zdorovaya
Natsiya (published in 28 Russian regions) and the infrastructure of the
national newspaper network. Vsya Rossiya has a presence in 54 regions and
its daily total audience exceeds 15 million people.
The board of directors of the new company is headed by Vasily
Kichedzhi, the former deputy to the plenipotentiary envoy of the Russian
president to the Central Federal District (known in the media business as a
major shareholder in the TV company Stolitsa and owner of the Radio
Tsentr radio stations). Sergei Kalmykov, the head of Vsya Rossiya news
agency, became the director general. Under its development program, the
media group will implement a series of projects including the provision of
information services and the development of the publishing business. The
focus will be on expanding the regional presence, partly by bringing in
foreign partners interested in joint projects in the Russian market. The group
will also distribute books. It plans to buy a publishing complex in the first
quarter of 2008.
The Gameland Publishing House changed its structure substantially in
2007 with 40% of its shares acquired by the investment company Troika
Dialog for 295 million rubles. Troika Capital Partners has become a coowner of Gameland. Gameland has used the proceeds to create its own cable
television channels (the first cable TV channel devoted to games, Gameland
TV, was launched in 2008), promote its publications in the regions, and
launch new magazines with accompanying websites and TV channels. For
its part, in April 2007 Gameland bought 25% of Smile-Expo, the organizer
of one of the two Russian fairs for computer game fans, for 100 million
rubles. While in 2005 Gameland’s multimedia projects accounted for 2%3% of its turnover, the figure was 5%-7% in 2006 and is expected to reach
40% by 2010.
17
On July 1, 2007, the management of OVA-Press decided to rename
the company Forward Media Group (FMG). As it was announced, it marked
the beginning of a new stage for FMG, with increased market presence due
to new licensed and proprietary projects, expansion to Ukraine and the
strengthening of ongoing projects. FMG has a strong presence on the
magazine market, being among the top 15 publishing houses in Russia in
terms of advertising revenues and readership (according to TNS Gallup
AdFact, FMG ranked 12th among magazine publishers in terms of
advertising revenues in 2007). Its portfolio includes eight magazines (Hello!,
Interier+Dizain, Moi Krokha i Ya, the supplements 100% Zagorodnyi Dom,
Antikvariat, 100% Kukhni/Vannye, and others) with a total monthly
circulation of more than 1 million copies. The group’s annual turnover is an
estimated 610-730 million rubles. FMG belongs to RAInKo, one of the units
of the Basic Element company.
On September 6, 2007, Building MG announced the floating of the
shares of the Real Estate Media aimed at the development of projects
targeting buyers of housing and those who rent commercial space. The
company includes the media projects Building MG in Russia and Ukraine:
the Russian magazine Life for buyers of apartments and houses in and
around Moscow, in Sochi and St. Petersburg, the magazine Commercial for
lessees of office, selling and warehouse space in Moscow and major Russian
cities, as well as Ukrainian magazines Life (for buyers of apartments and
houses in Kiev, Odessa and Yalta) and Provereno – Znak Kachestva.
Ekspertiza Nedvizhomosti.
The United Media Holding (publisher of Business&FM) last year
acquired the magazine Populyarnye Finansy. Moreover, beginning from
October 2007, in addition to the Business FM radio station, the holding
launched the Kino&FM radio station broadcasting film soundtracks round
the clock. Investments in the new projects exceeded 410 million rubles. By
the same token, the holding suspended the issue of the newspaper
Moskovskiye Novosti as of January 1, 2008 transferring the English-language
version of that paper, The Moscow News, under the management of RIA
Novosti.
Media assets are becoming more transparent and attractive for
business, which is borne out by the financial reports of individual Russian
media companies. The first to publish such a report on the results of the first
nine months of 2007 was the PromSvyazKapital holding, which owns the
newspapers Argumenty i Fakty, Extra M, Trud, Okruga, the printing
companies Media Pressa and Extra M, and the press distribution network
Aria-AiF. Based on the published report PromSvyazKapital will have earned
11.7 billion rubles by the end of 2007, 1.6 billion rubles in EBITDA and 811
18
million rubles in net profits, which puts the company’s assets at about 15
billion rubles.
The newspaper Vedomosti reports that from the results of last year the
consolidated operational proceeds of the STS Media holding amounted to
11.56 billion rubles and the net profits increased by 28% to 3.33 billion
rubles. RBC’s returns last year reached 4.7 billion rubles instead of the
predicted 4.3 billion rubles. Media services account for 55% of its structure,
printed publications for 23% and RBC-TV for 22%.
From earlier audits of Russian publishing houses with a share of
foreign capital it is known that the earnings of the Russian unit of the
Lagardere-HFS group in 2006 amounted to 4.4 billion rubles, and the
earnings of the publishing house Independent Media Sanoma Magazines,
owned by SanomaWSOY, increased by 18% to 3.6 billion rubles in 2007.
One should note the emergence in the Russian market last year of the
German media group WAZ, which bought the newspaper Sloboda and eight
magazines in St. Petersburg and Moscow.
The media market has been favorable not only for major investors. In
2007 the managing company KIT Fortis Investments set up a closed mutual
fund KIT Fortis-Rossiiskiye Massmedia, with the minimal share of 1 million
rubles. The fund has announced that it owns 49% of the publishing house
Creative Media, which puts out the magazines Lichny Byudzhet (circ.
50,000), Zhenskiye Sekrety (150,000), Sports Illustrated Swimsuit Edition
(100,000) and Interview. That gave the nation’s middle class the first
opportunity to invest in the media business.
The diversification of major companies’ media assets is aimed
primarily at improving their business performance. Theoretically, the
broader the range of media owned by a holding, the better its chances of
building up its business muscle by offering various packages of services
aimed at various groups of advertisers. In fact it amounts to turnkey
placement of adverts, i.e. the offer not of individual services but catering to
all the client’s advertising needs. In addition, the practice of package
proposals by holdings contributes to the commercial success of specialized
publications which attract only a small group of clients as individual
advertising media and may interest many more clients when they are offered
as part of a package.
True, it is not easy to ensure such synergy in practice because the
more publications a company has the greater the chances that the advertiser
will be confused in assessing their potential. To achieve the best result,
flexible centralized management of the holding is needed to ensure a balance
of interests, otherwise holding structures remain run-of-the-mill media
conglomerates.
19
Despite the diversity of media projects, original concepts in the
Russian media markets are few and far between. All too often a new project
is launched simply because a competitor has a similar product. That is
particularly true of print media. It is hard to find even a couple of serious
differences between various magazines about cinema, fashion, design or
cars. Clones are mounting an offensive online and on television. But, oddly
enough, there is still enough room in the market for everyone. Part of the
reason is that the current policy pursued by advertisers, which can be
described as “carpet bombing,” encourages massive media cloning. The
advertisers constantly increase spending to promote their goods and services,
although most of them have not yet understood the need to assess the results
of such investments more carefully.
Industry representatives, in our opinion, should give serious thought to
new ideas, experiment with audiences, especially those that have not yet
been targeted or not sufficiently targeted by the media. For example,
potential demand for quality press in the regions is high, but most of the
national media companies have not yet paid serious attention to it. This may
be partly because the profile of the regional reader does not fit the image of
the “socially active audience”, so cherished by advertisers: the young, rich,
energetic and avid consumers.
The second reason why regional audiences are underestimated is the
defective instruments used to measure their parameters. As a result, global
and major national advertisers are oblivious of the potential of that audience
and the advertising potential of the regional press as a whole.
One has to admit that media business in Russia is making good use of
the favorable economic situation, but its growth is still mainly quantitative,
fueled by the increase of advertising and availability of money to invest.
That is a normal development stage through which every business passes.
The problem is, however, that sooner or later it will come to an end, and
then the value of fresh ideas will soar.
20
NEWSPAPERS: DAILY, WEEKLY AND FREE
Newspapers are a key component of the Russian periodicals market
and the main producers of information content. Currently, there are 35,500
registered dailies and weeklies in the Russian Federation. But the
registration data does not reflect the real number of publications circulating
in the market. According to experts, only about 15,000 dailies and weeklies
are actually present in the market.
The size of newspapers and proceeds from their sales and advertising
revenues increased in 2007 while the circulation and readership of printed
versions continued to shrink. In 2007, 7.8 billion copies were printed compared
with 8.05 billion in 2006. This should be attributed mainly to the waning
interest in print media among the population as a whole, and especially among
young people, due to the rapid development of online media.
Another factor behind the falling interest in national and partly local
newspapers in Russia is the problems with distribution, which have persisted
and even grown worse recently. This is true in particular of the dailies because
prompt delivery of fresh issues to the reader in all the regions where they are
published is critical. So far, unfortunately, subscription newspapers are
delivered within a day even in cities, while in rural areas they are delivered
only two or three times and sometimes once a week.
The downward trend is worldwide. As follows from the report by
Christoph Miller, member of the board of the German concern KBA, the
21
circulation of dailies in the period between 2002 and 2007 registered an
increase only in Asia and Oceania (from 281 to 332 million copies). In Europe
and North America in the same period they dropped from 98 to 94 and from 69
to 66 million copies respectively, while remaining practically unchanged in
Africa and Latin America. Simultaneously the circulation of free-distribution
dailies tripled in Europe and doubled in North America, Asia and Oceania. The
following have been the main trends in the world newspaper market in recent
years:
- rapid growth of the newspaper market in China, India and Eastern
Europe, especially in the free-distribution segment;
- falling circulation of newspapers sold in developed countries;
- practically universal adoption of full color in newspapers and the switch
of quality press from traditional broadsheet to compact formats
(“Berliner”, a narrower format than the standard А2; tabloid format);
- growing investments by publishers in printing, newsroom equipment,
new printing and preprint technologies (about $6 billion in 18 months
from January 2006 through June 2007), widespread use of new printing
services (drying, stitching, plating etc);
- some of the new newspaper trends and rubrics originated on the
Internet;
- printed and online newspaper formats no longer compete with but
mutually complement each other; and
- despite of the rapid growth of the electronic media audience the total
amount of advertising in print media has remained unchanged since 2000.
These trends show that the world newspaper industry is alive and well,
and is not only coping with the growing competition from other media but is
actively introducing new media formats.
•
•
•
•
U.S. newspapers in 2006
More than 1,500 newspapers are published and distributed.
The annual turnover is $59 billion.
8 out of 10 adult Americans read newspapers at least once a week.
55 million Americans (1 out of 3 readers of print media) visit
newspaper websites at least once a week.
Source: Distripress
The market-oriented Russian dailies, both national and regional, are
searching for a niche in the current conditions seeking to reverse the negative
trend of falling circulation and shrinking readership. They make wide use of
advanced experience of foreign publishers, turning multimedia, switching to
color and more reader-friendly formats, applying gloss technologies, changing
their content, presentation, the distribution system and much else. As a result,
22
newspapers have been able to hold and even increase their market share. For
example, advertising revenues of Russian newspapers grew markedly in 2007.
Readership of Russian newspapers in 2000-2007
(% of population over 16)
Publication
1. Argumenty i Fakty
2. Komsomolskaya Pravda
3. Antenna-Telesem
4. Moya Semya
5. Zhizn
6. SPID-Info
7. Moskovsky Komsomolets
(including regional issues)
8. Sport-Express
9. Izvestia
10. Sovershenno Sekretno
11. Rossiiskaya Gazeta
12. Pravda
13. Tselebnik
14-15. Trud
14-15. Mir Novostei
16. Novaya Gazeta
17-18. Vedomosti
17-18. Orakul
19. Nezavisimaya Gazeta
20-21. Kommersant
20-21. Moskovskiye Novosti
20-21. Zavtra
Other national press
Regional/local daily with sociopolitical content
Regional/ local weekly with
socio- political content
Other local papers
Don’t read papers regularly
2000
21
12
-*/
15
11
2003
19
16
5
14
11
2004
18
14
7
10
9
2005
21
18
7
11
8
2006
16
13
7
7
5
2007
14
13
8
6
6
6
5
2
3
9
1
1
4
2
1
1
<1
4
14
3
2
6
2
2
4
2
<1
1
<1
7
11
3
2
3
2
1
3
1
1
<1
1
<1
6
11
4
2
4
2
1
4
1
1
1
1
<1
7
12
2
2
2
2
1
3
2
1
<1
1
2
1
1
1
1
6
12
3
2
2
2
2
1
1
1
1
1
1
1
1
1
<1
5
11
20
21
26
20
23
16
19
30
22
26
24
25
28
26
24
30
24
33
-*/ — publication not counted;
Source: Levada Center
Stimulating interest in newspaper reading, especially among young
people, will become critical in the foreseeable future, and it cannot be
achieved without improving the quality of printed matter. Unfortunately,
23
Russian newspapers today are often unattractive and do not always
provide accurate information. Their printed version readership is steadily
declining. According to TNS Gallup Media, the audience of eight of the
most read dailies in the country dropped by 14.1% on average in 2006.
The trend slowed down but continued in 2007. Simultaneously studies by
VTsIOM and the Information Policy Development Fund show that people
increasingly prefer local and network press because it is more easily
accessible.
An important challenge facing the newspaper industry in Russia is
to instill reading habits in young people. Publishing houses have mounted
social programs to that end. For example, the publishing house
Moskovsky Komsomolets has held three national educational events
called “Conquer Vorobyovy Gory,” which offer all applicants an equal
chance of becoming students at Moscow University. The project is
steadily expanding its geography and age presence, and is a critical
element in building up a loyal young readership of the press as a whole
and the Moskovsky Komsomolets brand in particular.
The newspaper market reveals some specific features. Within very
harsh deadlines that dailies have to meet, they have to prepare quality
content and present it in a format that attracts the reader. Special
instruments and technologies exist for that purpose. They have been
widely discussed recently at the annual exhibition-cum-conference
“Publishing Business-Expo,” various seminars, in the magazines Strategia
i Praktika Izdatelskogo Biznesa. Ifra-GIPP Magazine, Kurier Pechati,
Novosti SMI, Industriya Reklamy and other industry publications. But
judging from feedback, many people in the newspaper business are
simply unfamiliar with these technologies. Perhaps it is one of the main
reasons why most Russian newspapers have yet to achieve a decent
quality.
Sometimes all it takes to make a newspaper more popular is to
change the work style. For example, to attract readers’ attention it is
important to have photographs, information graphics and tables with
comments in addition to the text. Such a newspaper looks more attractive
because it contains more entry points for the reader.
The number of regional newspapers that match the national papers
in quality is still very small. And in general daily papers in the regions are
still a rarity (apart from local issues of national syndicated publications).
The content and design of Russian newspapers, both national and local,
varies greatly. But the problem of quality is relevant for practically all
newspapers if they want to attract readers.
Shrinking readership of printed versions of newspapers is a fact. At
the same time, practice attests that aggressive use of digital technologies
24
could be instrumental in retaining and even increasing the audience. One
example in point is the Komsomolskaya Pravda Publishing House, which
was one of the first to scrap electronic copies of printed versions of the
newspapers KP and Sovetskiy Sport replacing them with essentially new
products. The new-look KP site now publishes news and articles specially
written for the online resource and accommodates an archive with text
and photographs from the printed versions. The main difference of the
electronic KP version from the traditional one is the emphasis on the
news. With the introduction of the news line, it became an active
competitor not only in the market of print media, but also among online
publications. From late 2007 the kp.ru site introduced a pilot system that
combines the resources of regional offices, the editorial offices of the
electronic versions of Komsomolskaya Pravda and the news on local KP
sites on a single technological platform including content management. In
addition, the KP Publishing House has launched or is planning to launch
several more information resources on topics such as cars, real estate, TV
schedules and an entertainment project “KP w”.
The results were quick to show themselves. Ever since
measurements of the online newspaper audience began to be taken in
November 2006 in Moscow by TNS Web Index (part of the TNS Russia
group of polling companies), the KP site has been the most visited site in
the “Media and news” segment, with the number of visits growing every
month. The revenues of Komsomolskaya Pravda increased by more than
50% last year, with revenues from the www.kp.ru site growing by more
than 200%, according to TNS Web Index data.
The audience of the KP site has, according to the same sample,
some distinct social and demographic features. It consists mainly of men
and women in the economically active age group (89%) who have a
permanent job (72%), higher education (60%) and high incomes (66%).
735,000 Muscovites (53% of the audience) who visit the kp.ru site are
executives or professionals, and 22% (300,000 visitors) are students in
various levels of education. In addition to TNS Web Index, TopMail.ru,
Liveinternet.ru and Rambler confirm Komsomolskaya Pravda’s leadership
on the web. According to their data, the Sovetsky Sport site is making a
good showing. In September 2007, it moved into first place in terms of
the number of readers among the sports newspaper sites.
Other traditional publications have also concluded that they need to target
mainly the young audience by going online. This year several major
media groups have announced investments in the development of Internet
resources. The Moskovsky Komsomolets site has allocated space for blogs
and allowed readers to publish their own news. Its Internet editorial office
updates the publication 24 hours a day with materials that are different
25
from the printed MK version, appealing mainly to an audience of well-off
people in the 20-35 age group. The site has a colorful design that stands
out from other online media.
Changing readership of Internet sites.
Data on visits from any point on the globe (ТОР 15).
Name of
resource*
Aggregate
audience of TOР
15 sites
kp.ru
Lenta.ru
Tden.ru
Km.ru
Gazeta.ru
Rian.ru
Vzglyad.ru
Pravda.ru
Dni.ru
Newsru.com
Expert.ru
Kommersant.ru
AiF.ru
Izvestia.ru
Ng.ru
Audience
Audience
Audience change
as of
as of
between
Audience
December Share, December
December 2006 change,
2007,
%
2006
and December
%
thousand
thousand
2007
people
people
37,724
100%
19,620
4,818.9
3,613.4
3,170.3
3,111.7
3,040.1
2,880.8
2,517.3
2,464.6
2,059.1
2,046.7
1,933.7
1,703.8
1,542.8
1,501.8
1,319.5
12.8%
9.6%
8.4%
8.2%
8.1%
7.6%
6.7%
6.5%
5.5%
5.4%
5.1%
4.5%
4.1%
4.0%
3.5%
1,826.2
4,236.7
1,814.3
4,198.7
2,654.9
2,343.9
959.8
691.5
894.6
-
18,103.9
103.3%
2,992.7
163.9%
-1,125.0
-26.6%
1,225.9
67.6%
-1,681.4
-40.0%
-595.8
-22.4%
-297.2
-12.7%
973.9
101.5%
1,012.4
146.4%
648.2
72.5%
Source: TNS Gallup Media
*The members of TOP 15 are news portals and Internet versions of print
media. TNS Web Index data are included only for the sites studied.
Kommersant has also changed the design of its website, which is
now less dependent on the structure of the printed version. The front page
“Kartina Dnya” is now constantly updated with materials prepared by five
journalists, and the Kommersant-Video section has been regularly
updated with creative content since the end of September 2007. Starting
in 2008 the Kommersant Publishing House has been working entirely in
the new editorial and publishing environment “Kommersant-Redaktsiya
26
2.0”. Another adept of the media Web 2-0, the Afisha Publishing House,
has taken to promoting glamorous lifestyles through thematic video blogs.
Vedomosti has combined the business part and various
entertainment resources in the RB.ru project launched in September 2007.
On January 30, 2008, its website got the blog backlink service that allows
the users of LiveJournal and the Moi Krug social network to be
authorized. Vedomosti also plans to go on television and is negotiating a
joint project with Russian TV channels. The Vedomosti TV product will
mark another step in expanding its communication platforms.
A digital version of the St. Petersburg free-distribution newspaper
Moi Rayon appeared in early 2008. Multimedia formats are developing on
the site of the Argumenty i Fakty weekly, www.aif.ru, where video plays a
growing role. The Sobesednik Publishing House and the newspaper
Izvestia have fully renewed their sites, which are now independent media
outlets. Novaya Gazeta started putting out audio books of prose and
poetry on CDs in April 2007. The series was based on subscriber polls.
The Media Partner holding, which belongs to the ESN group of
companies, the owner of the Komsomolskaya Pravda Publishing House, is
running a project to create a network news and music radio station called
“Obshcheye Radio – Komsomolskaya Pravda” in 50 Russian cities where
the newspaper has its branches. The radio and newspaper audiences are
the same, people aged 25-45. The network based on KP content is to be
completed in 2009. So far the project is pursued only in the regions, but in
future it may broadcast in Moscow and St. Petersburg as well. Up to 2.5
billion rubles is to be spent to develop the network.
KP’s radio project is ambitious, but it is not the only one. Radio
stations and print media under the same name already exist in the Russian
market. The best known among them is the Business FM station and the
newspaper Business & FM owned by the United Media Holding. But in
this case the radio station came first, followed by the newspaper Business
& FM.
To sum up, newspapers increasingly concentrate on the production
of content on paper, online, on cellular phones, radio and TV. Russian
media market experts predict that in the next three to five years they will
undergo major changes due to the growing number of communication
channels and changing means of content delivery. The traditional monomedium format will gradually be replaced with the multimedia one: the
media will provide multi-format content diffused under the same brand
through all the channels: printed publications, radio, television, the
Internet, and cellular phones. Content will be the cementing element
among diverse information channels. While formerly the work of a media
company had three components – content production, brand (the company
27
producing the content) and the communication channel, in the future
brand will be directly tied to content and the company will be able to
choose which channel to use to transmit information.
This trend was pioneered in Russia by the RBC holding, which
claims an aggregate audience of 14 million. That company has from the
outset used the same brand for its newspaper, magazine, TV channel and
website. It owns a financial and economic portal www.rbc.ru, a website of
the analytical newspaper RBK Daily, a financial-analytical portal
QuoteTotal, a high-tech resource – www.cnews.ru, a car market resource
– www.autonews.ru, tourism and recreation – www.turist.ru, an
educational site for students www.5ballov.ru, the weekly Internet paper
www.utro.ru, free mail www.pochta.ru and others. However, despite of
the vigorous development of RBC’s business the concentration of its
audience, notably on the www.rbc.ru, site owes much to marketing
mechanisms that increase the number of users based on hits of the
resource, and not on the amount of time the visitors linger. There are a
host of such technologies on the Internet, but solid media have until
recently refrained from using them. The situation has changed. Because of
the growing competition, these technologies have been pressed into
service. They began to be used in the summer of 2005, when the online
newspaper Vzglyad bought space for its news on the front page of the
Mail.ru portal thus grabbing 85% of the daily traffic and becoming the
most visited site on the Russian Internet. In the summer of 2007,
Kommersant and Vedomosti publishing houses joined RBC and Vzglyad.
According to Arsen Revazov, co-owner of the leading Russian Internet
agency IMHOVI, about 50% of advertisers prefer business sites. It is not
by chance that the major news and search portals – Yandex, Rambler,
Gazeta.ru, Lenta.ru, Newsru.com and others operate in this field.
The popularity of business websites among advertisers probably
gave rise to the new trend of having business inserts in the printed
newspaper versions. In 2007, they were introduced by AiF, MK, KP,
Izvestia, Novaya Gazeta and some regional periodicals. In addition, MK
has started putting out full-color specialized supplements timed to
professional holidays.
One of the oldest Russian newspapers, Trud, has also changed its
concept. On February 27, 2008, it launched a new format targeted mainly
at medium-level managers. Now Trud will not only report the main news,
but will also have sections on work organization, careers and vacancies.
Structurally it has identified three main sections for target audiences:
materials on work and everything related to work, news and
entertainment. The main difference of the new Trud from its competitors
is that the reader will get at least eight pages of daily tips on how to deal
28
with different work-related situations. Experts and market participants
believe the new paper will be assured of demand, but fear that advertisers
may be put off by its outdated title.
The first issue of the new-look weekly called Moskovsky
Komsomolets Subbota + Voskresenye appeared on March 15. The
periodical is designed to combine the traditional entertainment it carries
on weekends and prompt news reporting that is a hallmark of the MK
daily.
Komsomolskaya Pravda Book Collection, a unique and ambitious
project launched on October 8, 2007, enables readers to acquire a 30volume collection of world literary masterpieces if they buy
Komsomolskaya Pravda. On that day all 400,000 readers of the Moscow
Monday issue of KP received a free full-color 16-page catalogue with a
brief description of the book collection, and a week later they received
their first free volume of the collection. Shortly thereafter the KP book
collection project was launched in 20 more Russian regions.
The KP Book Collection and its catalogue provided additional
advertising space, which will give the KP partners effective feedback on
potential consumer over an indefinite period of time. The total number of
hard-cover copies of the book collection nationwide will be 8.5 million.
In 2006 the KP Book Collection project was successfully tested in
Volgograd, Rostov-on-Don, Chelyabinsk and Kaliningrad, attracting keen
interest among readers and getting a lot of resonance in the professional
circles.
On February 20, 2008, a similar project was launched in St.
Petersburg by Argumeny i Fakty timed to the 30th anniversary of the
publication. The AiF Book Collection offers a unique collection of worldrenowned authors, such as The Mysteries of History by Edvard Radzinsky,
Pride and Prejudice by Jane Austin, The Airport by Arthur Hailey, etc.
The collection includes 21 hard-cover volumes priced at 99 rubles each.
Like in the KP project, the collection’s first volume was delivered to the
AiF readers for free.
A new departure in the quality press market in Russia was the
launching on April 6, 2007 of the Rossiiskaya Gazeta project, the weekly
Rossiiskaya Gazeta – Nedelya published and freely distributed by the
Russian Postal Service at the federal government’s expense with a
circulation of 3.5 million copies among population groups entitled to
various benefits: World War II veterans, veterans of military action in
“hot spots”, the disabled and Chernobyl victims, servicemen, law
enforcement officers, firemen, employees of the penitentiary system who
were disabled by injuries sustained in the line of duty, family members of
deceased World War II veterans and other military actions, etc.
29
The advent of that publication went a long way to cement the
information space of the Russian Federation and brought quality national
press within reach of more people. At the same time, the appearance of a
big-circulation free quality weekly carrying a television program
potentially makes inroads into the audience of traditional regional
publishers, but at the same time it stimulates competition and forces other
newspaper market participants to keep down prices for their products
despite inflation.
One must note the growing activity of the Russian press in foreign
markets. In August 2007 the British Daily Telegraph, the American
Washington Post and the Indian Economic Times included Englishlanguage supplements by Rossiiskaya Gazeta under a common heading
“Russia: Beyond the Headlines.” In terms of its editorial concept and
design, the supplement meets the most exacting world standards. It is
generally recognized that the RG foreign supplement project is a new
development in world practice and undoubtedly one of the most effective
efforts to boost Russia’s image in the world and counter the Russiabashing trend in foreign media. For the first time Russian content is
delivered directly to millions of readers of influential foreign
newspapers. RG’s monthly supplements can be read in hard copy, online
and in the popular electronic e-Paper format, to which illustrative
materials, video and audio podcasts, web-links and other types of
content are connected.
The 200th issue of the newspaper AiF. Yevropa, a weekly
supplement to Argumenty i Fakty, came out recently. It first appeared in
1995 and is now distributed across Western Europe, the Baltics, Turkey,
Tunisia and Thailand, with a circulation of over 600,000.
Other leading Russian periodicals – Komsomolskaya Pravda,
Moskovsky Komsomolets and Izvestia – are also expanding their overseas
presence. For example, Komsomolskaya Pravda is distributed in 32
countries in Europe, Asia, the Americas and Africa. Its overseas
circulation increased by 70% to 260,000 copies in 2007. The Moskovsky
Komsomolets Publishing House, in addition to foreign sales of its
Russian edition, puts out independent Russian newspapers in the United
States, Canada, Australia, the United Emirates, and European countries,
and since July 2007 also in Turkey, a total of 250,000 copies. Izvestia
sells 25,000 copies abroad, mainly in Israel. In March 2007, the United
Media Holding teamed up with RIA Novosti to publish the revamped
English-language newspaper The Moscow News (the project is now
managed by RIA-Novosti).
30
The readership of Russian dailies
Single-issue
readership
(1,000 people)
in 2006
Single-issue
audience
(1,000 people)
in 2007
2,148.5
1,925.0
1,179.5
1,215.4
Rossiiskaya Gazeta
335.3
638.0
Sport-Express
568.6
550.6
Sovetsky Sport
463.2
508.8
Name of daily
Komsomolskaya
Pravda
Moskovsky
Komsomolets
Publisher
Komsomolskaya
Pravda
Moskovsky
Komsomolets
Redaktsiya
Rossiiskaya Gazeta
Sport-Express
Komsomolskaya
Pravda
PromSvyazKapital
Gazprom-Media
Kommersant
Trud
303.3
374.7
Izvestia
431.5
371.4
Kommersant
233.0
237.5
Total
5,662.9
5,964.0
Source: TNS Gallup Media (cities with a population of 100,000+ are represented)
Newspaper innovations bring are fruitful everywhere in the world.
According to WAN data published in February 2007, circulation of
newspapers in the world is growing as is the number of new publications
launched worldwide. In the last five years, the global circulation of both free
and paid-for newspapers grew by more than 10% and the total circulation of
free-distribution dailies increased by almost 150% over the same period.
As regards the overall situation in the market of weeklies, as in the
previous years, it is shaping up better than in the dailies market, analysts say.
The most popular are TV guides, comparatively cheap and respectable
weeklies for family reading with attractive advertising. The leader in this
group is still Antenna-Telesem national weekly, published by HFS&IMG,
which comes out in 64 Russian regions, in Astana, Kiev, Minsk, and Tallinn,
and has a total circulation of 5.2 million copies and a single-issue audience
of more than 10 million. But Antenna-Telesem is not an isolated case. It has
at least a couple of serious rivals in every Russian region. Above all,
TELENEDELYA (Popular Press Publisher) a color magazine-format TV
guide, which hit the market in 2006 and is now published in 20 Russian
cities, in Belarus and Kazakhstan with a circulation of 1,060,000 copies.
Network weekly publications by Pronto-Moskva, Komsomolskaya
Pravda, Moskovsky Komsomolets, Provintsiya, Argumenty Nedeli and
many other interregional publications are making good progress.
An original TNT project appeared in the Russian market in October
2007: the newspaper Moskva. Instruktsia po Primeneniyu with an initial
circulation of 120,000 copies. This is not a billboard, a consumer magazine
31
or straight news. The newspaper tries to combine business and leisure. It
writes only what every person living in Moscow needs to know and, the
publisher claims, contains nothing that can be of any use to people living
elsewhere.
TOP-10 single-issue audience publishers among
all the papers in 2007
Single-issue
readership
Percentage of urban
readers aged 16 and
above
1. HFS & IMG
10,121.7
17.8
2. Komsomolskaya Pravda
8,435.0
14.8
3. Argumenty i Fakty
7,042.3
12.4
4. Bauer-Russia
4,615.1
8.1
5. Pronto-Moskva
2,855.1
5.0
6. Moskovsky Komsomolets
2,733.2
4.8
7. S-Info
2,245.1
3.9
8. News Media-Rus
2,219.1
3.9
9. Media Mir
1,950.9
3.4
237.5
0.4
Publisher
10. Kommersant
Source: TNS Gallup Media (cities with a population
of 100,000+ people are represented)
Regional and local publications account for two thirds of sociopolitical newspapers in the country. In recent years the advertising sections
of the regional media, including network media, have been growing faster
than in most national publications. As a result, the local press is becoming
ever more attractive for investors, and regional and interregional media
holdings have been mushrooming in the Russian regions.
The Kirov Region has three such holdings: RNT Media-Group (which
includes the newspapers PRO - Gorod, Navigator, Komsomolskaya Pravda
v Kirove, Chto, Gde, Pochem?, Kirovsky Biznes-Zhurnal, the TV company
Channel 33, Radio Maria station); the Commodity – Money – Commodity
Publishing House, which puts out corporate publications: the magazines
Press-Sluzhba, Delimsya Opytom, the newspapers Bankir, Generatsiya 5,
Energetik Vyatki, Metallurg, Tvoya Diagonal, TDT) and the publishing
house Mediatrend, which issues the newspapers Avtosdelka and the
magazine Inomarka Kirov.
32
Two regional media centers have emerged in the Vologda Region:
Vologda and Cherepovets. Each has its own media system and rated
publications. According to the regional information, press and broadcasting
committee, the Vologda newspapers Krasny Sever, Vologodskaya Nedelya
and Premier have the biggest circulations. In Cherepovets and adjacent
areas, it is the newspapers Rech (five issues a week), Golos Cherepovtsa and
Kuryer. The leading publishing houses in the Vologda Region are
Cherepovets, Premier-Inform and FEST.
The Cherepovets Publishing House issues socio-political newspapers
Rech, Golos Cherepovtsa, Vsyo i Srazu, the magazines Delovoi Klub, Stil
Zhizni, Zdorovye Vologodchiny. Premier-Inform publishes the socialpolitical weekly Premier: Novosti za Nedelyu, a digest for women Samoye
Luchsheye, and a collection of scanword puzzles Samoye Luchsheye –
Skanvordy, the humor newspaper S Privetom, a newspaper on alternative
medicine Bez Tabletok, the culinary newspaper Povareshka and a women’s
magazine Sovremennitsa. FEST publishes the newspaper Krasny Sever, is
the founder of the newspaper Vologodskaya Nedelya and the magazine Lad
Vologodsky.
The biggest media structure in the Kostroma Region is Narodnaya
Media Gruppa, which integrates seven print media publications:
Kostromskaya Narodnaya Gazeta, Golos Naroda – Kostroma, Kostromskoi
Telegid, Moskovsky Komsomolets v Kostrome, Sredyi Klass – Kostroma,
Kostromskiye Besplatnye Obyavleniya and Kostromskaya Yarmarka. The
trends in other Russian regions are similar.
The biggest media player in the Samara Region (in terms of the
number of publications) is Media-Samara (a division of the Volgopromgaz
financial-industrial group). The media group brings together more than 10
regional electronic and print media, including the dailies Samarskiye Izvestia
(Samara), Ploshchad Svobody (Togliatti), the weeklies Samarskoye
Obozreniye, Budni (Samara), Gorod N-sk (Novokuibyshevsk) and
Postscriptum (Togliatti).
The biggest regional market of medium-sized print media is
Kaliningrad. The region has 352 publications, including 234 newspapers and
97 magazines. About half of them come out regularly. Most of the media are
published in Kaliningrad, which is the home of half of the region’s
population.
News press includes the newspapers Komsomolskaya Pravda v
Kaliningrade, Kaliningradskaya Pravda, Argumenty i Fakty – Kaliningrad,
Strana Kaliningrad, Moskovsky Komsomolets v Kaliningrade,
Kaliningradskaya Antenna, Rossiiskaya Gazeta, Kaliningradskiye Novye
Kolesa, Kaskad-Podrobnosti, Mayak Baltiki, Dvornik, Grazhdanin, Izvestiya
Kaliningrada, Yantarny Karavan and Tridtsat Devaty Region. The main
33
publications in the advertising segment are Iz Ruk v Ruki, Yarmarka and the
biggest circulation free-distribution newspaper Va-Bank-Inform with a total
weekly circulation of 150,000 copies.
Most of the newspapers are weeklies. In addition to the regional insert
into Komsomolskaya Pravda there is only one daily, the oldest regional
paper Kaliningradskaya Pravda (published since 1946, issued five times a
week, with a TV-Afisha supplement on Saturdays, with a circulation between
16,500 and 22,000 copies, eight А2 pages and 24 А3 pages on Fridays).
Like everywhere else, the national network press is strong in the
region. It arrived there in the 1990s: Moskovsky Komsomolets in 1993,
Komsomolskaya Pravda in 1996, Argumenty i Fakty in 1998, Yantarny
Karavan, a Kaliningrad newspaper from the Provintsia Publishing House in
1999.
The regional publisher of most national papers is Zapadnaya Pressa, a
major publishing center in the region, which includes an advertising agency,
a retail network (over 60 kiosks and 300 alternative sales points), a delivery
service, an outdoor advertising agency, and a printing and publishing
complex. Zapadnaya Pressa controls 39% of print media sales and 55% of
the advertising market in the regional press. The company currently
publishes nine newspapers and 10 magazines with a total average monthly
circulation of over 2.6 million copies.
The Kaliningrad newspaper market is highly saturated, which makes it
difficult for newcomers to gain a foothold. No new newspapers were
introduced in the city and the region in 2007. The existing periodicals are
trying to keep up their circulation and meet the demand. Experts believe that
there are two main changes in the Kaliningrad newspaper market, and
indeed in the country as a whole:
a) the issue of specialized publications on real estate, finances and
economic analysis (Kaliningrad already has the newspapers Yevrorubl,
Finansy i Nedvizhimost and other newspapers in these segments);
b) the establishment of multimedia holdings, which cannot sustain
their operations without print media. For example, the local broadcasting
company Kaskad recently launched the newspaper Kaskad-Podrobnosti and
the regional broadcasting company has bought the weekly Kaliningradskiye
Izvestia.
Local newspapers have an audience twice the size of the national
press, according to VTsIOM and the Information Policy Development Fund
(FRIP). The share of leaders of federal-regional newspapers dealing with
social and political matters (national and network publications) has in recent
years hovered around 28%, whereas the share of regional publications has
been 25% and that of the municipal press (district and city newspapers) as
high as 36%. One in every four Russians (26%) never reads these papers.
34
Contrary to our earlier forecasts the free-distribution press market in
Russia was the fastest growing sector in 2007 as consumer demand for it
grew and it attracted more and more advertisers.
According to the TNS Gallup Media survey of the audience of a
single news periodical issue in St. Petersburg in 2007, two free-distribution
local periodicals were constantly among the top three. The largest number of
people in St. Petersburg (788,000 on average) read the publications of the
Moi Rayon (My District) newspaper network, put out by Regionalnye
Nezavisimye Gazety Severo-Zapad jointly with the media concern Shibsted
(Norway). Argumenty i Fakty is in second place (687,900 readers), with the
free-distribution paper Tsentr Plus in third place (635,300 readers). The free
television guide Metro-TV appeared more than a year and a half ago and
now has a circulation of 300,000 copies challenging other paid-for
newspapers in St. Petersburg.
On October 12, 2007, Metro International launched a free-distribution
women’s magazine Metro Beauty with a circulation of 250,000 copies. By
way of comparison, the circulation of the country’s biggest women’s
magazine Cosmopolitan in St. Petersburg is 96,000 copies. Experts are sure
of Metro Beauty’s success because there are many potential advertisers in
the St. Petersburg market who have no need and cannot afford to place their
advertisements in national women’s magazines.
In Moscow the positions of free-distribution dailies in 2007 also
strengthened. The Moi Rayon network of free-distribution papers, which came to
35
Moscow from St. Petersburg in September 2006, has by now built up its circulation
to 530,000 copies and is distributed in 48 districts in Moscow, which are home to
almost half of the city’s population. The overall average single-issue circulation in
Moscow and St. Petersburg is now 970,000 copies for an audience of 1.2
million. Thus, the Moi Rayon network of papers is the leader among the
urban news periodicals in the two capitals.
The local Moscow free-distribution newspaper Metro, owned by
Sistema Mass-Media concern, doubled its circulation in March 2007 to
600,000 copies and is now distributed at 75 metro stations. Thus Metro has
emerged as the third most important non-advertising newspaper in Moscow
after MK and KP in terms of circulation and audience. According to TNS
Gallup AdFact, advertising in Metro (A2 page size) increased by 113% in
2007 compared with the previous year. That indicates systemic changes in
the publication, notably the modernization of content and design, the
increased number of selling points and innovative offers to advertisers.
Today the newspaper Metro has a unique distribution system
comprising 108 metro stations in Moscow and 89 major supermarkets
belonging to the Sedmoi Kontinent, Perekryostok and Ramstor chains.
A new departure in the Russian press market is the new package for
advertisers offered by Metro called Sindikat Federatsiya, which provides
network placing of adverts in regional free-distribution information
periodicals. The announced advertising package has a circulation of 4.5
million copies. Sindikat Federatsiya is a pool of regional free-distribution
information newspapers, which offers to place advertisements either in all its
publications or in selected regions. Advertising space is sold in a centralized
way through the Metro Moscow office under an agency contract with
regional partners for a commission of 15%. The introduction of that service
meets the growing demand among advertisers for advertising space and BTL
promotion campaigns in the Russian cities in free-distribution information
periodicals with a stable readership.
Along with these two publications and the newspaper Okruga (Extra M
Media Publishing House, weekly circulation 1.2 million), new entrants into the
Moscow free press market in 2007 included the newspapers Sobesednik. Moskovsky
Pochtovy Vypusk, Roditelsky Dom and Vmeste.
The city newspaper Sobesednik. Moskovsky Pochtovy Vypusk is a
collaborative effort of the Sobesednik Publishing House and the Moscow
office of the Russian Postal Service. The bulk of the publication is made up
of a digest of the best Sobesednik articles with an addition of postal service
advertisements. Although many Muscovites regard advertising newspapers
as junk mail to be thrown out, Sobesednik. Moskovsky Pochtovy Vypusk
increased its circulation from 100,000 to 300,000 starting from the fourth
36
issue. So far it is a monthly, but the publishers say it will be published twice
a month with a circulation of 1 million copies.
The newspaper Roditelsky Dom, a brainchild of Moscow’s mayor, is a
free-distribution family paper with a circulation of 100,000. The children’s
newspaper Vmeste came out on the eve of International Day for the
Protection of Children with a circulation of 10,000 copies. Its main theme is
children’s movements (socio-political, patriotic, creative, sports, etc).
Neither publication aims at commercial success. They are published by
Moskovsky Komsomolets jointly with the public relations committee of the
city of Moscow.
The Swedish publishing group Metro International is planning to
launch a free newspaper in the Moscow market. It is contemplating a joint
venture with Komsomolskaya Pravda to launch the newspaper Metro, which
will be distributed at the entrances to Moscow metro stations. The
newspaper Okruga was distributed in this way starting at the end of 2006,
but in mid-2007 it registered itself as an advertising periodical and reverted
to the former system of delivery to house mailboxes.
The pressure of the free-distribution press on the paid-for publication
market is even stronger in the regional centers of Russia. The leading print
media in Tyumen are free-distribution publications Karavan-Media and
Gostiny Dvor, which are published twice a week in enough copies to fill all
the mail boxes in the city. Trailing well behind in terms of readership are the
paid-for newspapers the Telesem teleguide, Argumenty i Fakty and
Tolstushka KP. According to TNS Gallup AdFact, the tор three publications
in Yekaterinburg in terms of advertising revenues in 2007 were Va-Bank,
Nasha Gazeta (with a TV program) and Bystryi Kurier.
Murmansk recently got a free-distribution full-color newspaper Vash
Provodnik v Mire Tovarov i Uslug. The first issue had 12 pages, but in the
future its size will increase and its content will be directly answering
consumers’ questions about choosing various goods or services. The
newspaper’s first issue carried materials on private pension funds, on how to
choose the right spares for your car, the rating of foreign-made cars and
other useful information.
Vladivostok has had a free-distribution TV guide Millionka + TV
since August 2006. From the outset it has been a colorful, useful and
interesting newspaper for TV viewers. During the past year the newspaper
built up its circulation to 120,000 copies.
In September 2007, Omskiye SMI launched a glossy women’s
magazine Sezon Lyubvi. Among its undisputed advantages is the fact that the
magazine reports only news and love stories in the Omsk Region, is
distributed free and offers cheap advertising space.
37
Regional Russian authorities use free-distribution press as a political
information resource. The prefectures and district authorities in Moscow, for
example, issue 130 free-distribution newspapers with a circulation of 4
million copies. It has to be said, however, that the share of free-distribution
press is high only in metropolises, while in cities with a population under
100,000, not to speak of rural areas, it is practically non-existent.
Leading Russian publishers in terms of circulation
(including newspapers, TV guides, advertising and entertainment
publications, 2007)
No. Publisher
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
PromSvyazKapital
Komsomolskaya Pravda
HFS& IMG
Bauer Russia
Rossiiskaya Gazeta
Tsentr Plyus
Moskovsky Komsomolets
Redaktsiya Vestnika
ZOZh
News Media
Sobesednik
S-Info
Mir Novostei Media
Moya Semya
Provintsiya
Pronto-Moskva
Single-issue
circulation,
thousand
copies
Of which
advertising
Of which
nonadvertising
10,513.3
6,647.7
6,548.5
5,691.6
3,806.6
2,900.0
2,812.2
5,806.6
0
2,115.7
0
0
2,900.0
0
4,706.7
6,647.7
4,432.8
5,691.6
3,806.6
0
2,812.2
2,704.2
0
2,704.2
2,379.6
2,292.0
2,155.5
2,155.0
1,523.4
1,272.5
1,267.1
38
0
2,379.6
350.0
1,942.0
0
2,155.5
0
2,155.0
0
1,523.4
0
1,272.5
1,267.1
0
Source: Mediastat (GIPP) Project
MAGAZINES
The magazine market in the country was worth 37.5 billion rubles in 2007
(sales and advertising revenues), according to RBK. The Russian Association of
Communication Agencies (AKAR), reports a 22% growth of magazine
advertising revenues between 2006 and 2007. The Russian magazine market has
been growing at a brisk pace for many years in a row, but AKAR believes that
the pace of growth will slow down to 7%-9 % in the next year or two.
The top 10 magazines in terms of advertising revenues
(2007, based on price lists in rubles without VAT)
№
1.
7 Dnei
2.
Cosmopolitan
3.
Elle
4.
5.
6.
7.
8.
9.
10.
Vogue
Liza
Glamour
Ekspert
Karavan Istoryi
Kommersant Dengi
Za Rulyom
All magazines
Periodical
Publisher
Sem Dnei
Independent Media Sanoma
Magazines
Hachette Filipacchi Shkulev
(AFS)
Conde Nast
Burda
Conde Nast
Ekspert
Sem Dnei
Kommersant
Za Rulyom
Budget
1 927 999 644
1 761 028591
1 388 596 937
1 183001 757
1 159 212 551
998 603 665
730 266 772
702 819 642
654 586 223
635 005 529
39 695 348 693
Source: TNS Gallup AdFact
As of the beginning of 2007 there were 23,500 registered magazines in the
Russian Federation (19,000 original titles), of which 15,000 were national and
8,500 regional. In reality the number of magazines is about 12,000. The
aggregate circulation of Russian magazines in 2007 was about 1.9 billion copies,
including more than 900 million copies of glossy magazines, of which 600
million copies were printed abroad.
The number of launches of major national magazines, including
partworks, not counting redesign, change of title and relaunch, was 5 times the
number of closures in 2007. The most eventful period was in March-April and
September-October 2007. Burda publishers launched seven new projects, three
of which are partworks with other publishing houses. They include several
crossword publications, the magazines Dobrye Sovety. Domashniy Doctor,
Otdokhni! Imena, and Moi Rebyonok. Mamochkina Shkola. All the newcomers
39
are doing well, steadily building up circulation and readership. For example, the
monthly Otdokhni! Imena has more than tripled its circulations.
Since June 2007 Burda has been publishing the magazine Madame
FIGARO, and in January 2008 it teamed up with GE Fabbri Editions and De
Agostini to launch eight new partworks (Chess. Harry Porter, The Adventures of
Shrek, and others). Burda will launch four or five independent projects before the
end of 2008.
The publishing houses Independent Media Sanoma Magazines and
Hachette Filipacchi Shkulev launched four magazines each in 2007, and Creative
Media, C-Media, Comics Ltd and Prof-Media launched two each. The
publishing house Edipresse Konliga launched an international brand Viva!, and
Kommersant a lifestyle periodical Citizen K, which is a Russian version of the
top-range French magazine about fashion and lifestyle with large designer
photographs. Initial investments in the project topped 61 million rubles. The
annual budget is 37 million rubles. Experts believe Citizen K in Russia would
reach a break-even point in three years (12 issues).
Many of the recent launches have been b2b publications as well as
specialized niche publications. Among the publishing houses that have
suspended publication one should note SK Press, which shut down three
magazines (Seventeen, Travel + Leisure, Auto Motor und Sport) and Sekret
Firmy, which shutdown two magazines (Imeyesh Pravo and Vsyo Yasno). Axel
Springer shut down Wallpaper, Arnold Magazines shut down Loaded, SPN
Publishing shut down My plus, and Rodionov Publisher shut down L’Optimum.
Among the major trends in the magazine market in 2007 mention should
be made of the boom in the celebrity magazines niche, the continued growth in
the fashionable women’s and lifestyle glossy sector, the popularity of car and
shopping themes, and the launching of more and more original (non-licensed)
projects.
The celebrity magazines segment, which previously had nine publications
in Russia (7 Dnei, Gala, Gala Biografia, Hello, OK!, Karavan Istorii,
Kollektsiya Karavana Istorii, Atmosfera, and Otdokhni! Imena), was in 2007
joined by license magazines Viva! from Edipresse Konliga and Tainy Zvezd from
Bauer Russia Publishers, the proprietary project of the Forward Media Group,
the magazine Story, the original project of HFS&IMG – the weekly StarHit, and
the monthly Interview from the Creative Media publishing house. The
Sobesednik publisher also launched its first ever glossy magazine Tolko Zvezdy
(Only Stars). It is distinguished from most other magazines by its manner of
presentation. It does not write about beauty, cosmetics, health and cars itself but
has stars speaking about their own experiences. Thus collateral information that
interests the target audience blends with the content to fully justify the
magazine’s title.
40
Investments into promoting these projects have been significant. For
example, the start-up circulation of Star Hit was 715,000 copies and the
promotional budget in 2007 and 2008 is planned at 250,000 million rubles, a
staggering sum for the Russian publishing market. Other periodicals plan to
spend an average 75-125 million rubles each for these purposes.
The boom in the celebrity segment does not come as a surprise. Growing
incomes of the population, the burgeoning of the entertainment industry and
growing advertising budgets in the luxury segment tend to boost demand for
such information. According to the analytical center Video International, the
celebrity segment in Russia stood at almost 500 million rubles in 2006 and
nearly doubled in 2007. The readership of celebrity magazines increased by
109% in the same period. Steady growth of the share of celebrity and lifestyle
publications is a worldwide trend. Of the 27 glossy products launched in
Western Europe last year seven are magazines about celebrities. Women’s
magazines have been publishing more and more articles about stars. Although
new magazines about celebrities spring up all the time, the most popular
magazine of this kind in Russia is Karavan Istoriy, which was the pioneer of the
genre in Russia, according to TNS Gallup Media.
As before, 2007 saw the launching of new women’s magazines, a niche
for which there is steady demand both among readers and advertisers. In the
second half of 2007 newcomers to the Russian market included Votre Santé,
Woman and Home and Sex&The City. The latter is an original project of the
Parlan publishing house devoted to the life of a modern city woman,
independent, educated and ambitious. In addition, the Arnold Magazines
publishing house, which already publishes such license magazines as
Homes&Gardens and the French Votre Beaute, has signed a contract with the
British company ZAC Publishing to issue an up-market fashion monthly Ten
Magazine in Russia.
Another interesting trend in 2007, along with the use of international
brands, was the launching of many original Russian magazine titles. In addition
to the already mentioned magazines StarHit, Story, Interview, Sex&The City,
they include Domoi from HFS&IMG, Trend from the Za Rulyom publisher,
Russky Reporter from Ekspert, Lichnyi Byudzhet from Creative Media and
Luntik from Egmont publisher, which are new regional publications. The trend is
likely to grow because by launching original magazines the publisher avoids
paying the licensor for the use of the license and the risk of the license being
transferred to another Russian publisher.
In parallel the mass circulation women’s magazines tend to become
“glamorized” as women living in metropolises see their incomes grow and lose
interest in clothes patterns and other characteristic attributes of that segment in
the past. Threatened with shrinking audiences the popular women’s magazines
are forced to change their format and partly their content. They have been
41
growing thicker and look more and more like glamour magazines, their main
rivals.
The need to adjust the structure of advertising revenues is pushing the
mass-circulation women’s magazines in the same direction.
Share of various types of goods in the advertising revenues
of the magazines Liza and Cosmopolitan (2007, %)
Category
Cosmetics / perfumes / hygiene
Apparel and footwear
Medicines and food supplements
Food
Household appliances
Soft drinks/ beer
Transport
Other
TOTAL:
Cosmopolitan
57.7
16.6
3.9
1.8
2.6
1.4
2.1
13.7
100.0
Liza
29.0
5.3
19.3
9.0
3.9
2.6
0.4
30.4
100.0
Sources: TNS Gallup AdFact, ATsVI
A comparison of the structure of advertising revenues of the
magazines Liza and Cosmopolitan (see table above) suggests that masscirculation women’s magazines have to publish more advertisements of
perfumes, cosmetics, clothes and footwear if they are to boost their
advertising revenues. But to do so they have to become more glamorous,
which is a change most readers would welcome.
The main “victims” of this trend are the publishing houses which put
out mass circulation women’s magazines aimed at medium- and low-income
readers, in the first place the Burda publishing house. The first to face the
danger was its most successful project, the magazine Liza, which began
rapidly losing its readers in 2006. However, Burda rectified the situation by
a series of consistent management and editorial moves. Liza is gradually
turning into a thick glossy magazine and ranked fifth in its niche in terms of
advertising revenues in 2007 after 7 Dnei, Cosmopolitan, Elle and Vogue.
The oldest brand in the Russian publishing market, the magazine Burda, has
also been losing readers, albeit not as dramatically. The time has probably
come for it to change its format too.
Health periodicals form a separate niche in the magazine market.
Being a source of competent professional information on the healthy way of
life and offering articles in the genre of popular science, these publications
as a rule steer clear of inaccuracies, hunches and unsupported facts. Their
frequent contributors are highly qualified scientists, doctors and consultants.
42
That is why not every region can boast such a magazine. Most of them are
published in Moscow.
The Russian health magazine market is changing, though not very
much. Over the past seven years more than twenty such publications have
gone out of business: Semeiny Doctor, Formula Zdorovya, Ona/Zdorovye,
Materinstvo, Ulitsa Sezam dlya Roditelei, Vita, Neotlozhka, Doktor Vera,
Vash Lyubimyi Malysh, Spid-Info/Zdorovye, and others. But new magazines
of this kind spring up all the time.
Leading health magazines in 2007
Title
Zdorovye
Domashny Doktor
Zhenskoye Zdorovye
Khudeyem Pravilno
Zdorovye ot Prirody
Area
Russia,
Moscow, St.
Petersburg
Moscow
Moscow
Moscow
Moscow
AIR*, thousand
people
1046.8
375. 4
148.0
233.2
138.1
97.8
48.9
AIR*, % of
market
1.8
4.1
3.7
2.6
1.5
1.1
0.5
Source: TNS Gallup Media
*AIR – average audience of a single issue of all publications in cities with a
population of over 100,000.
There are different ways in which health magazines gain their readership. For
example, the Burda publishing house awards bonuses to those whose letters have
been published in the magazine Domashny Doktor (Home Doctor), which,
incidentally, is in line with the magazine’s concept because its content consists of
readers’ letters instead of traditional articles. There are three leaders in this market:
Zdorovye (the Zdorovye publishing house), Domashny Doktor (Burda) and
Zhenskoye Zdorovye (Women’s Health). Snapping at their heels is the magazine
Khudeyem Pravilno (Lose Weight in the Right Way), published by Zdorovye.
Other magazines in the same thematic niche are Shape published by Veneto,
Zdorovye ot Prirody (Natural) and many others.
In the market of men’s glossy magazines, contrary to our last year’s growth
forecasts, there were no fundamental changes in 2007. As before, they lag way
behind women’s magazines in terms of circulation and readership. The leaders in
the women’s segment, Karavan Istoriy and Cosmopolitan have almost three times
bigger circulation and readership than their counterpart in the men’s segment, the
magazine MAXIM. Samplings taken by TNS Gallup Media have also registered a
drop in readership of most magazines for men (FHM, ХХL, Men's Health, Playboy,
GQ). Only MAXIM and Esquire increased their audiences. In fact, MAXIM became
the fastest growing periodical in the history of Russian magazines for men. Its
43
readership increased by 8% in 2007. Since September of that year MAXIM has had
a facelift: it has a new design, font and several new sections.
One reason for the shrinking readership of glossy magazines for men is that
their market in Russia has not jelled, unlike the women’s magazine market. Some
periodicals shut down in 2007 (L'Optimum), and some new ones were launched, for
example, Arena, GQ Style and others. Besides, the main women’s magazines have a
clear-cut brand positioning strategy. Karavan Istoriy, Cosmopolitan, Elle, Vogue
and others as a rule cater to different market niches and do not compete among
themselves. Men’s entertainment magazines have not yet structured their target
audience so effectively. Basically, Men's Health cannot be compared to MAXIM
and Playboy but it so happened that they all fight for position and pick at each
other’s readership.
The advertising revenues of male publications account for about 3.3% of the
total print media advertising revenues, but they are growing faster: during the past
year the advertising revenues of men’s glossy magazines increased by 21% to draw
level with the advertising revenues of interior design magazines. It makes sense for
the advertiser to work in the men’s magazines niche because the readers are well-todo men with medium and high incomes, who can afford the goods and services
advertised. The most frequently advertised items in such magazines as MAXIM,
Playboy, XXL, FHM are perfumes, cars, watches, clothes, household appliances,
cigarettes and alcohol.
Advertising revenues of Russian magazines by categories,
2006-2007, billion rubles*
Category
Women’s and fashion magazines
Business magazines
Men’s magazines
Car magazines
General Interest magazines
Interior design magazines
Computers and games magazines
2006
2007
In % of
2006
8.576
3.462
1.747
1.462
1.376
1.372
0.451
12.381
4.312
2. 524
1.874
1.784
1.771
0.585
+ 44.4%
+ 24.6%
+ 44.5%
+ 28.1%
+ 29.1%
+ 29.1%
+ 29.7%
Source: TNS Gallup AdFact.
*The budgets were calculated based on official price lists of publishing houses
without account of discounts and taxes.
RBC predicts that in the future the growth of the Russian magazine
market, including men’s glossy magazines, will be mainly driven by advertising
revenues. By 2010, the share of advertising revenues in the magazine market will
rise to 58%-60%, which would mean an increase by 5%-7% on 2007.
44
Next to women’s glossy magazines, the niche of business and sociopolitical magazines has always been a strong second in the Russian magazine
market in terms of advertising revenues and has rightly been regarded as one of
the wealthiest. But unlike its main rival, which has been increasing its revenues
year in and year out and driving the whole magazine market, business magazines
have been growing more slowly than the market on average for several years in a
row.
The closure of a number of business and socio-political publications in
recent years (Yezhenedelny Zhurnal, Novy Ochevidets, Russky Focus, etc.) and
the failure of the surviving magazines to turn a profit for many years all show
that this market segment has become very difficult to succeed in. Only very
confident publishers can afford the risk of launching a new magazine or
newspaper in that segment. For example, SmartMoney (published by IMSM),
RBC (published by RBC Media) or D’ (published by GK Ekspert). The
Ogonyok Publishing House has launched a magazine-format newspaper Nomer
Odin (Number One), the Eurasian Media Group is reviving the newspaper Za
Rubezhom (International Life), and Creative Media has launched the magazine
Lichny Byudzhet (Personal Budget), etc.
Тор 15 commodity categories advertised
in business and socio-political magazines
(2007, based on price-lists, million rubles, without VAT)
Category
2007
Cars
Financial services
Media
Day-to-day services
Entertainment
Computers
Real estate
Communications
Alcoholic drinks
Education and employment
Watches/ jewelry
Internet
Insurance
Advertising and marketing
Transportation services
928.5
833.0
690.9
335.65
333.2
328.3
296.45
262.15
208.25
159.25
142.1
120.1
110.25
90.65
90.65
Growth on Share, %
2006
34.7
21
33.3
18
53.4
15
115.0
9
13.6
7.2
12.1
6.9
30.6
6.8
4.9
6
220.7
5
27.3
4
31.7
3.3
19.1
2.7
67.9
2.2
52.9
1.9
17.2
1.9
Source: TNS Gallup AdFact
45
But on the whole the leaders in this niche retained their positions in 2007.
The four leading publications (Ekspert, Kommersant Dengi, Itogi and Forbes)
still account for more than 50% of the advertising revenues of all the business
and socio-political magazines in the country. Another 32% goes to five other
old-timers: Sekret Firmy, Profil, Kommersant Vlast, Russian Newseek and
Kompaniya, leaving only 18% of advertising revenues for the other participants.
At the same time, while national socio-political magazines have been
stagnating, the regional network media are making good headway. The
publishing houses Computerra (Biznes-Zhurnal) and Shef (The Chief) constantly
report new magazine launches in more and more cities. Biznes-Zhurnal, for
example, is published in 44 regional centers and has a circulation of 225,000
copies. The Bonnier Business Press Publishing House launched 12 new regional
publications copying the Delovoi Peterburg format in October 2007.
This was also the approach taken by the Expert publishing group, which
launched the magazine Russky Reporter. The pilot issue of that weekly hit the
shelves in Yekaterinburg, Novosibirsk, Rostov-on-Don and Samara on May 17,
2007, and on September 6, 2007 Russky Reporter was launched on the national
scale.
Russky Reporter tries to address Russian problems, phenomena and trends
by enlisting quality journalism. The current price of one copy is between 30 and
35 rubles, but is likely to rise to the level of the best-selling periodicals in the
Russian market. The trial press run was 66,000 copies, and the returns fluctuate
between 55% and 60% with a downward tendency. The circulation of the first
national issue was 17,000 copies. The publishers claim they can raise it to
300,000 copies a week.
Main indicators of leading car monthlies in groups, 2007
Title
Publisher
Za Rulyom
Tyuning
Avtomobilei
Top Gear
Za Rulyom
AIR,
Cost of advertising Circulation,
thousands
page, thousand
thousand
rubles
copies
2762.5
540
550
Mediasign
485.1
187.62
231
Parlant
523.1
270
300
Source: TNS Gallup Media, NRS study
In the car magazines sector there have traditionally been three main
groups, each with its own format. The first is general-interest car magazines. It is
led by the veteran magazine Za Rulyom (At the Wheel), which is over 80 years
old, and Avtopilot published by Kommersant. The second and biggest group is
car magazines for advanced users, niche publications about tuning, auto sound,
off-roaders and camping. It even includes car magazines for women. Tyuning
46
Avtomobilei has the biggest readership in this group - 485,100. The third and
final group is car lifestyle magazines, notably Top Gear and Quattroruote. This
group has the best prospects for increasing the number of periodicals, readership
and advertising budgets because the companies advertising in these magazines
have massive advertising budgets whereas the main advertisers in the highly
specialized publications as a rule have limited resources.
True, readers who are not versed in the niceties of the magazine business
have their own views on the structure of the Russian car publications market.
Samplings by TNS Gallup Media show that they divide the market very roughly
between Za Rulyom (more than 2.7 million readers) and all the other magazines.
By comparison, the same pollster reports that the three glossy men’s magazines,
Maxim, Men’s Health and Playboy have a combined readership of a little more
than 2 million.
Za Rulyom is the historic leader in its segment because several generations
of motorists have been reading it. Za Rulyom is to the Russian automobile press
what Komsomolskaya Pravda is to the socio-political newspaper segment.
However, while due credit must be given to the editorial office, the unchallenged
leadership of one magazine in a sea of potential rivals shows that the level of
competition in that magazine segment is low. In fact, the main rivals to Za
Rulyom are not magazines but newspapers: Avtorevyu and Za Rulyom – Region,
which have 742,000 and 720,000 readers, respectively. The magazine Klakson is
not far behind. In other words, not all consumers of the car press go for glossy
magazines.
Many Russian children’s magazines today remind one of children in an
adult environment. But unlike children’s position in society, these periodicals do
not enjoy preferential treatment in the market. At the turn of the new year 2007,
an illustrated magazine Yedinorosik with the United Russia (Yedinaya Rossiya)
party emblem on its cover was launched in Chelyabinsk. It shows that politicians
are targeting the children’s audience as their future voters. Unfortunately, the
same cannot yet be said of those who advertise their wares in children’s
magazines (the target audience of under 14) only when they can’t place their
advertisements elsewhere.
The Russian market of children’s magazines has been trying to restore its
position throughout the last 16 years, ever since the Soviet machine that churned
out children’s periodicals collapsed in 1991-1992. Foreigners have been quicker
to establish themselves in the new children’s press environment. In 1992, the
Danish publishing concern Egmont International Holding opened a Russian
subsidiary Egmont Russia. In the 1990s, that publishing house capitalized on the
craze for foreign characters that spread among Russian children.
As the official licensor of Walt Disney, Mattel, BBC and Warner Bros, it
put out about a dozen magazines such as Mickey Mouse, Igrayem s Barbie (Play
with Barbie) and Vinni-Pukh (Winnie the Pooh). Later Egmont launched several
47
Russian projects: Prostokvashino, Toshka i Kompaniya and multimedia-oriented
Luntik. Egmont now has a monopoly in the market boasting a monthly
circulation of 1.6 million. All the other publishing houses between them have a
circulation of about a million children’s periodicals. The most successful among
them are Komiks and Advance-Press.
Children’s magazine readership (2007, thousand people)
Vedma
Priklucheniya Scooby-Doo
GEOlyonok
Smeshariki
Tom i Jerry
Igrayem s Barbie
Printsessa
Vovochka i Kompaniya
Yeralash
National Geographic. Yuny Puteshestvennik
Mickey Mouse
Veselyie Kartinki
Yuny Erudit
Vinni i Yego Druzya
Bugs Bunny i Yego Druzya
Murzilka
Chudesa i Tainy Planety Zemlya
Toshka i Kompaniya
Disney dlya Malyshei
Tsvetnaya Nitochka
Prostokvashino
Kollektsiya Idei
Vesyolye Igry
Filya
Klyopa
376.3
319.4
257.0
239.1
232.2
217.1
215.9
211.9
198.0
192.1
190.4
171.9
165.4
157.0
148.6
144.0
141.6
138.0
115.4
94.8
94.2
79.4
60.3
33.5
29.3
Source: TNS Gallup Media
In the group of entertainment and educational children’s
magazines, too, the leading publishing house is Egmont (Printsessa,
Igrayem s Barbie) (see table above). Among comics, Tom i Jerry and
48
Mickey Mouse are the leaders. January 2008 saw the appearance of an
interesting children’s monthly Chudesa i Priklyucheniya Detyam from
the Zhurnalist Publishing House, a long-awaited child of its “grownup
namesake,” the magazine Chudesa i Priklyucheniya, which has been
produced for 15 years.
According to experts, children’s publications account for no more
than 15% of the total print media readership. The national children’s
periodicals market has about 50 titles and is worth an estimated 200
million rubles. The most competitive segment is the magazines for
younger school children (6-10 age group), which account for about 70%
of the total number of titles. Publishing magazines for children above the
age of 11-12 carries the risk of additional competition from teenage
magazines Girl, Oops!, Yes!, Molotok as well as from Internet resources.
The target audience of children’s periodicals is often blurred. For
example, the magazine Kak Ustroyeno Chelovecheskoye Telo purports to
be aimed at children between 4 and 11, but Murzilka continues to believe
that it will “attract children of all ages”.
The old-timers among children’s magazines have a harder time
than Egmont’s products because stand-alone magazines have, on
average, to pay more for access to the network than the big players. But
they have an undoubted edge because, being recognizable brands, they
attract major advertisers, such as Danone or pharmaceutical companies.
Children’s magazines are a distinct segment with a distinct
consumer, who is choosy when it comes to advertisements. Besides,
parents frown upon children’s magazines that carry advertisements.
Sensing this, advertisers of goods for children often tend to place their
advertisements not in children’s periodicals but in magazines for parents,
such as Young Family, Shchastliviye Roditeli (Happy Parents) and
others. Publishers of children’s periodicals are confident, however, that
their advertising is highly effective because children read most of these
magazines together with their parents who can also be regarded as the
target audience. In addition, children’s periodicals offer a unique chance
to place advertisements in the form of interactive games, which is the
most effective way of influencing children. Nevertheless, advertising
still accounts for no more than 10% of the total revenues from children’s
publications.
The main revenues in children’s publications come from
distribution, which also happens to be the main problem. Both standalone magazines and major publishing houses are unhappy with the
existing system of distributing children’s periodicals. The main cause of
complaints is that they have to obey the general rules of entry and
presence on the shop shelves – pay the charge for getting into the
49
network. To be displayed on the shelves of a major supermarket, a single
unaffiliated magazine, for example, has to pay 75,000 rubles on average.
That is why Egmont, for example, has been pushing for a quota for
children’s periodicals on shelves within 15% of the total number of titles
on sale, and Natalya Dubinina, the chief editor of Klyopa, thinks that
distributors should accept all the existing children’s periodicals for sale.
The problem is, however, that distributors don’t want to offer
preferences to children’s magazines at the expense of business, arguing
that children’s periodicals are not published out of charity, but mainly
for profit. A partial solution to the problem could be an overall change in
the terms of retailing children’s goods in the country, including
periodicals.
The publishers themselves are also trying to survive by
overcoming the traditional “children’s” market problems. Etnopress
publishers, for example, made a little bit of history by launching the first
ever children’s lifestyle magazine Zayats (Rabbit). It looks like a glossy
magazine for grownups, but has content that targets children. True, the
magazine retails at a price (100 rubles +) 2-3 times higher than other
children’s magazines. Zayats has mounted a massive outdoor advertising
campaign in Moscow. The result is that the publishers reported a
doubling of circulation, although rivals are sceptical. They believe that a
children’s glossy lifestyle magazine is not the best way to bring up the
young generation and is not a cure-all for marketing problems.
According to TNS Gallup Media, a pollster, who sampled the
audience for children’s magazines, there are several ways that help them
stay afloat in the market. The first is to use popular foreign children’s
characters. The second is to publish a “younger brother” of a wellknown adult brand. For example, the publishing house Gruner+Yar and
its GEOlyonok. The third is to issue children’s magazines as an adjunct
to Russian cartoons and films. The magazine Smeshariki is prepared by
the St. Petersburg company Marmelad-Media based on the cartoon serial
“Smeshariki.” Other examples are Yeralash and Luntik.
50
ТОP-10 publishing houses in terms of magazine readership
Publisher
1. Burda
2. Sem Dney
3. Independent Media Sanoma
Magazines
4. Bauer Russia
5. Za Rulyom
6. Conde Nast
7. HFS&IMG
8. Media Park
9. OVA-Press
10. ID Zhurnala Zdorovye
Aggregate
readership in
Russia, October
2007
10607.7
5920.9
% of urban
population in Russia
over the age of 16
18.6%
10.4%
5841.2
10.2%
4225.1
2881.7
2176.1
2015.0
1653.0
1296.1
1046.8
7.4%
5.1%
3.8%
3.5%
2.9%
2.3%
1.8%
Source: TNS Gallup Media (only cities with the population
of over 100,000 are represented)
On the whole, the Russian magazine market increased in 2007
compared with the previous year. About 100 new major national projects
were launched while only about 20 national magazines were shut down. The
regional magazine markets have also been booming, launching about 300
new major regional and interregional magazines, while many of the existing
local magazine brands have strengthened their positions.
Advertising space in monthlies in 2007 was most in demand for
beauty and health products, perfumes, clothes, footwear, retail, cars and
related goods and services.
ТОР-5 goods categories advertised in monthlies
(2007, in rubles*)
Advertising segments in monthlies
Beauty and health products
Retail services
Clothes and footwear
Cars and related goods
Perfumes
2006
2007
Growth, %
2 672 952 840
1 610 996 760
1 955 919 770
1 809 234 940
1 005 451 350
3 943 268 500
2 839 809 430
2 715 570 230
2 569 960 200
1 722 777 700
47.5
76.3
38.8
42.0
63.2
Source: TNS Gallup AdFact
*Data from price list monitoring not taking into account discounts, markups and
taxes
51
In the weekly magazines sector (see table below) the fastest growing
advertising items were cars and related goods, financial services, retail
services, beauty and health products and computer technology.
ТОР-5 categories of goods advertised in weeklies
(2007, in rubles*)
Advertising segments in weeklies
2006
2007
Growth, %
1 102 949 940
1 639 879 370
48.7
Financial services
770 898 000
1 246 088 050
61.6
Retail services
528 594 290
Beauty and health products
Computer technology, periphery
506 709 340
635 681 900
906 062 650
797 369 240
786 625 640
71.4
57.4
23.7
Cars and related goods
Source: TNS Gallup AdFact
* Data from price list monitoring not taking into account discounts, markups and
taxes
Glossy magazines in the regions are mainly distributed for free.
Local glossy magazines began to spring up everywhere in 2005. Today
every region has 3-4 such periodicals. For example, in Oryol there are four
local periodicals: Region 57 (business), Status-Oryol (information,
advertising), Novy Oryol (the city’s history and current life), Orlovskaya
Sudarynya (bulletin of women’s and family life). Chita has the information
and entertainment magazine Azimut, the business magazine Resursy
Zabaikalya, the consumer magazine Uslugi v Chite and the entertainment/
leisure/ lifestyle magazine Velvet. In Kaluga, the glamour magazines include
Zhit Khorosho and ViktOr, the local glossy magazine Komsomolki and
several advertising publications. The Kaliningrad market since 2005 has
seen the publication of nearly 20 new glossy magazines and several
reference books. More than half of them are part of the Zapadnaya Pressa
group projects. In Udmurtia, about 30 magazines, mainly network projects
with local content, are published with varying degrees of regularity.
Among the national publishing houses Abak-Press is the most active
regionally, and among interregional publishers it is the Russkaya Aziya in
Novosibirsk, Paramon in Chelyabinsk, Banzai in Yekaterinburg and so on.
The single print run of Abak-Press magazines has topped 1 million. The
monthly magazine Vybirai (Paramon publishers) comes out in 24 Russian
cities with a circulation approaching 900,000. The magazine Dorogoye
Udovolstviye from Russkaya Aziya publishers is distributed in 14 regional
centers in Russia, and in Novosibirsk that publisher also issues a monthly
52
shopping guide Udachnaya Pokupka and the business magazine Status. In
2007, the Moskovsky Komsomolets Publishing House launched a massive
expansion in the regions, offering niche publications for men: Okhotka i
Rybalka XXI Vek, MK Mobil, and others. However, few magazine projects
are initiated in the regions, and with rare exceptions such projects lose out in
competition with national periodicals.
The growing popularity of the Internet has hit men’s magazines the
hardest. For example, FHM, the major magazine for “tough guys” published
by the British company Emap and until recently its most prized asset, lost
more than a quarter of its circulation last year and was put up for sale
because the page three girls in the magazine were no match to the
pornography on the Internet. Men’s magazines in France, the United States,
Italy and most other developed countries face the same problems.
However attractive online versions may be, they lack what readers
like in magazines: that they can be carried around and have glossy pages. So
magazines are losing young readers slower than newspapers. Magazines are
also better off as far as advertising is concerned. Advertisers like it that
many genres (fashion, design, etc.) are most appealing to readers in the form
of magazine advertisements, and are even thought to be an inseparable part
of the product.
While until recently magazine publishers paid little attention to the
Internet, now it is the core of every business model. In creating Internet
versions, major magazine publishers do not just duplicate their printed
product but offer useful and entertaining online services. For example, the
Car and Driver site opened by Lagardere has a virtual test-drive and the
Better Homes and Gardens site has a 3D-program which allows people to
redesign their homes.
Magazine publishers have not yet reached a consensus on whether
they should go online with existing brands or something new. Conde Nast
believes that the audience can be attracted by introducing thematic sites
drawing on both the magazine’s content and wider information. Others
disagree. Time Inc has preserved the brands of its major magazines, creating
People.com and SI.com, although now Time Inc, for fear of blemishing the
People brand, can no longer afford to print sarcastic or cynical gossip that
many prefer to read online. As a result it dropped from first to second place
in terms of entertainment behind the TMZ.com site (owned by Time
Warner). However, according to the Executive Vice President of Time Inc,
John Squires, People.com can charge advertisers for the brand’s popularity.
Currently only a small proportion of magazine publishers’ revenues
come from the Internet. The sites are good at attracting and retaining
subscribers, but they seldom pay their way. Even if a really attractive site is
created, it has to struggle to gain a leading position because the Internet has
53
large and established independent communities. For example, the Internet
publication auFeminin.com leads in the women’s magazine segment in six
European countries, including France and Germany.
Two strategies are thought to be the most promising today. The first is
to have a strong magazine brand on which to build a whole complex that
may include TV and radio broadcasts, CDs and/or DVDs, books,
supplements, etc. The other and less costly strategy is to put out a digital
version of the printed periodical that fully replicates the content and layout
of the magazine but is distributed electronically and offers extra
opportunities for advertising. The Russian pioneer in this field is the
magazine Afisha, which has created the biggest online magazine. Ekspert
magazine is trying to emulate Afisha’s success.
Although the number of titles of glossy magazines in the Russian
market has grown significantly in recent years, their total readership (see
table above) has hardly increased, with the exception of general interest and
women’s periodicals. Leading by a huge margin within these categories are
the magazines Vokrug Sveta (Round the World), Sovershenno Sekretno (Top
Secret), GEO, Karavan Istoriy, Cosmopolitan and Liza.
Single-issue magazine readership
(by category, as of October 2007)
Category of magazine*
Women’s and fashion
magazines
Car magazines
General Interest magazines
Interior design magazines
Men’s magazines
Business magazines
Computers and games
magazines
Readership of a single
issue (thousand people)
% of the population
above the age of 16
10 835.0
19.0%
4 736.0
4 644.3
2 589.0
2 554.2
1 855.7
8.3%
8.1%
4.5%
4.5%
3.3%
1 373.1
2.4%
Source: TNS Gallup Media (only cities with the population
of over 100,000 are represented).
The medium-term forecast is tougher competition in the Russian
magazine market, further consolidation of the publishing business, and
growing interest of non-core investors (including foreign ones) in magazine
assets, mainly of the entertainment kind.
54
CORPORATE PUBLICATIONS
Experts traditionally divide the corporate media into three categories:
- b2b (business-to-business) – publications oriented to partners in
business;
- b2c (business-to-client) – consumer-oriented publications (usually
they have the biggest circulation);
- b2p (business-to-personnel) – personnel-oriented publications.
Experts draw a distinction between b2b publications as such and the
rest of the corporate press, because the owners of the latter do not have the
goal of making a profit.
Experts have different estimates on the value of the corporate
publications market. The Medialine Publishers put the figure at 24.5 billion
rubles. This is based on the fact that Russia has between 6,000 and 6,500
corporate media, and each one costs from 2.45 million to 3.7 million rubles
on average per year.
The b2b market is estimated at 12.25 billion rubles, of which 9.8
billion comes from subscription, and 2.45 million rubles from advertising
and retail sales.
In Kommersant’s estimate, the Moscow market has about 1,000
personnel-oriented publications, with each issue costing about 735,000
rubles; and some 400 regular consumer-oriented publications, with the
average cost of 2 million rubles per issue. Both usually come out once every
three months. Thus, the annual expenses on the corporate press (not counting
distribution costs in Moscow) run about 6.2 billion rubles.
The corporate press turnover is rapidly growing. Experts predict that
in five to seven years this market will double. Indicatively, in 2007 one of
the leading German corporate publishers, Burda Yukom Publishing, came to
the Russian market for the first time. It signed a strategic agreement with the
Mediaservis project, a subsidiary of the Gudok Publishing House. The
Economist publishing group sold its first license for the issue in Russia of
the CFO Russia magazine for financial executives to the b2b Media
Publishing House (part of the Prof-Media holding).
It is believed that a corporate newspaper is a sign of corporate culture
and a catalyst for teamwork. It helps discuss company problems and find
solutions for them; to better know its employees, reveal and develop their
talents, describe their hobbies and free time, and even entertain. A
newspaper creates the company’s image. It is a vehicle for disseminating
company information and motivating employees.
The majority of such publications come out once a month in the A3
and A4 formats. For the most part, they are the responsibility of the PR
department, but in some cases they are issued by the personnel department.
55
With rare exceptions, Western companies use outsourcing (bespoke
publishing) for the production of corporate newspapers, but in Russia it is
unpopular because the heads of companies set their own requirements for the
content of articles, which they want to project “the right” image.
Western corporate media is 112 years old. In 1895, John Deere, a
manufacturer of agricultural equipment, issued for his customers – small
farmers – The Furrow magazine, which is still published. Russia also has a
long-standing tradition in this respect: many factories had their own
newspapers in the Soviet era. This is why most production companies, which
include many old plants, account for the biggest number of corporate
newspapers.
The foreign corporate press creates a brand in an understandable and
low-key format. Even if materials are visually based on ideology and style of
a brand, they never promote it directly but rather create a certain mood. This
applies to customer-oriented publications by Avon, Levi’s, D&G, Prada,
Comme des Garcons, Benetton, Harley Davidson, Swarowski, Selfridges,
and K-mart. These are not just catalogues with texts but a serious mass
media effort.
The modern market of corporate media outsourcing began developing
in 2002-2003 when big publishing houses decided to start making profits
from such publications. This is true of the Afisha Publishers, Independent
Media, Kommersant, and SPN Publishing. Somewhat later they were joined
by the SK Press. During this time, the market was also conquered by
specialized publishers, such as Medialine, Mediakrat, and Fabrika Zhurnalov
(Magazine Factory). Now they account for 30% of the corporate press
production in value terms. The remaining 70% are produced either by
companies themselves or by small firms, which are rapidly developing.
The Russian Association of Corporate Media was set up in 2004. Its
organizing committee includes representatives of such major companies as
Gazprom, LUKoil, RusAl, Aeroflot, AvtoVaz, Sheremetyevo, UralSib, Shell
Exploration & Production Services (RF) BV, Danon Industry, Philip Morris
Sales & Marketing, and the Russian Public Relations Association.
In the estimate of the Custom Publishing Council, every year more
than 116,000 titles of customer-oriented media are published in the United
States alone, and their annual turnover exceeds $30 billion. This makes the
Russian market’s potential quite obvious.
Experts believe that in the near future, the Russian corporate media
market will grow by 20%-25% every year. Corporate media publishers are
inspired by the rapid development of a similar market in Western countries –
the Russian market usually repeats their experience several years later. In
this context, the money spent on the Russian corporate media may double in
four or five years.
56
Moreover, with time an increasing number of company publications
will switch to outsourcing. Today, corporate media owners have very
different estimates of the role played by outsourcing on the market. The
figure fluctuates between 30%-50%, considering the share of big
professional publishers and the fact that production of corporate media is
most often the responsibility of subsidiaries. In any event, a switch of
corporate media production to outsourcing is the main trend in this segment
of the Russian market.
It is also obvious that in the near future, advertising will become the
main source of growing incomes for corporate media owners. For the time
being, only in-flight magazines are getting handsome proceeds from ads. In
unanimous opinion, the leader is the SPN Publishing, which issues Aeroflot,
Aeroflot Premium, Inflight Review and AirUnion Magazine. In-flight
magazines are also produced by the Kommersant Publishing House
(Mezhdunarodny Aeroport Vnukovo – Vnukovo International Airport),
Gazeta Gudok (Sakvoyazh), SK Press (Domodedovo, Vysoky Polyot, and
Alitalia Style). Incidentally, last fall it signed contracts with the Hong Kong
Airlines, and Swiss Air on the publication of Russian versions of their inflight magazines.
In the estimate of Vladimir Tychinin, SPN Publishing commercial
director, in-flight advertising brings about 1.2 billion rubles per year. Other
corporate media are also eager to join this market. This is a two-way street –
advertisers are interested in the corporate media because they have clear-cut
links with the target audience. For the time being, advertising in the
corporate media is based on left-over funding, although international
experience shows that it will be on the upsurge. For example, in the U.K., in
the APA estimate, advertisements are placed in half of all corporate media,
and amounted to 128 million pounds in value terms in 2005, which
compares with the total press advertising market of 385 million pounds.
All professional b2b publications in Russia were initially oriented to a
kind of a literacy campaign because the majority of specialists did not have a
profile market education at that time. This position may be justified by the
circumstances, although the very idea of b2b implies the transfer of
information from business to business, that is, communication with the
reader on an equal footing.
Regrettably, there are not many publications in the Russian press
market that engage in serious business discussions. One of them is the Sales
Business magazine for marketing and sales experts, produced by the ActionMedia Publishing House. Initially, it was circulated by subscription only.
But a simple statement of obvious facts proved to be insufficient for
business people, and in 2007 Sales Business started writing about trends
which are not visible until a certain point. Its reasoning was simple – not all
57
companies can afford to have their own market services and serious
research, and the magazine would be helpful in this respect.
Importantly, the unique format of Sales Business allows it to attract
the audience, which used to buy weeklies or subscribe to foreign
publications, showing no interest in b2b monthlies. The magazine has its
own site (www.salespro.ru) with a consumer market hotline. The site is
based on the Web 2.0 concept, which allows users to take part in creating its
content, express their opinions, ask questions, and engage in informal
communication.
For the most part, b2b publications are distributed by subscription,
carried out by direct sales departments or in cooperation with subscription
agencies. Their retail sales are minimal although they perform the role of an
advertising instrument, which is also important.
Interest in b2b publications directly depends on their content since
their audience is virtually a daily user of the Internet and other sources of
business information.
58
ADVERTISING IN THE PRESS
The Russian advertising market has been growing steadily and
reached as much as 228.7 billion rubles in 2007. According to the Russian
Association of Communication Agencies (AKAR), this market rose by
26.4% in 2007, down from 27% in 2006. TV advertising rose by 31%,
against 30% growth in 2006. The Internet advertising market registered the
highest growth (92.4%), but its share remained insignificant (2.56%) and
had no tangible effect on overall market growth. However, judging by global
tendencies, the volume of advertising will continue to grow in this segment.
Advertising volume of mass media*
billion rubles
2006
2007
Growth from
2006, %
85.9
12.5
44.6
9.4
19.2
16.0
33.1
3.0
1.8
1.3
0.4
180.8869
112.5
15.7
51.9
11.6
23.4
16.9
40.4
5.8
2.4
1.9
0.5
228.651
31.0%
25.6%
16.4%
23.4%
21.9%
5.6%
22.1%
92.4%
25.0%
46.2
25.0
26.4%
Segments
Television
Radio
Print media, including
newspapers
magazines
Advertising publications
Outdoor ads
Internet
Other media
Indoor Media
Ads in movie theaters
TOTAL
* Without line and concealed ads.
Source: AKAR
In 2007, the print media advertising market grew by 16.4%, but its
total share in overall advertising volumes dropped from 26.3% to 22.6%. As
before, AKAR determined the volume of the advertising market in print
media ignoring ads in Internet publications, line ads and other commercial
information that frequently appears in print media. Therefore, the real share
of print media in the Russian ad market is underestimated by about 4-5%.
However, even in that case, the share of print media in the Russian
advertising market is substantially smaller than that of television (49.2%),
whereas in industrialized European countries, print media have held onto the
lead in the total volume of ad sales. The situation in the Russian newspaper
59
advertising market is especially disappointing. In 2007, newspaper ads
accounted for 5.07% of the Russian ad market (down by 1.3% from 2006).
Internationally, newspapers are second only to television (and even surpass
it when combined with magazines) in advertising turnover. Daily and
weekly papers have more ads of all types than magazines, radio and the
Internet combined.
In our opinion, the main reason for the low advertising revenues of
Russian papers is the shortage of financially independent and commercially
effective local, municipal and regional daily papers, though this segment of
print media is a major consumer of their advertising budgets in developed
countries. Besides, a chronic distribution problem and a lack of data on
newspaper readers, which are common problems in the Russian print media
market, hinder any sizeable rise in newspaper ad revenues.
At the end of 2007, AKAR reported that the Russian ad market grew
by over 650% from the 1996 figure, and this growth would continue though
it would be slower. The ZenithOptimedia agency incorporated into the
Publicis transnational communications holding predicts that in the 20052010 period, the consolidated budget of the Russian ad market will double,
to reach 324 billion rubles. This will make Russia the sixth largest
advertising market in the world. Analysts at PricewaterhouseCoopers cite
more modest figures in assessing the prospects for the Russian ad market.
They think that Russian advertisers’ expenditures will exceed 300 billion
rubles only in 2011. The reasons they cite are a slowdown in the ad market
60
growth rates because of a fear of a recession in the global economy, the
introduction of legislative restrictions on outdoor ads, and the reduction of
TV time allocated to ad blocks from 12 to 9 minutes per hour.
According to ZenithOptimedia’s forecast made public in December
2007, in 2008 worldwide advertising spending will rise by 6.7% compared
to 5.4% in 2007. This year, the ad market will earn an additional $3 billion
from the Olympic Games, $2 billion from the U.S. presidential election and
$1 billion from the European Football Championships.
However, according to expert estimates, the effectiveness of TV ads is
waning. Whereas in 1990, ten advertising clips broadcast during TV primetime reached 40% to 50% of television viewers in European countries, the
current average coverage is a mere 15%, according to ZenithOptimedia’s
data. The clutter effect is becoming stronger. In 1971, the European
consumer received 560 ads a day, compared to over 3,000 now.
Newspapers and magazines are facing the same problems today as
cable and other non-air media in trying to attract and keep their audience.
The share of traditional electronic media in the total volume of daily average
media consumption is also falling since people have quite a few other
interactive communication channels at their disposal, including various
online and mobile media. Moreover, traditional media, such as newspapers,
magazines, TV and radio, are becoming less popular with young people
(under the age of 35), which makes the established TV prime time segment
more uncertain. According to Video International Trend, this year’s
aggregate TV GRP (gross rating point) indicators, which are decisive in
measuring the size of the audience and determining TV advertising prices,
will drop to their 2001 level despite a ninefold increase in people’s
purchasing power during this period.
Moreover, media inflation caused by the reduction of the maximum
volume of advertising per hour of TV airtime since January 1, 2008, because
of limits fixed by the new advertising law, has made it more difficult for
federal channels to include their ads on regional TV programs. Mobile
monitoring conducted by TNS Gallup AdFact shows that in some cities
national channels’ ads are often overlapped by local ones.
Internet advertising registered the fastest growth among other ad
media in Russia and the world. As early as 2009, its global volume will
amount to $47.4 billion, up by 82% from 2006. Internet advertising has the
highest growth rates (up to 100%) in Moscow and St. Petersburg. The
average annual countrywide growth (without Moscow and St. Petersburg) is
25%, because broadband communication is unavailable in more than 70% of
the Russian Federation. Providers promise to increase the number of Russian
Internet users from the current 28 million to 35 million by 2010.
61
A specific feature of the Russian print media market is that the
country’s ten largest publishing houses account for over a half of the market
(54.9%). Delovoi Mir (Business World) Publishers is the leader (10%),
followed by Independent Media Sanoma Magazines (9.8%) and HFS& IMG
(7.1%).
There is another problem that is also coming to the fore. In June 2007,
the Microsoft Corporation and Starcom MediaVest conducted a joint
survey that led to the conclusion that the “antipathy era” had begun.
Every third consumer in the world tries to ignore ads and seeks ways to
avoid them all together. Some 33% of young people between the ages of
17 and 35 widely use ad-zapping devices like TiVo, other gadgets
blocking pop-up ads on the Internet, or satellite radio services.
Analysts at Microsoft and Starcom are convinced that people
avoiding ads value their time, so they should be encouraged when they
watch ads. In its recent report, “The End of Advertising as We Know It,”
IBM Global Business Services predicts big changes in the advertising
business within the next five years that will overshadow all that has
happened to it during the past 50 years. In studying the results of a
survey of 2,400 consumers and 80 heads of advertising agencies from all
over the world, the researchers came to the conclusion that consumers
have grown tired of ad blocks on TV, and therefore are trying to more
actively control the use, filtration, distribution and consumption of
multimedia resources, as well as advertising clips connected with them.
62
For instance, half of the owners of digital video recorders watch at least
50% of all programs by recording them first and later playing them back,
while 40% of all respondents consider advertising clips on the Internet
even more irritating than those in any other media formats. More than
half of the polled IBM specialists in the advertising business think that
within the next five years, open trading floors for advertising offers (the
largest of which are now managed by Google, Yahoo and AOL) will
capture 30% of all revenues earned today by the traditional market
players – broadcasting companies and print media. The 30-second ad
clips will lose 10%-15% of their revenues.
The potential of non-traditional advertising channels is also
growing. According to the Russian Marketing Services Association
(RAMU), marketing services in Russia (consumer promotion, trade
promotion, direct marketing, POSM, event marketing, etc.) amounted to
about 50 billion rubles in 2007, which surpasses the figure for the
Internet many times over, and comes close to the average countrywide
indicators of the Russian print media advertising market.
There is also BTL Services Inc. whose market share (which is not
considered transparent enough) is assessed by AKAR at 8%, which is
what all advertising budgets allocate today for communication with
consumers. In 2007, this sector grew by 22% and experts predict 50%
growth in it by 2009. Given such growth rates, the marketing services
sector may grow by 150% within 3 to 4 years, to as much as 120-125
billion rubles, and turn into the most dynamic segment of the advertising
market.
However, the real situation is not all bad for traditional media.
Competition between new and traditional media is gaining speed. This
process cannot be stopped but it can be used in the interests of
traditional media, because consumers’ trust in them is still high. A
global Internet survey, conducted by Nielsen Media Research in April
2007 to determine the level of consumers’ trust in 13 types of
advertising mediums and sources of information about goods and
services, shows that newspapers are trusted more today than Internet
forums. The survey polled 26,480 consumers from among regular
Internet users in 47 countries, including Russia. As expected, word-ofmouth advertising was the leader in consumer trust (78%), followed by
newspaper advertising (63%). This shows that a considerate attitude
toward clients and high quality services are the best way to promote a
product, even when diverse electronic media are widespread and
accessible, and modern technologies exert more and more influence on
print media.
63
Consumer trust in various advertising mediums
Trust in various advertising mediums
Consumers’ recommendations/ word-of-mouth
Newspapers
Consumers’ opinions of Internet ads about goods or services
Brand sites
Television
Magazines
Radio
List serve e-mails
Ads before films
Ads in Internet search engines
Banner ads
Text message ads
Level of trust
78%
63%
61%
60%
56%
56%
54%
49%
38%
34%
26%
18%
Source: Nielsen Media Research
Consumer trust in ads is the highest in Brazil and the Philippines.
Some 67% of the respondents said they trusted different kinds of ads,
fully or partially. Denmark tops the list of the “distrustful”: only 28% of
Danish respondents trust ads, followed by Italians (32%), Lithuanians
(34%), and Germans (35%). Russians rank tenth on the list, together
with Estonians (40% each). Consumer trust in advertising blogs and
forums is very high in North America (66%) and Asia (62%), and is the
highest in South Korea (81%) and Taiwan (76%). Finland displays the
lowest level of trust in them (35%).
Though Internet media are gradually catching up with traditional
advertising channels in terms of profits, the latter maintain their
positions (see the table above). Note that web sites and mediums of
traditional media (the press, radio and TV) account for a considerable
portion of ads on the Internet. According to the data from the U.S.
company Veronis Suhler Stevenson, their share of the web advertising
market has reached 37% (by names). According to the company’s
forecasts, traditional media will control at least 35% of the online
advertising market in 2010, which means that the situation will not
change drastically.
Meanwhile, the role of media agencies is changing under the new
conditions. Whereas earlier it came down mainly to the purchase of time
and trading floors at the easiest terms, now the key to success is a clear
understanding of changes in consumers’ habits, tracing the effects of all
possible contacts with them, and a search for communication channels
ensuring the highest possible return on ad investments. The term “media
64
agency” is becoming outdated and should therefore be replaced with the
term “communication agency,” as it serves to better integrate tasks with
the ways of achieving the set goals. First of all, it makes it possible to
assess the potential of all media channels at the beginning of the
planning process by using uniform techniques, and also to assess the
efficiency of media-mix companies and help the sector better grasp the
communication processes. AKAR President Sergei Piskarev believes
that this approach comprehensively concentrates all media dimensions
around consumer data.
Newspapers have given a pleasant surprise to the Russian
advertising market during the past two years. The newspaper advertising
market will most likely continue to grow this year. There are quite a few
reasons for this, including:
- vigorous consumer activity growing faster in the regions and
giving a boost to advertising in local and regional papers;
- improvement in the contents and quality of newspapers which
issue numerous full-color periodic and single advertising
supplements of high printed quality geared toward the fastest
growing segments of advertisers;
- further introduction of modern advertising technologies in the
publishing business;
- the introduction of limitations on TV and outdoor ads, as
provided by the new advertising law, etc.
The Russian magazine advertising market will also grow
considerably this year. As for specifically advertising publications, they
are in for hard times. They are losing their influence on consumers,
which means that their revenues will continue to fall.
65
PRESS DISTRIBUTION
Today, the development of the distribution market for Russian print media
falls far behind the booming publishing sector. While it is on the whole coping
with its functions, the distribution market is still not transparent, streamlined or
effective enough. The market has some modern, prosperous, hi-tech distribution
companies along with unprofitable weak organizations that are not fit to be
effective vehicles for the distribution of print media.
The Russian print media market is noted for its diversity and tough
competition. The whole range of Russian newspapers and magazines, from posh
glossy publications to low-budget black-and-white newspapers needs an
effective distribution system.
The publishing community has some justified complaints about the
existing system for distributing print media. It is costly, non-transparent, given to
charging for the presence of publications in the network, and it does not permit
the publisher to manage his own press runs because the distributors for the most
part are unable to provide adequate analytical services on publication sales. To
these shortcomings one should add the lack of sectoral standards and set rules for
the functioning of the retail press distribution market, a lack of overall market
66
statistics, substandard logistics, and a lack of modern technologies for selling
newspapers and magazines.
Another acute problem is the capitalization of distribution companies.
Distribution firms as a rule have no significant assets. Experience shows that if
such firms go bankrupt, publishers have no chance of recovering even part of the
debt owed to them, which is not conducive to trust between publishers and
distributors.
Press distributors also have some well-grounded complaints about the
publishers. They mainly concern the industry’s investment and marketing
policies. Crises in the press distribution market are mounting, which all of its
participants are aware of, but the publishers and distributors have so far been
unable to reach agreed solutions that address the strategic problems and are
beneficial to all. In Europe, for example, logistics, the principles of press
distribution and revenue sharing from its sales among participants appear to be
fairer and more effective in terms of the current state of and prospects for the
press distribution market.
One priority in the development of the Russian print media distribution
market is developing uniform sectoral standards and rules required for its
civilized functioning. Although the dialogue on this issue is complicated by
tough competition among the publishing houses, the press distributors and
between them, some progress can be reported over the past years. New sectoral
organizations have been created, some of them aimed at solving the problems of
distribution: Publishers’ Initiative, the Union of Moscow Publishers and the
Russian Press Union. The ARPP, ANRI, and GIPP and other entities continue
their work. These organizations help publishers and distributors resolve industry
problems.
More and more representatives of the publishing and the distributing
communities, including foreign partners, are taking part in the discussion
aimed at producing unified sectoral standards and rules. No single major
event in the country can avoid discussing the problems of the domestic press
distribution market today. Many events are devoted exclusively to this
theme.
On February 14, 2007, with the support of the Federal Agency for the
Press and Mass Communications, an international conference was organized
in Moscow by the Association of Periodical Press Distributors on the
“Conflict of Press Distribution Models in Russia and in Europe.” It was
attended by over 70 representatives of leading publishing houses and
distribution firms from Russia, Germany, Italy and Spain. In November
2007, also with the support of the Federal Agency for the Press and Mass
Communications, a roundtable on alternative press subscription was held. A
month earlier press distribution in Russia was the main topic at the 12th
international ARPP seminar “The Russian Media Market – 2008: New Plans,
67
Agreements and Technologies.” The problem loomed large during the two
key annual sectoral exhibitions: “Publishing Business-2007” and “Press2008,” and in numerous regional conferences and seminars. Hopefully, the
number of events will sooner or later translate into improvements in quality.
The overall slow development of the Russian distribution market is
largely the result of an endemic shortage of investments in the field.
Investments in the sector, in the opinion of A. F. Listevnik, director general
of the Burda Publishing House, have for many years been unequal with
investments in the publishing business, which hinders a modern approach to
solving the strategic tasks of developing the press distribution business. The
available investment resources are not always properly used.
The backward state of this market results in the domestic press
distribution system being one of the most expensive in the world. For the
sake of comparison, 60% of the profits from sales in Russia are the costs of
the wholesale and retail segment, compared with 30% in Germany. This is
partly due to Russia’s unique geography, and yet the main reason is a lack of
transparency and the chaotic structure of the system. Distribution of printed
material in Russia includes numerous stages and levels, which typically
duplicate one another. Each costs money and makes it more difficult for the
periodicals to reach a selling outlet. In the optimum case there should be
three stages: publisher – distributor – selling point, ideally with 2-3 parallel
structures.
Additionally, the distribution business is not very profitable, which
deters potential investors. There are several reasons why retail distribution of
the press in Russia brings such low profits. The main reason is the low cost
of the periodicals compared with foreign publications, which is due to the
low purchasing power of the population and publishers’ fears that higher
prices would diminish circulations. So publications are often sold below
production costs. As a result, the distributor who gets a percentage of the
sales proceeds has no revenues that would justify his expenditures. The
distributor is thus tempted to increase his markup or to look for methods to
replenish his budget in ways that do not completely follow market rules:
forcing marketing services on clients, additional charges for early display,
etc. Many distributors are starting to build their business with a focus on
raising revenue from such additional services, rather than selling the actual
publications. It has to be noted that some publishers are prepared to pay for
marketing and analytical services that are useful and of high quality, for
example, real-time analysis of sales in outlets. Unfortunately, the
technological facilities available to most distributors make it impossible for
them to currently offer such services.
Publishers are increasingly engaged in all the segments of the press
distribution system on a large scale. For a publisher, press distribution is by
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definition not just a business, but a means to assure that the whole press run
is delivered to the readers, i.e. a kind of production unit in which the
publisher will always seek to cut costs and optimize the distribution
business, which also affects the overall situation.
In a bid to reduce the distribution costs of newspapers and magazines,
major publishing houses have invested heavily in the development of their
own distribution networks. As a result, along with professional distribution
companies, many press distribution entities sprang up in which publishers
participate. For example, Burda controls the company Sales. Other
publishers have powerful specialized units within their companies.
Publishers’ associations have also been quite active in the distribution
market. Pursuant to the Moscow government’s Decree No. 965 of November
20, 2005 “On the Guidelines of the Development of the Periodical Press
Distribution System in the City of Moscow,” the Union of Moscow
Publishers is installing and launching a pilot network of kiosks in the NorthWestern and South-Eastern city districts. Publishing Initiative has invested
in the program Gorodskoi Lotok (City Stall), etc.
The print media distribution market is experiencing some other
important changes. For example, the number of regional wholesalers has
dropped by 50%-60% in the last two to three years. The number of
distributors and selling points also dropped in the small retailing sector. In
Moscow, for example, after the city government shut down selling points in
and around metro stations, their number dropped by about 40%. That move
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was recently followed by a virtual ban on press sales by car kiosks. There
are many similar examples in the regions. As a result, the number of retail
sales outlets for periodicals in Russia per 1,000 citizens is much lower than
in Europe and North America (see table above). In Russia there is one
selling point per 3,000 people compared with 600 in Poland.
2007 saw the growing trend of enlarging and integrating distribution
companies in Russia. In some cases the functions of distribution, sorting,
logistics and retailing are performed by only one company. Rospechat is an
example of such integration. Drawing on the resources of its owner, Basic
Element, and reporting strong growth figures and a large regional retail
network, the agency occupies a leading position in the country’s subscription
market and has managed to build up an effective system of fees for its
services. It is also important that regional development of Rospechat is
paralleled by the appearance of rival local entities, which is undoubtedly
good for the Russian distribution market.
In addition to Rospechat, there are some other large and medium
players in this market, including AiF, DM Distribution, GK Logos, TopKniga, Moskovsky Komsomolets Publishing House and others. As seen
from 2007, foreign players with huge investment potential have expressed
the desire to occupy a significant part of the press distribution market in
Russia. For example, Rautakirja, the distributing unit of the company
SanomaWSOY Group, bought Russian press distribution companies HDS
and Press Point International in August 2007. Experts predict that in the
foreseeable future, Russia will have about five major distributors controlling
between 10%-30% of the market each, which will inevitably lead to changes
in the system of delivery and charges for services.
Press sales in supermarkets have recently become very important.
Sales in supermarkets are growing quickly, accounting for an ever larger
share of the distribution market. After reviewing the increase of press runs
and successful sales of printed periodicals in supermarkets, their networks
expressed the firm desire to independently manage this process in 2007,
imposing high fees for the presence of printed products in their networks.
That created another conflict in the market, in this case between the
publishers and the retail networks. Admittedly, also in this case the market
players have taken steps to resolve the problems together. The management
of the company Х5 Retail Group and representatives of major publishers
have set up an ad hoc group which tried over five months to work out
mutually acceptable rules of selling periodicals in the Perekryostok chain of
supermarkets. Although the group has not solved all of the problems, the
very fact that compromises are sought, and results were achieved, is good
news for the distribution market.
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In the context of stiff competition and in the absence of standards that
determine the work of retail networks, publications without advertisements
are the hardest hit. These include children’s, youth, cultural-educational and
other low-circulation publications which are effectively barred from the
shelves in supermarkets. The problem must be considered by a roundtable of
publishers and distributors with the participation of government
representatives. The apparent solution is to provide special conditions for
socially significant publications.
In the structure of retail press sales in Russia, kiosks have the largest
share. In recent years their number has grown due to a sharp drop in the
number of stalls and hawkers, and due to the increase in the number of sites
available for kiosks in a number of regions. Press distribution through kiosk
chains in the country is a fairly stable business and is likely to remain so.
Moreover, the current consolidation of kiosks into large network companies
enables them to cut costs, ensure a good range of products and competitive
prices. Even so, the future belongs to new formats of press retailing,
according to experts.
Obviously, the press retail market needs an open and transparent
discussion between publishers and distributors to determine the path of its
further development. Neither the publishers, the distributors nor the
consumers need the painful and futile processes of recarving the market. In
our opinion, it makes more sense to develop the market according to the
optimal model that draws on the best of Russian and foreign experiences.
Common efforts are needed to try to turn around the current situation when
press retailing in Russia, in terms of national legislation, becomes
indistinguishable from the selling of other consumer goods, although its
social significance is not to be called into question.
One element in addressing the problems of print media distribution
could be the more active use of agency contracts. Under such a contract, the
publisher can, on the one hand, control the end price of the press run and
obtain information on its sales, and on the other, must pay for the relevant
services provided by the distributor (for example, invoices for the delivery
and processing of direct and remission flows). One of the main problems
with the agency contract that stands in the way of its full-scale introduction
is the inability of the distributors to provide timely data on press sales, which
renders the contract largely meaningless for publishers. But in addition to
that, publishers and distributors have been wary about introducing the
agency contract in the Russian market in general.
Also, periodical subscription in Russia only changes very slowly.
After a revision of the fees for Russian Postal Service services in the first six
months of 2006, the average fees increased by 56%. The problem of
subscription was given an unprecedented amount of attention in 2006-2007
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after the press sector, backed by the Federal Agency for the Press and Mass
Communications, initiated a discussion on the issue, and after First Deputy
Prime Minister Dmitry Medvedev took a strong stand on the issue.
Pursuant to Dmitry Medvedev’s instructions, the Russian Postal
Service was allowed to increase subscription and delivery fees by no more
than the inflation rate. After the Federal Anti-Monopoly Service reviewed
the rates, the government of the Russian Federation in the first quarter of
2007 introduced proposals on the type and amount of state support for
subscriptions prepared by the Ministry of Information and Communications
in collaboration with Rospechat, the Federal Television and Radio Service,
the Federal Anti-Monopoly Service and the Justice Ministry. If these
proposals are implemented, the cost of subscriptions for customers should
drop, and the quality of the service should improve, which may boost
subscription rates by 15%-20%, according to experts. Unfortunately, a final
decision on the issue has yet to be made.
In 2007, for the first time in the last six years, subscriptions for
periodicals in Russia, according to the Russian Postal Service, increased by
more than 4%. Growth was reported in 63 regions, and in 11 of them the
growth rate was between 8%-20%. The trend continued in the first six
months of 2008, although at a more modest rate: overall subscriptions
increased by 1.8%, with 59 regions reporting increases.
The reason for the increase is the stepped-up activity of publishers in
promoting subscriptions for their own products. Given the overall
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backwardness of the subscription system, they have been exerting more
efforts and committing more money to motivating the postal workers who
receive, process and deliver subscription periodicals, to develop alternative
forms of subscription, their advertising and various marketing activities to
attract readership.
At the same time, one of the cardinal issues – the higher cost of
subscriptions compared with retailing in Russia – remains unresolved. In
economically developed countries, a subscription for a publication is always
less than the retail price.
According to the company Wessenden Marketing, publishers throughout
the world traditionally offer discounts to subscribers. An annual subscription for a
monthly magazine in the U.S. costs on average $27.30, whereas the retail price of
one issue is $4.46. That means that the discount for a subscription in the United
States is almost 50%. Not surprisingly, subscriptions accounts for 87% of
distribution costs compared with just 13% for retailing.
In Europe, discounts for subscriptions of newspapers and magazines are not
as high as in the United States: an average of 12% in Belgium, 20% in Spain and
France, and 22% in Great Britain. Whereas in Russia, a subscription copy costs
40%-60% more than a retail copy.
It needs to be stressed that subscriptions have been growing or
remained at the same level mainly in those Russian regions where prices for
Russian postal services have been growing slowly. Where these prices in
2006-2007 rose by 100% or more, periodical subscriptions dropped by as
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much as 20%. According to the Public Chamber commission on
communications, information policy and freedom of speech, subscription as
an institution is in dire need of government support. A drop in subscriptions
means reduced information for thousands of our fellow citizens. The Russian
government must soon make long overdue decisions aimed at government
support for periodical subscriptions.
The Russian press distribution market is developing slowly and
erratically. Many issues of transparency, stability and effectiveness have yet
to be addressed. The market needs rapid development, approval and
introduction of sectoral rules (standards) applying to all its participants,
including publishers, national distributors, wholesalers and retailers,
subscription agencies and subscription delivery services, which would mark
a big step forward toward a civilized market for printed press distribution in
the Russian Federation. Particular attention must be given to the frequently
uncooperative position of the Russian Postal Service with regard to the
publishing sector.
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THE INTERNET AND THE PRESS
At the beginning of the 21st century, the Internet had 500 million
users. Now that number has increased to over two billion and the
Internet is almost as popular as television. If you add to it another billion
of video game fans (video games are also a source of mass information,
if not news, then advertising for sure), it emerges that computers are now
playing a more important role than TV.
The Internet is convenient; a web user is not tied to a broadcasting
schedule as a television viewer or a radio listener is, but, unlike readers
of traditional print media, has access to multimedia content. Thanks to
the simplicity of publishing amateur content, the Internet is gradually
turning journalistic writing into a hobby. Of course, so-called “folk
journalism” does not compare with professional methods of gathering,
organizing or publishing news, but as pieces of reporting, popular blogs
can easily compete with print media.
Russia keeps up with the latest global Internet trends, and in many
respects leads the world. In 2007, the IBM Institute for Business Value,
helped by the Romir research holding, carried out a study called “Basic
Trends and New Preferences in Using Mass Media in Russia.” The study
showed that only 30% of Russians used television as a source of news
(for 26% television was purely background noise; i.e. it was on, but no
one watched it). On the other hand, half of all Internet users produced
his or her own information content.
For example, so-called “thousandmen” (bloggers with over a
thousand regular readers) are a unique Russian phenomenon if you
exclude Western authors who were popular before they started blogging.
Among them are such names as Sun Microsystems managing director
Jonathan Schwartz, whose blog is translated into ten languages,
including Russian. Unlike Schwartz, most of the Russian “thousandmen”
had no previous notoriety and gained it only on the Internet. In June
2007, according to the IBM Institute for Business Value, eight of the top
20 Russian Internet most visited sites had no other content than that
provided by their users. And it should be said that these twenty sites
contained no traditional media.
Among the top 20 most popular English-language sites the picture
is slightly different – only eight of them (YouTube, MySpace, etc.) have
their content provided by users, although the BBC ranks 20th. Yahoo
leads the English-language ratings, but this portal, although not
considered a media channel, provides extensive coverage of news from
leading world agencies. As, incidentally, does one of the Russian
language Internet leaders, Mail.ru. Studies conducted in November 2007
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by TNS Web Index so far only covering Moscow, showed that the
Yandex portal reaches out to 96% of the Moscow Internet audience
between the ages of 12 and 54; Mail.ru 86%; Odnoklassniki.ru 67%; and
the Rambler portal 65%.
The enthusiasm shown by online publication fans is increasingly
put to commercial use. Andreas Neus, head of the Media&Entertainment
division of the IBM Institute for Business Value, said that an ad spot
produced by the winner of an Internet competition cost the customer
Sony $2,000, although a product of the same quality, made by a
professional studio, would have costs 100 times more, according to
expert estimates.
Journalists should not fear a blogger invasion. Bloggers are still
not in a position to replace a regular army of freelance journalists,
correspondents and editors. But bloggers can already catch errors in
professional texts and supply missing details. In technological terms, the
trend is also clear; news distributed on the Internet is utilized better than
that printed on paper or broadcast over the air. Only 2% of the
population with Internet access uses television as a news source,
although in Russia and the world, television is the main media medium.
The rest of the population watches television only for entertainment. On
the Internet, on the other hand, most users seek news, or 93% of those
between the ages of 15 and 24, and 98% of those between the ages of 40
and 60. This is hard to interpret other than as a local Internet victory
over television.
In July 2007, the Levada Center conducted studies, which showed
that one in four Russians had a home computer; 61% had a cell phone;
and 17% could use the mobile Internet. The share of cell phones was
already higher than that of home telephones (61% versus 57%), while in
2005, 48% had a home telephone, and only 42% a cell phone. At the
same time, 6% of the country’s population knew nothing about the
Internet, and 73% had no opportunity to use it.
Internet users mainly come from the educated section of society
with a basic knowledge of the Internet, enough time and money to
engage in such a pastime, and a desire to read independent and often
contradictory media. The main user of Internet information is one who
is affluent, has an intellectual job, and a steady source of income.
Usually, these are people between the ages of 16 and 45, with a higher or
technical college education, are active in their communities, and have
their own perspective on key social issues.
Moscow has the largest number of Internet users in Russia, with
more than five million users each month. Over the past two years,
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Internet use in Moscow has grown by 63%, up from 3,315,000 to
5,267,000.
The Central Federal District (excluding Moscow) and the Volga
Federal District each have about the same number of users - 5 million
and 4.8 million, respectively. In the Northwestern Federal District,
including St. Petersburg, 3.8 million people use the Internet. In the
Siberian District, the figure is 3.5 million; in southern Russia, 3.3
million; in the Urals Federal District, 1.8 million; and in the Far East,
1.6 million. Almost 70% of users log in from their homes, and men make
up 59% of the Russian Internet users. The most active users are young
people between the ages of 18 and 24. They account for about half of all
users and are followed, in descending order, by the age groups of 25-34,
35-44, and 45-55, and only 2% are over the age of 55.
MForum Analytics experts estimate that by 2010, 21 million
Russians will be using the Internet daily and 16 million sporadically.
According to their figures, in 2007, the daily audience of the Russian
Internet rose by 16% to reach 11.8 million people. This audience, which
generates the bulk of network traffic, can further grow only on the
condition that high-speed Internet reaches Russia’s regions. MForum
Analytics predicts that in 2008, the Russian Internet’s daily number of
users will rise by 22% and in 2009, by 26%.
The Public Opinion Foundation (POF) says that the number of
Internet users in Russia is no longer growing as rapidly as before. While
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prior to the summer of 2007, biweekly foundation polls registered rapid
growth in the number of users, last summer a slowdown became
obvious. One of the reasons is high network access prices in the regions.
According to the POF, unless measures are taken to reduce rates and
fight against provider monopolies, in several years’ time Internet use in
Russia will stall at 34% and show no further progress.
Ruslan Tagiyev, a media research director at TNS Gallup Media,
on the other hand, believes that public interest in the Internet is still
high. In Moscow at least the number of users is increasing at a good
pace, and by the end of 2008, he thinks, about 30% of Russians will be
using the Internet. The increase in the number of users is only likely to
start tapering off when it reaches 75%.
As the Internet spreads across Russia, it also builds its market in
the country. As estimated by J’son&Partners, this market in 2007 was
worth 53.9 billion rubles. By 2010, online sales, according to experts,
could amount to 50% of its volume, and reach 170 billion to 240 billion
rubles, according to various sources.
A factor contributing to Internet market growth is the introduction
of broadband access in large cities, making it possible to download
“heavy” content (films, games, software), while “light” content (music,
books, etc.) is today distributed mainly through cell phones,
communicators or smartphones.
In 2007, Independent Media Sanoma Magazines and WapStart,
basing themselves on cellular use in Russia, launched a mobile version
of the Cosmopolitan magazine at wap.cosmo.ru. Now, using their
cellular phones, magazine readers are able not only to read what its
issues offer (news, articles, advertisements and predictions), but also to
post on forums, comment on materials, take part in votes, polls and
competitions, download free content, etc.
Its wap site largely copies the features of Cosmopolitan’s Internet
version, containing the most popular columns: Issue Preview (including
regional issues); Best from Cosmopolitan (a selection of articles on
beauty, health, relationships, and fashion); and Cosmo Girl (a photo
competition for the right to grace the home page of the site). In view of
its mobile format, the developers added the Photoblog service to the
general structure of the wap site to enable visitors to upload photos or
images from their phones and participate in voting for the best content
(unlike Cosmopolitan’s web version, wap site voting is free). Registered
wap visitors can also obtain personalized data – a weather forecast for a
specific city and a daily horoscope, including a daily personal horoscope
– on their phones in the form of text messages.
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However, while cellular communication advancement in Russia
has been a success, this cannot be said of the spread of computers and
the Internet. According to the latest figures released by the Russian
Ministry of Information and Communications, only 25 million people
(18% of the population) use the Internet fairly regularly. Statistics
experts from Internet World Stats give a higher estimate of Internet use
in Russia – 19.8%.
According to the same data from Internet World Stats, Internet use
in Belarus is 56.3%, or more than in France (54.7%). Among the former
Soviet republics, Estonia leads the field (with 57.8%). Russia is fifth,
behind Latvia and Lithuania, but ahead of Moldova, Ukraine and the
former South Caucasian and Central Asian republics of the Soviet
Union. In other words, it is too early to speak of the Internet “in Russian
villages that are not yet mapped.”
The slow spread of the Internet is the main factor holding back not
only the digital content market, but also the market for information and
communications technologies (ICT). Incidentally, in 2007, Internet
World Stats estimated Russia’s ICT per capita consumption at $250, or
six times less than in the EU, 10 times less than in Japan, and 13 times
less than in Switzerland.
Nevertheless, Internet market players are already looking forward
to massive demand in the future, early signs of which are evident in
Moscow, St. Petersburg and some other large cities. By the end of 2007,
broadband Internet use in Moscow had climbed to 38%, while the figure
for the country as a whole was just 1.3% (as reported by Fitch Ratings).
Most Russian users continue to access the network mainly through
dial-up connections, while modern Internet technologies begin to pay
their way only when a certain visiting threshold is crossed. For Internet
use to spread faster, broadband rather dial-up connections are needed.
Things, however, should improve soon. At the end of July 2007,
Russia’s Security Council approved a strategy for information
development in the country, which plans broadband online access for
three-quarters of Russian families by 2015.
Real practice suggests the Russian Internet services market has a
bright future. Last year, Microsoft launched an MSN portal in Russian.
On June 29, 2007, the msn.ru site created the search engine Windows
Live and news. More than 80% of the project’s information is provided
by Kommersant and its online publication Gazeta.ru. The remaining 20%
is news from Reuters and The Associated Press.
In the field of search engines, Russian-language Google is MSN’s
main rival. American Google established itself in the Russian market in
October 2006. The company is doing well, although below expectations.
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Monitoring results reported by comScore Networks showed that in the
summer of 2007, Google only ranked 8th on the list of most visited
Russian Internet sites, led by Yandex and Mail.ru. But before the start of
2008, Google moved forward with 17.2% to become the second largest
player in the Russian search engines market. Before that, Rambler was
second among Russian search engines. Now only Yandex with 54.5%,
1.8 billion rubles in earnings and a net profit of 732 million rubles, is
ahead of the overseas company. Andrei Ivanov, a main specialist on
Internet marketing at Ashmanov & Partners, thinks in 2008 Yandex will
have a stake of about 50%; Google 25%; while Rambler is unlikely to
exceed 15%.
Nevertheless, analysts believe the appearance of MSN in Russia
will sharpen competition in basic segments of the Internet market.
However, most of them do not think MSN will, as expected by
Microsoft, become one of the three most popular Russian Internet
portals. According to experts, the company will find it difficult to push
Russian leaders from the market. At any rate, this will call for a budget
of tens of millions of dollars.
The survey “The Competitive Index of the Information
Technologies (IT) Industry Across the World,” prepared by the
Economist Intelligence Unit (EIU), gives a list of 66 countries, where
the IT scene looks favorable. Russia is placed 48th on it, almost catching
India and ahead of China. The U.S., Japan, South Korea and the United
Kingdom lead the world in information technologies. The reasons for
Russia’s low performance are insufficient investment, poorly developed
IT infrastructure in the regions, inadequate government support, and
widespread piracy.
On the other hand, the same report indicates that Russia is an
attractive place for outsourcing new IT programs because over 200,000
technical specialists with an engineering education and many with a
command of English graduate annually. The information supplied by the
Ministry of Information and Communications also supports such a
conclusion. Whereas in 2006 Russia exported 49 billion rubles’ worth
of IT programs, in 2010 their export will reach 295 billion to 345 billion
rubles, and the total volume of the Russian IT market will reach one
trillion rubles. But even with such rates, Russia is unlikely to quickly
catch up with the world leaders.
Five trends stand out among a host of details that transformed the
Internet after 2000. Their effect is felt even today and they have the
potential to change the Internet beyond recognition. First, at the
beginning of the 21st century, the world network spawned search
engines on such a grand scale that they brought a lot of advertising and
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spam to the Internet. Second, following a boom in user content and the
emergence of behavior analysis systems, the Internet became more
social. Third, new technologies are now spreading content via fileexchanging networks and their popularity is a source of worry for
traditional media and a cause of the large-scale war with piracy. Fourth,
there is a trend away from conventional and costly programs, such as
Microsoft Office, and towards network freeware, such as the one
provided by Google. Fifth, millions of people are increasingly slipping
into virtual reality, and, vice versa, virtual reality is invading the real
world.
Google pioneered all these changes by developing a new network
search technology and discovering a new model for earning money on
the Internet. Instead of posting flashy banner ads, Google began placing
relevant messages entitled “sponsored links” next to search results. As a
result, between 2000 and 2007, company revenues rose from $19 million
to $11 billion, most of it coming from search-related or context
advertising, which proved a real find for the Internet industry. Google
now has a near monopoly on the American Internet search advertising
market, whose volume is estimated at $7 to $8 billion. (According to the
Interactive Advertising Bureau, the American Internet market in 2007
was worth over $17 billion). The market steadily grows, and one holding
after another announces a review of their advertising budgets. Johnson
& Johnson, for example, announced shifting most of its advertising
budget, some $250 million, from traditional to digital media. L'Oreal in
2007 set aside 2% of its advertising spending, which exceeded $6
billion, for online ads. According to the American Advertising
Federation, 73% of marketing experts in 2007 reallocated 20% of their
advertising budgets to new media. The European Interactive Advertising
Association claims that consumer brands look to increasing their
network advertising budgets from 5.6% in 2005 to 9.8% in 2008, and
entertainment industry companies, even to 11.2%. Lastly, experts from
Zenith Optimedia predict that by 2009, the Internet will be able to
absorb 9% of the aggregate advertising budget of the world’s leading
companies.
However, the pay per click model of online advertising has some
inherent flaws. The problem has two aspects – false clicks and search
junk. Companies like Google and Yahoo are paid for every click on an
ad link, whether or not this click brings an actual buyer, which has given
rise to a whole cheating industry – so-called click fraud, or phony clicks.
Click fraud is fully automated, and the result is that 15% of ad link
connections are a “mark-up,” i.e. the advertisers let $1 billion go down
the drain (data supplied by Outsell).
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The other aspect of the problem is information junk. Whatever a
user searches for today, ads are sure to be among the first results. Using
specially written programs, cheaters create tens of thousands of senseless
one-off sites (doorways) that contain no useful information but reroute
users to advertising catalogues and thus credit their makers with a few
clicks to ad links.
A study by Kaspersky Laboratory revealed that in 2007, spam
made up 80% of mail traffic on the Russian Internet. Russia’s spam was
still mainly concerned with medicine whose percentage doubled during
the year, rising to 22.4%. Education came in second (at 13.8%) with
offerings of training courses, workshop practice, and diplomas.
Computers and the Internet (9.2%), mainly featuring English-language
offers of unlicensed software, came in third.
In this context, it is interesting to note that the latest eye-tracking
study undertaken by Nielsen Norman Group has managed to prove that
there is such a thing as “banner blindness.” In simpler words, regular
Internet users practically ignore banner ads, links and the rest, and
instead focus on the main content.
The Internet is currently experiencing a boom in user generated
content (blogs or live journals). In the past few years, blogs have not
only incorporated text, but also images and video. The services
MySpace, which is part of Rupert Murdoch’s News Corporation empire,
and YouTube, the leading user video site belonging to Google are
flagship projects of the Web 2.0-era Internet.
Economically, Web 2.0 is as advantageous as a self-service store.
If a concept suggested by an author “catches on,” users supply content
freely, making it unnecessary to spend on studios, film crews, or
royalties. To put it simply, the Web 2.0 system has gained its current
status thanks to very low information storage and transmission costs.
According to the latest IDC study, 70% of all information on the Internet
in 2010 will be created by the users themselves. Besides, the Web 2.0
fashion has again pushed venture companies to substantive investments
in the Internet. In particular, in 2006, American venture funds invested
$4 billion in Internet start-ups, or 32% more than in 2005 (figures
supplied by Thomson Financial and National Venture Capital
Association). This was the largest cash investment ever in the history of
Internet business. But many experts think that is not enough and are
strongly recommending everyone to prepare for the Web 3.0 era
(Imhonet), which, in their opinion, will become a reality by 2011.
Imhonet will give the user a higher status, a different job, and a different
reward.
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In 2007, the global Internet search advertising market climbed by
25% to reach $20 billion, but potentially its volume could have been
larger. Many big-time advertisers still hold back from the Internet
because of its lack of standards for measuring online users. Unlike
newspapers, radio and television, the Internet still lacks clear-cut criteria
for assessing target groups, claim Nielsen Online experts doing
statistical studies of the Internet.
The role of users in creating site content is also exaggerated.
Studies by Hitwise show that few people have a desire to create content
on their own. Of all YouTube users, only 0.16% upload their videos on
the site, while most prefer watching others’ products. The content of the
Wikipedia Internet encyclopedia is generated by no more than 4.6% of
its visitors, while among Flickr guests, only 0.2% upload their photos. In
the view of Hitwise analysts, the general rule of user content can be
summed up in the following way: 1% generate content, 10% interface
with it, and the rest merely use it. Spammers and advertising cheaters are
the most enthusiastic blog builders. Studies by Umbria Communications
have shown that up to 20% of newly created blogs are spam.
Today, Internet technologies are so advanced that they can build
whole clusters of virtual doubles. Mathematics experts call this process
collaborative filtering. The term describes a search for similar objects in
large data arrays. For example, if two strangers like the same 20 books,
the odds are that the twenty-first book fancied by the first will also
appeal to the second.
It has emerged, however, that the search engine, or a server storing
information about search requests, including passages to other sites,
knows the most about Internet users. Those interested need only to sift
through its content to find things out about users that they do not know
about themselves. Millions of Americans were shocked when Google,
launching its new Gmail service, began posting individual advertising
spots next to personally addressed letters. Through this, Google
demonstrated that it could index both what users look for and what they
write to each other, gaining a sort of divine or diabolical power over
them.
The Internet is increasingly filtering into everyday life. One may
sometimes wonder if a person reading texts or watching videos on a
computer screen, responding to many e-mails, chatting with dozens of
people on instant messengers, and living and making money in virtual
worlds, is communicating with humans, or with machines. Modern
business response has been unmistakable: the more flexible companies
are shifting their products and services to the Internet to be able to
follow any changes in the social environment. To do so, they are even
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prepared to pay taxes twice: in a virtual and in a real world of their
registration. In short, while earlier futurologists spoke and wrote only
about globalization, now they can also discuss a virtualization of reality.
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PAPER AND PRINTING SERVICES MARKET1
A state-of-the-art printing industry is a key pre-requisite for the
development of national periodicals. In the last few years, the Russian
printing industry has been posting positive changes and turning out books,
magazines and other printed matter, as well as cardboard crates, labels and
advertising materials. In effect, the printing industry caters to all end
commodity-and-service markets. The Association of Paper Wholesalers
estimates nationwide printed matter consumption at over 172.5 billion
rubles. Chalk-overlay paper and cardboard printed matter account for 113
billion rubles or 65.5%.
Production and consumption of Russian
printed matter in 2007
1.
Gross nationwide printed matter
consumption
2,564 thou. metric tons worth
172.5 billion rubles
1.1
Including chalk-overlay paper and
cardboard printed matter
1,248 thou. metric tons worth
113 billion rubles
2.
Gross nationwide printed matter output
2,194 thou. metric tons worth
159 million rubles
2.1
Including chalk-overlay paper and
cardboard printed matter
830,000 metric tons worth
84.7 billion rubles
3.
Gross printed matter imports
432,000 metric tons worth
29.7 billion rubles
3.1
Including chalk-overlay paper and
cardboard printed matter
418,000 metric tons worth
28.3 billion rubles
4.
Gross printed matter exports
62,000 metric tons worth
10.75 billion rubles
Sources: Association of Paper Wholesalers,
Interregional Printing and Publishing Association
A method
market capacity
Program (ICP)
services volume
for assessing the potential domestic printing-services
based on the UN-sponsored International Comparison
estimates the maximum possible national printingat 1.32% of the Russian GDP. Russia’s Federal State
1
The Federal Agency for Press and Mass Communications and the Interregional Printing and Publishing
Association (MAP) have prepared a separate detailed report “On the State of the Russian Printing Services
Market With Regard to All National Printing Enterprises.”
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Statistics Service estimated the 2007 national GDP at 32.3 trillion
rubles. Consequently, the printed matter market should have a maximum
volume of 435.5 billion rubles, but in reality accounts for just 40% of the
required levels (172.5 billion rubles in 2007).
The gap between the Russian printed matter market’s real and
potential volumes is determined by the following factors:
– the structure of society’s demand for printed matter has not yet
adapted to free-market standards and still has traces of the Soviet-era
mentality, such as inadequate information-advertising support for
commercial operations, and the relatively infrequent use of printed
matter by households, etc.;
– Russian society has a small middle class, the main buyer of
printed matter in industrialized countries; there is a huge gap in incomes
between the small high-income population, which, therefore, requires
small amounts of printed matter, and low-income groups that are unable
to buy printed matter;
– the printing industry’s material and technical base is far from
perfect; moreover, high interest loans and leasing payments suppress the
growth of small and medium-sized businesses;
– Russia relies heavily on unique imported expendable materials
on which high duties are levied; first of all, this concerns chalk-overlay
paper and cardboard accounting for 55-70% of printing-services costs.
At the same time, it should be noted that the Russian printing
industry’s continued development is facilitated by its ability to adapt. In
the last 8 years, it has received over 81 billion rubles’ worth of private
investment. This has made it possible to commission over 20 new
printing-industry companies, including several ultra-modern enterprises
turning out newspapers, magazines and packaging materials. About 100
operational printers have been upgraded.
From 2005-2007, the number of colors per page increased from
1.67 to 1.82 points. The increase in the use of color in newspapers is
particularly impressive. In 2007, 20% of national newspapers, 18% of
socio-political newspapers, 40% of advertising newspapers, 23% of
specialized newspapers and all regional entertainment guides used color
newsprint. The average number of colors per page is 1.8 points. The
printing industry had to drastically overhaul its equipment because of
this factor and the increased number of newspaper pages – on average
each issue now has 16 A3 format pages.
The Sovetskaya Sibir and Uralsky Rabochy printers in Novosibirsk
and Yekaterinburg, as well as the Chelyabinsky Dom Pechati and
Tsaritsyn enterprises in Chelyabinsk and Volgograd, and a number of
others, have successfully installed new and replaced obsolete equipment.
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Even regional cities have now started using multi-color newsprint. For
instance, multi-color rotary presses are being supplied to printing offices
in Magnitogorsk, Zlatoust, Achinsk, Berezovsky, Neftekamsk and other
cities. Periodicals owe their improved quality to light coated art paper
used for printing the most popular glossy advertisements.
Newspaper-printing equipment manufactured by the LITEX plant,
formerly called KPTS PoligrafMash, in Rybinsk has once again become
popular on the Russian market. In 2007, the company supplied 30% of
up-to-date equipment matching current newspaper-printing standards,
including production of light chalk-overlay paper periodicals.
Nevertheless, Russia still lacks state-of-the-art printers.
The production potential of the Russian printing industry
(as of January 1, 2008)
1.
Number of printing-industry enterprises (printing
offices)
1.1
Including large enterprises turning out printed
matter worth over 250 million rubles per year
1.2
Including medium enterprises turning out printed
matter worth over 25 million rubles per year
5,960
1.3
Including small enterprises turning out printed
matter worth no more than 2.5 million rubles per
year
10,000
2.
Number of workers employed by Russian printingindustry enterprises
16,100
140
Over 320,000
Sources: Association of Paper Wholesalers,
Interregional Printing and Publishing Association
The government continued to implement the concept for
expanding the national printing industry in the execution of the Russian
President’s Directive Pr-1146 dated June 19, 2003. Last year, a
document stipulating the creation of four integrated companies on the
basis of federal printing enterprises and publishing houses was finalized
and submitted to the government for consideration. As of January 1,
2008, Russia had only 57 such enterprises, which, nonetheless, control
important segments of the printing services market. For example, they
account for 48.2% of the black-and-white book market (millions of
sheet-copies), 45.2% of the album market, 30.2% of the newspaper
market and 18.9% of the magazine market.
After assessing the results of such work, the Russian Government
ordered the Federal Agency for the Press and Mass Communications and
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the Russian Property Management Agency (Rosimushchestvo) to find
managing companies for integrated printers and publishers within a set
period of time. At the same time, managing companies were ordered to
implement a massive retooling program at such companies, to attain
preset printing volumes and to provide economic justification for
preserving their core activities. The revamped federal printing industry
companies continued to retool and expand production last year. In all,
such programs received 966.9 million rubles worth of investment. The
printing industry expanded production by 11.5% on 2006, turned out
18.4 billion sheet-copies last year, including 10.3% more books, 37.4%
more magazines and 12.5% more newspapers. Gross newspaper output
exceeded 10 billion sheet-copies; and the daily print run was 35.3
million copies.
Russia’s top-quality printing industry owes its intensive
development of the past few years to the rapidly growing print
advertising and packaging-and-label markets. The situation was also
influenced by the lack of restrictions on foreign companies wishing to
acquire Russian print media. Consequently, foreign publications started
operating in Russia and facilitated the active development of the
domestic periodical and printed advertising materials markets. All this
helped boost top-quality press demand.
However, advertising proceeds are no longer enough to finance the
development of a cost-effective printing industry. Analysts believe that
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the government must introduce entirely different investment incentives
that would, first of all, attract financial institutions and would also help
introduce up-to-date printing technologies.
The modern Russian printing offices, including Almaz-Press,
Pushkinskaya Ploshchad, MDM-Pechat and many others produce the
same top-quality products as similar companies in Finland, Ukraine,
Poland and the Baltics. Nevertheless, foreign printers still have serious
competitive advantages over domestic producers, although they are not
technically superior.
Due to cheaper chalk-overlay paper, printing equipment and
materials, foreign printed matter costs 10-20% less. Although Russian
printing equipment is just as good as foreign, local companies are unable
to completely tap its potential. Added to this are low automation,
mechanization and robotization levels at production facilities and
warehouses. Automated printing-office control systems are being
introduced rather slowly. Production discipline also leaves a lot to be
desired; moreover, the industry lacks skilled workers, as well as junior
and mid-level managers. This is why orders are not always fulfilled on
time. Low labor productivity is another problem. The printing industry’s
rudimentary infrastructure and inadequate cooperation between
specialized enterprises in fulfilling complex orders is another drawback.
The domestic printing-services market players explain the main
competitive advantage of foreign printing companies by high taxes and
import duties levied on chalk-overlay paper and expendable materials at
a time when the national printing industry receives 98% of such
materials from abroad.
The government levies 15% paper import duties, as well as
fluctuating duties on ready-made printed matter. Under the 1950
Florence Agreement on the Importation of Educational, Scientific and
Cultural Materials, only 0.15% duties are levied on non-advertising and
non-erotic periodicals, mostly magazines, accounting for over 42% of
printed matter imports. 10% duties are levied on cardboard crates
(23.5% of total imports); labels making up for 14.5% of imports are
subject to 5% duties; and 15% duties are levied on advertising printed
matter (the same as on paper) accounting for 20% of total imports.
On May 6, 1995, the Russian Government issued Resolution No.
454 stipulating 15% import duties on chalk-overlay paper and cardboard,
thereby creating a glaring economic paradox. Russian authorities equate
paper serving as feedstock for the production of high value-added and
top-quality printed matter with ready-made advertisements and levy the
same duties on them. However, their added value is created abroad and
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imported into Russia free of charge, while expanding the printing
industry of neighboring states and contributing to their tax proceeds.
The situation is aggravated by easy-term value-added tax (VAT)
rates. Under the Russian Tax Code, 18% VAT is levied on all printing
services. However, all printed matter ordered at foreign companies and
imported into Russia are subject to 10% VAT under the 1950 Florence
Agreement, helping publishers to save up to 8% of printing costs.
Obviously, this does not improve the printing industry’s investment
climate and compels investors to finance the construction and
development of foreign printing enterprises catering to the Russian
market.
The Russian pulp-and-paper industry is still facing problems.
Although this country has 25% of the world’s timber resources, it ranks
tenth in terms of paper and cardboard output.
The annual reports of the Federal Agency for the Press and Mass
Communications, as well as numerous appeals by publishers and
printing-industry executives to the government and other executive
agencies, have repeatedly noted that Russia has never produced topquality chalk-overlay paper for glossy printed matter. The situation has
not changed today. In 2007, the domestic market had to import virtually
all the required amounts of chalk-overlay paper, namely, 750,000 metric
tons worth 17.5 billion rubles.
At the same time, “protectionist” import duties on chalk-overlay
paper and cardboard were introduced at some time in order to stimulate
their production in Russia, but to no avail. However, after the
introduction of the current 15% duties, Russian companies started
ordering printed matter worth up to 17 billion rubles per year elsewhere.
Our calculations show that the Russian print media sector has paid at
least 175 billion rubles to foreign printing-industry companies since the
introduction of high import duties on chalk-overlay paper and printingmaterials.
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Paper and cardboard production and consumption
in Russia in 2007
1.
Paper and cardboard consumption
volumes
6,376 thou. metric tons worth
124.2 billion rubles
1.1
Including paper and cardboard for
printing
2,644 thou. metric tons worth
71.2 billion rubles
1.2
Including chalk-overlay paper and
cardboard
830,000 metric tons worth 29.5
billion rubles
2.
Gross paper and cardboard output
7,292 thou. metric tons worth
93 billion rubles
2.1
Including corrugated paper, cardboard
crates, technical paper and other specialpurpose paper
4,392 thou. metric tons worth
53.8 billion rubles
2.2
Including paper and cardboard for
printing
2,900 thou. metric tons worth
39.3 billion rubles
2.2
Including spoilt cardboard
80,000 metric tons worth 1.77
billion rubles
2.2.2
Including newsprint
1,990 thou. metric tons worth
24.38 billion rubles
3.
Gross paper and cardboard import
volumes
1,627 thou. metric tons worth
43.7 billion rubles
3.1.
Including paper and cardboard for
printing
1,080 thou. metric tons worth
29 billion rubles
3.1.1
Including chalk-overlay paper and
cardboard
750,000 metric tons worth 17.5
billion rubles
4.
Gross paper and cardboard export
volumes
2,543 thou. metric tons worth
36.2 billion rubles
4.1
Including corrugated paper, cardboard
crates, technical paper and other specialpurpose paper
1,207 thou. metric tons worth
17.2 billion rubles
4.2.
Including paper and cardboard for
printing
1,336 thou. metric tons worth
19 billion rubles
4.2.1
Including newsprint
1,186 thou. metric tons worth
15.6 billion rubles
Sources: Association of Paper Wholesalers,
Russian Pulp & Paper Association
The Russian Industry and Energy Ministry is now drafting a
federal target program stipulating the creation of in-depth timberprocessing and top-quality paper-production facilities by 2015 in
execution of the Government Resolution No. 419 “On High-Priority
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Investment Projects in the Sphere of Forest Development” dated June
30, 2007. The government is expected to approve the program by late
2008.
A study of open sources suggests that, while assessing measures to
expand domestic production of chalk-overlay paper and cardboard, the
Russian Industry and Energy Ministry believes that continued
“protectionist” duties and reduced chalk-overlay paper imports will
stimulate its nationwide production as well as in-depth timber
processing. But market analysts are highly skeptical about the
effectiveness of this concept because the 13-year experience of applying
prohibitive chalk-overlay paper and cardboard import duties in Russia
proves the opposite. Since 1995, Russia has failed to master production
of top-quality chalk-overlay paper. There is still a lack of viable projects
in this sphere. Moreover, 15% import duties artificially reduce chalkoverlay paper demand, impair production investment and cause the
printing industry to stagnate. For instance, contracts with foreign
investors on commissioning up-to-date paper mills in the Kostroma,
Nizhny Novgorod and Novgorod regions have not been implemented to
date.
The production potential of the Russian pulp-and-paper
industry
1.
Total number of paper and cardboard
producers
100
1.1
Including large companies turning
out over 500,000 metric tons per year
9
1.2
Including companies with foreign
capital
7 turning out 45% of paper and
cardboard
2.
The number of corporate workers
3.
Total production investment in 19992006
About 100,000
83.5 billion rubles, including
investment for pulp and printed
matter production
Sources: Association of Paper Wholesalers,
Russian Pulp & Paper Association
The situation is exacerbated by the global pulp-and-paper
industry’s over-production crisis and declining demand. In 2007,
European countries shut down facilities turning out 700,000 metric tons
of chalk-overlay paper, and since 2005 facilities providing 2.5 million
metric tons of paper in the same category. The situation in the rest of the
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world is no better. Facilities worldwide can produce 49 million metric
tons of chalk-overlay paper, whereas global demand is just 44.6 million
metric tons. The unsold 4.4 million metric-ton surplus accounts for 9%
of gross output.
It would take at least five years to design and build a modern paper
mill, provided that investment and state incentives are available.
However, “protectionist” duties would improve the positions of
neighboring countries and would seriously weaken the national printing
industry over the same period.
The only way to stimulate chalk-overlay paper production in
Russia is to expand the national paper and printed services market. This
can be accomplished by introducing equal rules for Russian and foreign
companies and by abolishing paper-import duties. China is an illustrative
example because initially its printed-services market started expanding
by 30% per year, consequently boosting the development of the pulpand-paper industry.
In 2003, Ukraine reduced chalk-overlay paper import duties and
quickly became an important printing-services center primarily fulfilling
Russian orders. Currently, national chalk-overlay paper demand
increases by 50% per year. After processing, 50% of such paper is
delivered to Russia in the form of ready-made printed matter. Ukraine
has become a tough competitor for printers in Finland, Eastern Europe
and the Baltics.
Per-capita paper consumption in the world and separate
countries, in kilograms
Countries
1995
2000
2003
2005
2006
2007
The world
47
53
52
53
50
55
The United States
333
328
304
310
300
320
Japan
241
250
250
250
247
255
Germany
193
231
227
230
233
225
Finland
374
429
326
330
338
329
Poland
40
62
75
83
88
95
China
25
33
33
40
47
55
Russia
14
23
32
40
45
45
Ukraine
6
12
20
26
30
35
Source: Association of Paper Wholesalers
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Analysts of the paper and printing services market agree that
expanded in-depth timber processing, namely, production of top-quality
paper in Russia, is only possible if the demand for printed matter
increases. However, this goal cannot be attained unless paper-import
duties and the relevant taxation regime are modified.
The printing industry could expand production and contribute far
greater federal-budget revenues if paper-import duties are reduced to 5%
and are eventually abolished. The sum total would by far exceed that of
custom-duty proceeds. In the first year after their abolition, the federal
budget would lose 632 million rubles in revenues but would receive
additional tax proceeds totaling 1.26 billion rubles. Budgetary revenues
would continue to swell in the long-term.
Analysts of the Russian printing industry believe that the
following measures can solve the problem.
1. Lifting or reducing customs duties on imported chalk-overlay
paper (Commodity Group 48.10) at least until the commissioning of the
relevant national production facilities. At the same time, round-timber
export duties must be raised stage by stage in accordance with the
Government Resolution No. 75 dated February 5, 2007. Under the
resolution, such duties must total 80% of round-timber costs by January
1, 2009.
2. Levying standard easy-term through value-added tax (VAT)
rates on all printed matter, except advertisements and erotic magazines.
3. Including the proposed measures to build up the domestic chalkoverlay paper market into the state program of the Russian timberindustry sector’s development in full conformity with President Putin’s
Instruction to the Government, the Industry and Energy Ministry and
Economic Development and Trade Ministry on April 9, 2007 “to draft
comprehensive programs for developing hi-tech industries, including
those recycling natural resources, and to submit them for subsequent
approval.”
On April 14, 2007, the Russian Government issued Resolution No.
225 “On Temporary Paper and Self-Sticking Cardboard Import Duties,”
which reduced import duties in these categories (Foreign-Trade
Commodity Code 4811 41 900 0) from 15% to 5% for a period of 9
months. After summing up the practical experience of their application,
the government stipulated 5% fixed import duties in its February 5, 2008
resolution No. 48. Acting on behalf of several companies producing selfsticking labels, the Packaging, Labeling and Design Center submitted a
request on regulating the customs duties with the support of the
packaging industry development subcommittee of Russia’s Chamber of
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Commerce and Industry and the magazine Tara i Upakovka (“Crates and
Packaging”) that had advocated this decision for over 18 months.
This highlights the need for creating an effective dialogue between
self-regulating industrial bodies and the state on the basis of mutual
interests. Although, such cooperation is proceeding with difficulty, there
are some positive examples in this sphere. For instance, a decision to
abolish import duties on foreign printing equipment was preceded by a
lengthy discussion. Starting on July 1, 2007, no import duties are levied
on such equipment. For nine months before that deadline, temporary
zero import duties were stipulated. There is hope that a similar decision
will be made with regard to chalk-overlay paper and cardboard imports.
Zero or reduced import duties on rare foreign feedstock lacking in
Russia imply that national customs legislation is moving to support
domestic producers.
The proposed customs-duties decision is backed by numerous
organizations, including the National Press Coordinating Council, the
Interregional Printing and Publishing Association, GIPP, the
Izdatelskaya Initsiativa non-commercial partnership, the Moscow
Printing Services Union, the St. Petersburg Union of Printing
Enterprises, the Siberian Printing Services Union, the Urals Printing
Services Union, the Association of Paper Wholesalers and even the
Russian Pulp & Paper Association (Bumprom), which also realizes that
the Russian market will not receive enough chalk-overlay paper in the
near future.
It is very important that all professional public organizations in the
industry step up their efforts today. The end goal can be achieved in the
near future. On February 21, 2008, the Russian Government examined
guidelines for the 2009-2011 customs-and-tariffs policy, which will aim
to relocate production to Russia through reduced import duties on
feedstock and materials. The government attaches priority to production,
rather than imports, which fully corresponds to the long-term interests of
the national paper and printing services market.
95
STATE SUPPORT FOR THE PERIODICAL PRESS
In 2007, the Federal Agency for the Press and Mass Communications
continued to distribute budget funds to press organizations engaged in
socially important projects. All in all, it received 658 requests from
organizations implementing 864 such projects. A total of 351 newspapers
and periodicals from 57 regions received grants under Article 4500000,
“Events in Culture, Cinema and the Media,” amounting to 127,582,000
rubles for 415 projects, including 27,582,000 rubles for 133 state-controlled
periodicals and 100 million rubles for 218 privately owned periodicals.
Another 23 million rubles went to 22 periodicals for people with disabilities,
including 20 million rubles to periodicals for people with impaired vision.
Compared with the previous year, the principles and volume of state
assistance to all types of publications did not change in 2007. Financial
assistance to socially important periodicals was distributed among bidders
by decision of the Expert Council of the Federal Press and Mass
Communications Agency, taking into account the provisions of Government
Resolution 249, dated May 22, 2004, “On measures to Raise the Efficiency
of Budget Expenses” (with subsequent amendments).
The most popular grant recipients were social, fiction, cultural,
educational and popular science publications that needed state funds for
promoting socially important projects, as well as the bidders who presented
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socially important projects most attractively. The socially important projects
in periodicals include series of materials on the same subject representing
social and state interests and aimed at solving social problems, which have
been, or are planned to be, published in newspapers, magazines, yearbooks,
bulletins and omnibuses officially registered in Russia.
Allocations to publications for people with impaired vision were
provided monthly, according to the 2007 plan approved by the Central
Board of the Russian Society of the Blind. Under Article 14 of Federal Law
181-FZ, “On the Social Protection of People with Disabilities in the Russian
Federation,” dated November 24, 1995, economic assistance to periodicals
for people with impaired vision covered not just partial compensation of
expenses on the acquisition of newsprint and payment of printing services in
Russia, but all expenses related to publishing and marketing the said
publications.
State allocations allowed these publications to routinely publish
periodicals for people with impaired vision and even cut their prices,
therefore ensuring the right of these people to objective and reliable
information about issues of importance to them.
In line with the recommendations of the second branch conference,
“The Mass Media, Book Publishing and Printing: Results of 2006 and
Development Prospects,” the board of the Federal Press and Mass
Communications Agency held a meeting on September 27, 2007 to discuss
ways to streamline taxation in the printing of periodicals and books related
to education, science and culture. Proposals on this issue, drafted by the
National Press Coordinating Council, were examined by legal experts and
placed for a month on the web sites of the Federal Press and Mass
Communications Agency and GIPP for broad public discussion.
Participants in the discussion agreed that the Russian system of
taxation of periodicals and books on education, science and culture should
be revised with due regard for their role as a socially important commodity
and the specific features of their production and marketing, which are not
always taken into consideration in legislation. The Russian and global
experience shows that Russian legislation on the taxation of print media and
book publishing should be revised or complemented with interpretations of
legal clauses, because many norms in current legislation greatly increase the
tax burden on the publishers and distributors of periodicals and hinder the
development of the publishing business in Russia.
As a result, the final document of the meeting was streamlined and
meaningful, and was approved by the board with only minor amendments.
After additional work on the document and its legal examination, the
proposals are to be submitted to the government for consideration in the
second quarter of 2008, in accordance with the established procedure.
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Experts agree that their application will make the financial operation of the
printing business more transparent, therefore attracting additional
investments and encouraging new projects. In short, the future of the
publishing business in Russia depends directly on the solution of this
problem.
Another major problem that cannot be solved without state assistance
is the dire lack of skilled personnel, including journalists. Russia needs to
create a proper system of undergraduate and postgraduate training programs
adjusted to the rapid development of the media. The problem was discussed
in October 2006 at a board meeting of the Federal Press and Mass
Communications Agency, attended by representatives of the media and the
system of training personnel for them, as well as at the branch conference,
“Training Creative and Managerial Personnel for the Publishing Sector,”
sponsored by the Federal Press and Mass Communications Agency.
This helped to outline the key problems in this sphere, which boil
down to the following. The state approved list of professions ensuring the
operation of the media and mass communications with due regard for
modern requirements has become obsolete. As a result, there is no basic
training for many professions needed in the media.
The universities and the sector are taking measures to adjust training
to modern requirements, but few Russian universities have the capability to
finance the training of requisite personnel for the media. At the same time,
broadcasting and publishing companies, which are working on this market
and know its personnel requirements, have the needed capability as well as
material and technical facilities. The Russian media business can, with state
assistance, take an active part in the training of personnel for this sector.
On October 15, 2007, a two-year program, Media-MBA, was
launched at the International Business School of the Government’s Financial
Academy. The project was initiated by GIPP. Graduates will receive MBA
degrees with Media as their major. This is Russia’s first attempt to train toplevel managers for the media business.
Under the Media Education and Personnel project, which is being
implemented with the assistance of the Federal Press and Mass
Communications Agency, GIPP, working jointly with experts of JSC
Shtaty.ru and the Mediajobs portal, conducted an expert monitoring of the
labor market of print media in 2007 and compiled a list of related modern
creative and managerial professions, which was later widely discussed. At
the same time, a list of modern professions was compiled for the book
printing business, while the National Association of TV & Radio
Broadcasters (NAT) compiled a list of modern professions for the electronic
media.
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The said lists (see www.fapmc.ru and www.gipp.ru) include
definitions of qualification requirements for professionals working in print
and electronic media (skills and knowledge), their functions and powers, as
well as glossaries of professions. NAT and GIPP recommend these lists for
use in education and personnel policy of print and electronic media. They
are expected to greatly facilitate the personnel policy in the media business,
and allow educational establishments and branch experts to elaborate
educational standards and programs of training and advanced training of
professionals for print and electronic media adjusted to the media market
requirements.
The Federal Press and Mass Communications Agency also plans to
send these lists of professions and supplemented qualification requirements
to the Ministry of Education and Science and to the Education and
Methodology departments of universities as recommendations for
modernizing the training and drafting modern state educational standards in
the training and advanced training of professionals for print and electronic
media adjusted to the sector’s demands.
Legal regulation of print media did not change substantially in 2007.
As before, it is still aimed at developing the media business on the principles
of the priority of the freedom of speech and independence of the media. The
situation in Russian media legislation is extensively covered in the report of
the Federal Press and Mass Communications Agency, “Russian Periodical
Press Market: 2007. Situation, Trends and Prospects,” and does not need
additional commentaries.
The legal practice last year also shows that the overwhelming majority
of legal and administrative suits brought against the media are connected
with violations of advertising legislation or the protection of the honor and
dignity of people and organizations. Last year, nine lawsuits against media
outlets and journalists related to the essence of their materials were granted
in Russia.
They include the decision of the Moscow Arbitration Court to grant
the slander suit of the company Inteco against publishing house Axel
Springer Russia; the decision of the Zamoskvoretsky Court of Moscow to
shut down the newspaper Duel in view of numerous breaches of legislation;
the decision of the Orenburg Regional Court to close the newspaper Za
Veru, Tsarya i Otechestvo for publishing extremist materials; the ruling of
the Vladimir Magistrate Court against Sergei Gromov, former chief editor of
the local newspaper Vladimirsky Krai, accused of offending a state official;
the decision of the TvFerskoi District Court of Moscow to arrest Boris
Zemtsov, deputy editor-in-chief of the newspaper Nezavisimaya Gazeta, on
suspicion of extortion; the decision of the Pskov Regional Court to give a
suspended sentence to two Kaliningrad journalists, Igor Rudnikov, the
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founder of the newspaper Novye Kolesa, and Oleg Berezovsky, a journalist
of the newspaper; the ruling of the Magistrate Court of the Oktyabrsky
District of Saratov against Vladimir Spiryagin, chief editor of the newspaper
Saratovsky Rasklad, accused of slandering Vyacheslav Volodin, a leader of
the United Russia party; the decision of the Novosibirsk Regional Court to
sentence Igor Kolodezenko, chief editor of the newspaper Rodnaya Sibir, to
five years in prison for publishing extremist materials; and the decision of
the Oktyabrsky District Court of Izhevsk to recognize the Russkaya Falanga
newspaper (No. 14 (42) of December 25, 2004), the Respublika newspaper
(No. 4 of April 18-24, 2004), and the newspaper Nash Narodny Nablyudatel
(No. 1, November 2003) as extremist publications.
But there are also other, positive examples.
By decision of the Urals department of the Russian Prosecutor
General’s Office, Nikolai Rumyantsev, the prosecutor of Nizhnevartovsk, in
the Tyumen Region, was fired for sanctioning the arrest of Alexei
Kungurov, chief editor of the newspaper Volny Gorod, and Alexander
Bezdelov, a journalist on the staff of the newspaper, on charges of
slandering Alexander Peterman, head of the Slavtek company.
In the fall of 2007, the Saratov Arbitration Court reversed the decision
of the Middle Volga department of Rosokhrankultura, the Russian
government agency in charge of protecting the nation’s cultural heritage, to
caution the newspaper Novye Vremena v Saratove against extremist
publications. The court analyzed the “Triumph of Will” article published by
the newspaper and accompanying illustrations of the 1934 Nazi congress,
and ruled that they did not contain “elements of extremism.” The court also
reversed the decision of the agency’s territorial department to cancel the
registration of the regional opposition newspaper Saratovsky Reporter for
publishing a collage that depicted President Vladimir Putin as Stirlitz, a
Soviet spy from a famous film about World War II.
The St. Petersburg Municipal Court ruled in December 2007 to lift the
charges of extremism from the newspaper Novy Peterburg and reverse its
previous decision to suspend the newspaper’s operation.
On March 21, 2008, the State Duma adopted in the second reading a
draft federal law “On the Procedure for Foreign Investment in Commercial
Organizations of Strategic Importance for the National Security of the
Russian Federation.”
The bill cites 42 types of organizations in which foreign investment
shall be limited, including major federal media, major printers and nearly all
television and radio broadcasting companies.
The law on strategic companies does not ban foreign investment in
them, but limits their involvement and stipulates stricter state control of such
companies’ operation.
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The day before, President Putin signed a decree “On Measures to
Ensure the Information Security of the Russian Federation in the Use of
Information and Telecommunication Networks of International Information
Exchange.” The decree should secure the country’s information security
during the use of the above networks for transmitting information across the
state border, including on the Internet. From now on, the use of such
networks is permitted only with the use of special methods protecting
information containing state or official secrets. These are coding
(cryptographic) methods certified by Russia’s Federal Security Service
(FSB) and/or the Federal Service for Technical and Export Control.
Since the law limiting foreign investment in strategic organizations
has not been approved yet and there is no mechanism for applying the above
presidential decree. We will discuss them in greater detail in the next annual
report of the Federal Agency for the Press and Mass Communications on the
situation, trends and prospects of the Russian periodical press market.
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Russian Periodical Press Market: 2008. Situation, Trends and Prospects. A report by the
Russian Federal Agency for the Press and Mass Communications, Moscow, March 2008.
Printed in full conformity with the quality of materials submitted by Pervaya Obraztsovaya
Printing House, 28 Valovaya Ulitsa, Moscow 115054.