Responding to the Russian Media Crisis:
A Sectoral Analysis and Action Plan by the National Press Institute of Russia
Testimony of Robert Karl Manoff, Director, Center for War, Peace, and the News Media, New York University, before the House Foreign Operations, Export Financing, and Related Programs Subcommittee of the House Appropriations Committee, Washington D.C.,
March 4, 1999
 
Mr. Chairman and Members of the Committee, on behalf of New York University and the National Press Institute of Russia, the major initiative undertaken by NYU's Center for War, Peace, and the News Media, I would like to take this opportunity to thank you for your previous support of our work.
 
We have been gratified by this Subcommittee's staunch endorsement of media assistance programs, most recently in House Report 105-719, which, inter alia, supported "training in commercial management with emphasis on financial skills, basic and advanced journalism training, and development of an independent media infrastructure." The continuing interest of this Subcommittee in such programs will remain critical to their continued implementation and success in the years to come.
 
I very much appreciate the opportunity to provide testimony to this Subcommittee today, and would like to offer the following comments as a journalist, an academic, and the founder and director of an NGO that has been providing media assistance in the former Soviet Union and Central and Eastern Europe since 1985 -- longer than any other organization operating in the region.
 
Since I appeared before you last year to discuss the importance of the media to the transition process in Russia and to American policy interests in that country, the economic crisis that has devastated the economy since August has dramatically impacted the media sector, as well.
 
While the fundamental sectoral assistance approach that has been developed over many years by the National Press Institute (NPI) remains valid, the present economic crisis in Russia clearly requires that efforts to assist the independent media be reviewed and refocused. In light of this fact, NPI has been vigorously reassessing its current activity and developing new programmatic initiatives continuously since the crisis began in August. As part of this process, NPI has issued two detailed analytical studies of the crisis and its effects on independent regional newspapers, as well as a comprehensive programmatic Newspaper Crisis Recovery Program.
 
The National Press Institute believes that the present crisis will continue to impact the independent press for many years to come. Moreover, as Russia moves into the upcoming national election season, new dimensions of the media crisis will emerge, presenting new challenges that bear upon the fate of the entire political-economic transition of the country. As a permanent media-assistance organization that is on the ground throughout Russia every day working with the entire media sector, NPI has undertaken continuous monitoring of the media crisis and the implications of this crisis for the future of Russia and the success of American policy, and I would like to share some of our findings with you today.
 

1. The Press Before the Crisis

 
It is important to begin by recognizing that Russia's pre-crisis media sector was far from able to meet the requirements of democratic politics and a market-based economy. A number of industry characteristics accounted for the economic weakness and the professional inadequacy of pre-crisis regional newspapers:
 
  • Regional newspapers were printed on outmoded, state-owned printing presses and distributed by monopoly (often state-controlled) distribution companies;
  • Regional newspapers had an abnormally small share of both national and local retail advertising markets;
    • There were far too many regional newspapers in extremely restricted markets, making it impossible for many of them to gain financial independence. Of the approximately 10,800 titles registered in Russia's 89 regions, only half had circulations over 10,000;
  • Media markets (in terms of reader trust and advertiser confidence) were grossly distorted by the presence of state-subsidized mouthpieces posing as local newspapers;
    • Regional newspapers were managed by former journalists with an extremely limited understanding of the business side of publishing, especially the importance of aggressive marketing and outreach to both readers and advertisers;
  • Governments at all levels continued to exert control over the media, largely through economic levers, especially at the regional level (currently approximately 85 percent of Russian newspapers receive some form of subsidy);
    • Investment and capital resources were scarce, except in the case of politically-motivated investments;
  • The unstable and underdeveloped legal environment surrounding the media inhibited innovation, risk-taking, and sustainability;
    • Information access remained restricted, despite freedom of information laws;
  • Nonstate newspaper publishers rarely communicated with one another, and were unwilling to share information or work together to promote their common interests and improve the legal and regulatory environment in which they operated; and
    • Public confidence in the media was abysmally low because of poor journalistic professionalism and the widespread (and often correct) impression that journalists served political and financial interests rather than their readers.
    In summary, the condition of the nation's media was in many respects grave even before the crisis, and this made the impact of events following August 17 all the more dire.
     

    2. The Impact of the Crisis

     
    In the aftermath of the crisis itself, NPI research has made it clear that the financial, managerial, professional and political position of the regional print media has suffered grievously. Among the findings:
     
    • Publishers have responded to the crisis with reductions in publishing volume and sharp cuts in staffing levels. Overall, 61 percent of publishers reported reducing the number of pages published per week. Reductions ranged from 10 to 50 percent, with an average for all publishers of 17 percent.
  • Half of all papers reported laying off staff, ether permanently or temporarily. Other papers reported across-the-board salary cuts, staff reorganizations and reductions in working hours.
    • Most newspapers reported enacting other anti-crisis measures such as more closely monitoring all costs and more rigorously controlling circulation.
  • Analysts in several Moscow-based advertising agencies estimate that the overall advertising market in Russia has fallen by 70 percent since August. Almost all of the publishers that NPI surveyed reported decreased advertising revenues since mid-August despite the fact that many of them have increased advertising rates.
    • The impact of the present crisis on subscription sales, the major source of revenue, will be quite drastic, probably even more devastating to most newspapers than the collapse of advertising markets. The subscription crisis will most seriously affect newspapers (mostly dailies) that are widely distributed across vast regions, and may have the effect of turning truly regional newspapers into city papers. Citizens outside of metropolitan areas will be largely cut off from locally generated news.
  • Almost all newspapers have experienced immediate and dramatic increases in their basic production costs. Overall costs rose on average by about 15 percent despite the fairly draconian anti-crisis measures that all newspapers have undertaken. NPI's research has shown that prices of the two largest cost centers for Russian newspapers (newsprint and printing) have been fluctuating wildly throughout the crisis and show no signs of stabilizing. It is impossible even to generalize, except to say that the price of newsprint has increased by 20 to 100 percent and the price of printing has risen similarly.
    • Eighty-five percent of publishers surveyed stated that a lack of printing equipment was the main obstacle to developing their business. At the same time, representatives of advertising agencies continue to tell NPI that newspapers simply are not interesting to their clients because of poor print quality. Russia has tried for too long to build a newspaper industry without bothering to make significant capital investment. This is simply not possible. A method must be found to finance the installation of small, modern offset newspaper printing presses in Russia.
  • Publishers of regional papers, as a result of the crisis, feel more sharply than ever the need for permanent representation in Moscow, both to promote their business interests with potential advertisers and to lobby their corporate interests with the government. Ninety-five percent of the publishers surveyed said that such a representation was "essential."
    •  

    3. The Six Crises of the Russian Media

     
    These findings are striking taken individually, but the cumulative impact of the collapse of the advertising market, the dramatic drop in subscription sales, the decline in the size of papers and their frequency of publication, the laying off of key journalistic and editorial staff, and a raft of other crisis consequences that NPI has documented -- this cumulative impact is even more fraught with danger for the processes of democratization and marketization in the country. In the aggregate, in fact, the Russian media -- and with it the country itself -- are now facing six crises of fateful import:
     
    • The Economic Crisis: Like all sectors in Russia, the newspaper industry has been rocked by the economic effects of the post-August crisis, as described above.
  • The Information Crisis: The economic crisis has forced newspapers to reduce staff and to cancel subscriptions to information sources such as news agencies. As a result, the economic crisis has become a journalistic crisis and newspapers are less able than ever to provide the information that society needs. NPI seeks to develop a variety of mechanisms (on-line journalism, database development, briefings and press conferences, publications, establishing contacts among newspapers in different regions, etc.) to increase the volume and quality of information available to Russian journalists and the public. NPI understands that simply helping publishers resolve their business problems will not enable them to survive if they are not able to produce products that readers need and want.
    • The Social Crisis: Such a dramatic collapse of the economy as Russia has experienced inevitably will have serious social consequences. This is especially true in a country like Russia which is composed of many ethnic and religious communities and which has a long, troubled history of intolerance and xenophobia. Since August, observers have noted with alarm a dramatic increase in anti-Semitism and in pro-fascist activity. NPI has observed intensified ethnic conflict in many regions and has received, for instance, a heart-rending appeal from publishers in the Northern Caucasus for assistance in helping to diffuse ethnic tensions before violence again engulfs that part of the country. In this region at least, publishers feel that social unrest is more immediate threat to their newspapers than the economic consequences of the crisis. While these are not issues that can be resolved by effective and responsible journalism, they certainly will never be resolved without it.
  • The Political Crisis: NPI and the publishers with which it works recognize that the upcoming parliamentary (1999) and presidential (2000) elections represent a significant threat to the independence of the regional media ­ a threat that looms larger because of the economic, political and social turmoil provoked by the crisis. NPI believes that journalists must be given guidance and resources to enable them to resist both political pressure and financial incentives during the campaigns, and to keep the needs and interests of their readers at the center of their election coverage.
    • The Legal Crisis: As a result of their weakened financial position and the strained political atmosphere engendered by the crisis, newspapers are more subject than ever to intimidation through legal action by the authorities and other interests. Publishers have repeatedly told NPI that they need organized and systematic assistance in such areas as business law, advertising law and the registration of organizations.
  • The Professional Crisis: The overall weakness demonstrated by independent newspapers in the present environment points to significant shortcomings in the level of journalistic professionalism throughout the country. Newspapers cannot recover from their economic difficulties, cannot resist political and criminal pressure and cannot play a stabilizing social role if they are unable to win and retain the confidence of the public. The National Press Institute emphasizes the importance of targeted programs designed to improve the professional and responsible presentation of information, such as the NPI Nuclear Security Program, its ethics programs and its long-running initiative on the coverage of ethnic conflict.
    •  

    4. Why Media Assistance Dollars Will Not be Wasted

     
    Most experts agree that it will be many years before Russia recovers from the shock of the present crisis. However, they also agree that new opportunities may have been created to correct the structural flaws that provoked the crisis in the first place. In this context, it is impossible to exaggerate the importance of the non-state regional press. Commercial newspapers play an active role in stimulating local economic development, in ferreting out and eliminating corruption and other obstacles to investment and, perhaps most importantly, in keeping the public informed and engaged in democratization and the economic transformation process.
     
    Although it is clear that the present crisis in Russia represents a serious, long-term setback for privately owned newspapers, publishers have not thrown up their hands in despair. Instead, they have rolled up their sleeves and responded to the situation with reasonable and well-considered crisis-management measures, although most of them will have a very hard time bearing further shocks and recovering from the present one without assistance. They are putting their available resources to excellent use and making heroic efforts with precious little support. They are more than ever ready to learn from the experience of other countries and from one another, more than ever taking themselves seriously as entrepreneurs and seeking sensible, market-oriented solutions to their problems. They are now acutely aware of the need to rebuild their businesses by increasing revenue, cutting costs, and providing a better product, and are more eager than ever before to do what is necessary to finally establish their newspapers on the basis of sound business practices, aggressive marketing, and quality journalism that truly responds to the public interest.
     
    The publishers of non-state newspapers in Russia belong to the emerging class of Russians who neither seek nor expect assistance from the state. Their confidence has been badly shaken by the present crisis, but their determination to overcome remains strong. It is indicative that only a tiny minority of the papers that NPI works with have approached local authorities for subsidies, while almost all have approached NPI for assistance in managing advertising, circulation, human resources and the like. A publisher from southern Russia recently told NPI, "There is no point in waiting for state support or subsidies. I have to rely on myself and to actively seek out market-oriented solutions to my problems."
     
    Considering this frame of mind, it is not surprising that the crisis has actually produced some positive effects. For example: Some publishers have intensified their focus on local advertising sales, looking to increase their base of small advertisers instead of relying on a few larger clients; other publishers have increased their control over single-copy sales and newspaper distribution generally, reducing waste and returns and increasing revenue; and yet other publishers have begun to think actively about how they can make their newspapers essential to readers who now have even less disposable income than before.
     
    However, daunting obstacles remain and another election season is looming in Russia. Publishers fear these elections even more than the economic crisis. They know that with each election, the confidence of citizens in political reform and in the media declines, further eroding their strength. They understand that, no matter what assurances may be uttered, all too few Russian politicians are deeply committed to the development of an open society. In the wake of the economic crisis, commercial newspapers in Russia enter the election season in a seriously vulnerable condition.
     
     

    5. What Kind of Assistance is Needed Now

     
    NPI's analysis of the present situation in Russia suggests a number of concrete actions that could and should be undertaken to resuscitate the non-state regional newspaper industry in the wake of the present crisis and to lay the foundations for a viable independent press in Russia. In order to do so, it is necessary for non-state newspapers ­ with the guidance and assistance of Western media professionals ­ to work together in a concerted fashion to (1) increase revenues by increasing advertising market share and circulation, (2) decrease costs through more efficient management, (3) improve the legal and regulatory environment through lobbying and legal and tax reform, and (4) improve journalistic practices and standards and heighten the media's sense of public responsibility to the public. With these goals in mind, NPI believes that the following specific initiatives are required to assist Russia's regional media in responding to the crisis:
     
    • Targeted newspaper consulting programs should be expanded and intensified. Experience has clearly shown that Western management expertise in the areas of advertising sales, marketing and promotion, circulation and financial management is directly applicable to Russia and that exposure to these methods brings tangible benefits to Russian newspapers.
  • Programs must be developed to expand the share of the national advertising market enjoyed by regional newspapers. A central advertising representation and the development of a coordinated schedule of thematic supplements (health, computers, travel, etc.) are the most promising places to begin this work.
    • Advertisers and newspaper managers need much more reliable information about newspaper readership and potential readership. Newspapers must be assisted in designing and executing research programs and in using research to market their newspapers to advertisers. Newspaper managers must be assisted in developing concrete strategies for selling newspaper advertising in competition with other media, especially street advertising, national magazines and radio.
  • Methods of increasing the exchange of information among publishers, including especially information about effective marketing initiatives and programs designed to increase reader participation in the community, should be developed.
    • A coordinated legal service for independent newspapers, including media law and business law, should be initiated. Special attention should be given to problems faced by state-controlled newspapers seeking to be privatized.
  • A detailed lobbying agenda for non-state newspapers should be developed and presented to the industry for discussion and, possibly, action. The primary issues that must be addressed are state subsidies to the media and the unfair competition that they cause, state control over newspaper printing presses, access to information and methods of using tax legislation to stimulate advertising in private newspapers.
    • The industry should be monitored carefully in order to assess the impact of the present crisis on subscription revenues. It may be crucial to create emergency mechanisms for infusing working capital into the industry.
  • Programs should be implemented to facilitate discussion of the impact of upcoming elections on the media and the role of independent newspapers in covering the political process. Newspapers should be given the opportunity to create programs that increase public confidence in the processes of democracy and reform.
    • Concentrated efforts must be undertaken to vastly expand access to high-quality newspaper printing throughout the country. Loan funds, guarantee funds, franchising and especially leasing mechanisms should be considered in order to give newspapers the maximum opportunity either to own their own presses or at least to have a choice of where to print.

    6. The Role of the National Press Institute

     
    In line with these recommendations, the National Press Institute is now working with the United States Agency for International Development and a range of other funding and programmatic organizations, including the United States Information Agency, to implement an aggressive program in the country. This program builds on NPI's seven years of experience as a permanent, nationwide, Russian NGO dedicated to developing the emerging independent and professional mass media as a pillar of a stable, democratic civil society in Russia
     
    Begun as a project of New York University in 1992, NPI is now an independent Russian NGO with 45 staff members in six sites throughout Russia (Moscow, Nizhny Novgorod, Novosibirsk, St. Petersburg, Samara, and Yekaterinburg), all but one of whom are Russian nationals. It has organized over 3000 programs in 40 cities across Russia, with an aggregate attendance of over 135,000 journalists, media managers, and other professionals. It applies a unique sectoral strategy based on a comprehensive approach to the economic, political, professional, educational, and legal problems facing the media
     
    In the years since it was established by the NYU Center for War, Peace, and the News Media, the National Press Institute has provided management training and consulting to thousands of newspapers throughout the country, leading directly in some cases to full financial independence from the local authorities. Through training and provision of information it has helped thousands of journalists to improve their reporting on key issues. It has promoted inclusive and broad-based journalism that both promotes a diversity of viewpoints and encourages civil society. It has championed the cause of freedom of information in Russia. It has arranged lasting partnerships between Russian and American newspapers. In these and a host of other ways too numerous to summarize here, NPI has employed its sectoral strategy to promote the development of a stronger, more democratic, and sustainable independent media sector.
     
    In implementing the strategy that has been adumbrated here, NPI will rely on the consummate Russian media professionals who staff the six departments that will continue to be called upon to design and implement the assistance programs that respond to the sectoral crisis:
     
    • The NPI Business Development Service provides consulting, training, professional information, and other services and support to media organizations seeking to attract financing, develop business plans, improve their management, or in other ways improve their financial viability and attract capital. In the coming year, it will mange NPI's programs to create a centralized advertising representation for regional newspapers in Moscow; to launch a legal service to provide assistance on business-law issues; and to expand its management consulting programs, using both American and Russian media management professionals.
  • The NPI School of Media Management and Journalism operates courses on journalism and the newspaper business at all NPI locations, and is becoming Russia's major mid-career training institute for the print media. In the coming year, it will serve hundreds of media professionals with mid-career training to help them manage the aftermath of the crisis through courses in advertising management, newspaper marketing, electoral coverage, legal journalism, and reporting on the economic and political issues involved in the crisis itself.
    • The NPI Center for Cyberjournalism is Russia's premiere institution devoted to providing training and consulting in new technology applications for the media. The Center for Cyberjournalism also organizes the only annual conference in the former Soviet Union devoted to promoting Internet use and Web publishing by journalists and publishers; it also offers a range of other information and consulting services and publications. Its Internet Media Service is becoming a prime delivery vehicle for a spectrum of informational and assistance services and resources, and during the coming year the cyberjournalism program will focus on responding to the post-crisis needs of the media through its educational and training programs and Internet resources.
  • NPI undertakes Special Projects to respond to particular needs or opportunities in the Russian media sector, such as improving coverage of critical nuclear issues and working with journalists to promote the values of tolerance and pluralism necessary for the success of democratic governance in a multi-ethnic and multi-confessional society. NPI's Nuclear Reporting Program has worked since 1992 to promote coverage of nuclear security and safety, arms control, proliferation, and export issues on the part of the Russian media. The efforts of the program will be enhanced during the coming year, during which time NPI will also be inaugurating a series of initiatives devoted to encouraging informed, honest, objective, and sophisticated coverage of the forthcoming parliamentary and presidential election campaigns.
    • The NPI Press Centers organize hundreds of briefings, press conferences, and roundtables every year, featuring a wide range of political leaders, economists, civic leaders, journalists, NGO activists, and a range of other newsmakers and experts. During the coming year it will focus especially on providing information to independent media that can no longer afford to subscribe to non-government information sources; on furnishing information on all aspects of the crisis itself in order to promote complex coverage of the economic and political issues involved; and on providing a forum for candidates, citizen groups, and experts on the issues during the forthcoming campaigns.
  • Finally, the NPI Research Center monitors, studies, and publicizes economic, political, and journalistic issues and trends in the Russian media sector. Over the next year the Research Center will continue to monitor closely the impact of the crisis on the Russian media and will examine the efforts of Russia's media managers to handle its consequences and improve the viability of the regional media sector.
    •  
    As NPI continues to monitor developments in the media sector and in Russian society at large, it is natural that its sectoral analysis and programmatic responses will constantly evolve in response to changing circumstances and the new problems and opportunities they reveal.
     
    Meanwhile, the National Press Institute has crafted its complex of responses to the post-August crisis in Russia with the goal of using limited resources in a way that will have nationwide impact on the key problems facing independent newspapers and Russia's emerging civil society. Nonetheless, it is necessary to keep in mind the tremendous scale of the challenges presented by the crisis. Now is frankly not the moment for pilot projects, under-funded half-measures or programs that do not go to the heart of the issues confronting the media. The present crisis compels us to be bold and imaginative in our thinking and energetic in our response.
     
    The formation of an open civil society in Russia with the informed participation of average citizens, the creation of a stable and productive democratic process and true national economic development based on free markets depend in no small measure on ensuring that citizens and consumers are served by viable, responsible and independent press. The National Press Institute is proud to be playing an essential role in this very important work.
     
     
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