|
|
| |||
|
|
Summary: In order to begin assessing the impact of the present crisis in Russia on privately owned regional newspapers, the National Press Institute (NPI) conducted an informal survey of regional newspaper publishers. The results demonstrate clearly the vulnerability of regional newspapers to such financial shocks and, hence, their general inability to properly inform Russian society during times of crisis. As soon as the crisis broke, newspapers went into crisis mode, immediately laying off staff, reducing frequency and volume, canceling subscriptions to outside news sources, etc. The survey also demonstrates clearly the intimate connection between private newspapers in Russia and the development of local small business. The ultimate effects of this crisis undoubtedly depend on its duration and on measures taken by national and local governments. However, it is clear that the landscape of the regional media has changed for the worse. Plans for capital improvements and investment have been wiped out. Newspaper managers have begun learning the dangerous lesson that dependence on advertising revenue can be less reliable than dependence on political patronage. Brief Description of the Study: Between September 2 and September 9, 1998, the National Press Institute conducted an informal survey of private regional newspapers across Russia to determine the immediate impact of the present economic and political turmoil in the country. The written survey was supported by further research by all of NPI's regional centers and by the Business Development Service. This report briefly summarizes the results and offers some preliminary conclusions on the effects of the crisis and what should be done to further bolster Russia's non-state regional press. NPI plans to issue additional periodic reports on the state of private newspapers in Russia as developments warrant. Brief Description of the Non-State Regional Press Before the Crisis: Even before the present crisis, privately owned newspapers in Russia faced an unenviable situation. Some key features of the Russian regional media are:
Brief Description of the Crisis: The present crisis in Russia has three components. First, there has been a general devaluation of the ruble from a rate of about 6 to the dollar at the end of August, to a peak of about 28 to the dollar during the period in which the survey was conducted, to a level of about 12 to the dollar at the time this report was written. The uncertainty about the exchange rate had dramatic consequences on the Russian economy as a whole, since it remains heavily dependent on imported consumer goods. The collapse of the ruble set off panic buying of basic goods throughout the regions, emptying store shelves. Importers suspended business and many stores insured themselves by raising prices even more than the exchange fluctuations would justify. The general economic crisis was further exacerbated by a partial collapse of the banking system. The Russian government's decision to stop payments on government bonds and debt instantly made a number of leading banks insolvent. Commercial transactions were all but halted and individual depositors were unable to withdraw their funds. The suspension of SBS-Agro Bank, which has been very active in the regions over the last couple of years, has been especially acutely felt. Finally, the dismissal of Prime Minister Sergei Kirienko and the attempt to replace him with former Prime Minister Viktor Chernomyrdin led to a tense standoff between President Yeltsin and the State Duma. This standoff meant that the government was paralyzed and unable to respond effectively to the economic crisis. The confirmation of Yevgeny Primakov as prime minister on September 11 gives hope that further political crisis, at least, has been averted, although the Communist Party continues to plan for mass protests on October 7 and several other Duma factions have already announced their opposition to the new government.
Effects of the Crisis on the Regional Press Effects on Revenues: Most regional newspapers in Russia continue to receive most of their revenues from subscriptions and single-copy sales. The most dramatic effect of the crisis was to devalue the rubles that had been received for subscriptions for the period from July-December. Most newspapers responded by purchasing as much newsprint as possible, which may have contributed to the price increase of newsprint. The few newspapers that had been trying to save money in order to make capital improvements saw these efforts erased. Surprisingly, none of the newspapers responding reported significant increases in single-copy sales, even though one would expect that more citizens would be interested in getting news about the crisis. Although the Russian distribution system makes it difficult to say for certain what the effect has been (because distributors file reports only monthly), the general sense is that retail sales have remained steady or fallen slightly. The subscription campaign for the first half of 1999 began in most cities in August. Although no specific information is available yet, most respondents anticipated that the crisis would negatively impact subscriptions for this period. Since the campaign is already underway and subscription prices have already been announced, newspapers are reluctant to announce increases, although maintaining the old prices will be virtually impossible. The effects of the crisis on local newspaper advertising markets have been dramatic. Many advertising contracts already signed for September and October have been cancelled. Overall advertising has been reduced by 30 to 50 percent. Payments for advertising run in August have been lost or delayed due to the banking crisis. Many retailers have cancelled advertising simply because the rush to purchase goods has made advertising unnecessary. In Nizhny Novgorod, the business-oriented newspaper Birzha (The Market), which has long been known as one of Russia's most successful advertising-supported newspapers, reported an immediate reduction in revenues of at least 30 percent. Effects on Costs: Almost all of the newspapers responding to the survey reported immediate and dramatic increases in their basic production costs, although these increases were different in different parts of the country. Papers in St. Petersburg reported that the cost of newsprint rose 15-20 percent, while in Vyatka and Nizhny Novgorod prices roughly doubled. The cost of printing at state-controlled printing presses also rose from 15-30 percent in most locations. All newspapers reported that they either anticipate further increases or have already been notified that such increases are coming. It is likely that price levels will even out across the country over time. There is some evidence that the price increases hit different papers differently even within a single city. In the Urals city of Chelyabinsk, for instance, the daily Vecherny Chelyabinsk (Evening Chelyabinsk) reported that the cost of printing had risen 33 percent, while its cross-town competitor Chelyabinsky Rabochy (Chelyabinsk Worker) reporterd no increase at the same printer. It is likely that price levels will even out across the country over time. Only two of the newspapers surveyed, Gorodskie Vesti (City News) in Volgograd and Stavropolskie Gubernskie Vedomosti (Stavropol Regional News) own their own printing presses. Both reported that the cost of imported plates, film and ink had been raised but that they were still printing from old stocks. Stavropol Regional News reported that they had actually signed on new printing clients because of price increases at the competing state press. How Newspapers Have Responded: The financial condition of Russian newspapers was so weak even before the crisis that they were forced to take immediate and drastic steps as soon as events began unfolding. No newspaper reported having sufficient cash reserves to allow it to continue functioning normally even through the first week of the crisis. Even Moscow-based publications and those owned by the foreign company Independent Media (Moscow Times and St. Petersburg Times) have resorted to Draconian measures in response to the crisis. For the most part, newspapers have reacted mechanically and defensively. Immediate steps were taken to reduce costs. One newspaper in Novosibirsk reported that it had suspended publication. Others sent the majority of their staff home on unpaid leave. Many newspapers, even some of the nation's most prestigious regional papers such as Chelyabinsk Worker and Uralsky Rabochy (Urals Worker) in Yekaterinburg, reported reduced frequency and/or volume. In short, at the very time when Russians most sorely need information from non-government sources, regional newspapers have been providing steadily less . Many newspapers report attempts to cut costs by cancelling subscriptions to national news services and access to the Internet and electronic mail. These actions also undoubtedly increase the isolation of regional newspapers and reduce the effectiveness of their coverage of the crisis. The number of regional newspapers with online editions will no doubt soon decrease, reducing the availability of information from the regions and the exchange of information among them. Most newspapers report efforts to spend all available cash by purchasing as much newsprint as possible. Proactive Responses: Very few newspapers have done anything proactive in order to minimize the impact of the crisis. A business-oriented newspaper in St. Petersburg has used its regular system of city-wide posters to advertise the slogan ìAn Anti-Crisis Packet in Every Issue of Delovoi Peterburg.î The effects of this campaign on single-copy sales are not yet clear. The English-language St. Petersburg Times is offering advertisers a 50 percent discount for advertisements which ìexpress confidence about the future.î Playing to advertisers' vanity, the paper headlines the offer: ìA special offer for companies wanting to confirm that they're standing firmly on their feet!î The paper is also publishing house advertisements with quotations from experts in advertising about the need to continue advertising even during times of economic difficulty. Other newspapers report that they are attempting to reduce advertiser anxiety about the exchange rate by offering guaranteed rates for advertisements in October and even November. Undoubtedly, as the initial crisis passes and immediate measures are taken, more newspapers will no doubt begin acting along these lines. An Unusual Case: Stavropolskie Gubernskie Vedomosti (Stavropol Regional News) filed an extremely uncharacteristic report. This paper was the only respondent which, in addition to publishing a newspaper, also owns a commercial retail store. Because of the prevalence of barter advertising in Stavropol, this newspaper opened a small store in 1995 which is wholly owned by the newspaper and which sells a wide range of items acquired by barter for advertising space. Over the last couple of years, this store has developed into a significant profit center for the company and has given the paper greater flexibility in accepting barter advertising. Since the present crisis broke, the store has reported a dramatic increase in sales as a result of hoarding. Moreover, a significant number of advertising clients that might have cancelled payment for advertisements run in August offered instead to pay by barter, meaning that this revenue was not lost as it was for other papers responding to the survey. Finally, because advertisers know this paper's friendly attitude toward barter advertising, contracts for September and October have been largely continued so far. Stavropol Regional News reports far fewer cancellations of contracts than other regional papers. Banking Crisis and Political Crisis: None of the newspapers responding reported direct negative consequences either as a result of the collapse of the banking system or as a result of the standoff between Yeltsin and the Duma. Although many newspapers reported delayed payments from advertisers with accounts in frozen banks, none of the papers themselves seem to have lost access to their accounts. Because of previous crises in the regional banking systems, local publishers have learned which banks are the most reliable. Most papers report that local political authorities have also been paralyzed and slow to react to the crisis generally. There have been no reported attempts to influence coverage or gain influence over the financially weakened newspapers. The newspaper Zolotoi Rog (The Golden Horn) in Vladivostok reports that, as a result of the crisis, the commercial company that owns shares of the paper may be forced to sell. The paper's publisher fears that the local administration may be the only organization in a position to purchase the shares. As one indicator of things to come, the report of Vyatsky Nabludatel (The Vyatka Observer) in Kirov may be instructive. On September 1, the publisher of this paper received a telephone call from the director of the press office of the mayor's office. He was asked to come to the mayor's office to discuss coverage of local efforts to handle the unfolding crisis ìin order to avoid unnecessarily worrying the public.î The publisher declined the invitation and nothing more has come of it to date. Measures to Be Taken: All respondents agree that the crisis is systemic and that no easy solutions are to be found. Newspapers that receive large portions of their revenue from advertising are particularly vulnerable and point to Russian government tax policies that hamper the development of local small business and local small manufacturing. However, a number of concrete steps were suggested: Renew the Law on Support for the Mass Media: The current law granting tax exemptions to the mass media is set to expire at the end of the year and there is considerable fear that it will not be extended. Every single respondent to the survey indicated that securing the extension of these exemptions is the most important thing that can be done to support them at present. Specifically, this law exempts the mass media from the 20 percent VAT, as well as a variety of other taxes and duties. If they are discontinued, for instance, the cost of newsprint and printing will automatically increase a further 20 percent. Publishers note that the chances of continuing these exemptions are reduced as pressure on the Russian government to quickly increase tax revenues increases. Any lobbying effort on this issue must convince lawmakers that supporting the regional press will stimulate local economies and ultimately increase tax revenues. Increase Access to Information: Although many papers are reducing their access to outside information, most publishers feel an increased need for contact beyond their regions in order to learn more about the crisis and about its effects on other newspapers. They request assistance in securing access to news services at reduced cost. They request that the price of newsprint be regularly monitored and reported. They suggest that ideas for responding to the crisis be monitored and distributed. They support the idea of a national conference of non-state newspaper publishers and many indicate renewed interest in a national publishers' association. Increase Access to Moscow-Based Advertising Revenues: Although the crisis has resulted in a serious decline in advertising around the country, regional publishers note that their interests are poorly represented and lobbied among national advertisers and advertising agencies in Moscow. They note that 75 percent of all advertising spending in Russia is determined in Moscow and urge the development of mechanisms to increase regional newspapers' share in that spending. NPI's Efforts: The National Press Institute and the organizations with which it works are developing a number of initiatives in response to this crisis and the information received during this survey. Together with the Moscow Media Law and Policy Institute, NPI is developing a plan for lobbying the Duma and the Russian government to continue tax exemptions for the mass media, especially private regional newspapers. This campaign will no doubt continue for the rest of 1998 and will involve publishers lobbying at the local level as well as a concentrated effort to reach decision-makers in Moscow. The National Press Institute is investigating ways of providing regional newspapers with access to national news services at a reduced cost for the duration of the crisis. This would vastly improve the ability of regional newspapers to report on the national dimensions of the crisis, as well as to understand local events in context. The National Press Institute is proceeding with planning for its National Newspaper Management Conference, to be held in Moscow November 11-13. This is the premiere national gathering of non-state publishers and it is particularly important that this event proceed as scheduled despite the crisis. The National Press Institute is developing its ability to provide crucial management information to newspaper publishers. A system of monitoring newsprint prices is being developed. Contact with publishers through electronic mail, fax, and telephone is being increased and proactive responses to the crisis are being broadly disseminated. Together with regional publishers, the National Press Institute is developing initiatives designed to increase both local and national advertising revenues. The National Press Institute, recognizing that this crisis is a profound event that will have a long-term impact on the regional media, will continue to monitor the situation and report in detail the effects of the crisis and the effectiveness of measures taken to weather it. These reports will also investigate the differences between the ways the crisis has affected state-sponsored and private newspapers. Prognoses: It is clear that the present crisis represents a long-term setback for privately owned newspapers in Russia. Just how grave a setback certainly depends on how long the crisis lasts and what measures are taken to manage it. If the new government responds by implementing inflationary measures, limiting convertibility of the ruble or nationalizing sectors of the economy, the threat to Russia's private newspapers would be great. If, on the other hand, the government undertakes to stimulate local economic development (by providing tax incentives to advertise in local newspapers, for instance) and to eliminate subsidies to state-controlled media organs, the ultimate effects of the crisis could actually be positive in that measure. It is certainly quite possible that the crisis will lead to efforts on the national and local levels to increase state control over the media. Many publishers themselves are responding to the crisis with calls for extending subsidies. Some fear that state agencies will take over as commercial sponsors seek to divest themselves of media properties. In this regard, the situation will differ dramatically from region to region. The crisis will also most likely force many publications to close down. Since Russia presently has far too many newspapers for the size of its market, this is not necessarily undesirable. However, it is clear that private and locally owned newspapers will be the first to close: state-controlled mouthpieces will no doubt remain and the negative consequences for the development of civil society are clear. The crisis has demonstrated most definitely the links between Russia's most reliable and responsible local newspapers and the fate of local small business. Publishers were only just beginning to trust the idea that newspapers can and should be supported largely by advertising revenues. One likely effect of the crisis will be to undermine this crucial psychological breakthrough. Publishers who were only just beginning to spend more time with local Chambers of Commerce than in the smoke-filled rooms of the local mayor's office will be tempted to return to tried and true methods. The crisis has demonstrated the financial vulnerability of the regional press. If the Russian government undertakes to squeeze tax revenues out of local small business, the consequences will be extremely dire for the media. In very short order, the result will be the end of local economic diversification, the end of small-scale industrial production in the regions and increased economic and political dependency on Moscow. With it, Russia's newborn independent press will collapse. As Herbert Hoover said in 1928, "Free speech does not live many hours after free industry and free commerce die." Click here for NPI
Return to Global Beat Home Page Nuclear Watch | Balkan Conflicts | East Asian Security | EU Integration & Enlargement | Middle East | NATO Expansion | Nuclear Weapons and Proliferation | South Asian Security | U.S. Defense Policy | Publications | Events | Experts Directory | Links Directory |
|
