Russian Media Model: New Economic Structures

1
Russian Media ModelNew Economic Structures

• Professor Elena Vartanova
• Faculty of Journalism
• Moscow State University/
• Aleksander Institute, Helsinki University

2
Lecture 3. Evolution of Media Market

• Nature of economic changes
• Progress of advertising industry
• New consumers

3
Media in Russia How to Assess?

• Change? - Yes
• Transformation? - Yes
• Evolution?

4
Russian Economy afterthe Soviet Union

• Basic changes
• privatization,
• liberalization of economy,
• rise of resource-based economy,
• stagnation in industrial production,
• growing poverty,
• decline in system of social security system,
  health care and education system

• Recent trends
• Economic growth based on oil export
• Rise of telecommunication industry,
• Rapid growth of the Internet 14 of population
  (2005)
• Boom in mobile telephony estimates between 54 -
  83 (2005

5
Economics of the Soviet Media

• Combined state - party ownership
• Planned financing through redistribution of the
  Communist party and state money
• Top-down subordination of media outlets
• Surveillance and coordination of information
  flows
• Heavy investments into some sectors of
  infrastructure (post, TV terrestrial network,
  satellite communications)
• No attention to audience needs
• Immature advertising

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Major Factors of Change in Russian Media
Economy

• Disappearance of plan(partial withdraw of the
  state), introduction of private ownership
  (privatization) and free market relations (does
  journalism sell?)
• Lack of industry resources for strategic
  investments into infrastructure and therefore
  dependence upon resource oligarchs
• Digital revolution uneven pressures from the
  global

7
Economic History of Russian Media Industry

• Privatization (1991-1996) emergence of
  integrated political-business elite
  privatization of media by journalists TV as a
  political party financed by loyal oligarchs
  illegal mechanisms to ensure manipulative use of
  mass media (corruption, bribery, concealed
  advertising)
• Oligarchization (1996-2000) structurization and
  redistribution of ownership among loyal business
  elite (NTV case) growth of media-industrial
  conglomerates with low interest to media as
  business rise and fall of advertising industry
  (1998)
• De-Oligarchization/Etatization (since 2000)
  withdraw of oligarchs from media industry
  professionalization of media management
  consolidation of financial resources (growth of
  advertising) cross-media concentration (Gazprom
  media, Prof-media)

8
Russian Media Industry Post-Industrial Realities

• Multiplication of channels consequences of being
  private and digital
• Need for profits as a result of
  commercialization of content concepts
  (tabloidization, infotainment tainments)
• Emergence of leisure industries in which media
  holds the central role
• New actors that were silent in times of planned
  Soviet media economy play a role advertising,
  technology, audiences

9
Advertising in Russian Media
10
Structure of Russian Advertising Market in 2005
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Dreaming with BRIC

• Brazil(11), Russia(7), India (6), China (8) the
  highest growth of advertising markets
• Rapid development of national economies and GDP
• Rapidly growing consumer sector more positive
  attitude to advertising by audience

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Advertising Expenditure in GDP, (2004)

• China 1,57
• USA 1,37
• UK 0,98
• Japan 0,85
• Brazil 0,76
• Germany 0,74
• Russia 0,73
• Italy 0,62
• France 0,6
• India 0,42 ZenithOptimedia

13
Consumers Profile in Russia

• Low spending to media and communication - about
  1,4 of family budgets
• 2000-2005 growth of consumer spending 257,
  annual inflation rate - not more than 20
• Core spending - food, housing, drinkstobacco
• Growth of spending for drugs, transportation,
  entertainment

14
Advertising / Media Relations Russian Case

• Restriction for advertising in print media 40
  (Russian Mass Media Law)
• Strong presence of the state at the TV sector
  the state broadcaster VGTRK got 300 mln. in
  2004 as state subsidies (82,5 of all state money
  invested in the media sector)
• Oligopoly at the national TV advertising market
  Video International and NTV-Media hold
  dominant position an selling advertising at the
  national level

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Predictions?

• Predictions still impossible media market is not
  self-sufficient
• Integration of Russia into WTO will change
  economic structures of Russian mass media
• Globalization will minimize peculiarities of
  Russian media market