Russia: The media and the mob

Editorial independence still carries too high a price for many publishers in Russia, Maria Esposito writes.

Publishing a rich list doesn't usually come with a death warrant attached, but that seems to have been the case for the US-born journalist Paul Klebnikov.

Less than two months after compiling the first authoritative rundown of Russia's super-wealthy, Klebnikov, the editor of the business title Forbes Russia, was gunned down by contract killers outside his Moscow office in May 2004. Last month, the Russian authorities failed to pin a guilty verdict on the main suspects - two Chechens working for a notorious warlord offended by Klebnikov's writing. With a question-mark still hanging over the identity of his killers, Klebnikov is widely believed to have been a victim of political terrorism.

"If a magazine or newspaper is linked to political and strategic economic issues, then Russia is an ideologically difficult place to be," one media player who refused to be named says. "We can't report on these issues.

Russia leaves a lot of freedom for consumer content but our group doesn't have any daily newspapers. It would not be possible to have a strong editorial product, because you would not be able to report on everything."

The clearest example of this media clampdown is the 300 million-rouble (more than £6 million) fine slapped on the leading business daily, Kommersant.

After reporting that customers were flocking to withdraw money from Alfa-Bank during the 2004 banking crisis, Kommersant was forced to pay damages for allegedly damaging the financial market and causing the bank's customers to panic. "It's a sign that it's dangerous to go too far," the same source says. "It was damaging the image of that bank, which is closely linked to the government."

One title that seemed likely to feel the heat after Klebnikov's death and the Kommersant ruling is Newsweek, which shares an office with Forbes in Moscow. Surprisingly, the fallout from both incidents has been minimal.

"We haven't had any problems, given that we're running an independent news magazine," the magazine's publisher, Rhona Murphy, says. "We didn't expect any problems, but after Forbes we were a bit nervous. They have maybe taken a view that they can't do anything about us. Maybe because it's Newsweek and it's not a Russian brand, they don't even try."

For international consumer titles, the situation is less dangerous but still fraught. "There were some visitations and threats that didn't matter," George J Green, the president of Hearst Magazines International, which publishes Cosmopolitan, Good Housekeeping and Harper's Bazaar in Russia, says. "It was just a little different but it wasn't off-putting. We've never had a government person influence what we put into the magazines."

The biggest problems for new entrants to the Russian media market are, in Green's view, largely self-inflicted. "It's about British, German and French people trying to be British, German and French in a market full of Russians," he says. "You get the right approvals and have Russian people working there, so it's a Russian business. We want the Russians to interpret our brands in a Russian way. If you get over that hurdle, which most can't, then you'll be successful."

The other main stumbling block for publishers is often scale. "If you have a tertiary or insignificant brand, then welcome to the real world," Green says. "You had better take something that has size." Scale is a key factor in assuring distribution across a country of 140 million people. "It is very difficult to be an independent publisher and distribute all over Russia," an unnamed source says. "A publisher today has to have 70 distribution agreements. Book publishers can have up to 120. In other countries, it might be between one and five agreements."

This complex system is a hangover from the old Communist days. "The distribution system for goods is not developed and press distribution is like the distribution of all other goods," Svetlana Shupe, the chief executive of ZenithOptimedia Russia, says. "It's mainly wholesale, not retail, and most advertisers are not sure where their goods are going to end up. You can't organise an outdoor campaign and reach the whole country."

Outside of the main cities, media agencies also come up against other problems. "Going further into the regions, you get less transparency, such as double pricing or a separate price list for local advertisers, but the main sales houses have a pretty transparent system," Vladimir Rass, the chief executive of MindShare Russia, says.

There is also a question-mark hanging over the enormous inflation hikes inflicted on the advertising market each year. "We have 20-30 per cent inflation each year," Shupe says. "When you go to media sellers and ask where the inflation comes from, the fact that the market is not transparent and no-one is obliged to publish data means you get the answer that the market is just increasing and it is very difficult to prove if it is or not. You have to do forecasts based on big clients, and then there is a margin of error of 5 per cent."

While experienced local staff can help international media traders tackle these opaque business practices, there is one conceptual problem only time will solve. "The main problem for media agencies is one of culture," Kerry Tarrant, the regional sales manager for Europe, the Middle East and Africa at CNBC, says. "The ad industry is only 15 years old. Russians are able to believe in product advertising. The problem is getting them to understand intangible ads such as corporate advertising or image campaigns."

The ad market, which was worth around £2.7 billion last year, may be playing catch-up, but attitudes to impartial political reporting are not progressing as quickly. "The situation is much better than it was ten years ago, when it was possible to have bigger consequences for much smaller things," Shupe says. "But it's still far from a Western understanding of democracy and free speech."