“In Russia, the internet – as an ad medium – under-performs and over-promises; that’s a good thing,” says Vasily Gatov, vice president of the Russian Publisher's Guild and owner/publisher of "625 Publishers."
The year 2009 hit the media industry in Russia particularly hard. Was there a significant rebound in advertising expenditure in 2010?
The year 2010 was better than predicted for printed media, but the distribution of the rebound was very unequal. Leaders got it all (sometimes far exceeding their real share and market penetration), while many publishers continue to confront a decline in ad revenues and circulation. That applies to both the newspaper segment (average rebound 20%, after a 41% decline in 2009), and magazines (5% rebound after a 46% drop). Again in view of the depth of the plunge, this recovery looks pretty pale.
Also, beyond the AKAR (Russian Advertising Market Monitor) estimates, the figures do not include the "crisis discount" that is still demanded (if not to say demanded by way of blackmail) by most advertisers and not reflected in rate cards. My personal experience is that the "crisis discounts" exacted by global brands from Russian media remain at 40% below the lowest possible rate card, making the rebound truly insignificant.
Do you expect some growth or stability for next year?
So far, most publishers expect 2011 to be "softer" in terms of advertising revenues. Advertisers and agencies have more or less stabilized their spending and achieved a new media mix. So advertising is not as profitable for printed media as it used to be, but publishers still manage to avoid red ink in the bottom line. There is no sustainable positive trend in circulation and audience (both parameters are sliding down, but not steeply). The only good thing for print publishers is that the internet – as an ad medium –under-performs and over-promises.
Are some publishing groups in a better position?
As I said, leaders in segments are usually doing much better than anyone else, even the second tier. Kommersant in the daily market, AiF in weeklies, Hachette Filipacchi Shkulev in TV guides, Independent Media/Sanoma Magazines in glossy magazines, and Burda in low-end magazines have been reporting strong growth in ad revenues since March 2010 and good copy sales (good enough that they don’t need to be shy). Others haven't yet gained much above the very very limited diet of 2009.
In most parts of the world, production costs are increasing because of higher prices for newsprint. What is the situation in Russia?
Both newsprint and coated paper have become more expensive in Russia since May. Newsprint producers already have upped the price by 10% to the crisis level, and the paper industry forecaster RAO Rosbumprom says there will be an increase of at least 15% in 2011.
One of the big events in 2010 was the deployment of 3G in Russia. Have media companies take advantage of that opportunity?
The deployment of 3G boosted mobile internet usage a lot. We have seen increases of at least 18% in internet audiences in 2010. But publishing companies have not made much use of it.
What is the situation with the applications market for the smartphone and the iPad – is it taking off in your market also? Do you think it's going to be a hit in your country as well?
The iPad is hype, applications are hype. Many Russian publishers already have either produced apps or at least commissioned them. Very few use the paid model; most apps are free and considered a service. Russia accounts for some 200,000 iPads imported before the official launch on the domestic market, and it sells at the rate of 6,000-7,000 a week. Christmas/New Year will add even more. So it is already a hit.