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Russia: Financial Crisis Hits Mass Media

By Floriana Fossato and Matthew Frost

Moscow/Prague, 16 October 1998 (RFE/RL) -- The Russian financial crisis has affected the country's mass media in various ways, most of them negative.

A dramatic fall-off in advertising revenue, estimated to be at least 50 percent, has severely affected the ability of the electronic and print media to continue operations at the same level as in pre-crisis days.

Some newspapers have folded while others, together with radio and television outlets, have severely reduced their output or original programming. Many media employees have been forced to accept deep cuts in take-home pay or to take what is called "indefinite unpaid leave."

The difficult situation has been compounded by a sharp rise in printing and production costs, a deterioration in the newspaper distribution system, and reduced access to any cash reserves held in Russian bank accounts.

Igor Yakovenko of the Union of Journalists also notes that up to two-thirds of media subscription receipts were invested in state treasury bills (known as GKOs). The high rates of interest offered by the government on these bills made them an attractive investment for newspaper holdings with cash reserves. Unfortunately, the government all but defaulted on the treasury bills on August 17.

But there may be some positive effects of the crisis as well. Oleg Dobrodeyev, General Director of NTV -- Russia's main commercial television station -- says that the current financial squeeze will force TV networks to produce cheap but quality programming in order to survive. With the dramatic fall in the value of the ruble -- from just over six rubles a dollar in July to the current 15 rubles a dollar -- networks can no longer afford to purchase expensive series from abroad.

Because foreign producers often demand pre-payments for their programs, the paralysis of the banking service has created enormous difficulties even for the larger, more prosperous networks. But whether this state of affairs stimulates greater domestic production of programming across the board remains to be seen.

The financial crisis has also led to economies being imposed in many media operations, especially in the provinces. The cut-backs include reducing subscriptions to wire services and other information sources, which have deprived many domestic media of adequate information sources, a cause for concern in today's Russia.

A recent report issued by Russia's independent National Press Institute (NPI) paints a gloomy picture of how the regional media are coping with reductions in advertising revenues. The report notes that at a time when Russians sorely need information from non-government sources, regional newspapers have generally been forced to reduce output in order to save on costs.

One exception to the rule, the report notes, is the newspaper Stavropolskie Gubernskiye Vedomosti (Stavropol Regional News). Since 1995, this south-Russian daily has run a commercial retail store selling a wide range of consumer items acquired by barter for advertising space. Not only did the store increase its profits during a hoarding frenzy prompted by the financial crisis, but advertising revenue in the form of barter goods has not decreased since.

Anatoly Novikov, of the TV company Volga based in Nizhny Novgorod, provides a more typical scenario in listing the measures his TV and radio conglomerate have taken in the face of the crisis. Novikov told RFE/RL this week that some of his staff has temporarily been placed on reduced salaries and that programming hours have been cut. He said that while he considered what he called a "purge" of the print media a positive development --there are over 400 registered publications in the Nizhny Novgorod area-- the constraints placed on the electronic media by necessary cost-cutting measures were immense.

Novikov also cited the burden imposed on employers of paying employees' social contributions --around 40 percent of gross pay-- as a major factor in cutting back salaries across the board. Russia's mass media currently enjoys some tax exemptions, but not in payroll taxes. And the NPI report notes that the current law granting tax exemptions to media is due to expire at the end of the year.

Today, mass media are exempt from the government's 20 percent value-added tax as well as from a variety of other taxes and duties. If these exemptions are ended, then the cost of newsprint and printing will automatically increase over and above the extra costs recently incurred due to the fall of the ruble.

NPI concludes that the crisis will likely force many regional publications to close down. Moreover, most likely it will be the private and locally owned media outlets that will be the first to close, with the balance of power shifting to state-controlled publications.

( The report issued by Russia's National Press Institute is available on the Internet at: NPI is a non-profit organization dedicated to developing emerging independent mass media.)