Business in Russia Vis-a-Vis the Russian Media

In most advanced countries, businesses can normally expect that the media will,

1. Serve as trustworthy advertising vehicles.

2. Expose advertising messages to prospective buyers.

3. Contribute to democratic and economic stability by enabling an informed electorate.

But businesses operating in Russia today — both domestic and foreign — can reap none of these benefits.

A recent national survey found that only ten percent of respondents say that they trust the national and regional press. Moreover, 76 percent hold the media in such contempt that they feel there should be censorship of the mass media.

A typical media outlet has an audience composed largely of non-buyers because the consumer base is not being targeted — and because of a paucity of disposable income. There is potential relief for both these problems, however.

And, finally, the content of most media outlets is replete with disinformation that is demanded by media owners or paid for by private, political, and governmental sponsors. It consists of paid stories masquerading as news. Euphemistically, this practice is known as “hidden advertising.”

How Did This Happen?

During the Yeltsin administration, laws were enacted that made it virtually impossible for media companies to operate profitably within the law. They discouraged the growth of a supportive advertising market by disalloweing advertising as a legitimate business deduction. They also restricted the amount of media ad content. In adapting to that circumstance, media companies began to accept payments from politicians and oligarchs who put funds into the money-losing ventures in return for an opportunity to color the news. Over time, many of these sponsors gained ownership or control of the media companies.

What Are the Consequences?

The primary interest of owners and subsidizers is in influencing voters, not buyers. Thus media audiences are aggregated accordingly. But, most studies indicate that, outside of Moscow and St. Petersburg, only 20 to 25 percent of Russians have disposable income. That results in most advertising rubles being spent on exposure to those without an ability to buy. The media are standing in the way of advertisers reaching their target audiences. What’s more, news media content is infuriating consumers. It is sponsor-oriented, not consumer-oriented. Much of the content is irrelevant to their interests and their lives. The “hidden advertising” can be recognized readily by consumers. This leads to distrust and to calls for censorship to end the nonsense.

Can’t Anything Be Done About This?

The Russian Media Fund is working to normalize Russia’s media sector. It is a project backed by the International Center for Journalists, the Russian Media Research Center Sreda, and media business consultant William Dunkerley. RMF requested and received a formal invitation from the Putin administration to offer advice on reforming the media sector. Since then, it has successfully advocated for changing the media regulatory structure. As a result, businesses’ advertising expenditures have become fully tax deductible and newspapers are no longer limited to 40 percent ad content. Now it is possible for a media company to operate successfully without a need for corrupted revenues.

Does That Mean Things Are Changing?

No, it does not. Media companies are not abandoning their coercive sources of support. Appeals to reason or principle have not been efficacious. Even well constructed training programs have had negligible results in this regard. Participants understand the model of a market-responsive media enterprise. But for them it is an abstraction and switching to it is a risk. They are unwilling to take the leap of faith needed for change.

Creating an Imperative to Change

The RMF strategy now is to replace the sources of corrupt funding with legitimate sources of revenue. It will create an imperative for media companies to overcome their risk-aversive behavior and change their ways of doing business. It will require that they become consumer-responsive businesses.

How Can That Be Done?

RMF has plans for a dynamic and sustained public-service advertising program to take this latent consumer discontent and heat it up so it will boil over. As a result, paid-for stories will become socially unacceptable and the subject of overt public scorn. When the placement of hidden advertising is met with public ridicule, sponsors will be disinclined to continue it. Finally, a concrete and powerful impetus for change will exist.

Would Media Outlets Cooperate?

Wouldn’t media companies resist cooperating with this scheme? After all, it will result in the diminution of revenue from hidden advertising and would hold them up to ridicule. The RMF plan includes three features to overcome that problem. The first is the involvement of the Putin administration, which, despite some signs to the contrary, has taken a position against corrupted funding and on behalf of strengthening financial independence in the media. Initial discussions regarding RMF have been positively received. By enlisting public-service advertising issued by the Kremlin, many media owners in today’s climate are likely to cooperate. Secondly, RMF will offer media companies and advertisers alike, extensive support aimed at helping them to make the paradigm shift. It will be in the form of a comprehensive educational and coaching program. Thirdly, self-incrimination will be reduced for media companies willing to get behind the campaign and take pride in new ways of doing business.

The educational initiative will show advertisers how they can use legitimate, display advertising as a better way of achieving their marketing objectives than hidden advertising. And it will provide media companies with the necessary plans, strategies, training, and coaching for them to become successful as consumer-responsive companies.

Will Others Oppose This Plan?

Virtually anyone vested in the current corrupted and coercive system will perceive the RMF plan as a threat. That includes not only the sponsors and initiators of hidden advertising, but also those who create, sell, and broker the propaganda. Clearly, within their worlds, this plan is impractical and undesirable.

Overcoming that will require a significant block of advertisers and the Putin administration to unite in supporting the RMF initiative.

Inertia is on the side of things staying the same. Collaborative action is now needed to upset the status quo and bring about change.

What Will Be the End Result?

At the successful completion of this project, what benefits will accrue to companies doing business in Russia?

1. They will have trustworthy advertising vehicles available to them. This will greatly increase the effectiveness of their advertising.

2. They will be able to expose their advertising messages to buyers in a targeted way. Enormous efficiency in marketing will be gained through this.

3. They will have assurance of the kind of domestic political and economic stability that is promoted by an effective Fourth Estate.

For More Information...

Read Democracy in Russia Vis-a-Vis the Russian Media for more details on the Russian Media Fund project.