Assistant editor Ekaterina Larina spoke to Russia Journal publisher and CEO of Norasco Publishing Ajay Goyal during his recent visit to Moscow on Russian print media, The Russia Journal and the future of foreign investments in Russian media.

Ekaterina Larina: We all talk of a highly educated country and thus a great market for publications. There are more than 15,000 publications in Moscow alone. What is holding back foreign investment in the media sector?

Ajay Goyal: Like in all other sectors, lack of infrastructure. The media is a monopolized and disorganized sector of the economy that provides opportunities for high profits to a select few, while depriving consumers and entrepreneurs alike of the wider benefits of the market. It's an underdeveloped market that suffers from lack of printing facilities, distribution, a banking system, over-regulation of small- and medium-sized businesses, lack of managerial talent and general lack of a business culture in this sector. Moreover, newspapers have always been seen, pre- and post- perestroika, as propaganda tools. Most Russian entrepreneurs think that only yellow journalism can be profitable. Others think they should push only their own agenda. It hasn't occurred to people to look at it as a good business.

EL. So why did Norasco take the risk?

AG. We studied the market carefully and for a long time. We have entered a niche area. Russia - one of the most important countries in the world, which owes the rest of the world $140 billion, and has annual trade of over $130 billion - does not have a single business newspaper for the international community, in and outside Russia. People read about Russia only when there are scandals or sensational events. Russia needs to be reported objectively. And there is much more to report besides scandals. In many ways, it is no different from any other country in transition. There is a market for a paper like this. We have seen that in the last six months with 1 million readers on our web site and a good response to our print edition. It speaks of interest in Russia. Now it is up to us to capitalize on it.

EL. So what are the challenges for RJ?

AG. Immense. Trade, wholesale and retail, does not want to touch a foreign-language product. There is no home delivery of newspapers. I remember that we used to get constipated without the morning paper in India. I took to coffee in Russia as an alternative ... Then there is an English-language monopoly paper and that keeps any other publication from entering the market. One has to practically re-invent the wheel. We had no delusions. We knew that we faced an enormous challenge both in terms of the journal's quality and on the commercial front. We are beginning to get the hang of it now. For a small and new English paper, we have one of the best-organized distribution arrangements in the city. We have made a huge investment in that. We have over a decade of experience in trade in this country and we are using it.

Of course, putting out a quality paper is the biggest challenge. I did not want a paper dependent on wires and syndication. I wanted 100 percent in-house, top-quality, objective analysis and commentary. I am proud of what we have achieved, but we have a long way to go. Our aim is simple. To have the best business journal on Russia, and to cover Russia, its society, its politics, economy and future without prejudice and bias. We have our values: free market values, strengthening the Russian middle class, promoting small enterprise and the rights of entrepreneurs as well as those of foreign businesses and their investments. We would like to be at the forefront of integrating Russia, a prosperous Russia and its business with the rest of world. It's a tough beat.

EL. These are important months for Russian print media. Kommersant was sold. The Financial Times and Dow Jones are launching a paper with Independent Media. ...

AG. Yes, but these are very different events. The launch of Vedomosti is exciting. I think it is one of the most important events for the Russian print media. It will set trends in many areas - in quality business journalism, objective reporting and commercial management of a newspaper. As for Kommersant, it is a sad story. For many of us who have been associated with Russia during the last 20 years, it was like a personal loss. Of course [Leonid] Miloslavsky [President of Kommersant] is saying many things to reassure the public, but we all know what kind of a proprietor the paper has and what it can do to the paper's reputation.

Q. Is it true that Norasco also made a bid for Kommersant? Was the price really $20 million? Why did your bid fail?

AG. No, it was not like that. Look, we were interested. By the time we got around to putting together a bid, in early summer, we got the feeling that a deal had already been done. We sent some feelers out, but the proprietors were not very keen on talking to anyone. They had even taken their investment bankers off the case. I got a clear indication from some friends that the deal was done and some loose ends were being tied up. Moreover, buying the paper is just a fraction of a job done. One then needs to sit down and talk about the future. There was no such communication. It is pointless to talk about price at this time, though I do think that the owners did not have a solid basis for their demand. Moreover, we did not want to get a bidding war started. We would, in any case, have done it in our own time, at our own pace, in our own style. Once we felt that the deal was as good as done, we just sat back and relaxed.

EL. I keep hearing in the White House corridors that Norasco is soon launching a daily Russian newspaper as well. Is there anything to these rumors?

AG. Look, Katya, one cannot be in the Russian market with only an English-language publication. Yes, we are here for Russian papers and periodicals. But a daily broadsheet is a serious investment. Gazeta in Poland has investment plans of more than $100 million over seven years. FT invested more than $100 million in its German project. It is pointless to talk about a broadsheet without thinking in terms of major investment in infrastructure first. Do you start a paper and just throw it on the street? No. You have to invest in distribution, printing machinery and much more. A new paper is being launched [Vedomosti], with very strong partners. Let us see how they fare. We can all watch and learn from their experience. Better their money on trial than mine. We shall talk about it next year.

EL. But why not buy some other paper? So many Russian papers are in trouble?

AG. There is no other paper. I mean there are excellent papers, great editors and journalists ... like Sevodnya and Vremya MN, but they are not ripe enough to be on the market as investment opportunities. They have to survive on their own for the next four to five years. Right now, they should be floating in cash. It's election time. But no paper is worth buying. In the regions, there are a few good publications, but no advertising market. So one is restricted to Moscow basically, and it will have to be a new paper.

EL. Expert magazine reported that Dow, FT and IM are investing $10 million in Vedomosti. Is that enough to start a daily paper?

AG. It must be wrong. You don't launch a daily broadsheet in a country like Russia with $10 million. I know at least a dozen oligarchs here who would dole out $10 million to $20 million to start a daily broadsheet. I would not even think of starting a broadsheet unless there was $40 million to $50 million committed over the years. It is better not to take any view if you cannot take a long-term view here. People still think they can walk in here, in this country and double their money in a year or two. These are serious companies, they must have lined up much more. Maybe $10 million is just the start-up capital.

It's also possible that they are depending on the ability of FT and Wall Street Journal to bring in huge ad revenues, their global accounts and muscle power. It would be walking a tightrope, but with some luck it can work for them. But even then, I think they need to invest heavily in distribution, if not printing. But that is my personal opinion. They would also be looking at some very fast turnover. If anyone can do it, FT-Dow-In[dependent] Media can. They [FT and Dow] have a good partner, the best in Russia. Like I said, let us wait and watch.

EL. Coming back to The Russia Journal. I know you are doing a commercial launch later this month. But what are the short- to medium-term plans given that the country is going from crisis to crisis.

AG. Yes, we will hold a launch on Sept. 30. We want to introduce the paper and its policies to trade, to advertisers. We haven't really tapped the market for advertisements so far. I expect some ads to start coming in the beginning of next year. But I really expect the business to take off after next summer. The new government will come in and take two to three months to settle down, and we shall all see the shape of things to come in September 2000. We took a very conservative view from the start. I insisted on putting zero revenue for the first year in projections. People were appalled. But I said, 'Look, I know Russia. I have to run this thing and I think the first year will be zero.' Moreover, I have my own money on the line as well. We have good partners. We have done better, of course, much better, but I take things very conservatively. Now its like a marathon, hurdle race. Each hundred meters there is a hurdle. We know that as well. We thought it would be reasonable to put together $3 to $4 million, and I told the shareholders to talk about the paper again in September 2000. I think we will make profits on this paper beginning year four. Until then, if we keep jumping all the hurdles and don't strain any muscles, we are in the race. But we would be setting the pace.

EL. What do you mean?

AG. I mean the business would be done fairly and correctly. I am not willing to give the paper away free. We give value for money, and we charge money for value. Both from readers and advertisers. We have met a lot of resistance. People say, "We have been used to free English papers for the last 10 years. Why should we pay?" I expected that. But 6,200 subscribers within six months - it speaks for itself. Then one of these free papers gives away a lot of advertising free. That's unfair practices. Well, why beat about the bush? Moscow Times. Some of our managers thought we should also do that. They did it in the beginning. I put an end to it. No free ads, no barter. They (Moscow Times) overstate their circulation by almost twice. Perhaps much more. In fact, there is no circulation. They print and they dump the paper. Who knows how many and where? No one has ever done an audit! I said I want to know my readers. If they do not want to pay for the paper after a year, there is no market for a paper. Period. But it would be self-delusion to keep printing 30- to 40,000 copies and throwing them away for people to clean their shoes and put cat litter on. We are not that desperate. We will do it correctly, our own way, the correct way - or we will wind it up.

EL. Besides a weekly and LifeStyle, are there any other publications in the pipeline?

AG. LifeStyle will be developed further. It is in trial phase. There are two magazines in the pipeline. I cannot tell you more at this stage.

EL. Finally, boss, I have to ask you this. A couple of weeks ago, Exile played a good joke on one of our advertising executives. The poor fellow even went to the Moscow Times office looking for an ad. It was hilarious. But in the introduction they wrote that we are a CIA-funded paper. Can you tell me ...

AG. (chuckles) Yeah! I can tell you, but I will have to kill you, Katyusha!