To Peter the Great, what was later to become known as the "mass media" was a pet project. After his epoch-making decree "Means of Notification of Foreign and Internal Events," the tsar sanctioned the publication – and personally edited the first edition – of Vedomosti, the first official news periodical in the whole of the Russian Empire, on Jan. 13, 1703.
It was a government mouthpiece, and, so, it was never short of financing.
In some ways, little has changed. Today, a daily newspaper of the same name, published jointly by the Financial Times of London and the Wall Street Journal of New York in partnership with a Dutch publisher, has a circulation of only 40,000 and could hardly be called part of the "mass media" in a country with more than 100 million educated readers. Nevertheless, it also does not lack money. It is just as servile to the authorities and elite as Peter the Great’s favorite project, and money for such "for the elite, of the elite and by the elite" media projects is never in short supply.
A little over two hundred years after Peter’s enterprise, Vladimir Lenin and his Bolshevik comrades had similar intentions regarding the media when they came to power in 1917. They seized the means of mass communication after overpowering the Avrora warship guarding the tsar’s Winter Palace in Petrograd (later Leningrad and, now, St. Petersburg) as the October Revolution spread, and the communists used the mass media mainly as propaganda tools against their enemies until they were driven from power in the early 1990s.
In the Soviet Union, nothing in the media escaped the scrutiny of the state: Everything was done in line with the Kremlin’s instructions on how editors should use the right tone to drive home the official message.
The trend for the government to try to control the media is still very much alive. Most Russian electronic mass-media outlets are now either wholly or partly, directly or indirectly, owned by the government, a tendency that has strengthened since Vladimir Putin became president in 2000.

The media’s oligarchic era
Barred from open circulation in the Soviet Union to protect morality, Playboy was one of the first glossy magazines to hit the newsstands in the mid-1990s.
Derk Sauer, a former reporter for an ultra-left Dutch newspaper and now CEO and principal shareholder of Independent Media, which published the magazinen at that time, is said to have received funding from Menatep Group, close to oil giant Yukos and oligarch Mikhail Khodorkovsky, for the venture. Menatep sold its shares in Independent Media only weeks before its president, Platon Lebedev, was hauled off to prison on charges of embezzlement by Russian prosecutors. Now, Vladimir Potanin’s Interros, cozy with the Kremlin, has a large chunk of shares in the company. Today, Sauer, with help from his oligarch financiers, runs the largest consumer-magazine publishing group in Russia.
When communism collapsed in 1991, most Russian publishing houses – unacquainted with having to work in a competitive environment and no longer receiving state subsidies – soon became debt-ridden. Consequently, they were easily swallowed up by the budding class of oligarchs in the mid-1990s.
Thus began a distinctive era in Russia’s print-media industry – the era of the oligarchs. They, like the communists before them, saw the mass media only as a means to an end. The oligarchs employed them as a tool for image-making and battles over state assets and politics.
It was the oligarchs who introduced so-called "black PR," paid-for articles and the now-dreaded kompromat – compromising materials that are capable of damaging opponents’ reputations – in the media. The oligarchs eventually destroyed whatever public trust average Russians had left in the mass media after over 70 years of communist misuse.
At the peak of this era, holdings affiliated with Boris Berezovsky and Vladimir Gusinsky personified the oligarchy's foray into the media. Both have since been forced into self-imposed exile in the West, following the Kremlin’s winner-take-all battle against them, and Gusinsky has been arrested by the Greek police.
This has paved the way for others to get into the act, such as Potanin’s Inteross, which now controls a substantial share of the local media market through its affiliated Prof-Media.
The oligarchs’ role in the post-Soviet media has had both a positive and a negative impact, but mostly the latter, according to Viktor Shkulev, chairman of the board of Russia-based Hachette, Filipachi & Shkulev Publishing House, whose glossy publications include the Russian-language versions of Elle, Maxim and Marie Claire.
"Undoubtedly, on the positive side is that a lot of the oligarchs’ industrial-financial groups have invested a great deal of money in the industry, which has facilitated the development and stability of the sector," he said. "This has enabled media managers to buy necessary equipment and execute projects they thought necessary for the well-being of their publishing houses."
On the minus side, however, most of these of oligarchs’ investments in the mass media were motivated by politics, he said.
"Almost everything the oligarchs have done in the mass media has been overshadowed by their political agendas, which are either directed toward satisfying their own or their political and business colleagues’ present or future special interests," Shkulev added. "In my opinion, this practice has been wholly detrimental to the industry in general and to its conscientious practitioners in particular."

On the path of recovery
The industry is still trying to come to terms with the yoke of oligarchy, prompting increasing cases of editors-in-chief who have openly challenged interventions into their editorial lines and, having failed to stop the practice, have resigned.
One example, according to the Moscow chapter of the European Institute for the Media, was Andrei Chugunov, the editor-in-chief of Nizhninovgorod Rabochy, a local publication belonging to Inter Media Group. He resigned over a disagreement on editorial policy in 2001.
Also, former Noviye Izvestia editor-in-chief Igor Golembiovsky – fired by the paper’s nominal majority shareholder, Oleg Mitvol, in February – has set up a new publication, Resonans. Golembiovsky claims that Mitvol was used by the Kremlin to orchestrate the attack on him over Noviye Izvestia’s harsh editorial line against the government.
Advertising executives say that securing financial independence is the only way to ground true independence for the Russian media. They add that there have been promising signs that finances "not linked to oligarchs and the government" are gradually coming to the print-media market.
Financial performance over the past two years has shown that the print-media sector has not only recovered from the ruins of the 1990s, but was also able to post one of the world’s fastest growth rates in 2002, fetching about $600 million in advertising revenue alone, according to Russian Association of Advertising Agencies (RARA) reports on last year. This translates into about $380 million of advertising revenue in newspapers and $220 million in magazines in 2002, said RARA President Vladimir Evstafiev.
The sector’s gross turnover for 2002 looks even higher after sales and subscriptions figures of $1 billion to $1.3 billion are figured in, bringing it roughly to between $1.5 billion and $1.8 billion. The magazine segment accounted for about 35-40 percent of the industry’s gross turnover, while newspapers made up the remainder, according to media-market reports.
The RARA forecasts that this year’s advertising revenues are on course to beat 2002's. About $330 million-$340 million were garnered in the first half of 2003, an increase of 25 percent over the corresponding period in last year, according to the organization.

Magazines see radical changes
"The Soviet print media in general were seen as a means for propagating communist doctrines in society all the way down to the grass-roots level," said Shkulev.
"This means decisions on content, print runs, areas of distribution, target audience and so forth were made at the highest political level," he added.
Shkulev, who is also vice president of the International Federation of the Periodical Press (FIPP), an organization of over 41 national magazine associations and 127 publishing houses worldwide, noted that there have been radical changes in the print-media industry that greatly differentiate it from what it was in the Soviet Union.
"In the Soviet era, every journal targeted a highly specific audience. Rabotnitsa [Working Woman] and Kristiyanka [Farm Woman] were meant mostly for women in villages. Za Rulyom [Behind the Wheel] was for drivers, Zdorovye [Health], was for people interested in health issues, Vokrug Sveta [Around the World] was for travelers and Ogonyok [Spark] was for the intelligentsia."
Today, things are different, says Shkulev, recollecting his former job as director and, then, CEO of Komsomolskaya Pravda, which was privatized in the early 1990s. "There is not just a variety of publications in different spheres – there are different publications on each subject, providing alternative views and other information to readers interested in such topics," he said.
In 1999, the growing media industry became a part of the U.S.-Russian Media Entrepreneurs Dialog, a program initiated by Putin and U.S. President George W. Bush to help define and execute reforms to attract investors and promote standards in Russia’s media industry.
Arnd-Folker Listewnik, general director of ZAO Burda Publishing House and a German citizen, said that there are no longer serious differences between Russian and German magazine readership.
"The tastes and needs of Russian and Western readers do differ in certain aspects, but they both value professionalism and the quality of what they read in magazines," he said.
Burda Moden first published its fashion magazine Burda in 1987. It currently publishes 60 publications in Russia, of which 33 are magazines, including Cool, Lisa, Vot Tak and Playboy – which was acquired from the Independent Media. "Burda Moden is a Russian company with only three expatriates in its over-400 staff. Its publications' content is therefore mainly defined by the Russian staff," Listewnik added.
Burda Moden has become a major player in the sector, accounting for about 13 percent of the newspaper segment and 10 percent of the magazine market, according to media-market researcher Gallup Media’s latest data for Russia.

Sources of revenue for the print media
According to an FIPP report, in the United States, the world’s most-developed media market, about 84 percent of most magazines’ print runs are sold through subscriptions. In Russia, this is not the case, as sales in general and subscriptions in particular together account for, at most, about 10-30 percent of print-media’s revenue, the report said. The remainder comes from advertising and other, unregulated, sources. Many magazine publishers, including foreign ones, falsify information about their print runs.
According to the RARA’s Evstafiev, "subscriptions contribute very little, just like selling through kiosks and other retail outlets, while the largest revenue come from advertising."
High-quality, glossy periodicals in the magazine segment are the "default advertising choices" for producers of designer clothes, cigars, expensive cars, cosmetics and perfumery targeting the elite. "The elite nature of these products obligates their sellers to advertise only in top-quality journals as a sure way of reaching their target audience," Evstafiev said.
One aspect of the bullish print-media market is an increase in the proportion of local advertisers. "Previously, foreign advertisers dominated the print-media advertising market, but today, the market has changed. Domestic advertisers now control over 60 percent [of the market]," Shkulev said.
He added that a look into the print-media industry in terms of its main sources of revenue would reveal that roughly one-third of magazines and only 10-15 percent of newspapers get a large proportion of their annual revenues from advertising. "The rest, that is, about 70 percent of journals and 85-90 percent of newspapers, get their main revenues from direct sales," he said.
The Russian media advertising market still has a long way to go be on a par with those in more-developed economies in terms of per capita expenditure. Currently, this index stans at a level of about $19 in Russia and about $500 in the United States, according to the FIPP.
Ajay Goyal, the owner of Norasco Media, which publishes The Russia Journal, says he is not a believer in advertising-driven growth alone.
"Most advertising-revenue figures are based on flimsy readership surveys and circulation numbers commissioned by publishers," he said.
"Unless real readership picks up, unless the public buys more copies and until copy sales make up at least 50 percent of revenue – the whole story of growth could become a disaster."
The good news, according to Goyal, is that "there is an enormous choice out there for Russian readers, and they are a very sophisticated bunch. There are publications with mass readership and no advertising, and, then, there are advertising-saturated consumer magazines with almost no readership. There is bound to be a shakeup – only publishing quality will survive, and only the reader will decide who wins. Advertisers will also demand value for their money – the oligarchs cannot subsidize consumer magazines forever."

Russia and the global magazine market
While addressing Russian publishers and journalists during a conference on "Magazines: Current Trends and Future Prospects" at a June meeting in Moscow, Donald Kummerfeld, the FIPP's president, put the approximate number of magazine titles on the global media market at 100,000. He added that about 16 billion copies are bought by or distributed to readers worldwide every year. At least 300 publishing houses print titles outside their home countries, usually in partnership or under license with local publishers, he said.
"The trend is likely to increase with the ongoing revoking of some restrictions on media and the growing literacy rates in some countries," Kummerfeld added.
In terms of quantity, Russia is getting in line with the global trend. The Press Ministry says that approximately 12,000 out of about 40,000 currently registered print publications nationwide are magazines. Shkulev estimates that only about 60 percent of the official number are actually in operation.
Citing a PricewaterhouseCoopers global media-outlook report, Kummerfeld put the global gross turnover of the sector at about $71 billion in 2002, with the lion’s share of about $30 billion, or about 42 percent of the gross total, going to the United States. All of Eastern Europe, including Russia, came to less than 2 percent. In developed economies, magazines sell large volumes and have huge advertisement revenues, but their industries’ overall growth rates are relatively small.
On the other hand, growth rates are higher in some less-developed countries due to rising disposable incomes, literacy rates and increasing advertising volumes, especially on emerging markets where market activities are no longer constrained by government and cultural barriers, said the FIPP’s Kummerfeld.

Problems on the domestic market
According to Russian Press Ministry, some of the problematic trends in the industry include increasing number of publications targeting highly specific audiences, proliferation of glossy local and mostly foreign-licensed publications on the market, disappearance or low visibility of former popular Soviet brands, predominance of Western-styled, youth-oriented entertainment publications over local ones.
Others include declining professionalism among journalists and restriction of press freedoms by media owners and official authorities, shrinking readership audience and poor management due to preservation of certain Soviet-style practices in some most publications.
But sector operators have highlighted other more troubling problems.
Some international editions sell their advertising space en bloc to their major clients. In such cases, advertisements are made by parent companies outside the country either free of charge to subsidiaries abroad or come at very cheap rates.
Evstafiev said that such practices are harmful to the domestic advertising market for Russia-based journals because it deprives them of a large amount of advertising money that the local subsidiaries of multinationals would have had to spend to advertise their products to the elite.
Shkulev says the laws regulating sale, distribution and commissions on print products today are too conservative in their concept, and therefore, hinder business activity in the industry.
He called for liberalization of legislation directed at making business practices more transparent and free of restrictions. "The publishers, he said, can, in turn, pay the taxes necessary for such freedom," he added.
Norasco Media’s Goyal said that the current growth in the magazine market cannot be sustained only on advertisers pumping in more money, because "soon, [advertisers] will ask for the real readers and the real numbers."
Goyal says he sees quality and integrity of content and an increase in the number of retail outlets as the key. "Advertisers will follow where the readers go. Retail in printed products is a bottleneck, but that will get resolved pretty soon to the extent that it has been in the rest of the markets," he said.
"Then, the quality of content will eventually determine the winners," Goyal noted, adding, "I believe in the mantra of Time Inc. CEO Anne Moore, who said at an FIPP meeting in Paris that ‘I love my advertisers, but I love my readers more’.", he said.