Casualty of Russia's Economic Crisis: a Free Press

The financial crisis that has swept over Russia in the past month has left nothing untouched. Along with the danger to market reforms and democracy, the economic collapse is now threatening hopes for a free and independent press.

Russia's media are caught in a vise of rising costs and falling revenues. Those that survive will be left in a world where former sources of financing - from advertisers to bankers - have been decimated.

Add to that an unstable political situation, with presidential and parliamentary elections on the horizon, and the temptation for the government to step in and "tame" the media may prove irresistible.

"The government has an addiction to agitation and propaganda," says Robert Coalson, director of the Business Development Services for the National Press Institute (NPI) in Moscow, which provides management and business consultation to the Russian press.

"It may now be impossible for any truly independent publications to survive. There will have to be some government support, and that is a very slippery slope in Russia," he says.

Izvestia, which had transformed itself from the government mouthpiece of Soviet times into one of Russia's most respected publications, is one of those in trouble. Acquired last year by financier Vladimir Potanin, Izvestia has been forced to merge with another Potanin paper, Russkiy Telegraf. Almost half the staff members on both papers were let go in the process.

In the early days of the post-Soviet era, Russia's newly wealthy "oligarchs" bought or established newspapers and television channels as their own personal playthings, and new publications sprang up almost overnight.

The Russian public, voracious readers even during Soviet times, provided a ready market for what was then a new and exciting form of journalism. In Moscow alone there are more than 20 daily newspapers, covering the spectrum from right-wing nationalism to the radical communist left.

But, with the overall economic collapse, the Russian financial elite has had to scale down its media involvement. "For some of them, it will be the end of their careers," says one media observer.

In addition to the decline in direct support from Russia's rich, more traditional sources of funding are in danger. Television advertising revenues are down 60 to 70 percent, say industry specialists, while newspapers are losing at least a third of their traditional advertising customers. Glossy magazines, with their higher printing costs, have been hit especially hard.

Derk Sauer, head of Independent Media, Russia's largest publisher of glossies, says that the industry is undergoing what he calls "a fundamental crisis."

"We have taken a very severe beating," says the Dutch-born publisher, whose magazine empire includes Cosmopolitan, Good Housekeeping, and Harper's Bazaar. "There is no doubt that there will be an industry shakeout."

Independent Media itself has had to lay off 80 of its 600 employees and has slashed salaries and operating budgets for those who are left.

The psychological effects of the crisis may outlast the economic ones, says NPI's Mr. Coalson. "Newspaper managers were just beginning to think that a commercial orientation was possible, that advertising works," he says. "Now, with advertising revenues contracting so drastically, they will be convinced that it is better to be on good terms with the government."

The government, which is close to bankrupt, has very limited resources for propping up the press. It does, however, have the legal means to reward the loyal and punish the rebellious, says Andrei Richter, director of Moscow's Media, Law, and Policy Center. "The crucial question is what will happen to government subsidies when the current law on support for the press expires on Jan. 1, 1999," he says.

The press now receives tax and customs breaks, and other privileges, adds Mr. Richter. The government also has punitive measures at its disposal, such as requirements for licensing and registration.

The danger thus exists that the government will try to use the press to make it conform once again to its own interests.

"We have quite a good history of that," laughs Richter.

With advertising revenues contracting so drastically, newspaper managers will want to be on good terms with the government.