Ukraine War Choking Russia’s Media Business Into Oblivion

Tens of thousands of Ukrainians and Russians got killed since Russia attacked on February 24, but there is another victim of this conflict: Russia’s media industry. Both the dwindling business and censorship are choking it to death.

In the late 1980s, under Mikhail Gorbachev, Russia developed a vital, polyphonic media, heading into the waning days of Soviet communism. Breaking news, analyses, and commentary filled the airwaves and millions of pages. Politicians, writers, and thinkers competed for airtime and print space. Overnight, it became a major business. Pravda was no longer the only game in town.

Over the last two decades, the advertising market in Russia has grown fast (see graph in Russian language).

Managing the message of the Ukraine war has changed the news landscape. And Western companies committing self-exile has made matters worse, financially, for media companies of all types.

Ad Business in a Nosedive

In 2021 advertising revenue grew 22 % annualized. But since February, 11, with many global companies leaving Russia’s ad market, including Google, Nestle, McDonald’s and Coca-Cola, to name a few, the media ad market for the second quarter of 2022 looks dire, with grave implications for the independent media.

The main factors of the fall were the withdrawal of Western advertisers, coupled with the recognition of Facebook (now Meta) as a bad actor in Russia.

Nadezhda Mereshchenko, Operational Performance Director of OMD OM Group, estimated the current losses of the advertising market at 40-50% in mid-April. OM Group estimates that each month of the war dragging on would lead to another 5% decline in the ad market. It may further fall another 20-25%.

In addition to foreign brands that have left the advertising market, education companies have most noticeably reduced the cost of promotion by 74%; advertising, PR agencies, publishers down -68.8%; public organizations -66%; car dealers -55%; tourism -39%; and bars, restaurants, cafes are down -37%.

According to the Unisender service, 50% of companies cut spending on targeted advertising on social networks, and 21% refused to even do that kind of advertising.

Television: the number of advertising minutes used on TV in April—June decreased by 33%, according to a study by Havas Media. The indicator fell the most in May, down by 39%. In June, it fell 29%. In total, only 62% of the allowed advertising time was utilized on TV in June; on average, it is 5.6 minutes per hour. At the beginning of the year, the indicator was significantly higher and amounted to 83%, but in May it fell to 52%.

The minimum possible losses through March alone for broadcast news will amount to 50.8 billion rubles ($815.5 million). Some 40% of the Russian media’s ad budget comes from global companies now openly and commercially opposing Russia.

Radio: out of the top 15 advertisers in 2022, there are 14 Russian and only one foreign (Tele2), based on data from Mediascope, a Russian media industry research company.

The minimum possible losses Mediscope expects for radio is 1,185 billion rubles (around $18 million). The maximum losses are seen at around 2,665 billion rubles (around $42 million).

Their top 15 advertisers are mostly Russian banks, which make up 33% of ad revenue for radio now, more than double pre-war.

Print: The departure of Western brands makes it more difficult to calculate, but for now, it looks like the minimum possible losses will amount to 1.578 billion rubles (around $25.3 million and the max looks similar to radio, at 2.633 billion rubles. The share of ad budgets coming from European and American companies: 28%. That’s dried up.

The Media Bleeding Red: Politics Trumps Finances

The roots of today’s media mess can be most easily traced to the world’s biggest divorce — Russia and Ukraine began parting ways in 2014. The domestic media was asked to pick a side, and impartiality was not the right one. Pro-Ukraine was not a side. This narrative control has led to a crackdown of debate in Russian media.

Media outlets are under unprecedented pressure due to the new political, legal, and economic realities of running a media company. The cacophony of ideas in the 1990s – a breath of fresh air coming from the Cold War Pravda propaganda of spy games and political dramas in search of a mushroom cloud – has transformed back to the days of state-sponsored storytelling.

In March 2022, newly approved legislation made it so that any media or journalist who expresses an opinion or vision of the events in Ukraine other than those approved by the Ministry of Defense can be sentenced to 15 years of prison. The legislation was wrapped in Russia’s version of a fake news law, called the “anti-fake law”.

As a result, independent media are often banned by Roskomnadzor, the state media “disinformation” agency and can only be accessed using a virtual private network (VPN).

Roskomnadzor has also blocked access to Facebook, Instagram, and Twitter. A new law on state treason would make any information gathering deemed by the state-controlled courts, militarily- or security-wise, punishable by many years in the Gulag.

The authorities have destroyed independent media by blocking the most popular, critical media outlets, closing independent radio stations, and forcing dozens of journalists to halt their work or leave the country. They are depriving Russians of access to different sources and viewpoints. But to Russia’s government, just like many of its Western counterparts, if it is not state-approved, an enemy state must be behind the message instead.

The state crackdown of independent media in Russia is like the Bolsheviks shuttering media outlets after the 1917 October coup against the Czars.

By June 2022, as many as 166 independent media outlets, journalists and bloggers have been declared “foreign agents,” including some of the most well-known names like The Moscow Times, Dozhd (Rain), Echo Moskvy, and Latvia-based Meduza.

Private newspapers like Novaya Gazeta, whose editor Dmitry Muratov won the Nobel Peace Prize in 2021, suspended operations in March.

Russian Business Media in Lawfare Fight

One of the last independent, privately-owned media still standing in Russia that is covering the war in Ukraine is the RBC media group owned by the Russian entrepreneur Grigory Berezkin. RBC still broadcasts various opinions including by Western and Ukrainian leaders.

Most of its content is not political: RBC mostly covers investments, stock markets, financial literacy, and new technology. In the past, it partnered with Bloomberg, CNBC, Deutsche Welle, The Financial Times, and others. RBC survives on advertising revenues that are shrinking daily due to the economic consequences of sanctions and the departure of multinational companies from the Russian market.

In two months of the military operation (between March and April 2022) RBC saw a 65% collapse in advertising.

Despite the pressure to stop airing Ukrainian voices and others critical of the war and its economic fallout, RBC published hundreds of articles about the war and has spoken bluntly on the meaning and consequences of sanctions.

RBC now faces the threat of going out of business. If RBC shuts its broadcast, Russia will lose one of the last remaining independent voices in Russian business news and will have to fire over 1,000 people, including nearly 600 journalists who cover business and global markets like no one else in Russian-owned broadcasting.

Since 2017 Rosneft, a state-owned oil company, has been suing RBC in courts for defamation and other issues. In late 2021, Rosneft and its sister company NNK brought a new case against RBC. RBC lost in lower courts twice and is likely to lose on appeal later this month. The purpose seems to bankrupt RBC and leave its 600 journalists jobless.

Ekho Moskvy and Dozhd were also sued by Rosneft in the past, as was Bloomberg, all for articles the oil major claims were fraudulent.

Москва 1984

“What is happening looks like the period of late Stalinism, when anti-U.S. and anti-Western, nationalist rhetoric reached its peak, and the war hysteria of 1983,” says Elena Ivanitskaya, a former professor of literature and a literary critic.“The only ones who can even use the word ‘war’ are the hawks who blame the regime for being too soft, and call for militarized national economy, mobilization, and censorship. It is a symptom of authoritarianism on the verge of dictatorship,” she says.

Many prominent Russian journalists were forced to leave the country. Konstantin Eggert is now an anchor with the German broadcaster Deutsche Welle. He says the Putin government uses nationalist propaganda like a “narcotic”, and most Russians are happy to stay in their comfort zone and take it – as long as they don’t need to go to war.

“The independent media’s impact is as weak as the number of independently-minded Russians is small,” Eggert says. “The majority of them are drinking the Kool-Aide.”

Alexandra Prokopenko, a former columnist for Vedomosti, a business daily, says that since the war began, the division in Russia is no longer between those who agree and those who disagree but between state-designated “foreign agents” and the rest.

“Many media have been forced to close down,” she says. “Good journalists have moved abroad, and the few remaining journalists cannot even report the facts. They have to resort to Orwellian language, talking about negative growth instead of decline,” Prokopenko tells me. “The reasons stem from the consistent desire of the authorities to take control of the entire information agenda,” she says. “They lost internet control; so they had to catch up quickly.”

This state of media is terrible not only for ordinary people but also for decision-makers. The lack of nuance, different views and facts always leads to poor decision-making in policy and in business, Prokopenko says. No CEO is really ever appropriately served by a ‘Yes Man’.

“An important side effect of pervasive propaganda is that those who spread it are prone to believe in it,” Prokopenko says. “The Russian economy is slipping into crisis again, which will not be shown on television but will begin to show in people’s fridges and pantries in the fall. When propaganda works, you begin to believe that planes made of thatch fly better than those made of aluminum and titanium.”

This will not end well.

May it all be a lesson to the rest of us outside Russia.