From Russia With Love 3: The State and Challenges of Newspapers. The Mr. Magazine™ Interview with Pavel Filenkov, CEO, KommersantDecember 3, 2014
As in the United States, newspaper markets in Russia are facing many challenges, both in mastering the digital realms and in increasing revenue. I spoke with Pavel Filenkov, CEO at Kommersant Publishing House on my recent trip to Moscow and we talked about the future of newspapers in Russia and whether the level of journalism all publishers globally are experiencing, with digital figured into the equation, is as elevated as it has been in the past.
His answers are seemingly unique, yet extremely familiar as, once again, I realized that while many miles and customs may separate us, in the end we all face similar challenges.
I hope you find the Russian viewpoint of newspaper publishing as intriguing as I did as you read my interview with Pavel Filenkov, CEO, Kommersant Publishing House.
But first, the sound-bites:
On whether he sees the cup half empty or half full when it comes to newspapers in Russia, especially his own: Our newspaper market is of course overheated. I think we have three times more newspapers than we really need. We have, at this moment, approximately 6,000 to 8,000 newspapers.
On whether he believes journalism has improved or declined over the last 5 to 10 years: In Russia and in every country, there is government which this country needs. And every country has journalists, which I can also say this country needs, but I am not sure that our country needs the same level of journalism that we have now, or as we had two years ago.
On the impact of digital on print newspapers in Russia: We have to move in the direction of digital media. We do not see a model way, but the quantity of advertising money, which is in the digital field and the printed field, is approximately the same.
On whether the content of newspapers overall is a reflection of the general audience: I agree to some extent with that statement, but here in Russia we have a much more important problem, which limits the future development of our newspapers. And it’s the problem of distribution.
On the distribution problems of his newspaper, Kommersant: Our subscription base is collapsing because we have only one partner in distribution, the Russian post office. And the price of delivering newspapers is growing from month to month and year to year. In fact, our distribution through the Russian post office is absolutely inefficient.
On what he sees as the light of the future for his newspaper: We hope that we will have the capability to get money from the digital outlets in publishing. That’s why we are trying to develop a digital print system from Adobe.
On what keeps him up at night: Too many things. (Laughs) I go to bed very late and I wake up quite early.
And now for the lightly edited conversation with Pavel Filenkov, CEO, Kommersant Publishing House:
Pavel Filenkov: I think all are an advertising market, especially our newspapers. It’s just 100% part of unstolen money from oil. The lesser the price of oil, the less money we have, (Laughs) as the price of oil has fallen. So, of course, our income has fallen approximately the same percentage.
The estimation of how much our advertising market has fallen this year is about 12% among newspapers. The advertising in magazines has fallen even a bit more and a little less in business newspapers. As we are a business newspaper, of course, our percentage has fallen a bit less, around 4% for this year.
Of course, we understand that we have no reason to hope that the price will go high, so we think that next year will be worse than this one. The decrease in advertising incomes will of course continue and we think that decrease next year will be approximately 15%. But, this is certain, we have fun news also.
Our newspaper market is of course overheated. I think we have three times more newspapers than we really need. We have, at this moment, approximately 6,000 to 8,000 newspapers. Of course, not all of them are really working, but maybe around 5,000 are. It’s too many for our country.
And as a result of this, there is a lapse in the advertising market, and maybe a big part of these newspapers will die. And the main newspapers will divide their money, their heritage, and their piece of this pie.
So, I think that the newspapers that will survive during the next year will not have the poor health that we have at this moment. Of course, the quantity of newspapers will reduce, but the ones that survive will be status quo or maybe even in a better state economically.
But I do understand that this logic is, to some extent, crocodile logic, complete with crocodile tears, but we have to see things realistically. (Laughs)
Samir Husni: You have this vast number of newspapers; do you think in the last 5 or 10 years journalism has improved or declined? Are we better overall journalist’s today or are good journalists becoming few and far between?
Pavel Filenkov: We can see our country as a country with constant political and economic sedation. Of course, we will not see a reason why our journalism should become more worthy.
But our country changes and the newspapers should change as well. And of course, we are trying to satisfy external conditions and we try to go together with our country. And when we try to perform under these new conditions, I’m not sure that we become better,
If we can see our level of journalism from that point of view, I think in the future we will have journalism of more worth. But if we can also see journalism as a need of our society, then I think the level of this profession may become higher or at least stay the same.
In Russia and in every country, there is government which this country needs. And every country has journalists, which I can also say this country needs, but I am not sure that our country needs the same level of journalism that we have now, or as we had two years ago.
Samir Husni: What about the impact of digital? Has the advancement of digital impacted the printed newspaper at all?
Pavel Filenkov: We have to move in the direction of digital media. We do not see a model way, but the quantity of advertising money, which is in the digital field and the printed field, is approximately the same. But when we consider money in the digital field, 90% of this money belongs to context advertising. And only 10% belongs to real media advertising. And in print areas, the average is absolutely different, about 100% of the money is real advertising money, maybe a small percentage is context advertising money.
That’s why we can set only media advertising money, not context, so we can get from the Internet, from digital, only 10% of the market. So we cannot get from the digital area more than 10% of our income. But we are ready to go into this area.
For example, our auditorium in digital and our auditorium in print are approximately the same. Even on the internet we have more loyal readers. Only 10% of our money from the print area, do we get from the Internet.
We don’t have a model yet for how to get more money from that market. That’s why our development in the Internet area is very limited. We have finished the period of time when we invested in digital with all of our allotted money for that area. We finished that strategy because we aren’t getting a very high response from the investment.
So, at this moment, my strategy for Kommersant is to invest enough money to support our development level in the Internet; however we don’t consider the Internet our salvation.
Samir Husni: Have you noticed that with the printed newspapers, some people are saying the problem isn’t with ink on paper, it’s with what’s being put inside the paper: the content.
Pavel Filenkov: I agree to some extent with that statement, but here in Russia we have a much more important problem, which limits the future development of our newspapers. And it’s the problem of distribution, because at this time we have a lapse in both channels of distribution. Our subscription base is collapsing because we have only one partner in distribution, the Russian post office. And the price of delivering newspapers is growing from month to month and year to year. In fact, our distribution through the Russian post office is absolutely inefficient.
Samir Husni: It’s costing more than you’re bringing in.
Pavel Filenkov: Yes, exactly. And we have a very big problem with our retail, because the standard way of distribution is retailing by means of kiosks and outlets, and the quantity of these street kiosks is reducing from year to year. I don’t know why, but this is politic of our power, to reduce the number of street kiosks.
So, at this time we have more than a 50% return from our retail. Of course, this is an absolutely inefficient way of distribution. That’s why the problem of distribution is much more important for the survival of newspapers. It’s much more important than all our other problems, levels of journalism or technology or development; for us, all these problems are much less important than distribution.
Samir Husni: Very true. If you can’t get the paper into the hands of the readers…
Pavel Filenkov: Yes, but we are trying to use different ways of delivering and distributing newspapers. For example, for us a very important channel of distribution is on board distribution. The other problem is just printing our newspaper, but we still have enough of a printing press to print it.
We print our newspaper and it’s necessary to understand, the circulation of our newspaper isn’t big for Russia. We print about 100,000 to 120,000 copies and this is a low circulation because we are a business newspaper and our readership isn’t as big as other papers that print1 million to 2 million copies.
Our circulation is so low we have to print out the newspaper in 14 or 15 different places in order to deliver the paper on time to the different regions of the country.
Samir Husni: In the midst of all this gloom and doom that we face as journalists in the industry, where is the bright side? What do you see as the light as you move toward the future?
Pavel Filenkov: We hope that we will have the capability to get money from the digital outlets in publishing. That’s why we are trying to develop a digital print system from Adobe. We have our application in all electronic magazines and the Apple Store in Google Marketplace. Our application is produced for all platforms: tablets, PC’s IOS and Androids. And we believe that this will be another revenue stream for us in the future. So, that’s one channel.
The next channel, which we hope will give us another possibility to survive, is a way to deliver some services to our readers. For example, information services, databases, approaches to some loyal services, registration services and others as well. So we have created a special company which provides these services. And these services can be accessed by means of our site. For us, this is a way to attract additional readers and get more revenue, not just by advertising, but by the means of giving our readership much more value. Almost all of these services are payable services; they aren’t free of charge, so for us this is another important way of income.
At this time we get approximately the same money that we get from the Internet, about 10% of our advertising income we get from these services. And of course, we have a very good partnership between our newspaper and these services. The newspaper, in this case, serves as advertising for our company and our information facilities. We see these two ways as things we are going to develop.
Samir Husni: And this venture into e-commerce…
Pavel Filenkov: Yes, we tried to launch an e-commerce in its simplest form, as an eShort, but we stopped the project because we realized that we are not good sellers when it comes to jewelry or books and songs; we are not professionals. But we are professionals in the area of information, so we’ll produce our kind of goods.
Samir Husni: My typical last question; what keeps you up at night?
Pavel Filenkov: Too many things. (Laughs) I go to bed very late and I wake up quite early. I’m trying to do as much every day as I can and for me that is the result of my sleeplessness. Also, I wish to spend as much time with my work and my family as I can.
Samir Husni: Thank you.