Russian press market: contemporary conditions and prospects for development

1. ROUND TABLE «Mass media market in Russia and the USA: differences and common tendencies” Russian press market: contemporary conditions and prospects for development ARPP report Philadelphia, June, 2007

2. Russian press market development Russian press market has one of the fastest growth rate in the world, which is twice as big as in other countries. Source:FAPMK

3. Number of the registered mass media outlets In 2006 8342 new mass media outlets have been registered. It is 10.7% growth comparing to the year 2005, including: Newspapers -12.4% growth and magazines – 11.5% The number of the Internet mass media outlets grew 10.2% Dynamics of the number of the registered mass media outlets (2006 comparing to 2005) Mass media market structure Source: AKAR, expert reports from market participants

4. DAILY AND WEEKLY NEWSPAPERS There are 35500 newspaper titles registered in Russia. Combined circulation of all the Russian newspapers in 2006 reached 8.05 billion. The circulation of interregional federal newspapers is 2.8 billion. Russian newspaper market structure (circulation, in %, for 2006)

5. MAGAZINES Annual growth rate of the Russian magazine market for the last 3 years exceeds 13% per year. Combined magazine circulation in 2006 reached 1.85 billion, including 900 million of “glossy” magazines. Russian magazine market structure (circulation, in %, for 2006)

6. THE LEADING PUBLISHING HOUSES: Combined average monthly circulation(thousand items), 2006

7. LEADING PUBLISHING HOUSES: Combined average monthly circulation(thousand items) 2006

8. Russian advertisement market structure, 2006 Russian advertisement market is on the 11th place in the world by its size, which reached $ 4 billion in 2006. 2,1% 17,1% 87% 18%

9. Dynamics of the printed mass media outlets advertisement revenue, (in million US dollars) +13,5% +8% +21,5% +23% +19% +16%

10. For men 22.0% Women & fashion 16.5% Daily 19.0% Other 33.6% Advertisement 11.8% Car 18.0% Women & fashion 17.0% PC 2.7% Daily 11.0% 13.0% PC 10.0% Design Design 3.3% Business 7.1% TV-guides 5.7% 9.0% Business For men 3.3% Car 5.0% 7.0% TV-guides Advertisement 1.0% Printed mass media: advertisement revenue, 2006 Shares of the advertising income Growth rate Source: TNS Gallup AdFact, 2006

11. Electronic version of the printed media Does the mass media outlet have an on-line version? Types of the electronic versions Only 32% of the mass media outlets sell an on-line version of their printed material – less than 1/3 of the titles.Some of the publishers used to sell an on-line version, but rejected this idea due to the lack of demand. Many publishers choose e-mail subscription to distribute their electronic versions.Passworded access to the information on the publisher’s website is also quite a popular way. Source: ITCOR, July, 2006

12. Internet users in Russia, 2006 ¼ of Russians use Internet from time to time. As a source of the information Internet is used only by 14% of Russian population. In this field, the level of trust to the Internet information can be compared to the local and regional radio (13% and 10%). Source: WCIOM

13. RUSSIAN PUBLISHING MARKET TENDENCIES • Increase in number of registered mass media outlets along with the decrease in circulation; • Increase of specialized titles for special audiences, the decrease of titles with undefined theme; • Rapid growth of the free issues as the most attractive for the advertisers and customers; • Increase of the advertisement revenue because of the growth of the Russian advertisement market; • Increase of the investments into the promotion of the mass media outlets; • The growth of the customers’ interest towards the on-line versions of the newspapers; • Decrease of the number of the younger readers (25-35 y.o.); • Decrease of the newspapers’ share in the mass media structure; • Increase of the number of “glossy” and business magazines readers; • Increase in demand for men’s magazines; • Continuous consolidation of media assetsand concentration of the capital in publishing business, decrease in investments.

14. Printed mass media distribution. Wholesale. Rapid decrease in number of the wholesale distributors 100% 85% 66% 37% Source: Companies’ data

15. Printed mass media distribution.Retail. (2006) Retail sales structure (Moscow) Retail sales structure (Other regions) Source: ARPP

16. Retail sales development Source: REWE-GROUP

17. Retail sales development Source: RBC

18. Dynamics of the subscription via the Russian Post (mln. items) 4.1% growth Average annual decrease rate - 3% Source: Russian Post

19. Types of the subscribed mass media outlets(2006) Source: Russian Post

20. Russian subscription market tendencies • Stabilization on the subscription market; • Preference of the local mass media, increase of the subscribed regional titles; • Active implementation of the new and additional subscription services; • New alternative subscription structures in all the regions of Russia.

21. Printed mass media distribution market – main tendencies • Concentration of the capital in the distribution marketup to the federal level; • Withdrawal of the street sellers and small private businesses; • Decline of the importance of the wholesale sellers, wholesale segment has moved to the circulation management and logistics; • Decrease of the market share of the super- and hyper-markets in the retail sales; • Decrease of the profitability and assortment in the press distribution in the supermarkets due to the retailers’ interference and their intention to gain as much profit as possible, including the advertisement revenue; • Increase of the promotional spendings and advertising at the points of sale, aimed to increase the sales; • Decrease of the periodicals’ assortment at the retail points of sale, along with increase of assortment of other group of products; • Price increase in the market due to the changes in the Russian economy; • The market size growth is expected to take place because of the advertisement revenue and price increase.

22. The future of the Russian printed mass media ARPP conceptionfor 2007-2015г. Suggestions on improvement of the press distribution market infrastructure: • official governmental recognition of the press as socially important product to guarantee the freedom of speech and democracy and to create special conditions for the press distribution market; • to introduce a transparent VAT rate for manufacture and distribution of printed mass media,promote usage of the commission contracts; • establish as many press retail points of sale as possible (1 POS per 1000 people), in close proximity to the places of residence for standardized prices, defined by the publishers; • establish advanced logistic areas, warehouses, automated sorting lines;

23. The future of the Russian printed mass media ARPP conceptionfor 2007-2015г. • to support establishing and development of special press and multimedia products points of sale all over the country, with wide range of products and on-line terminals; • to develop the subscription market, including governmental support and partial financing of the delivery; • to create a unified national control system to supervise the movement of the products from the publishers in the distribution chains; • - to introduce the GPS system to adhere the press delivery timetable. ARPP

24. Thank you very much for your attention