Forced Divestment Russia to West Publishers: Nyet

A group of western publishers, led by Germany's Axel Springer and Burda, are asking Russian President Vladimir Putin to abandon plans to effectively ban foreign media ownership.
There may soon be less to read at Russian news stands.

“Dear Vladimir Vladimirovich, we must contact you regarding a difficult situation we find ourselves in.”

So reads the first sentence in the letter to Russian President Vladimir Putin from a group of Western publishers.

The letter, which was made available to Handelsblatt, was written in response to Mr. Putin's new media law, which will require Western media companies to reduce their stakes in Russian publications to a maximum 20 percent by 2016.

Six publishing houses with foreign ownership hold about 30 percent of the press market in Russia.

The letter was signed by the heads of Western publishing houses in Russia, including German publishers Burda, Bauer and Axel Springer.

The letter notes that forced sales in the current Russian economy would be “extremely inopportune” and would threaten 100,000 jobs in Russia “in the event of closure of the publishing houses."

The German publishers declined to comment on the letter.

According to data from research group TNS Russia, the Western publishers reach almost 60 million Russians through their publications.

The economic crisis has seen cutbacks in advertising, a main source of revenue for most publishers.

The advertising volume in Russia's print media dropped by 40 percent in January from a year earlier.

A substantial portion of these losses were recorded by Russian publishers with foreign ownership. The Western publishing houses fear they will have 30 percent less advertising revenue in the first half of 2015 than a year earlier.

International businesses are not placing ads anymore, because they do not know if they can deliver what they are advertising.

Western sanctions and the drop in the price of oil, Russia's main export, have led to drastic cutbacks in advertising in the country. Some international businesses are no longer placing ads because they are not sure in the current environment if they can deliver what they advertise.

The decline of the ruble, which has lost half its value in less than a year, has made imports expensive.

In this environment, the new Russian media law would exacerbate the industry's decline, the publishers argued in their letter.

The law, enacted by Mr. Putin last October, ordered foreign media to transfer 80 percent of their ownership to Russian control by February 2016. In doing so, the Western publishers in Russia would have to sell their stakes.

Regina von Flemming, who has been the chief executive of Axel Springer in Russia for 10 years and has a good rapport with politicians there, initiated the letter.

Springer publishes in Russia the business magazine Forbes, one of the few publications considered politically independent. Last week, Mr. Putin, invited Russian editors in chief, including the Forbes editor, to talks. At the meeting, the Forbes editor explained the damage the new law would cause to the magazine in Russia.

Handelsblatt learned from the Russian media that Mr. Putin had asked foreign publishers to put their concerns in a letter.

Executives at Springer and Burda formulated the joint letter last Thursday and five other Western publishing houses, including Bauer of Hamburg and Sanoma of Finland, signed it.

As of Wednesday afternoon, there had been no response from the Kremlin to the publishers' concerns.

The publishers asked for a one-year postponement of the new law, hoping political tensions will subside by then and the ownership provisions will not be enforced.

In Russian media circles, there are two interpretations for why Mr. Putin signed the new law.

Some say he wanted to weaken Western countries with counter-sanctions on an important industry. Others think the Russian president wants to further restrict freedom of speech and freedom of the press through the measures.

In addition to Forbes, the law would also affect the business newspaper Vedomosti, which has been critical of the government and is published in a joint venture with Finnish publisher group Sanoma, the Financial Times and The Wall Street Journal.

 

Maximillian Nowroth writes about Russia for Handelsblatt, Kai-Hinrich Renner reports on the media from Hamburg and Mathias Brüggmann heads the foreign affairs desk. To contact the authors: [email protected], [email protected], [email protected].