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. Last Updated: 07/27/2016

The Money Behind the News

At Komsomolskaya Pravda, the third-largest newspaper in the nation, editors are enraged. Uneximbank, Russia's second biggest by some calculations, has just bought a 20 percent stake in the paper, and its editors say the powerful bank will use the paper as a political tool.

But this is not a story of independent journalists fighting corporate influence. The current editors would simply prefer to continue as the mouthpiece for a different company -- Gazprom, the politically powerful gas monopoly which was earlier in negotiations to buy the 20 percent stake and has given the paper some $12 million over the past two years.

"Gazprom deserves to be written about a lot," said Fyodor Sizy, a member of Komsomolskaya Pravda's board and editor of its weekly business supplement, Delovoi Vtornik. "Gazprom has always kept a centrist position, and we like that position."

The battle at Komsomolskaya Pravda offers a rare public glimpse into the workings of Russia's press as it undergoes a major change in ownership. As banks and industrial companies buy up media properties, many editors are worried less about their independence than about deciding with whom they will get into bed.

Russia's new media magnates themselves often admit that they are not looking for profits, since with a few exceptions, newspapers in Russia lose money. Instead, they are looking for indirect benefits of prestige and political influence.

The list of new media owners reads like a Who's Who of Russia's corporate elite: Rem Vyakhirev of Gazprom, Vagit Alekperov of LUKOIL, Boris Berezovsky of LogoVAZ, Vladimir Potanin of Uneximbank, Mikhail Khodorkovsky of Bank Menatep, Vladimir Gusinsky of MOST Group, Sergei Rodionov of Bank Imperial.

"For a banker, a newspaper is like a 600-series Mercedes," said Olga Romanova, until recently economics editor of the daily Segodnya.

The new bosses have brought a measure of stability to a chaotic market, cutting out the system of small-scale bribes to journalists, common in the early days of a free Russian press, under which papers printed "to-order" articles on behalf of anyone with the money to pay for them. Newspapers today increasingly reflect the more consistent political biases of their owners, and the owners are varied enough to guarantee plurality. In this sense, the Russian press is developing along the lines of its counterparts in Western countries.

But while there are many voices in Russia's press, seldom can any one paper tell the whole truth. The average reader needs a scorecard to keep track of the twisted links between publishing, commerce and politics.

"To know what is happening in this country you need to read five or six newspapers," said Yassen Zassoursky, dean of the faculty of journalism at Moscow State University.

The idea that a corporate elite is taking over Russia's economy has found expression both on newspapers' pages and in their boardrooms. Over the past couple of years, most of Russia's top bankers and industrialists have publicly taken large stakes in major national papers and magazines. (See "The Press Web.")

Each owner deals differently with his properties, but one big difference between Russia and the West is that very few of Russia's new media magnates have profits as their first goal.

The new shareholders usually see newspapers either as a vehicle for self-promotion or, more subtly, as a powerful tool of influence which can be called into play should the need arise.

"If a company has a big media outlet, other press will avoid insulting it because they can expect a stormy reaction," said Mikhail Berger, economics editor at Izvestia, which claims to be profitable and hence independent.

Even unprofitable investments in media often have profitable repercussions. "Russian business is directly connected to politics," said Sergei Markov, analyst at the Carnegie Moscow Center. "In order to influence politics you need the media. It's perfectly rational economic behavior."

The mere fact that one owns a newspaper can be threatening enough to push desirable decisions through the government, said Iosif Dzialoshinsky, an expert at the Freedom of Information Commission, a nongovernmental organization.

"It's an instrument of fear," he said. "Bureaucrats are very careful about public opinion. That sort of blackmail can help one get necessary signatures and actions from bureaucrats."

For instance, Gazprom proudly says its media investments are not intended to earn a profit. "Of course not," said Anatoly Kotov, deputy head of the gas giant's public relations department. Gazprom's aim is "to support the media, particularly media that are directed in the interests of Russia."

But the term "support of the media," according to Vladimir Sungorkin, the chairman of Komsomolskaya Pravda who was responsible for the Uneximbank deal, is a code word for control of the media by so-called "sponsors" such as Gazprom and the Moscow government. For the past two years, he said, his paper, in exchange for "support," has regaled its estimated 20 million readers with a slew of positive stories about Gazprom and Moscow Mayor Yury Luzhkov.

Last year's presidential elections were a turning point for the media: Never have the indirect economic benefits of politics been more evident, particularly for MOST Group. Vladimir Gusinsky's media properties, which include the influential Segodnya newspaper and Itogi news magazine, played a key role in boosting Boris Yeltsin's rating from single digits in February to an election victory in July.

After Yeltsin's win, Gusinsky cashed in quickly. His television station, NTV, immediately received government permission to go nationwide and add daytime programming. He also used the window of opportunity to launch a massive satellite cable network, NTV Plus.

Newspaper and magazine editors willingly participated in the pro-Yeltsin propaganda campaign, said Sergei Parkhomenko, the editor of Itogi.

"The election of [Gennady] Zyuganov and the Communists' arrival to power would have meant a complete catastrophe for journalism as a profession and a sphere of business," he said. "Therefore owners didn't have to apply any pressure."

Nonetheless, the media's performance during the elections led owners to realize the power they held, said Zassoursky.

"After the presidential elections the owners started to look at papers again as instruments," he said. "This is in a way a return to the Soviet model."

Optimists say that since most owners can't afford to lose money for too long, ultimately they have to realize that a newspaper, to be profitable, must value the trust of its readers. "They are going through a process of self-education," said Sungorkin.

There is evidence of this occurring. "We see [Komsomolskaya Pravda] as a normal business," said Mikhail Kozhokin, head of the information department at Uneximbank. "Maximum objectivity and independence is the basis of successful business in the media market."

Sungorkin said he pursued Uneximbank because the bankers have a more sophisticated approach than Gazprom, on which Komsomolskaya Pravda used to depend. "Pipelines are not the most stirring theme," he said, referring to the articles which the paper printed to please Gazprom.

Bankers, by contrast, "have enough brains to understand that it's much more profitable to look after the reputation of the paper among its readers," he said.

Nonetheless, Sungorkin expects the bank to call for a favor some time. "I don't deny that in some crisis situation the head of the bank will call us and say, 'Hey, friends, partners, do me a favor, help me out,'" he said. "But first that should be some serious situation, second it should be logical."

One such crisis situation came up immediately after last year's presidential elections. Alexander Lebed, the authoritarian general and favorite to take over the presidency from Yeltsin, was seen as a major threat to the ruling Kremlin elite with which Russia's newspaper owners had close ties.

Lebed had lent his votes to Yeltsin in return for a powerful position as head of Russia's Security Council. Initially, he was portrayed as a hero, but his booming ambition and his loud campaigning against government corruption began to destabilize the favorable business environment in which the president's backers had invested so much time and money.

"Some of the press masters decided that he was too powerful," said Markov.

"They did all they could to discredit Mr. Lebed in a very crude way, and this is going on now," said Zassoursky. "I'm not his admirer, but still I don't think it justifies the vilification of this man."

In August, said Romanova, one deputy editor at Segodnya wrote an article that characterized Lebed as a "farsighted politician."

The article never appeared. According to Romanova, it didn't fit in with Gusinsky's interests at the time.

The editor "didn't publish it someplace else because he didn't want to argue with Gusinsky," she said, adding that she sympathized with the editor's actions. "I'm very afraid to get in a fight with MOST. That's scary."

Corporate investors can hold sway over the press because most newspapers have failed to become profitable businesses on their own. Since state subsidies began disappearing in 1992, producing a newspaper in Russia has become prohibitively expensive.

The few papers that apparently do make a profit are also the ones that fellow journalists name as the most independent: the weekly Argumenty i Fakty, Russia's biggest newspaper with an estimated 47.1 million readers; Moskovsky Komsomolets, a sensationalist Moscow daily with an estimated 9.8 million readers; and Izvestia.

"If a newspaper is profitable, it can afford to be independent," said Sungorkin of Komsomolskaya Pravda.

The average newspaper, said Dzialoshinsky, can cover only about 70 percent of its costs with advertising, subscriptions and newsstand sales.

Zassoursky estimates that a daily newspaper such as MOST Group's Segodnya costs from $10 million to $15 million a year to produce. Komsomolskaya Pravda costs nearly $18 million annually, according to Sizy.

For most papers the biggest problems are high printing and distribution costs. Big printing presses, most of which still belong to the government, are inefficient, set high prices and face little competition: Building a high-volume independent printing operation in Russia, where control of the presses is still a politically sensitive issue, is risky and expensive.

"The government believes that if it doesn't privatize the presses, [the newspapers] will answer to the government," said Sungorkin, adding that Komsomolskaya Pravda plans to spend some of Uneximbank's money on its own press to break free from the government cartel.

In distribution, state-owned Rospechat, direct descendant of the Soviet-era Soyuzpechat, holds a near monopoly and doesn't hesitate to name its own terms and prices.

Attempts to cut costs mean journalists often earn low salaries. At Komsomolskaya Pravda and at Kommersant daily, for example, a correspondent makes only about $350 a month in salary and per-article payments.

Financial problems have led to a lot of breaches of journalistic ethics. In most papers, certain journalists will accept payments to write "to-order" articles that slam or praise people and companies. The practice has become so common that some papers have special departments to weed out hidden advertisements, and readers are frequently interested less in what is written than in who paid for it and why.

"Unfortunately in the Russian press this type of relationship between journalists and companies is terribly widespread," said Parkhomenko. "In public opinion there is an understanding that almost everything that gets printed has been paid for in one way or another."

Even when companies have information with news value, they often must shell out to get it published.

"I saw in the budget of one press conference a line: payments to journalists," said Elmira Mikhailova, head of the Pryamaya Rech marketing communications company. "It was that concrete."

Journalists are not above a little racketeering. "They call us and say, 'We have compromising information about [your clients]. Do you want to rectify the situation?' 'Yes,' we say. 'Okay,' they say, 'it'll cost this much,'" said Mikhailova.

"The journalists themselves have adapted to the situation, they have settled in, they have become comfortable," said Dzialoshinsky. "In spirit, they are hired killers."

Sergei Klyuchenkov, who formerly headed a small agency that specialized in purchasing journalists for big banks, said that back in 1995 there was almost no newspaper in Moscow whose reporters he couldn't buy. The most he ever paid for a story, he said, was $2,500.

"That was a big political article" in a government paper, he said. "It wasn't disinformation, but it was part of a major campaign."

Editors have a hard time stopping the rot: Differentiating honest mentions from paid plugs is a tricky business. Sungorkin of Komsomolskaya Pravda said the most difficult areas are retail goods and entertainment: "You just can't tell if it's really interesting or if somebody bought the journalist."

Here the new owners appear to be playing a positive role. Much as in other sectors of the economy, enterprises that depend on the government, or that lack a clear owner, are more prone to corruption than those in which someone has taken the reins.

"I think that the privatization of the media will lead to a decrease in such paid articles," said Berger of Izvestia. "They are still around, but there are a lot less."

Klyuchenkov, who now works as commercial director of Profile magazine, closed his business more than a year ago, when small-time orders started to run dry. "The main clients we worked with have taken the path of least resistance: Either they buy newspapers or they make agreements with owners and editors," he said.

Today's private press, with private owners, is undoubtedly an improvement over the official party organs of Soviet days.

"A private owner is a live person, or a real corporation visible to the eye, with which you can talk, which you can convince," said Parkhomenko. "It's impossible to convince the government of anything. It's a lifeless, soulless machine."

But seldom can any one newspaper tell the whole story. In this sense, Russian newspapers are similar to their Western counterparts, though their blind spots tend to be bigger.

For example, media barons like Rupert Murdoch have no qualms about flogging their other business interests in newspapers they own. Murdoch has used his newspapers to promote ventures in television, satellite broadcasting and airlines.

The difference is that Western press lords usually have fewer side interests to push than Russian banking and industrial groups.

"It tends to be within the media" in Britain, said Mike Bromley, director of the graduate program in international journalism at City University, London. "There are five big players in the British market and they're all pretty well media corporations."

To a large extent, Russia's press has already been damned for its excesses. Scandals that would rock nations in the West make little more than ripples here: Readers, jaded by a stream of paid articles and political lines, have largely lost their faith in what the papers say.

"No newspaper can say that everyone is stealing," said Romanova of Segodnya. "They can only say that these three are robbers, but this one's good."