Papering over the cracks: local mass media adapts to survive

Romania’s mass media industry is going through turmoil: publications are closing down or downsizing, lay-offs are becoming more and more frequent while circulation and sales figures are plummeting. Measures taken recently by press bosses across the board only serve to further underline the drama. BR surveys the scene.

Otilia Haraga

“The mass media is currently at a crucial point in its evolution,” Dan Matiescu, CFO of Intact Media Group and coordinator of Intact Publishing operations, told BR. “The greatest challenge is financing for development. Compared to that, nothing else matters much.”

After two tough years, the local entertainment and media industry has stabilized and is beginning to show signs of recovery, according to PwC’s survey Global Entertainment and Media Outlook 2011.

The industry is predicted to register an average growth rate of 8.8 percent per year between 2011 and 2015. The value of the market should increase from USD 2.5 billion in 2010 to USD 3.8 billion in 2015. This will make the Romanian media and entertainment market the third fastest growing in the region after Turkey (with a 13.2 percent growth) and Russia (11.7 percent). However, in absolute terms, it will remain the smallest in the region.

“Given the wealth of free content available, E&M CEOs have to adapt their business models to capture the shifting nature of consumer demand. The bottom line is that in order to continue to create quality content, and deliver it over the internet, someone has to pay,” said Bogdan Belciu, partner in advisory, PwC Romania.

Last year, the total local advertising spend was EUR 316 million, on a par with the figure five years ago. It dropped by 9 percent across the whole year.
Print has been the worst hit, plummeting 30 percent in 2010 on the previous year, with a EUR 26 million advertising spend that will fall even further this year to EUR 24 million. TV continued to lead with EUR 209 million last year, but will sink to EUR 198 million. Radio will tread water, only decreasing by EUR 1 million from EUR 21 million last year. The only domain that seems to be prospering is the internet, which increased in 2010 by 30 percent on the previous year. Internet and cinema advertising are set to go from EUR 26 million in 2010 to EUR 34 million this year.

It is estimated that the total advertising spend in 2011 will reach EUR 306 million, according to the latest study Media Fact Book, released by Initiative. However, this prediction was made before a new economic crisis loomed from across the Ocean.

In the mass media field in Romania, the downturn is already taking a heavy toll, in the form of owners closing down publications, re-sizing, salary cuts and late payments. Just last week, businessman Elan Schwartzenberg, who in April bought 92 percent of the shares in Realitatea Media from controversial figure Sorin Ovidiu Vantu, called a press conference to officially announce the start of insolvency proceedings for the group. The procedure will last three years and has the aim of “protecting the company from everything that is happening outside.”

“I am the biggest creditor of Realitatea Media,” said the businessman, but did not wish to comment further on how this situation had arisen. He explained that Realitatea was faced with two great problems: debts run up in the past “that are not necessarily justified,” and the economic context forcing the company to reduce its expenses, equipment and headcount to survive. “Our accounts are blocked and the management did not manage to pay the taxes to the state,” said Schwartzenberg during the press conference.

Relations between Schwartzenberg and Sebastian Ghita, owner of Asesoft, who is in charge of the management of the company, are very good, and the latter may even acquire shares in the media company.

Print titles are also struggling. Adevarul, part of Adevarul Holding owned by businessman Dinu Patriciu, has cut its number of pages from 64 to 48. The title lost its leader position in the quality daily category in Q2 this year, with 40,555 copies sold per day, to Romania Libera, with 40,820, confirmed BRAT data.

According to media reports, Adevarul Holding will restructure its local editorial offices, cutting 39 down to just 4, in Bucharest, Iasi, Cluj and Timisoara, to which the other staff will be subordinated. Another 20 journalists from the Bucharest editorial office were made redundant. The firm is also experiencing some cash-flow problems. Last week, general manager Peter Imre announced that salaries would be two weeks late.

One of the most stable media groups on the Romanian market, Intact Media Group, has recently brought all its newspapers and magazines under the umbrella of one single company, Intact Publishing. Jurnalul National, Saptamana Financiara, Fin.ro, Felicia, Good Food, Top Gear and Focus will from now on be published under this brand. Last year, Intact also brought its television channels under the umbrella of one company, Antena Group.
“The main reason is the efficient use of resources, from HR to administrative. Of course, there will be better representation both in the sales and distribution departments via a consolidated package,” said Matiescu.

The only publication that will not be included is Gazeta Sporturilor, because “it has already made a series of important steps in its multimedia development strategy and its inclusion in this new entity would only tone down its rhythm,” he added. The print division of Intact Media Group currently has approximately 800 employees. “We do not intend to close any publication, since this is the aim of consolidation. On the contrary, we will develop and launch new products and not only on the Romanian market,” said Matiescu. However, the group will make new launches rather than acquisitions.”Our group is a greenfield and has developed through organic growth,” he says.

On the theme of acquisition, a major such transaction took place in the industry quite recently, when Ringier announced the total purchase of Edipresse Romania, which included publications such as Elle, Avantaje, Look!, Psychologies, Viva, Întamplari Adevarate, Povestea Mea, Lucru De Mana, Povesti de Viata and Baby, Popcorn magazine and the custom publishing division.

otilia.haraga@business-review.ro

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