Russia’s Ad Market Explodes in 2005. New Law Puts On The Brakes.

Michael Hedges - February 23, 2006

Ad spending in Russia passed US$ 5.1 billion in 2005, at the explosive rate averaging 30% in each of the last three years. Legislation now passed its second reading in the State Duma might bring an end to the seemingly endless TV ads, billboards on virtually every building and, of course, spam, filling Russian computer screens and threatening mobile phones.
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Figures cited by the Russian Association of Communications Agencies (RACA) show internet ad spending jumping 71% to US$60 million, TV up 37% to US$2.33 billion and spending on outdoor advertising – including nearly all side of every building – growing 28% to US$910 million. Radio advertising increased to US$300 million and spending on print ad rose 16% to US$1.39 billion.

Total ad spending in 2004 was US$ 3.91 billion and the rate of increase actually slowed to 28% in 2005 from the 33% increase in 2004 and 31% increase in 2003.

“The process is absolutely healthy,” said RACA vice president Vladimir Yevstafiev, quoted in Kommersant. “It is not the slowdown but rather enhancement of promotion market, which has neared the healthy-growth condition.”

In the face of all this good news for Russian media, the State Duma proceeded to pass on Wednesday (February 22), with large margin, arguably the most sever restrictions on advertising quantities. The new Act on Promotion radically cuts the amount of ads Russian TV viewers see to 15% of a station’s daily output, 20% of any hour with ad breaks no longer than 4 minutes. Already advertisers wait in line for available minutes on Russian TV. Now they’ll wait longer and, of course, pay more.

Video International and NTV-Media, the dominant Russian TV ad sales houses, greeted the new law by announcing contractual obligations after July 1st  2006 – the laws effective date - could not be guaranteed. “The rise in prices will be 10 percent to 20 percent in the second half of 2006,” said Sergey Vasiliev, quoted in a separate Kommersant article, who added that 80% of 2006 airtime had already been booked, though only 5% pre-paid.

“We won’t be able to execute obligations to advertisers and will have to reconsider all contracts,” moaned NTV-Media General Director Sergey Piskarev. In December both Video International – which sells time for TNT, among other channels – and NTV-Media announced “supply and demand” price increases of 30% for 2006, 26.7% in 2007 and 25.1% in 2008.

Raging demand for TV time in Russia continues unabated. Increased prices and decreased supply mandated by the Act on Promotion is likely to drive advertisers with less than gargantuan budgets to other media. Although internet advertising is increasing rapidly the new Act limits email ads to opt-in subscription lists. Vehicle advertising will be banned from 2008 under the new Act. Billboards on public buildings will also be restricted.

Also banned will be “umbrella brands,” which previously allowed banned categories – like tobacco – surreptitious exposure.

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Russian Upper House Votes for Ad Rules – March 5, 2006

All that remains for tough advertising restrictions to become law is Russian President Vladmir Putin’s signature. Television ads are the main target, limiting the amount of ads per hour and the length of ad breaks.

The Federation Council, Russia’s upper house of parliament, on Friday (March 3) passed changes made by the lower house – the State Duma – a week earlier.

Widely viewed as a populist signal from legislators, the law will curb the overwhelming cacophony of ads in all Russian media. TV ads will be limited to 20% of any given hour in 2006 and 2007, further reduced to 15% in 2008. Ad break length will be cut in half to 4 minutes. The new legislation replaces rules that allowed ads to fill 20% of a broadcasters day, without regard to hour, and ad break length limited only by fear of chasing away viewers.

Ads in live radio and TV sports programs can appear only during natural pauses and only if they do not “result in a loss of substantial information.” TV sports program producers fear the restrictions and out-right bans of alcohol and tobacco ads during prime time, including other products using brand names of alcohol and tobacco products, will cut the number of programs produced. "This law forbids beer companies from publicly supporting Russian sport,” moaned Gazeta.ru.

Ads in children’s TV programs face even tighter restrictions. Ads will only be allowed at a programs beginning or end with breaks no longer than one minute for a 15 minute program. “Such programs will cease to exist,” said TV director Yuri Belenkiy, quoted in Gazeta.ru. “In the absence of sufficient advertising, the state must give enormous grants in order to preserve television for children and adolescents.”

Wrong Boat on Russian Billboards Blamed on “Incompetence” – February 26, 2006

Somebody from the art department could be sent packing after 20 billboards honoring the Russian military for Defender of Fatherland Day showed not a Russian Navy Slava class vessel but the US Navy battleship Missouri. The posters were taken down Wednesday (February 22), just hours before the annual military parade. So, the local Moscow media had a field-day.

“Incompetence” roared the Defense Ministry. “We are baffled by the Russian media’s allegations that the Russian Defense Ministry may have ordered the advertisements.”

“The Missouri does in fact glorify the Russian military,” explained Vladimir Makarov, head of the Moscow Government Advertising Committee, quoted by news agency Rai Novosti. He added that the artists had symbolic intent – a cool boat, for example – rather than any specific vessel in mind.

ftm is astonished that the Moscow media could have even seen the billboards…for the billboards. The RAI Novosti building is covered by a 100 meter tall Motorola cellphone. Mr. Makarov’s office building offers a 24 story billboard for the MTS mobile phone company. The caption reads: “You’re The Best!”