Monday, 3 March 2008

Poster power looms large in Putin’s Russia

Financial News

By Jason Corcoran

03 March 2008

Letter from Moscow

A massive billboard featuring President Vladimir Putin walking next to a grinning Dmitry Medvedev looms large on the plaza leading to Red Square.

The words underneath the image of the outgoing President and his hand-picked successor read: “Together we will win.”

Yesterday’s presidential election wasn’t a question of if President Putin’s protégé would win, but by how much.

A carefully choreographed campaign and a near monopoly by the Kremlin ruling party of television and outdoor advertising almost guarantees Medvedev will be confirmed as the next President of Russia this week.

The image of Medvedev and Putin adorning the scaffolding of the city’s forthcoming Four Seasons Hotel had replaced a Rolex ad featuring tennis player Marat Safin in action.

A Moscow advertising source claimed officials from Putin’s United Russia party had secured billboard space for the elections in locations around the city at well below market rates.

Advertising has become big business in a city where designer brands have become important status symbols for nouveau riche Russians and the wannabes.

Companies spent a record 123bn roubles on advertising in Russia in the first nine months of last year, 24% higher than in the same period last year, according Russia’s Association of Communication Agencies.

Russia’s biggest player in billboard advertising is News Outdoor Group.

Its parent said last year it might sell the company, which owns more than 50,000 ad displays on billboards and bus shelters throughout Russia and the other Commonwealth of Independent States countries. Goldman Sachs has been retained to look at “strategic options”, which could also include attracting private equity partners.

The Moscow City Government claimed the company owed about $15.5m in unpaid fees for advertising space. It said the company has unjustly claimed discounts of up to 90%.

News Outdoor denied an inspection by ministry officials was related to the payment demands and assured customers and partners the incident would have no impact on its work.

Gallery Group, Russia’s second-largest operator recently acquired small operator Gorod Media and is plotting an initial public offering to fund more acquisitions and to challenge News Outdoor’s position.

While other forms of advertising on television and online are growing, the outdoor market in Moscow seems to be reaching saturation point.

Pressure on the industry is due to increase following the Government’s announcement it will create three advertising-free zones by the end of year.

The first zone being proposed is the area around the Kremlin’s embankments and the nearby Cathedral of Christ the Saviour.

Other zones concern the space surrounding the city’s Novodevichy Convent and Kolomenskoye Estate.

This move will require the demolition of thousands of advertising hoardings, which generate their owners an estimated $15m a year.

The operators generally have five-year contracts to operate the billboards and are expected to receive some form of compensation.

It is not yet clear whether the Moscow authorities will preclude Government-sponsored advertising in these zones. Some of the most pervasive advertising over the past few months has been for “Putin’s Plan”, “Medvedev’s Course” and, last summer, for VTB’s “People’s IPO”.

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