Report presented by Tamaz SULADZE (Georgia)
in the name of the Rapporteur: Peter KITTELMANN (Germany)

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EXPLANATORY MEMORANDUM

Introduction

The freedom of the press to publish and disseminate a range of news and information to the public is a corner stone of the democratic system of government. A free and unhindered press is seen to be a mark of the quality of any democratic polity. Theoretically, at least in this respect, every member of society should have access to a range of viewpoints through the ability of all to have access to a multiplicity of different views and opinions that combine into a patchwork of information provided by newspapers in conjunction with other mass media. The idea that the press should be free from external interference is part of a long tradition in democratic countries and is rooted in the history of constitutional democratic structures. As an integral part of accountable government, the press is perceived to act as a fourth estate, which watches over the government of the day in the public interest. It is also seen to be a central vehicle that informs the public about a whole range of public affairs on which political decisions are made within parliamentary structures. This enables citizens to make an informed choice on a variety of public matters and it empowers them to reflect upon, and reason about, decisions that affect public life and the political decision making processes.

The regional press is a neglected area in this respect as it is a crucial part in this framework. The regional press acts to support local government, local communities and keep the citizens informed about a whole range of matters. As the focus on regional politics has grown in recent years with continued support for issues such as devolution, then the regional press can be expected to become an even more important source of news and information for communities.

The report approaches the question of the freedom of the regional press in the context of the economic pressures and influences that are a result of the structural mechanisms of the industry. It analyses the potential threats to pluralism in the regional media and identifies of a number of developments that can be seen to impair the ideal of a plural and diverse regional press sector. It samples a number of countries that employ different kinds of political systems and press models, in order to draw out some wider generalisations about the current position of the regional press.

The Media and Democracy

The notion of press freedom, as it relates to newspapers that has dominated the history of democracies in the West is premised on a fundamental assumption that a patchwork of different proprietary outlets, guided by the demand of the market will reflect the different views and opinions of society. Traditionally, individual choice is seen as best served through a free and diverse market place where ideas and information are exchanged in a public sphere, which is essentially independent of the State and free of State coercion.

These fundamental premises are inscribed in numerous constitutions and the importance granted to the right to free speech is seen as an integral component of an open society. In large scale societies this necessarily entails having mass communication structures that in turn require mediated structures where public communication is channelled through a range of media, and therefore the range of that media, and access to the channels of communication for individuals and groups to express and receive opinions, is a crucial consideration as to the degree that the press are free from constraints and external pressures.

The Importance of the Regional Press

In most studies of the newspaper industry the regional press are largely overlooked by the fact that there tends to be a focus on the national press. However, both in terms of the number of titles and circulation levels the regional press are more widely read than their national counterparts.

Even in what can be considered centralised States such as the UK there is a strong and important regional press sector that has some 1300 regional and local newspapers in circulation. This includes 25 daily morning newspapers, 74 evening newspapers and 19 Sundays, which can be considered regional. There is a further 511 paid for weeklies and 647 free weekly titles that are a mixture of regional, but mostly locally distributed titles (The Newspaper Society 2001). The top selling regional newspapers are predictably tied to the larger conurbations such as London and Manchester and they hold a significant presence in the total newspaper market. In terms of sales the UK regional press collectively constitute an important part of the press market and together with the local press they are certainly equal in scale and scope with national titles. In other countries with more decentralised political structures the regional press is even more central to public life than the national press. Indeed in some countries a minority reads the national newspapers, albeit an elite minority, and the regional press plays out a primary role in the cultural and political life of the regional and local community.

In a strong federal State such as Germany the presence of the regional press is even more significant, and the dominance of the regional press over the national press sector is extremely pronounced. There are ten national titles in Germany, which have a small percentage of the annual circulation of total newspapers sold and distributed. Germany has approximately 337 local and regional newspapers that produce 1570 local issues. With a total circulation of 16.4 Million the local and regional newspapers account for a share of 69 percent in the market. With a daily circulation of 1.7 million the national papers only account for 7.2 percent of the market (IVW 2001).

The Nordic countries share an equally strong market for regional and local newspapers. The daily national press account for only 28 percent of the total circulation of newspapers, while regional and local newspapers dominate the rest of the press market. The market for regional titles in Sweden is also similarly dominant with the regional dailies accounting for 78 percent of the overall market.

The regional and local daily press in France are also one of the main sources of information for French readers with over 60 titles and 410 editions distributed, and approximately 20 million readers and over 6 million copies sold per day. Out of the top ten dailies seven are regional dailies (World Press Trends 2001). In 2000, 8.7 million people read a national daily every day (18.3 percent of French people over 15 years) and 18.3 million read a regional or local daily every day (38.4 percent of French people over 15 years). It is also worth noting that there is some regional specificity: higher readership in Brittany (59.1 percent read a regional/local daily every day) and Alsace (54.9 percent) (EUROPQN 2001).

The regional dailies do not universally hold such a central position and in some cases, for example in the Czech Republic, the regional press accounts for 25 percent of the Czech daily newspaper market, with 75 percent of the market commanded by national titles. It is nevertheless, a significant percentage even if it is not as prominent as in other countries and regions.

The importance of the regional press cannot only be seen in the quantity and scale of its circulation. The regional press has a central function in supporting the regional identity of an area, and is responsible for conveying news about a specific region, where the nationally based press is unable to, due to its focus on national issues. Regional politics, news and current affairs, as well as sport and local events are all importantly communicated through the regional press.

Diversity and the Press

When discussing pluralism in the press two central issues are raised. The first relates to the amount of different sources of information and news and the second to the diversity of the actual content of the available newspapers collectively. The two are related, but at the same time entail two aspects of diversity that need to be partially separated. Diversity of information refers to the nature of the content of a newspaper and the variety of information conveyed through an individual title as well as the information communicated through the total number of titles available to the population overall. The second notion of diversity is concerned with the sources of information and the amount of available actors and titles available to the reader in any one market. Allowing the citizen to have access to a wide array of titles owned by a whole range of proprietors, holding a variety of political and social views competing in the market place, is seen as a crucial area where diversity should be maintained.

In the context of the second principle, which is the focus of this report, two instruments are utilised by democratic governments in order to maintain and support the principal of pluralism. There is negative regulation, which is supported by media ownership rules that stipulate certain thresholds of ownership both within a media sector and across media. And there is positive regulation, most clearly reflected in the Nordic press model where a system of subsidy is employed in order that non-viable economic titles retain a market position and therefore diversity of sources in any one market is maintained (Høst 1999: 12-14).

Market Diversity

On a surface level the amount of titles available on the regional level suggests there is a wide range of newspapers available to local readers and although the amount of available titles has declined marginally in some countries, there remains an impressive number of newspapers available at the regional level, when a national overview is taken into consideration.

The Amount of Paid for Daily Regional Titles 1996-2000

Source: World Association of Newspapers 2001¹

The strongest markets are unsurprisingly the countries with bigger populations or States that have strong regional focus either culturally or politically. The most striking contrast is the strong presence of regional or local daily titles available in Sweden and Norway, considering that both of these countries have much smaller populations than the other States in the table.

Germany achieves the healthiest number of established regional titles, which is partially a result of its history and its strongly regionalised political system that continues to be a central feature in the country’s structure and its large population. The number of titles available in Germany far surpasses that of any of the other countries in the table, except for Russia.

Number of Titles and Circulation of Newspapers in Germany 2000

Source: BDZV/Schütz, 2000

Outwardly the structure of the regional press appears to be generally healthy with a whole range of different titles available throughout the countries studied in this report. However, below the surface appearance a range of other factors come into play that would suggest far more complexities within the structure of the regional press.

Horizontal Integration and Chain Ownership

Horizontal integration is common in all newspaper markets and on the regional market it is even more marked. This is due to both less regulatory instruments that act to maintain pluralism and diversity in the local markets, and more economic pressure on regional markets that do not have natural economies of scale within the markets, which actors operate within.

Horizontal integration is largely achieved through chain ownership and is seen as a crucial strategy to spread certain costs of producing a newspaper. Marketing, organisational tasks and other resources can be utilised in cost effective ways in order that a specific family of newspapers, linked through ownership structures, are able to exploit the resources at their disposal in a manner that achieves important cost savings across the production chain.

The British case is a clear example of this scenario where a few companies dominate the local markets. The Newspaper Society estimates that approximately Euro 11 billion has exchanged hands since 1995 on regional newspaper acquisitions and mergers in the UK. The top twenty publishers in 2001 control 84 percent of all regional and local titles in the UK and 96 percent of weekly regional newspapers. Of the total newspapers distributed in the UK 43 consist of one title only- that is to say that they are not part of a larger family group of newspapers (The Newspaper Society 2001).

In some cases chain ownership of the regional press is also supplemented with ownership links with national publications. As a result of the merger between the leading regional press publisher Trinity and the Mirror group in 1999, Trinity is today part of a company that also owns the national tabloids The Mirror in the UK and in Scotland the Daily Record. The group also has interests in the magazine and new media sector. Although it sold Belfast Telegraph Newspapers to Independent News and Media for Euro 560 million, it remains the key player in the UK regional market.

The regional press in Germany outwardly mirrors the high degree of regionalism in the federal system of government, whereby the Länder enjoy a high degree of influence in the decision making process. To some extent this is slightly misleading as some regionally based newspapers are in fact national newspapers. The Munich based Süddeutsche Zeitung and Frankfurt’s Frankfurter Allgemeine Zeitung are both national rather than regional newspapers and distributed throughout Germany.

Although the amount of titles suggests a great amount of diversity this is also to some degree superficial, as the regional press are related either through ownership patterns, a centralised system where content is produced for regional titles, or titles are linked with one another through an umbrella agency.

The consolidation of regional titles into large regional press groups has also accelerated in France over the past two decades. Most of the time, the dailies, which are incorporated within a group, keep their name and a certain degree of editorial freedom, but their autonomy is only relative. Large regional press groups - about 12 such as Ouest France or La Voix du Nord - can be considered as multimedia companies with interests or subsidiaries in radio, advertising sales as well as other areas. There is also the existence of large regional press groups built around a leading regional title (e.g. Ouest-France, la Voix du Nord, Sud Ouest).

A similar situation arises in other countries and market concentration of ownership through chain ownership is a standard characteristic of the regional newspaper markets in the majority of the countries, which are members of the Council of Europe.

Market Dominance

As a result of the need for chain ownership there is a tendency towards concentration of ownership across markets and more critically within markets, which in most cases leads to a monopoly supply in the regional markets.

The combined circulation of the regional press on a national level demonstrates this point, as a few companies in each of the national markets, control a huge percentage of the overall circulation. An extreme case is the UK where as off July 2001 the top twenty regional publishers own 1086 regional and local titles operating in the UK market- of these titles the combined circulation amounts to approximately 24 million.

Total Number of Daily Regional and Local Titles and Percentage of Total Circulation in the UK 2000

Source: The Newspaper Society 2001

Associated newspapers only owns seven titles; but has the key London market based Evening Standard with sales in excess of 445,000 daily and an estimated readership of 1.1 million. The top five companies therefore account for some 67 percent of all sales of regional newspapers in the UK and the top twenty companies control some 96 percent of the total circulation of UK based regional press. This leaves only four percent of the circulation of regional newspapers across the entire United Kingdom outside the control of the top twenty publishing houses.

The case is not unique to the UK. In Germany the situation parallels the one in the UK with market dominance by a handful of publishing houses- right across the majority of press markets a similar situation prevails, where control of a large percentage of the markets are controlled by a few companies.

Regional Press Concentration in Germany 2000

Source IVW 2000

The IVW uses a different system for calculating the number of titles. This is why the number of titles appear to be relatively low compared to those in the UK. The Ostsee-Zeitung, for instance, owned by Axel Springer-Verlag, has ten local issues, but appears only as one title in the statistics. The German press market today consists mainly of 10 publishing groups that collectively command a market share of 56 percent of sales.

Monopolies and Subsidies

Regional monopolies are also frequent in the regional newspaper industry due to a number of factors. Indeed it is almost standard for a regional newspaper to have a monopoly in a market and it is a rare occurrence, without some form of subsidy scheme, that a truly competitive regional market exists. Even where a subsidy scheme has been adopted monopolies are the norm rather than the exception.

Monopolies on individual newspaper markets leave the consumer without a choice between titles, or more specifically a choice between regional titles. The decision to buy a national or local title remains. However, given that the type of news in the three sectors differs widely in focus it is fair to say that having access to one regional newspaper restricts choice for the consumer.

In recognition of the perceived problem of maintaining diversity of regional newspapers the Nordic countries have a long tradition of supporting the regional press with a subsidy system in order that multiple titles are able to survive in the market and therefore pluralism is achieved and maintained in any one market.²

In the Nordic countries the subsidy scheme is defended on the basis of the recognition of not only the importance of the press in the democratic and public life of the citizens, but also of the failure of the market to achieve the necessary level of pluralism of actors. The general idea of the scheme is to counteract pressures and trends towards concentration and regional monopolies due to the market mechanism by enabling pluralism in market actors. In Sweden the decline of the communities with access to two or more newspapers available to readers in the past 50 years is significant and without the subsidy scheme would be even greater. The scheme was actually introduced in 1969 as a result of the closure of over 50 percent of second newspapers between 1945 and 1965.

Government Newspaper Subsidies (Mil Euro) at Current Prices

Source: Nordicom 2001

The subsidies in Sweden are allocated to newspapers that have less than 40 percent of the regional market share and they account for between 15 and 30 percent of the subsidised newspaper’s revenues (Swedish Institute 1999). The subsidies however, only amount to approximately three percent of total revenues generated by the Swedish press sector, but nevertheless represent an important source of income for some actors in the market. The second newspapers in Norway are also granted subsidies in areas where competition exists and again, as in the Swedish case, subsidies account for approximately 3 percent of overall newspaper revenues.

Despite the subsidies the trend towards monopolies continues and over the past years there has been an increasing move towards one-title markets, as the table below illustrates. Markets with second newspapers appear to have levelled out for the moment, but the increase in one-title markets would suggest that ultimately, given the current levels of subsidies, the increase in regional monopolies is likely to continue.

Regional Newspaper Diversity in Sweden 1999

Source: Swedish Institute 1999

The other Nordic countries employ a similar scheme and there is also an increasing trend towards chain ownership. In Finland the process of consolidation has been further accelerated by the merger in 1999 of Finland’s biggest newspaper publisher Sanoma and the book publisher WSOY and Helsinki Media. Two months before the merger Sanoma acquired the regional publisher Kymmene which has a number of regional newspapers in its stable. The second largest newspaper group in Finland, Alpress produces 31 titles including the leading regional newspaper Aamulehti. The media group also has interests in the television and magazine sectors.

A similar situation is evident in Norway with increased consolidation over the past years. There are today only ten regional markets where competition exists between newspapers, (Norwegian Ministry of Foreign Affairs 2000), which means that monopoly is common in the regional and local markets. There is also strong concentration of ownership in the market with three companies sharing between 55-60 percent of the market.

Even where a scheme is in place to support a second title the maintenance of pluralism largely fails, as the markets remain monopolistic and controlled by a single title. This would suggest that the current level of subsidy is inadequate and has failed to maintain a diverse number of outlets except for a few where multiple actors remain active.

A good example of the pressures towards monopoly is the acquisition of Kölnische Rundschau by the regional market leader DuMont Schauberg that has resulted in all Cologne based newspapers being published in one house. The cartel office that regulates press concentration cleared the take over for two reasons, which demonstrates some of the pressures in maintaining pluralism in the regional press sector. The market leader was the only expression of interest for Kölnische Rundschau, which had been in the red for years, according to its publisher. The option for the cartel office in this respect is to clear consolidation or see the title disappear completely, which in both cases results in the narrowing of actors in the market. Clearance of mergers is seen as the least worst option for the newspaper market in general.

With the knowledge that prohibited fusion often leads to the closure of a regional newspaper the cartel office are caught in a bind between losing a title completely or allowing the title to continue, but as part of a larger and often monopolistic family of newspapers.

In France a similar situation prevails and autonomous titles are rare. Even if, in many cities or arrondissements, French readers have the choice between editions of two competing newspapers these are usually related either to a larger press group or in some cities (e.g. Nantes, Dijon), the two titles belong to the same group.

Most countries do not employ a subsidy scheme and therefore there are higher levels of regional markets with monopoly regional newspapers. In the UK and Germany, despite their different political systems, monopoly is a standard feature of the regional newspaper market.

Foreign Ownership of the Regional Press: Further Expansion East

The Czech press system, like many of the former Communist States in Europe was subject of a major period of transformation, which in the case of Czechoslovakia started with the Velvet Revolution in November 1989. Before November 1989 there was a communist press system that was based on a centralised command system combining censorship, political, administrative and even economic control. The editors of the dailies and magazines were the Communist Party of Czechoslovakia (KSC), mass organisations like the trade unions, youth organisations, other smaller parallel parties and ministries within the government. All media were supervised by the State in regard to finances, ideology and organisation.

In 1989 just before the revolution in Czechoslovakia there were 30 daily newspapers, 18 in the Czech and 12 in the Slovak part. Of the eighteen Czech dailies eight were national and ten regional titles- the regional party committees of the Communist Party edited all of them. Additionally, there were also four evening dailies in the big cities of Prague, Brno, Ostrava and Plzen that were edited by the local city party committees. Press distribution was organised by the State owned PNS service, which was partially privatised after 1990. In 1997 the State sold its last 34 percent share of the company to the press publishers, so today PNS, is still the biggest distributor of newspapers and is controlled by private press groups.

In March 1990, the Czechoslovakian Parliament passed an amendment to the 1966 Press Law which formally abolished censorship and allowed private entities, including overseas investors, to own and edit newspapers. It was only in 2000 that a new press law was enacted in the Czech Republic to replace the 1990 amendment, after protracted political debate. The years following 1989 saw a real boom of newspapers and magazines established after the liberation from State censorship. During this period the number of Czech dailies increased from 18 in 1989 to 30 in 1990, 38 in 1991 (half consisting of regional dailies) and it reached its peak with 76 in 1992, the last year of the Czechoslovak State. After 1992 the number of titles and the amount of editions started to decrease. Rising newsprint costs, which in the summer of 1990 increased by more than 50 percent according to real market prices, and the introduction of VAT levied at 22 percent on newspapers further supported the decrease in titles. All State subsidies for the press were also abolished during this period.

As of 1999 in the Czech Republic there are eight regional dailies (two titles were closed down in 1995) and there are another twelve weekly regional titles (a reduction of 20 percent over five years in both daily and weekly titles). The decrease in the number of titles appears to be a tendency in some of the post Communist States that is also evident, albeit to a lesser degree in Hungary and Poland. At the same time contradictory trends are evident in Slovenia and Bulgaria with a stable plateau being reached after an initial boom and decline.

There are no restrictions on foreign ownership of the Czech media and compared to other countries the Czech republic is distinguished by the degree that foreign companies dominate so much of the press market.
In the autumn of 1990 the middle-sized German press group "Verlagsgruppe Passau" (VGP) which is based in the Bavarian city of Passau, near the border with Austria and Czech Republic, started to acquire regional daily publishing rights and to take over the daily staff of titles that were incorporated into the newly created enterprises.

VGP started in the Bohemian part of the Czech Republic, entering markets in northern, western, southern and eastern Bohemia successfully. In the middle of the 1990s it moved to Prague (Vecernik Praha) and central Bohemia. In 2001 the last independent regional titles im Moravia and two national dailies in Prague (Slovo and ZN Zemske Noviny) were acquired by the group.

In 2001 VGP with its Czech press holding "Vltava-Labe Press" (VLP) controls almost 100 percent of the regional newspaper market and a part of the national newspaper market in the Czech Republic. VGP expanded its reach into Poland in 1994 when it acquired some regional dailies and founded the regional title Polskapresse. In 1999/2000 it moved to Slovakia, where it created the national Grand Press and the regional Petit Press followings its successful Czech model. Ultimately the expansion of the German based press groups into the developing markets directly east of Germany leaves the Czech State without a domestically owned regional press. If the expansion continues into other countries then similar problems to that in the Czech case can be expected to develop.

Freedom and the State

The Russian Federation is the largest country in the world occupying one eighth of the world’s territory, with borders on 16 countries. There are 89 constitutive regions in the Russian Federation with diverse media arrangements and increasingly autonomous styles of government. The development of the media in the Russian regions has without doubt been the site of the most dynamic and dramatic changes in the media scene since the fall of the Soviet Union. Whereas previously, two or three newspapers served most large cities (even the smallest towns had at least one party newspaper), the expansion of the media in large cities is evident from an early point in the process of transition. A variety of new print media and television companies appeared, initially often of a very low professional quality but improving with experience and better financing. Throughout Russia and including Moscow levels of editorial independence depend on patronage and sources of advertising revenue. The relative weakness of the markets outside of the centre makes the regional media even more open to interference.

Nevertheless, the difficult conditions under which the Moscow-based press operate do not necessarily apply to newspapers and periodicals in the regions. Numerous regional publications were launched over the past ten years and a steady decline in circulation can no longer be witnessed for various reasons.

Launching when they did, many titles did not start off with the unrealistic levels of circulation of the older traditional newspapers. Also, local publications were able to take advantage of the shift in power away from the centre (and thus people’s interest in it) and concentrate on issues closer to home (which were of growing relevance over the last decade). They could include local TV guides (generally high on people’s reasons for buying newspapers), local news and human interest and they could produce copy more cheaply with lower costs for distribution. Essentially, they were aiming lower- targeting a limited audience, and therefore less likely to overreach, over employ and over produce. As a result the titles are more efficient and sometimes their operating costs are a fifth of the cost of national newspapers. Perhaps more importantly, they were available regularly, which was by the early 1990s no longer the case for the Moscow-based newspapers selling to the regions. The Moscow papers did eventually overcome this problem (mainly Komsomolskaya Pravda, Argumenty i Fakty and Moskovskii Komsomolets) but by that time they were fighting against cheaper, more locally relevant publications. The response of the Moscow papers has been to create regional variants of themselves, with a combination of articles reproduced from the central paper and articles produced by a local office.

The expansion of major Moscow newspapers by creating local versions of themselves in regional cities began towards the end of the nineties when these publications began to develop a greater degree of financial security, usually through massive investment and sponsorship (similar attempts by the Parisian press to create local editions in France towards the end of the 1980s failed and resulted in the strengthening of the supremacy of existing regional titles). Nevertheless in Russia they created their own coping mechanisms for the disintegration of State distribution and postal facilities by setting up their own distribution networks and private delivery systems. There have been mixed reactions to the movement of the central press towards the regions, with some analysts forecasting a negative impact on local media in terms of loss of advertising and others expecting an improvement in the quality of local management.

Russia is remarkable for the number of regional newspapers that it supports, however infrequently published or fragile economically these are. Research compiled by the Russian media magazine Sreda and Internews in 2000 shows that a city like Saratov, with a population of around one million inhabitants, can support 150 newspapers publishing regularly (out of 450 registered) with an advertising volume for the city itself of around Euro 5.2 million. However, an indication of the level of State involvement with media is that seven out of nine Saratov media holding companies were established by the local authorities.

Advertising and information-plus-advertising publications are the leaders in regional markets in terms of circulation and advertising volume. It is necessary to comment that exaggerating circulation figures is standard practice in Russia because of the desperate need to attract advertising revenue. Attempts by the Russian Union of Journalists to establish an independent body to verify circulation figures have met with difficulty due to the unwillingness of the media to comply.

The success of newspapers in the regions is relative and conditions are not very favourable. Income from advertising is limited; practically all newspapers are dependent on subsidies or other forms of sponsorship, structural facilities are often controlled by local administrations, which also have other levers to ensure compliance. The situation is worse in small towns and rural districts, where advertisers are entirely absent, the purchasing power of the population is even lower and costs for transportation are higher. The most profound problem facing the regional media is their economic dependence.

Newspapers must maintain good relations with the regional or district administrations, as the consequences of confronting or irritating those authorities are many and manifold. The rent on property can be arbitrarily increased, subsidies may be stopped and local printing houses may refuse to print the paper or become intransigent on the issue of payment. Newspapers not dependent on State subsidies generally rely on donations from other sponsors (since economic interests are so closely tied with political interests in Russia, sponsorship inevitably means political sponsorship) and are therefore not independent either. Sponsors and owners typically feel that they have a right to interfere with the editorial policy of a newspaper.

Only a very select group of papers has secured genuine financial independence and can survive on income from a variety of business interests. State subsidies to the press not only tie the newspapers to the local authorities, they also negatively affect the competitiveness of privately owned newspapers since subsidised newspapers can sell at a lower subscription or cover price.

A study conducted by the Russian Union of Journalists between 1999 and 2000 drew alarming conclusions about press freedom in the Russian regions:

“Russia today has no region with a climate favorable to all the stages in the creation of information products. While two regions have favorable conditions for access to information for the press (Yaroslavl and Murmansk Regions) and one region has a favorable profile for both the production and dissemination of information (Moscow), in not one region do these positive factors coincide to produce a comfortable legislative and political mass media sub-climate”.³

Russia’s economic instability, its tradition of political interference in the workings of the media and its fragmented regional State power structures all contribute to the creation of a highly problematic environment for its regional press.

Advertising

Unlike most other items that are exchanged through the market newspapers have a secondary, and in some cases primary market, based on selling the readership to advertisers (the mass media in general share this feature). Advertisers are therefore an integral part of the funding of a newspaper and in this respect the regional press are heavily reliant on this form of funding as a large percentage of revenues generated by the sector are derived from advertisers rather than directly from copy sales.

The importance of the press as a vehicle for advertising is extremely significant. For example in France the press constitutes 41.9 percent of the market share of advertising for all media (television (30.1 percent), outdoor-advertising (11. 6 percent), free papers (8.5 percent), radio (7.1 percent) and cinema (0.8 percent). Within the publishing industry advertising revenues are distributed widely across a number of activities with 24 percent for regional/local dailies, 16 percent for national dailies, 40 percent for magazines, 18 percent for specialised press and a final two percent for the weekly regional press (IREP 2001).

This relationship between advertising revenues and newspapers has an important consequence for the regional press media that further supports concentration and monopolies in the markets.

If two papers are active in any one market a situation will usually arise that unless the two publications have either a very similar audience share, or cater for very diverse markets, then the newspaper with the largest readership will enjoy certain advantages over the second title. This is especially so for regional newspapers who tend to have fairly middle range content, unlike national newspapers where two markets have developed that are distinguished by popular and quality titles.

This has two consequences: firstly the paper that generates the most revenue is likely to have more available funds in order to invest in the already expensive process of news gathering and editing. Secondly and as a result of this advantage the newspaper with the highest circulation in most cases will be more attractive to advertisers than the potential competitor in any one single market. In this situation the dominant title can command a greater rate of advertising revenue per page and reinvest the additional revenues to develop more attractive content (Picard and Brody 1996).

This ultimately creates certain advantages to the dominant title in that it enjoys an initial advantage that can be exploited to extend the market position of the title at the expense of the market share of the competing title. In terms of both circulation and advertising the first paper can exploit the advantage it has in the market place in order to further increase its position- taken to its logical conclusion it would suggest that advertising revenues further support monopolies.

Barriers to Access

The launch of newspapers and the barriers to entry are significant for a number of reasons. Although establishing a regional title is not as expensive as a national title there are still some significant obstacles to new market players. There are certain advantages to being a regional newspaper rather than a national one, as collection of news and information is usually of local nature and does not require expensive services of specialist journalistic reporting. By the same token the high initial investment costs necessary to establish a national newspaper and perhaps more importantly for regional newspapers, the difficulty in establishing a competitor in any one market where a title already operates remains significant.

A fundamental economic feature of the production of any newspaper includes the fact that newspaper production entails very high first copy costs and low to zero marginal costs. This is based upon the fact that in the production stage of a newspaper the large amount of costs goes towards creating what is commonly referred to as first copy. In order to produce first copy a whole range of highly intensive labour processes combine to produce the information included in the newspaper.

Secondly and related is the question of immateriality. This refers to the fact that newspapers are not destroyed in the act of consumption i.e. the consumption of a newspaper by one person does not in any way diminish the opportunity of the next person to consume the same news and information. As the value of a newspaper as a commodity is in the content rather than the paper on which the publication is printed upon this means that once the first copy is completed, extra copies are produced and sold at low to zero marginal costs. In this respect every additional consumer reached by the newspaper is an added consumer at minimum costs. Because this is combined with the fact that the first copy costs are high, each individual consumer reached by the newspapers at marginal costs, offsets the high original costs at little or no extra expense to the publisher.

The key to offsetting these costs in individual markets comes back to holding a loyal readership that on one hand openly purchase or subscribe to the title and on the other can be sold to advertisers. The difficulty that a new competitor has, especially where subscription represents a significant portion of sales, is to capture a consumer base from the existing title. There are new titles that have entered the market, especially in the countries of Central and Eastern Europe where the press industry has developed as a result of the transition from the State dominated media. However, actual success stories in Western Europe are rare both on the national and regional markets. Several attempts to launch a new daily newspaper in Sweden in the 1980s have failed with all but one, a business daily the Dagens Industri achieving success. To a lesser extent the case is the same across the region where very few new titles have entered the regional markets. The most recent establishment of a new title in the German newspaper market was in 1979 with the establishment of Die Tageszeitung. In the UK there is a notable rise in titles of paid for dailies between 1998 and 2000, but the general rule is that very few new titles have managed to establish a market position for themselves.

The case of the Czech Republic where a rapid increase in new titles followed the transition to democratic and free market structures demonstrates how quickly consolidation can take place. The initial growth of publications has been followed by a decline in titles and a high degree of consolidation and market concentration, with German publishing houses exporting their expertise of modern newspaper production to exploit new markets.

This being the case there are exceptions to the general rule. The rise in prominence over the past few years in the trend in the regional markets of the metropolitan-based free sheets that utilise transport networks and highly concentrated public spaces to distribute the title. These titles have no direct costs to the consumer and rely wholly on advertising revenues for funding and they enjoy comparatively low distribution costs as they are delivered in bulk to central points of distribution.

The owners of Metro estimate that the 21 editions, in 15 countries where the title is distributed, command a readership of nine million. In the UK it has become the sixth largest daily newspaper and in the Nordic region, given that the countries have strong regional markets, its market presence is impressive. The title is therefore the world’s fifth largest newspaper in terms of circulation and readership and its important regional strategy makes it a serious competitor to existing regional titles and adds considerable competitive pressure on the current newspaper markets in the regions.

Another interesting development is the growth of the local weekly newspapers in France, (hebdos de pay) which are performing well at the moment (about 250 titles with a total circulation of 1,459 000 copies). About 20 new titles have been created within the last two years. Large regional press groups are closely following this new development and are trying to buy local weekly papers. The regional press group, "La Voix du Nord" has recently bought three weekly papers in its traditional area of circulation. All together, this regional daily owns (alone or in association with other press groups) about a dozen titles in its main market and a few others in another French region. Similarly, the Ouest-France group (through its interest in filiale Plurihebdo) owns about 40 weekly newspapers.

Conclusion

The dilemma facing regulators is the question of whether concentration and the loss of independent newspapers and the consolidation of ownership across the regions best serve the public interest. The choice is often accepting chain ownership or the potential threat of a complete loss of a title operating on the market. Secondly, although concentration should be rightly seen as a threat to diversity there is little evidence that chain ownership actually interferes with editorial freedom. The main pressures on journalists and newspapers are basically about economic survival and sales, which bring with it a whole set of problems for journalists and editors to deal with.

The regional press has close links with the political culture of the nation states, which they operate within. However, despite States such as Germany having a strong federal system this does not militate against the problem of concentration. The fundamental mechanics of the market dictates the structural characteristics of the sector. The evidence would suggest that whatever the political importance granted to federalism or regional democracy the problem of concentration remains the same in most cases. Only the press subsidy model policy adopted in the Nordic regions utilises positive regulatory measures in order to attempt to solve the problem of regional monopolies. Given that the sums granted by these governments are relatively small the trend towards monopoly has not been seriously engaged with and monopolies prevail.

In Russia the boom in regional newspapers and the ties to the State remain a significant problem in the context of editorial freedom. Acquiescence to bodies (both commercial sponsors and regional departments) is a standard feature of the regional press in Russia and although there is an abundance of titles available, whether these can be considered independent is highly debatable given the current climate. It is also highly unlikely that the current amount of titles can be sustained over the next decade.

The idea that monopolies are acceptable in the regional markets is clearly a problem that has to consider the balance between the economic viability of having more than one actor operating in individual markets and the substantive requirements of the relationship between the regional and national press and the democratic system of government. If we are to hold on to pluralism as a source of democratic idealism then clearly there is a great degree of failure in the present system. There are significant barriers to entry for new titles and the degrees of concentration in individual markets are likely to continue without some form of regulatory intervention by the local authorities and the State- in this respect the system employed in the Nordic countries demonstrates that subsidies can be allocated without direct political interference.

Although outwardly the impression of a thriving and diverse regional press sector is evident, the reality is quite different with a few companies dominating the whole sector.
The amount of newspapers operating on the market is of course no indicator of the quality of news that a newspaper produces. It is impossible to actually evaluate the influence of the structure of the industry on the nature of content without some form of comparative content analysis, evaluating the information disseminated by regional newspapers. However, the current trends towards declining titles available on the regional markets added to the tendency towards regional monopolies in the market and chain ownership, would suggest the idea that pluralism should be an integral part of the press sector is currently problematic.

Though the market mechanism certainly has a role to play in the functioning of the press sector, the extent of this role must be critically engaged with. The importance of the communication media recognised in numerous legal instruments in a wide range of countries is undermined by the very fact that pluralism and market concentration act in tension with one another, and at this current point in time concentration and economies of scale appear to outweigh the question of diversity and access.

Most countries are witnessing a decline in newspaper readership, part of a long-term process that creates even more pressure on newspapers and journalists to survive in the market place. New challenges from television and new technologies, coupled with increasing competition from the local and national press would suggest that the question of economic pressure could become an even greater issue in the coming years.

The current structure of the industry would also suggest that a truly competitive market of ideas and information communicated through the regional press has been replaced with chain ownership and monopoly markets. By the very fact that regional newspapers exist in a highly competitive market both with one another (if monopoly has not already resulted) and with other media, the tension between diversity and the structural influence that pushes towards monopolies is unlikely to be reversed without the development of initiatives that support a free and plural regional newspapers industry.

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² For an in depth study of press subsidies in Europe see European Institute for the Media 1997.

³ The report looked at access to information, freedom to produce information and freedom to disseminate information. It can be found in English on the Freepress website at http://www.freepress.ru/win/index1.html.