Sanoma Media Holding is pulling out of Ukraine

Photo: Facebook Esquire Украина

The cut in advertising budgets dealt a blow to glossy magazines. In January 2015, the last issues of Esquire Ukraine, National Geographic, Harper’s Bazaar, Men’s Health and Domashniy Ochag (Hearth and Home) will be released. This information was posted on the website of the mother company Sanoma Media Holding based in Finland.

“As a result of strategic changes announced on October 31, 2013, Sanoma decided to suspend its operations in Ukraine upon agreement with all of its shareholders and licensed partners,” it reads in the statement.

Marketing Director of UMH Publishing Natalia Boyko says Sanoma Media is suspending its operations in Eastern Europe and Russia. “The company is focusing on more mature markets, such as Finland and the Netherlands,” she explained.

Cosmopolitan Ukraine magazine was also in the portfolio of Sanoma Media Ukraine. The Hearst Shkulev Media publishing house received the licensed right for its publication. “We were granted this right from Hearst. This is a new agreement. We did not buy anything from Sanoma. In Ukraine, we were not interested in any publications other than Cosmopolitan,” said President of Hearst Shkulev Ukraine Viktor Shkulev in an interview for TASS. Starting in February of next year, Cosmpolitan will be published by the Hearst Shkulev Ukraine publishing house, says Boyko.

Loss of gloss

The exit of Sanoma Media Ukraine is an alarming signal for the market. “Glossy magazines have always been a stable segment in which the lowest losses of advertising budgets were observed,” General Director of the Ukrainian Publishers’ Association Oleksiy Pohorelov assures. In the period January-September of this year, data of the Zenith Optimedia Ukrainian advertising agency shows that advertising budgets in print media fell by 32% compared to the same period last year. The cut in advertising budgets dealt the hardest blow to print media – the majority of advertisers reduced their expenses and some even pulled out of the print media market, says Director of Press and Radio of the ADV Group Ukraine Lesya Kostromina.

Pohorelov says the worsening of relations with Russia played a significant role in the reduction of companies’ expenses on advertising. Indeed, the budgets of many international advertisers were distributed by their Moscow offices. “All publications of Sanoma Media Ukraine are ad heavy models that do not withstand the decline of the advertising market. The mother company will not support unprofitable publications. For international media holding companies, business comes first,” said Boyko.

Director of Press and Radio Advertising at the GroupM Holding Company Ihor Romanenko says cheap specialized publications for whom advertising plays a secondary role help large media holding companies survive on the market. “For example, the Burda publishing house puts out the newspaper “I like to cook” with a circulation of 800,000. It is sold for UAH 3 with a print cost of UAH 1. This paper brings in profits even without advertising,” Romanenko says. Such publications are not in the portfolio of Sanoma Media Ukraine.

Slackening competition

Advertisers of Sanoma Media Ukraine will seek a replacement among rival publications. “Readers of expensive high-gloss magazines are a stable and difficult to reach target audience,” Pohorelov notes.

Director of the Cortex research company Andriy Kolesnyk says the transition of advertisers from one segment to another is highly unlikely, though the activation of the flow of advertisers on the Internet is possible. “Advertisers will most likely combine digital (tab versions of magazines) channels and print media,” Pohorelov presupposes. Be that as it may, there will not be a major redistribution of advertisers.

According to data of the Ukrainian Advertising Coalition, the volume of the advertising market in the print media in 2013 was UAH 2.5 bn, of which magazines accounted for UAH 1.35 bn.