Exposing corruption in the Azerbaijani media: the view of a veteran journalist

In a recent investigative report by the Report news agency "Corruption schemes that "escape" the attention of the  “Abzas Media’s” owners", dedicated to the situation around “Abzas Media,” I was attracted by the topic of the financial and economic situation of the media. For me, an experienced journalist who has been studying the economic foundations of the Azerbaijani media for a quarter of a century, this exposure echoes a topic that has remained in the shadows for decades.

The origins of this problem can be traced back to the dissolution of the Ministry of Information and Press and the subsequent liberalization of media registration in 1998. With the newfound freedom, a darker subtext has emerged — the concerted efforts of the authorities to destabilize the financial basis of independent media in Azerbaijan. This deliberate step was aimed at undermining the activities of the media, paving the way for state monopolization.

A striking example of such organized destruction is the death of the  Zerkalo (“Mirror”)  newspaper. Once a beacon of independent journalism with an advertising market of $1.2 million in 1997, it succumbed to a wave of manipulation. This fate has befallen many, illustrating a broader model of suppression of dissent by economic means.

The symbiotic relationship between media viability and economic sustainability cannot be overestimated. The government's strategy to limit advertising revenue effectively deprives the media of vitality. Without the ability to generate revenue, the media market withers, suppressing the emergence of new voices and perpetuating monopoly under the guise of state control.

Notable financing: The Tangled Web

An alarming aspect of this economic quagmire is the prevalence of illegal financing, a criminal act the consequences  of which go far beyond financial abuse. Inflated advertising indicators, disproportionate to the actual reach of the audience, illustrate the distorted economic reality faced by the media.

An illustrative example follows from a study conducted by me in 2009 for the State Support Fund for the Development of Mass Media under the President of the Republic of Armenia on the income of print media, which revealed a clear dissonance between advertising revenue and the number of readers. I submitted the report to the Foundation. But it was not made public because of the depressing results. For example, it turned out that two newspapers from among dozens of media outlets were financed by advertising in the amount of 250-500 thousand manats per year each by two well-known Holdings. At the same time, the daily sales of these two newspapers amounted, according to official data of print distributors, to 25 and 60 readers for each issue of the newspaper. Today's official statistics of the State Statistics Committee reflect distortions, pointing to an alarming dependence on illegal income in the media market.

Call for transparency and reforms

The report article states that 75% of media revenue should come from advertising, and 25% from subscriptions or retail sales. However, the dependence of the Azerbaijani media market on dubious financial flows challenges this balance. In early 2002, as part of a group of editors, I visited Pulitzer's newspaper The St. Louis Post-Dispatch in St. Louis (USA). We asked about the issue of generating the newspaper's income. It turned out that 85% accounted for advertising, and 15% for newspaper sales. When they asked us, in our answer this proportion was reversed. For them it was a shock, but for us it was a way of life.

So, let us start with the golden 1%, as a condition for the development of the market of independent, high-quality media. The international norm that reveals the degree of well-being of the media market is defined within 1% of the share of the media advertising market in GDP. Next, I will not repeat myself, and I will give the article "Press Day: The economic collapse of the media has worsened," which I published for the National Press Day on July 22. By tradition, I have been doing this every year for 20 years and drawing conclusions based on official data, as well as insiders in the pro-government media.

Press Day: The economic collapse of the media has worsened

"In 2022, revenues from advertising services and sales of advertising materials amounted to 138.3 million manats ($81.3 million), by 44.5% more than in the previous year. The share of mass media in the total volume of advertising was 11.6%. Low revenues from the distribution of media advertising in 2022 increased by only 8.9% to 16.1 million manats. The lion's share of media advertising fell on TV and radio companies - 15 million manats.

Since 2019, Azerbaijan has revised the statistics of advertising revenues of periodicals. This category includes income from advertising activities on various notices, printed and audiovisual products. Distributors of advertising in these categories have earned 735.2 thousand manats in 2022. These are about two times less than in the previous year. How much newspapers and magazines have extracted from advertising services is not specified.

This approach does not make it possible to analyze the state of each media sphere. The actions of the State Statistics Committee (SSC) actually distort the picture of the true situation of the media advertising market of Azerbaijan, which has been consistently difficult for more than 23 years.

According to the State Statistics Committee, 33.8 million manats (+5.8%) were earned from the production of advertising information, its placement – 47.9 million manats (+50.9%), its distribution - 56.5 million manats (+76.8%). About 30 million manats were spent on outdoor advertising, which is three times more than in 2021.

Record low share of media advertising in GDP

In 2022, Azerbaijan's GDP in real prices amounted to 133.8 billion manats ($75.2 billion). The share of media advertising in GDP decreased by three points, and amounted to 0.012% at the international norm of 1% of GDP.

From the beginning of the century until 2015, the volume of the Azerbaijani media advertising market in relation to GDP has consistently fluctuated within 0.1%, despite more than 10-fold GDP growth provided by the growth of oil revenues. Subsequently, the gap has greatly increased - this ratio is within the range of no more than 0.015%. This ratio is an important proof of the state control of the media advertising market and the unwillingness of the state to create conditions for economic freedom of the media. Ideally, the domestic media advertising market should be 1.33 billion manats, not 16.1 million manat. But this is impossible a priori.

The reasons for the degradation of the media advertising market

In Azerbaijan, it is impossible to achieve an international norm of correspondence between the volume of the media advertising market and GDP for a number of reasons, both economic and political.

First, it is not profitable for the authorities who are interested in information management and disorientation of society to have a developed and free advertising market, since it will inevitably cause the formation of financially independent, and therefore creatively independent media, as it already was in the 90s of the last century.

Secondly, the energy-dependent economy is not able to stimulate the development of advertising to international standards. The share of energy resources in GDP from 2005 to 2022 decreased from only 67% to 54%, and the economy's dependence on oil continues to be high. 88% of the export structure is accounted for by energy resources. The revenues of the state budget of Azerbaijan in 2022 amounted to 29.2 billion manats. At the same time, the oil sector supplied 48%. This indicates the low potential of real advertisers who are concentrated in the non-oil sector. The main advertising provider, small and medium-sized businesses (SMEs), occupies a niche of 10% in GDP. The government announced an economic development program until 2030 to increase the share of SMEs to 35%, but the program has not yet been adopted. It should be noted that in developed countries, SMEs account for up to 70%, and in some even up to 90%. In developed countries, it is small and medium-sized businesses that act as the backbone of the economy and the driving force of advertising.

Third, Azerbaijan, as an authoritarian state, is not interested in developing a free economy, free trade and free competition. Economic freedom inevitably leads to individual freedom, freedom of speech and, finally, to political freedom. It is no coincidence that the undermining of the independence of the media in Azerbaijan began with the crushing of their economic foundations, economic self-sufficiency.

Fourth, the "gray economy" of Azerbaijan forces most potential advertisers to conduct their business as much as possible in a hidden mode, in a semi-legal state, so as not to attract excessive attention of fiscal authorities.

Fifth, due to the above reasons, the culture of advertising has been practically destroyed in the country. Even business entities in need of them do not know about the power of its influence and consider it a burden.

Sixth, the advertising market is controlled and managed. The state itself determines to whom and how much to give advertising money. Basically, the flows are directed to controlled media.

Financial dependence of the media

We know the amount of legal funding for pro-government media. It was in the range of 58 million manats last year, of which 34 million and 17 million manats respectively account for state television and public TV. However, given the total dominance of the pro-government media, their staff and illegal salaries, we can say that we are talking about illegal subsidies for tens of millions of manats.

Media financing from the State Budget in 2022 (AZN)

Note. The budget of the Media Development Agency is not specified separately in the state budget for 2022. It is part of a group of public legal entities (culture, art, information, physical education, youth policy and other activities), which have been allocated 53 million manats in total. Is it unknown to whom and how much?

Not a rosy prospect

The media calendar year 2022-2023 (22.07.2022-22.07.2023) does not bode well for the development of freedom of speech in Azerbaijan. The introduction of legislative restrictions on media activities, arrests of journalists, fines, restrictions on access to information indicate that the authorities remain committed to the policy of control and management of the media space."

Even if we consider, for example, that advertising is broadcast only in pro-government media, it is still clear that this money is hardly enough only for the content of one online media, such as Report. What about the others? Who finances the media and how, and from what sources?

It is the responsibility of the media, especially such as Report, to sort out the intricate network of media financing and identify sources that support journalistic activities. Transparency in income generation is not just a journalist's responsibility, but a necessary condition for the development of a reliable, independent media market.

While allegations of corruption continue to be heard in “Abzas Media,” the need to create a transparent and economically sustainable media market is becoming more and more obvious. In pursuit of the truth, journalists should not only report on corruption, but also be tireless supporters of the economic strengthening of the media institutions that underpin a dynamic democracy.

P.S. Why does the Report, which broadcasts articles in three languages (Azerbaijani, English, Russian), publish its revelations only in Azerbaijani and Russian? But what about the English-speaking audience, to which the revealing articles are mainly addressed?