FOCUS: Russia’s law on true e-stories likely to hit news market, not cash flows

By Yekaterina Yezhova

MOSCOW, Jan 16 (PRIME) -- From now on popular Russian online news aggregators must check credibility of socially important information they publish under a law valid since January 1. Analysts said the move would not seriously hurt revenues of Internet companies, who said well prepared for the initiative, but the law could retard redistribution of the news market.

“Web users have basic needs in communication and information search. We check our email every day and look who’s ‘liked’ us every 10 minutes and cannot get home from a bus stop without the navigation app,” Finam analyst Leonid Delitsyn told PRIME.

“The Internet industry is strongly consolidated, and most of the services are in the hands of few companies. By showing news headlines, portals render additional services to users – they inform, entertain and guide.

“Users click the headlines and quit portals for a moment, but mass media don’t have a loyal audience, they have readers just for a few moments. It’s the portal that keeps the flock. Looking closely at data, we can see that regular audience of Internet mass media hardly exceeds their staff number and they have millions of readers thanks to aggregators and networks.”

The law bans news aggregators with daily traffic of more than one million users from publishing calls for terrorism or its public justification, state secrets or materials promoting pornography or violence. The portals must check credibility of publicly crucial information, but are not liable for direct quotes from mass media.

The aggregators must keep published stories and data on sources for six months and provide access to this information to the communications authority.

A spokesperson for Internet behemoth Mail.Ru Group, offering news aggregation among multiple services, told PRIME that “we’ve prepared for the law’s coming in force, and nothing will significantly change for users.” No further details were disclosed.

Yandex.News, a news service of Internet incumbent Yandex, introduced some legal additions to terms of cooperation with partners in order to comply with the law and suspended publication of materials of the mass media that had not signed the updated agreement. Yandex.News started testing the revised mode of work in late December 2016.

Delitsyn of Finam said Internet companies would unlikely abandon the news business despite the law, which certainly makes the aggregation process less attractive for them as expenses will rise, though not dramatically.

“They’ll have to hire lawyers to elaborate necessary procedures, editors experienced in such work and moderators for fieldwork. The companies already employ thousands of people, and extra personnel could raise the staff by a tiny number. Mark Zuckerberg in Facebook tries to tackle the matter via partnerships with media holdings, which are experienced in settling similar issues,” the analyst said.

When investors think of buying shares of Russian companies on NASDAQ or the London Stock Exchange, they keep in mind, first, oil prices; second, specific Russian markets; third, global high-tech. Now the main factor, which analysts are trying to assess, is the change of the U.S. administration and a potential revision of relations with Moscow, Delitsyn said.

“That is why possible losses of Internet companies from an internal law are paid much less attention in outlooks and researches than, let’s say, to woes of the U.S. high-tech, whose labor costs may increase,” he said.

“Besides, news aggregation is far from being the core business of Russian Internet leaders, and their incomes from it are not high. The law on aggregators in general slows down the technological redistribution on the news market, where news producers suffer losses, while online algorithms earn profits. Thanks to a tougher regulation, the niche is becoming less attractive for big companies. However, it does not mean that nobody can work here.

“In theory, Internet giants could license their news processing technologies out to mass media or various networks, which will aggregate news, check credibility of reports and hold themselves liable, which each of them already does for their own content.”

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