Written by MHM Admin

An organisation that offers affordable loans to independent news outlets striving to attain financial sustainability is working on a number of new initiatives aimed at helping media cope with the economic downturn. The help, provided by MDLF, the Media Development Loan Fund, includes reduced interest rates and the development of new strategies aimed at helping media in transition and post-conflict countries manage their costs.

The global financial crisis is threatening to silence independent news outlets more effectively than any government.

The Media Development Loan Fund's (MDLF) Crisis Fund is providing vital support to help clients survive the recession.

MDLF responded to the global financial crisis that broke in September 2008 by providing clients with several forms of assistance.

We have worked with them to develop strategies for managing their costs, collections and debts, and helped them exchange ideas on how to tackle the recession.

As a first step to easing their cash-flow burdens, we also temporarily lowered interest rates on loans and rescheduled principal payments to give them extra breathing space as they adapted to the new economic realities.

But this is not enough. To provide further relief, we launched a Crisis Loan Fund earlier this year that is providing fresh very low-cost loan capital to existing clients to support them through these challenging times.

Impact on clients

Media businesses around the world have seen advertising revenue collapse as manufacturers and retailers slashed advertising budgets in response to falling customer demand and to cut costs.

For many publishers, this constitutes around 50% of their income, while for many radio and TV companies it is their only source of revenue. News agencies have also seen sales fall, as news outlets that buy their services reduce their own spending.

In the worst ‘crisis-affected countries' - Russia, Serbia and Ukraine - the greatest concern is the severe downward trend in both print and broadcast advertising. Most publishing companies have also seen circulation sales fall, though this is largely due to the cost-cutting measure of closing non-profitable titles.

By focusing on maintaining and improving editorial content, over the same period some publishing houses have managed to stabilise or even increase the circulation of their main titles.

Printing houses have also been hit, with several reporting a sharp reduction in orders as customers reduce print runs in response to their own falling circulations. Printing house customers are also cutting back on the number of pages they print per edition and reducing the frequency of publication.

Currency devaluation

Since September 2008, currencies in many countries in which MDLF works have fallen significantly against the dollar and the Euro. The falls were particularly sharp late last year. The Ukrainian hrivna was worst hit, falling by 50% against the dollar in the final three months of 2008; in one week alone in December it fell by 21%.

With newsprint accounting for up to 60% of total costs of some printing house clients, this has led to a massive rise in the cost of raw materials in countries like Ukraine that have no domestic production. There have been similar cost increases for imported ink and plates.

Crisis Fund

Against this backdrop, MDLF established a Crisis Fund for extending new low-cost financing to clients in countries severely impacted by the crisis. The financial liquidity crisis has eliminated all forms of normal trade financing previously relied on by clients, and in the worst affected countries there is simply no alternative source of credit available. Providing access to cheap finance could give our clients a critical edge in surviving the crisis.

Crisis Fund loans may serve a number of purposes including:

• bridging cashflow needs while clients adjust to the new market circumstances;
• substituting for previous trade credit-lines that have become unavailable;
• 'creative financing', such as collective bulk purchases of major supplies, such as ink and newsprint, by multiple clients;
• seizing opportunities afforded by the closing of media outlets that had been subsidised and controlled by the state and by oligarchs.

To qualify, clients must present an anti-crisis plan, detailing the specific steps they are taking to cut costs, make savings and deal with the new economic environment.

The Crisis Loan Fund, supported by a tailored programme of technical assistance, will complement the reprogramming of existing loans that MDLF is also offering.

MDLF believes that these three parallel tracks of support are giving our clients the best possible chance of surviving the global crisis and will help them to face the post-crisis world in the strongest possible position.

Note: The author, Peter Whitehead, is Director of Communications at MDLF.