Stories about the reinvention of daily newspaper companies are often not what they seem. They tend to involve traditional media groups not so much investing in the future of news as placing their bets somewhere else entirely. Thus, the UK’s Daily Mail Group, and Hearst Corp, in the US, are investing more heavily in business media and entertainment. And even Rupert Murdoch’s News Corp is now generating 35% of its profit and all its growth from digital property listings.
All three of these family-controlled, global companies – with their rich heritage in newspapers – are effectively retreating from the news business. Their diversification strategies are helping to ensure that, when they do eventually exit the legacy operations, shareholders will be happy and no one will be surprised. Perhaps it won’t even be news.
But the real battle is happening elsewhere. In the race to master the technology before tech companies learn how to create journalistic content, traditional news brands are ranged against the likes of Facebook, Apple and Google – and news natives like BuzzFeed and Huffington Post which increasingly look like acquisition targets for either side.
Newspapers to watch
It is a race in which two legendary newspaper companies have become the ones to watch.
First, there is The Washington Post. More than two years after its $250m acquisition by Amazon’s Jeff Bezos, America’s second most famous newspaper has already overhauled the first, The New York Times, becoming the digital leader with 76m monthly uniques. The Post is reinventing itself as a “media and technology company” whose growth has come from a revamped website and mobile apps, content through Facebook, Apple and Google and (of course) pre-loaded apps on Amazon tablets. It is also offering content free through websites of smaller newspapers around the US, in a step toward fulfilling its ambition as a national rival to The New York Times and Wall Street Journal. On the way – eventually – to becoming a global news brand.
Second is Germany’s Axel Springer, whose Bild tabloid (at right is the first issue, in 1952) has long been Europe’s largest-selling newspaper, and which has been aggressively reinventing its print-centric business over the past five years.
As recently as 2009, the Berlin-based company seemed like any other troubled newspaper group whose sliding print advertising and circulation revenues had slashed EBITDA profits by almost 40%. Even strong digital growth had been insufficient to stop the rot. But, five years later, almost everything had changed. During 2009-14, revenues increased by 50% and EBITDA profit by 90%, with margins steady at 17%. This is not how it’s meant to be for a company still best known for its daily newspapers, Bild and Die Welt. The publisher, which 15 years ago was described by the Financial Times as “an internet midget”, is now a hyper-active 21st century digital-led media company. Perhaps one of the world’s best. But it retains an idealistic, almost old-fashioned vision:
“The soul and spirit of the company Axel Springer is journalism. We serve our readers with independent and critical information and advice as well as good entertainment. Through our media offerings we are making a contribution to the strengthening of freedom and democracy.”
It is one of a clutch of family-controlled companies which have long dominated print media in Germany. But – while it is a long way behind the broadcast-to-books giant Bertelsmann – Axel Springer’s digital acceleration has outpaced the magazine-centric Burda and Bauer.
It is exactly 70 years since the company was founded in Hamburg by Heinrich Springer and his son Axel, with the launch off the TV listings magazine Horzu and acquisition of the newspaper Hamburger Abendblatt. Springer’s prestige and profitability were transformed by the 1952 launch of Bild, based on Lord Northcliffe’s pioneering British tabloid, the Daily Mirror. But Bild (“Picture”) became more raunchy and politically right-wing. It has long been one of the world’s largest-selling dailies and is still Europe’s leader, with 2m circulation – even after a 50% decline in the past six years. In the 1980s, it had topped 5m. It remains highly profitable and has often accounted for more than 100% of Springer profits. But it has always been much more.
It is 40 years since Heinrich Böll’s best-selling novel and film, Die verlorene Ehre der Katharina Blum (translation: The Lost Honor of Katharina Blum) addressed Bild’s sensationalism and the political climate of panic over Red Army terrorism in 1970s West Germany. The main character, Katharina Blum, was an innocent housekeeper whose life is ruined by an invasive tabloid reporter. Like allegations that the paper helped provoke the 1968 shooting of Daniel Cohn-Bendit (“Danny the Red”), the story is part of Bild’s apparent notoriety.
More recently, Der Spiegel magazine, described Bild as an “incendiary” publication “which fulfils the role of the right-wing popular party that Germany has never had. In the corridors of the Reichstag, the ministries and also in the chancellery, there is the pronounced tendency to take Bild’s headlines at face value, without further exploration, as a valid expression of the popular mood.” But Kai Diekmann, the tabloid’s editor-in-chief and publisher, denies his paper behaves like an “arsonist”, inflaming prejudices: “We are number one because we don’t just give people the facts, we also talk about how the facts make people feel: if you read us, you discover what holds the country together, what moves people.” You get the point.
Fierce criticism of Bild punctuated the life of Axel Springer. But there were many other facets of the man who fought for the reunification of Germany and, symbolically, built his headquarters overlooking the Berlin Wall, which came down four years after his death. He has also been described by a leading Jewish paper as “The good Murdoch” for his role in campaigning for the reconciliation of Germany and Israel: “Aside from postwar Chancellor Konrad Adenauer, no German played a more significant role in the effort to repair his country’s burdened relationship with the Jews, and to ensure its support for their state, than Axel Springer. Through his newspapers, personal diplomacy, monetary contributions, and many other initiatives, Springer fought an uphill battle to orient German public opinion in favour of Israel, a legacy that his eponymous media empire continues to this day.”
His company’s controlling shareholder is now the 73-year-old Friede Springer, Axel’s fifth wife, who had been the nanny to his two sons. Axel and the 30-years-younger Friede were married in 1978, seven years before his death, which provoked long-lasting gossip, humour, and some litigation.
The newly-public company lurched from one crisis to another in the 15 years following its founder’s death, with a succession of bosses and disastrous strategies. Then, along came its unlikely saviour, Mathias Döpfner. Having studied musicology, literature and theatre science in Frankfurt and Boston, the 6ft 7 inch-tall editor began his career in 1982 as the music critic of the Frankfurter Allgemeine Zeitung. After working as a news correspondent in Brussels – and also as manager of the Winderstein concert agency – he moved to Gruner + Jahr in 1992.
Four years later, he became editor-in-chief of the tabloid Hamburger Morgenpost. In 1998, he joined Axel Springer as editor-in-chief of Die Welt, its prestigious – but seldom profitable – national daily. He sharply reduced its losses. Within four years, the seemingly unambitious Döpfner found himself propelled into the Springer senior management. He became chief executive in 2002 at age 38, not much more than half the age of his predecessor. It was the year after the company managed to make losses of €200m. He set about cutting costs and, in 2004, increased Springer profits by 23%. He also managed to rid the company of its hostile 40% shareholder, the former TV entrepreneur Leo Kirch.
The boss from nowhere
The tall, thoughtful Döpfner, who ranks today as one of the world’s most admired CEOs, could not have seemed a less likely media industry leader back in 2002. The editor’s sudden, fast-track executive career prompted colleagues and competitors to identify the characteristics he shared with the company’s late founder: his passion for music (in Döpfner’s case, everything from Mahler to James Brown), his “non-Jewish Zionism”, and strong personal convictions about almost everything in media and politics.
In 2005, The Economist, with a (sort of) characteristic restraint, reported: “Ms Springer has become extremely fond of Mr Döpfner, German media executives say, especially as his charisma and intellectual vigour remind her of her husband, an intensely political man.”
Döpfner’s occasional forays into the editorial pages also echo those of the founder and have further earned the approval of the widow, who now controls 57% of the company’s shares.
Fourteen years after his surprise elevation, nobody can dispute the success of the CEO who rose to the challenge of turbulent times. A company which had been drifting since the death of its founder has regained its confidence and profitability against all the odds.
In 2014, the €507m EBITDA profits were 12% up on 2013, turbo-charged by digital revenues which had multiplied three times and comprised 53% of the total €3bn revenues. Suddenly, Europe’s most famous newspaper group was a digital company with 72% of its profit coming from “new” media. The once so-German company now derives more than 50% of its revenue from international operations including the US where it has become one of the most active investors in Silicon Valley digital startups. Axel Springer seems to be living the dream of newspaper-centric businesses everywhere.
But that is because the conservative CEO has really been a revolutionary.
Colin Morrison is a director and consultant of digital, media, and information companies, principally in the UK, Europe, and the AsiaPacific. He is chairman of the newly launched SBTV News, an online news joint venture between the (UK) Press Association and the online music platform SBTV.
He was previously CEO of international media and digital companies for Reed Elsevier, EMAP, Australian Consolidated Press, Axel Springer, Future, and Hearst. He has been widely involved in media partnerships with organisations including the BBC, Hearst, Springer, Dennis, Sony, Microsoft, Washington Post, Press Association, and Hachette.
This post was republished with permission from his blog, Flashes & Flames. His views are his own and do not necessarily express the opinion of WAN-IFRA.