Washington Post: no billionaire’s toy
The 2013 announcement that Amazon founder Jeff Bezos had acquired the legendary Washington Post from the Graham family for $250m was exciting news for forlorn newspaper industry executives and for reporters who dusted off their anecdotes about how Lehman Brothers (yes) had once predicted Amazon would go bust. The deal was a thunderbolt for US media which reacted as if, well, Donald Trump had bought the Smithsonian or the British Museum. (Photo of the Post on iPad by Esther Vargas and used here with Creative Commons license.)
Once the dust had settled, it became clear that, however much the investment seemed very small in relation to Bezos’s US$50bn-plus fortune, The Washington Post would not be a mere plaything for the billionaire who has invested in everything from space travel to Uber, Business Insider, and Fundbox. The man whose fusion of e-commerce and content has arguably re-defined not just retailing but also media, has been serious in his time-efficient way of searching for solutions to the seemingly terminal problems of daily newspapers. And he has been enthusiastically investing in the expansion of staff and resources. Last year, it started to pay off.
The Washington Post claimed to have become America’s fourth national newspaper, joining The New York Times, The Wall Street Journal and USA Today, to have added 60 journalists (an 8% increase), and, most striking of all, to have become profitable for the first time in a decade. It increased subscribers by 75% and says it has doubled digital subs revenue. It also doubled its overall readership in print and online.
Bezos is distinctly hands-off when it comes to content and editorials but his fingerprints are all over a strategy that has 80 techies working alongside the paper’s 750 journalists, to produce huge amounts of video, print and digital content.
For the newspaper that made its modern reputation by exposing the Watergate presidential scandal in the 1970s, The Washington Post is making the most of its opportunity with Trump. Reporting has been expanded, not least with a quick-response investigative team, 62 different newsletters and big investment in mobile video and audio/podcasts (built on the success of its 44-episode presidential podcast series). The Post is all over the stories the world is following from Washington and the site has some 80m monthly uniques.
The newspaper, though, is very much still a work in progress. Bezos has ensured his people are working all the time to maximise download speeds and a range of other tech issues. Although Bezos owns the newspaper privately, it is not just Amazon’s launch into video streaming that brings his two main business interests so close together. Recently, the Post signed its biggest contract to sell web publishing tools, mostly hosted by Amazon. The deal, with the Los Angeles Times-parent company, is a boost for the profitable, year-old service, Arc Publishing, which now has 12 clients.
The approach to making money out of tools originally built for internal use is reminiscent of what Amazon did with the data centres that now form the backbone of Amazon Web Services (AWS). The deal benefits AWS, the world’s biggest cloud-computing business and Amazon’s fastest-growing division, which last year grew sales by 55% to $12.2bn. Arc is a neat opportunity to expand into publishing. Alongside Washington Post subs offers to Prime subscribers, it may also point the way towards a global push for the news brand itself. Alexa and Amazon Prime: you’re going to be in the news business.
Schibsted: who guessed?
The Oslo-based company, whose newspapers Verdens Gang and Aftenposten have long been dominant in Norway and Sweden, is the global media success few could have predicted. Schibsted has been a public company since 1989 but its independence is protected by a family trust which remains the largest shareholder.
These past 10 years, the 178-year-old company has dazzled its peers by gutsily using its newspaper platform to a build a world-class digital business. It has moved fast to strengthen its existing businesses and faster still to launch new ones. The strategy came from Rolv Erik Ryssdal (in photo at right), who became CEO in 2009.
Schibsted has growing newspapers-magazines-books-TV operations in Estonia, France, and Spain and nearly-global online businesses. It was, arguably, the first significant newspaper company to realise the potential of becoming the digital disruptor in markets where it had no legacy business to defend. The company now employs 7,000 people in 30 countries across three continents. Last year it increased revenue by 13%, with profit margins reaching 19%. More than 70% is now digital revenue, and digital classifieds grew by 17% in the first quarter this year. It also owns 41% of the 20 Minutes free newspapers in Switzerland, France and Spain.
The vitality of Schibsted can be gauged by two recent successes:
- Shpock (“shop in your pocket”), the ‘flea market app’, has more than tripled to 41m downloads and 12m active monthly users in the past 18 months, principally in Austria, Germany, Italy, the UK, Norway and Sweden. It is on the way to becoming a serious challenger to eBay.
- VGTV, the video channel spun-off from the leading Norwegian daily, now produces more revenue than the seven-day newspaper itself. In 2016, the 70-person VGTV generated $10m, and increased revenues by 51% during the first quarter of 2017 from daily unique audiences of 420k. That and also advertising was up almost 30%. VGTV is getting almost 1m video views – in Norway, which has a population of only 5m. This increasingly effective monetisation of TV-like online video news looks like a perfect role model for media groups everywhere. Especially those, like Schibsted, which realise that the success has been turbocharged by its separation from the newspaper which spawned it.
These fast-moving initiatives are part of the next wave of growth for the once small Scandinavian company that has become such a global force, increasingly head-to-head with its near neighbour in Germany.
Axel Springer: living the dream
The Berlin-based publisher of Die Welt and Bild recently reported EBITDA profit up by 17%, revenues up 7%. It is now generating 80% of its profits from digital and 50% of its revenues from international markets, including the US where it has become one of the most active investors in Silicon Valley startups. Axel Springer is living the dream of newspaper-centric businesses everywhere.
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%. The publisher, which 15 years ago was described by the Financial Times as “an internet midget”, is now a hyper-active 21st century digital media company.
It is 71 years since Springer was founded in Hamburg by Heinrich Springer and his son Axel, with the launch of the TV listings magazine Horzu and acquisition of the newspaper Hamburger Abendblatt. Their prestige and profitability were transformed by the 1952 launch of Bild, based on Alfred Harmsworth’s pioneering British tabloid, the Daily Mirror. But Bild (“Picture”) became more raunchy and politically right-wing.
Bild has long been one of the world’s largest-selling dailies and is still Europe’s leader, with almost 2m circulation – even after a 50% decline in the past seven years.
Axel Springer died in 1985. His company’s controlling shareholder is his fifth wife, Friede Springer. 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 (in photo at left). Having studied musicology, literature and theatre science in Frankfurt and Boston, the 6 ft 7 inch-tall (2 meters) 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. It was the year after the company managed to make losses of 200m euros. 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. Friede Springer now controls 57% of the public company’s shares.
In 2016, Springer made EBITDA profit of 0.6bn euros (+6.5%) on revenues of 3.3bn euros (+4% underlying). Profit margin was 18% from some strong performances:
- World-leading position in digital classifieds for jobs, homes and vacation rentals, especially in Germany, UK, South Africa and France. These revenues are growing organically at 12% and generating profit margins of 21.5%.
- Growing paid-for international media. Business Insider (a mix of free and paid-for services) was acquired for a heady $450m in 2015 – on the rebound from Springer’s abortive bid to buy the Financial Times. The 50% increase in revenues so far this year – and a 30% growth in video views – indicates the gamble is starting to pay off. In just 10 years, BI has grown from a three-person tech blog to an increasingly global news organization reaching a claimed 300m people each month. Springer may have similar ambitions for its mobile news aggregator Upday available across Europe exclusively on Samsung devices.
- Some 430k digital subscriptions for its two German daily newspapers.
- Its adventurous investment strategy in startups including as a major shareholder, alongside Discovery Communications, in Group Nine Media, a millennial portfolio which claims 3.5bn monthly video views. It also has a 50% share of the Brussels-based Politico Europe, which has 1.5m monthly uniques and a weekly print magazine.
The 6bn-euro company has tripled its value in the past 15 years.
The expansion underlines how Springer (like Schibsted) has been able to grow new digital business best by expanding in markets where it had no traditional media to defend. These companies have worked out how to become the disruptors.
Fairfax: Out of the fire
The publisher of the Sydney Morning Herald (SMH), The Age, and the Australian Financial Review is the archetypal story of newspaper decline. For decades, Aussies looking for a house, car or job in the country’s two biggest cities only had to go to the two most profitable and prestigious broadsheet newspapers, the SMH and The Age. Weekend editions once weighed 2kg, some of the heaviest papers published anywhere.
The long-term print classified success bred a familiar complacency. After the inevitable collapse, Fairfax has been widely criticised for passing up early, low-cost opportunities to own what are now Australia’s leading digitals in motors (CarSales), homes (REA), and jobs (Seek). Fairfax executives in the 1990s voted for the continuing supremacy of their print classifieds (once described enviously by Rupert Murdoch as “rivers of gold”) and passed up repeated chances to take control of the emerging digital companies.
The Fairfax brush-off left the startups to be funded, instead, variously by Lachlan Murdoch and James Packer. The fact that those three digital companies together now have almost 10 times the value of Fairfax Media is the well-publicised “revenge” for the new generation of the families which had long fought to control the 17-year-old newspaper group.
Fairfax’s painful recovery from those sleepy “print classifieds will never die” days are now marked by its own high-performing online property site Domain launched from the Sydney Morning Herald to become the number 2 to the News Corp-controlled REA.
It has been estimated that Domain, as a stand-alone site, would be worth more than the value of Fairfax as a whole, which is why the troubled parent company now finds itself the subject of competing private equity bids. The bidders are appetised by the view that the online property success would be greater still if unencumbered by print operations.
Flakey strategies and investor pressure had led Fairfax openly to flirt with the possibility of scrapping its printed newspapers – until someone did the calculations. Having come to their senses and reaffirmed the continuation of print for some years yet, the next Fairfax plan was to propose an IPO for the Domain site. That would have enriched shareholders but left the company with seemingly with only a half-share in a radio group as offering any growth prospects at all. Predictably, the Domain spin-off plan provoked the private equity bids, from the US-based firms TPG Capital and Hellman & Friedman (whose boss is a former chairman of Fairfax).
It might all have been so different. The A$1.9bn Fairfax Media might have been in the same position as Hearst, News Corp, Schibsted et al. But the founding family lost control in 1990 when an errant 26-year-old son son leveraged the business into bankruptcy. The upshot was a succession of ownership tussles involving disgraced Canadian proprietor Conrad Black, Aussie media mogul Kerry Packer, and mining heiress Gina Rinehart.
Twenty-five years of contested ownership, abortive mergers, bungled acquisitions, and six different CEOs would have been challenge enough for a traditional news group even without digital disruption and the loss of its classified wealth. Fairfax had it all.
The once towering media group has found itself under continual pressure from impatient shareholders, who have despaired of the strategic zig-zags. Despite having made more than 2,000 redundancies in the past seven years, the company still looks flabby. Observers cannot understand why Fairfax finds itself unable to make any kind of sustained profit from, say, the 100,000 daily newspaper sales each of the Sydney Morning Herald and The Age (with cover prices of A$2.80 and A$4.40 respectively). As elsewhere, there are even richer pickings at the weekend, and that’s before counting the revenue from pretty impressive digital audiences.
If Fairfax can’t make the Australian Financial Review profitable with 50,000 daily sales at A$4.40, surely someone else will. But that will now be down to the sharp-pencilled whizzes of private equity. A few years of private ownership might now, perversely, give these legendary news brands the opportunity of reinvention away from the glare. Just like the others.
Protected by family trusts
These positive developments at family/trust-controlled news companies (sort of) reflect what Clark Gilbert was saying about the need for traditional media to concentrate on its core relationships, unencumbered by the new digital opportunities. What once were newspaper groups have used their power, profits and audience platforms to create substantial new media businesses. Protected from short-term pressures by dynastic shareholding arrangements and alternative growth businesses, these once great news companies are free to experiment in order to maximise opportunities in a shrinking industry.
Other news companies may be able to secure a future, not least in partnerships with broadcasters, tech companies or digital-only news services. Some might become charities. But it will be a very different news business. The clue is in the way that the ‘news’, which once was the main focus of all these companies, is now mostly way down the pecking order.
So you’re English…
As the ‘inventor’ of national daily newspapers, the UK may again provide some stand-out retreats from global strategies that always seemed to make too much of their supposed ‘advantage’ of the English language. That is how it seems for two more quite dissimilar UK family-trust controlled media companies.
It is exactly 10 years since The Guardian became the first to roll-out a global news strategy which always seemed more a philosophy than a business plan. The free-spending expansion (subsidised by windfall profits from non-newspaper investments) started in the United States, where then-editor Alan Rusbridger built a considerable editorial reputation with his award-winning coverage of Wikileaks and Andrew Snowden. But his New York office, along with an Australia base, may soon become spectacular casualties of The Guardian’s life-saving campaign to halt its £100m annual cash burn – and ensure its survival. Or they may be hived off to the punchy Vice News, with whom The Guardian has a TV joint venture.
The ads-funded global online strategy never made sense for the charity-owned news brand that (even now) could become safely profitable and reader-funded if it gave up the world and got back to concentrating on the UK, where it has more than 100,000 paying (something) members. It might even generate ancillary worldwide digital subs revenue without really trying. The trouble is that, even in its most profitable, print-only days, The Guardian was never a major display advertising medium (most of its ads came from jobs classifieds). How could it have expected to do any better across the world in the digital-ravaged 21st century?
But The Guardian is far from the only British newspaper to have wasted money on hubristic, global dreams.
The family-controlled Daily Mail & General Trust (DMGT, founded 120 years ago by tabloid pioneer Alfred Harmsworth, ancestor of the current chairman and controlling shareholder) earns the majority of its profits from high-performing international B2B media, notably in the US. In that sense, it has secured its future. But the company remains best-known for the Daily Mail, the vociferous mid-market tabloid which is still one of the UK’s most profitable dailies alongside its best-read daily, the Metro free tabloid. This is the legacy news business that the DMGT parent group has expanded away from.
Mail Online boasts a mighty 240m monthly audience for its racy, showbiz-focused news service, which shares the branding but little else with a newspaper which still scares British governments to death. Mail Online has digital teams in London, New York, Sydney and Los Angeles, which pump out 1,200 pieces of content and 800 videos a day. It gets some 1.5bn mobile impressions daily. But the lengthening list of controversies, claims and inaccuracies is clearly hampering its commercial development in ways that underline the difference between a national news service and a global one. It is not too much of an exaggeration to say that some UK politicians would be simply too frightened to complain about exaggerations and worse in the Daily Mail. There’s no such apprehension, of course, in the US and Australia.
The controversies (highlighted by an expensive settlement recently with one Melania Trump) are keeping some advertisers away, in print and online. It is more than five years since Mail Online’s promised breakeven date came and went, amid staffing levels that are much more Fleet Street than BuzzFeed. And Jonah Peretti gets a lot more revenue. The Mail just doesn’t get it.
After 14 years of losses, DMGT (which, memorably, hung on to its UK regional newspapers long enough to lose almost £900m on their eventual sale) might just make a gilded escape from global online news and, perhaps, from the whole of its declining news business. Its claim to have “the world’s largest newspaper web site” is a good selling point, whatever the losses. Divestment could more than pay-off DMGT’s £700m of borrowings, create a war-chest for long-term B2B acquisitions and give shareholders something to smile about. Just watch.
Colin Morrison is a director and consultant of digital, media, and information companies, principally in the UK, Europe, and AsiaPacific.
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. His award-winning Flashes & Flames blog was honoured in the US Folio:100 as “an insightful and entertaining mind in a wobbly industry.”
This post was republished with permission from his blog. His views are his own and do not necessarily reflect the opinion of WAN-IFRA.