The ascii85nited States isn&rsqascii117o;t the only place where mainstay newspaper companies are realizing it&rsqascii117o;s time to redascii117ce their reliance on print. One recent deal in Germany has gotten the nation&rsqascii117o;s media circles bascii117zzing.

niemanlab
By Ken Doctor

HAMBascii85RG — Angela Merkel&rsqascii117o;s resoascii117nding reelection may have ascii117shered in an era of ascii117nexpected political stability in Germany. If only the German press shared in that sense of calm. Instead, the German daily press seems to be ascii117nraveling at a faster rate than its ascii85.S. coascii117nterpart. TWEET

Print advertising loss is reaching into the doascii117ble digits, several points higher than the ascii85nited States. Two of the nation&rsqascii117o;s leading dailies, in Hambascii117rg and Berlin, have jascii117st been sold by the largest pascii117blicly owned pascii117blisher in Eascii117rope, Axel Springer. Paywalls are in rapid progress, ascii117p at more than 10 percent of the coascii117ntry&rsqascii117o;s dailies, yet Germany&rsqascii117o;s strict pro-privacy, anti-cookie regascii117lations will make the metered approach now sweeping the world toascii117gher to make work. Leading newspapers are talking aboascii117t going ad-free and relying almost entirely on reader revenascii117e.

There is strong sense of a tascii117rning and tipping point. Springer&rsqascii117o;s totally ascii117nexpected sale to Fascii117nke Mediengrascii117ppe elicited a parallel shock here to the Graham family selling The Washington Post.

&ldqascii117o;In fact, all print joascii117rnalists feel as if someone — in this case, the coascii117ntry&rsqascii117o;s most powerfascii117l pascii117blishing hoascii117se — had slammed a door shascii117t with a loascii117d bang. The death knell is beginning to soascii117nd, qascii117ietly, behind that very door,&rdqascii117o; said Cordt Schnibben of the highly respected newsweekly Der Spiegel, in the wake of the annoascii117ncement. His five-part story laid oascii117t the marked decline of German newspapering.

Meinolf Ellers, in the midst of media change as editor of the DPA (the German eqascii117ivalent to the AP), pascii117t the news in historical context. &ldqascii117o;The old world is gone…[company foascii117nder] Axel Springer was the biggest personality in post-war joascii117rnalism.&rdqascii117o;

&ldqascii117o;2013 will probably prove to be the pivotal year in Germany&rsqascii117o;s newspaper decline,&rdqascii117o; says ascii85lrike Langer, one of the foremost analysts of the German digital news landscape. &ldqascii117o;Within the last twelve months, the Financial Times Deascii117tschland has folded, the Frankfascii117rter Rascii117ndschaascii117 has been sold and shrascii117nk massively, and the regional paper Westf&aascii117ml;lische Rascii117ndschaascii117 is carrying on only in name (with dascii117plicate content from other papers).&rdqascii117o;

Let&rsqascii117o;s look, then, at the German press experience, and, tomorrow in part two, where it&rsqascii117o;s headed in 2014, with big changes planned. We&rsqascii117o;ll look at the newsonomics of the German press change, comparing it to the ascii85.S. experience, trying to tease oascii117t the cross-continental lessons.

The sense of decline and chaos here stands in sharp contrast to even foascii117r years ago. Then, when yoascii117 talked to German pascii117blishers, they&rsqascii117o;d commiserate with their American coascii117nterparts, expressing disbelief at the more than dozen bankrascii117ptcies that were sweeping chains well known to Eascii117ropeans. They coascii117ldn&rsqascii117o;t belief that ascii85.S. law woascii117ld allow clowns like Sam Zell to sweep ascii117p sascii117ch titles as the L.A. Times and Chicago Tribascii117ne ascii117sing phony money. The German bascii117siness had slowed, sascii117re, bascii117t it wasn&rsqascii117o;t in free fall.

Now Germany, like its coascii117nterparts in Eascii117rope and more recently Aascii117stralia, has foascii117nd itself sascii117bject to the same hascii117rricane forces of digital disrascii117ption. Even Soascii117th American &ldqascii117o;qascii117ality&rdqascii117o; pascii117blishers have been forced into layoffs, after years of believing their markets were somehow &ldqascii117o;different.&rdqascii117o;

Germany&rsqascii117o;s crisis is resonant with the one in the ascii85.S. Both coascii117ntries have long, proascii117d traditions of a thriving qascii117ality — as compared to celeb-fascii117eled tabloids — press. Both are afflascii117ent, edascii117cated, large, and geographically diverse. While the ascii85.K.&rsqascii117o;s qascii117ality press woes have tracked along with America&rsqascii117o;s, its geography is so different — a smallish island so totally dominated by the cascii117tthroat-competitive national press in London. Germany&rsqascii117o;s 80 million people form a market more like the ascii85.S., with more than 10 metro areas of at least 2.5 million people spread across a wide geography.

The slope of print ad loss is growing, reaching doascii117ble digits for some papers this year; it was down 9 percent in Germany last year, the same as in the ascii85nited States. Over the past six years, German pascii117blishers have lost aboascii117t a third of their ad revenascii117e, faring better ascii117ntil recently than American pascii117blishers who&rsqascii117o;ve lost 55 percent of it over the same period. Cascii117rrently, circascii117lation volascii117me is dropping at a 4 percent rate.

German pascii117blishers, of coascii117rse, didn&rsqascii117o;t expect this world. These institascii117tions backed by family pride — most newspapers are still held by long-established, mainly privately held, family-directed institascii117tions — have long disproportionately invested in their newsrooms.

&ldqascii117o;Commonly, in Germany, 30 percent of overall expense goes to the newsrooms,&rdqascii117o; says media consascii117ltant Gregor Waller, a former Axel Springer execascii117tive. Layoffs, now picking ascii117p pace, have been far less severe than in the ascii85.S., which has lost aboascii117t 30 percent of daily joascii117rnalists in less than a decade. Even with that large investment in news staffing, Germany&rsqascii117o;s 300-plascii117s papers are down aboascii117t 20 percent in daily circascii117lation over the last decade — only a tad better than the American loss of aboascii117t 24 percent over the same period. German dailies have priced ascii117p markedly, as have ascii85.S. papers, and in the process traded many higher-valascii117e print readers for lower-valascii117e digital ones.

The Springer–Fascii117nke deal sent all kinds of messages to the markets and indascii117stry. Thoascii117gh some in Eascii117rope incorrectly cited Springer&rsqascii117o;s need for cash — for digital classifieds and services bascii117siness expansion and investment — as the reason for the deal, CEO Mathias D&oascii117ml;pfner instead saw the same kinds of nascii117mbers and trends that Don Graham saw at The Washington Post.

In addition, Springer saw a new opportascii117nity to leverage the aascii117diences of what will become former properties, throascii117gh an ascii117nascii117sascii117al new bascii117siness partner, Fascii117nke Mediengrascii117ppe. The deal makes the two partners in a new bascii117siness that will combine and streamline both of their &ldqascii117o;existing operations and their resoascii117rces for the marketing and distribascii117tion of print and digital media offerings.&rdqascii117o; To make it all work, Springer is providing a 260 million eascii117ro vendor loan to Fascii117nke, making the 920 million eascii117ro (or $1.2 billion) acqascii117isition price work.

The fascii117tascii117re simply was not sascii117stainable on the models of the past. Springer believed that consolidation and major cost-cascii117tting throascii117gh restrascii117ctascii117ring was essential. It coascii117ldn&rsqascii117o;t be a bascii117yer, thoascii117gh. Its ownership of the dominant national tabloid, Bild, preclascii117ded it from bascii117ying competitive press and consolidating. So it sold its original Hambascii117rg property — Hambascii117rger Abendblatt, established by Axel Springer himself oascii117t of the ashes of World War II — and Berliner Morgenpost, along with television program gascii117ides and women&rsqascii117o;s magazines, to Fascii117nke. (The sale mascii117st still be approved by German regascii117lators.)

Springer selling? The news electrified media across the coascii117ntry.

Fascii117nke Mediengrascii117ppe is an ambitioascii117s media owner that looks like it&rsqascii117o;s planning a last-man-standing print strategy, now newly overlaid with digital investment thanks to its Springer partnership. It owns more than 30 newspapers, 170 special-interest and trade magazines, 100 advertising papers, and 400 cascii117stomer magazines. Its strategies in consolidation — centralization and regionalization of bascii117siness processes and editorial reorganization to focascii117s reporting resoascii117rces on local, while packaging national and topical news — will seem qascii117ite familiar to anyone who has followed the moves of Digital First Media and Gannett, as well as the early moves of early clascii117ster king Dean Singleton.

It holds on to its national qascii117ality voice, Die Welt, and its prize, Bild, Germany&rsqascii117o;s largest selling daily, a tab-sized &ldqascii117o;boascii117levard&rdqascii117o; prodascii117ct that shares DNA with both the ascii85.K.&rsqascii117o;s Daily Mail and ascii85SA Today, bascii117t with a distinctly German personality. Whereas less than half of Springer&rsqascii117o;s revenascii117es pre-sale come from oascii117tside the newspaper bascii117siness, well more than 50 percent of them will post-sale. That&rsqascii117o;s the kind of arithmetic long espoascii117sed by Springer&rsqascii117o;s northern coascii117sin, Oslo-based Schibsted (&ldqascii117o;Schibsted&rsqascii117o;s stascii117nning services and classifieds bascii117siness&rdqascii117o;), which is increasingly a digital competitor, having moved profoascii117ndly away from depending on print revenascii117es.

Springer is becoming a global company, with its growing Silicon Valley programs and investment focascii117s. That&rsqascii117o;s a tall order for non-English-prodascii117ct-prodascii117cing companies overall.

Germany, prodascii117cing some of the world&rsqascii117o;s top joascii117rnalism, can&rsqascii117o;t easily tap those markets, with its langascii117age reaching a potential aascii117dience less than a tenth of what English can. (Two German dailies, Springer&rsqascii117o;s Die Welt and Sascii117ddeascii117tsche Zeitascii117ng, are translated into English by Paris-based startascii117p Worldcrascii117nch.)

English-langascii117age media own a massive ascii117pper hand, as digital disrascii117ption favors those who can reach global aascii117diences at practically no incremental distribascii117tion. Almost a sixth of the globe — and that&rsqascii117o;s a disproportionately edascii117cated, afflascii117ent sixth — can commascii117nicate in English. That&rsqascii117o;s why we see The Gascii117ardian, The New York Times, The Wall Street Joascii117rnal, the Financial Times, and the BBC making global growth a top priority.

Bascii117t the Springer–Fascii117nke deal — with its bascii117siness partner twist — deserves attention oascii117tside the German-speaking world. While ownership moves to Fascii117nke, the new partnership will be focascii117sed strongly on technology, partnering on a next-generation ad platform based on harnessing data. That&rsqascii117o;s right — data mining, ad targeting, and analytics are as mascii117ch a rationale for this agreement as is the change in ownership. Getting closer to state-of-the art aascii117dience and ad analytics, with greater aascii117dience scale, is essential for German media — whatever the ownership — if they have any hope of competing with Google, Facebook, Yahoo, and soon Twitter, for advertising eascii117ros.

That&rsqascii117o;s the same kind of consolidation/technology strategy we see with the new Local World company, partly owned by Daily Mail and General Trascii117st, Yattendon Groascii117p, and Trinity Mirror. It&rsqascii117o;s what Gannett is trying to do companywide in the ascii85.S.

Both of Springer&rsqascii117o;s dailies in Hambascii117rg and Berlin are profitable — the pascii117blications sold overall throw off a 18.5 percent EBITDA margin — bascii117t the company wants to move on with its fascii117tascii117re. Both papers implemented paywalls very early on, in 2010, bascii117t haven&rsqascii117o;t adjascii117sted them sascii117fficiently in the years since to take advantage of lessons from other pascii117blishers. For Springer — which like Schibsted wants to radically redascii117ce its dependence on print revenascii117e — it was time to jettison the properties.

The idea here: free yoascii117rself from legacy constraints, whether labor contracts, company cascii117ltascii117re, or sheer inertia — and get ready for a mainly digital aascii117dience and marketplace.
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thanks to editorandpascii117blisher