Article


From traditional print publishing house to diversified media company

by Marc Walder        

How changes in the media consumer market, the advertising market, and technology shaped Ringier Switzerland’s focus — and success.


Click the image to view a larger versionUntil five years ago, the publishing house Ringier Switzerland, a division of the Ringier Group, predominantly produced newspapers, magazines, and ran printing plants. Today, Ringier Switzerland is a diversified media company with three main sources of revenue: its core business, its entertainment division, and its digital business. 
 
This process of transformation was triggered by the insight that the market for newspapers and magazines was increasingly undergoing substantial changes. All traditional media companies are affected by changes in media consumption. The million dollar question is how to gain sustainable profits from journalistic content in the future. Ringier Switzerland chose a diversification strategy to cope with challenges in the media industry. Transformation means change in structure and competencies of employees.
 
Recent developments in media consumer market
 
Most newspapers and magazines in the United States and in Western Europe are experiencing a decrease in circulation. Since 2005, the three leading national paid newspapers in Switzerland lost at least 10% of sold circulation. Some try to win back their readers by means of re-launches. Unfortunately, these are rarely successful. To maintain their sales revenue levels, they are frequently reduced to just one option:  raising prices. This is a measure, however, that cannot be re-applied ad infinitum. 
 
Very few newspapers and magazines show increasing figures. Each particular success may be explained by either high quality combined with a unique value proposition (e.g. Die Zeit, the leading weekly newspaper in Germany) or free distribution (e.g. 20 Minuten, the leading free paper in Switzerland and probably one of the very few highly profitable free dailies). 
 
Overall, the print business is faced with the daunting challenge of creating new revenue streams or, at the very least, maintaining its sales revenues at current levels.
 
For the second time in 10 years, the growth of the World Wide Web is raising the hope that selling to users on the Web might monetise journalistic content. The New York Times’ “metered model” — which allows users to read a certain amount of articles for free before they are obliged to pay — may lead the way. 
 
The future will show whether a large enough consumer segment is prepared to pay for published product on the Web. At the end of the day, every publisher is faced with the choice of offering paid content with subsequent revenue from display advertising on the Web, the theory being that a paywall will lead to less traffic and hence to lower advertising revenue.
 
Smartphones and tablet PCs are spreading around the globe at an incredible pace. The boom of the mobile Internet has allowed the print business to regain the hope that it might finally be able to generate new revenue through digital distribution channels. Sadly, the public's willingness to pay for mobile net product so far primarily applies to games. Unfortunately, to date, there is no sign that publishing houses are succeeding in establishing a long-range business model in the digital world.
 
Recent developments in advertising market 
 
Within media's second essential source of revenue, publishing houses have been hit hard by structural sea changes. The last 10 years have seen a new type of advertising emerge, which proves to be strong competition for traditional advertisements in newspapers and magazines — the Internet, with its display, classified and search advertising. 
 
While such global players as Google and Yahoo dominate the search aspect, publishing houses are mostly involved in display and classifieds. Google is a good example of the complex environment publishers now find themselves operating in. On the one hand, Google generates traffic. On the other, it is a fierce competitor in the online advertising market. This phenomenon may be described as “co-opetition,” as coined by Raymond Noorda, founder of the network software company Novell.
 
Furthermore, the advertising market is subject to economic fluctuations. The financial crisis of 2009 made this very clear. The media industry was badly affected; the crisis led to many layoffs and shutdowns of print publications. 
 
At present, publishers have to face negative impacts caused by the unstable macro-economic situation. Hopefully, the current public debt crisis will not have a disastrous backlash on the media industry as in 2009. 
 
Technology as motor of structural change
 
This fundamental structural change in the print business, both in the media consumer and advertising markets, is mainly a result of technological progress. Internet, broadband technology, and smartphones make it possible to access information anywhere at any time — and often free of charge.
 
Traditional publishing houses offering newspapers and magazines are faced with the challenge of transforming their current business model and placing it on a new and sustainable foundation. 
 
In principle, there are several transformation strategies at our disposal. Ringier has chosen to diversify into new areas of business.
 
Diversification at Ringier Switzerland
 
Ringier Switzerland has been systematically pursuing a diversification strategy since 2009 and keeps developing it further in three main areas of revenue: core business, entertainment, and digital business.
  1. Core business: newspapers, magazines, and printing plants: The largest share of the company's revenue and profit, some 60% overall, is still generated by its core business. This will remain so in the medium run. Despite its investments into diversification, the company has also realised many important projects in its core business.

    The introduction of a newsroom for all newspapers in particular has provided a means of presenting a strong media brand across all channels, 24/7. The newsroom produces a daily newspaper (Monday through Saturday), a Sunday newspaper, and a free daily (Monday through Friday). Apart from these print titles, it also creates content for the Web site and currently nine apps under the Blick brand.

    By implementing the common newsroom, Ringier experienced a move from a de-centralised organisation philosophy to a more centralised approach. Prior to that, editorial and sales teams were split in print and online sections and spread over different buildings. Today, these teams are managed in an integrated fashion, and all work at the same place.

    The development of the core business is focused on expanding Ringier's strong print brands into the digital world. The key challenge will be to establish a viable business model that is partly based on revenue generated from users.

  2. Entertainment: TV, radio, events and services like ticketing and sports marketing: Ringier Switzerland systematically invests in the entertainment sector. Revenue streams and sources of revenue in this business differ from those of our core business. In other words, the structure of revenue has also been diversified. Event ticket sales are largely unaffected by economic cycles. Furthermore, the entertainment sector has various profitable areas of business to offer. 

    Ringier Switzerland holds shares in two market leaders: 

    • Good News, Switzerland's biggest concert booking agency.
    • Ticketcorner, the No. 1 source for ticketing by far.

    As Ringier media comprises large tabloids and general-interest magazines, the business of events, sports, stars, and entertainment is firmly rooted in the company’s DNA. 

    Conversely, a portfolio of local newspapers and political newsmagazines would make it much more difficult to pursue this strategy.

    With the establishment of the entertainment department, Ringier Switzerland aims to exploit new business opportunities.Achieving synergies requires skills in management of networks. In this context, requirements for leaders have changed greatly. Today, a manager at Ringier departments — in core business as well as entertainment — must be able to think and act across the group. The focus is always to create added value for customers — reader, user, as well as advertising clients. 

  3. Digital business: particularly classifieds and e-commerce: The company's third mainstay, digital business, includes platforms for classified ads and e-commerce. 

    Ringier Switzerland is a major shareholder in the Scout24 Switzerland Group, the market leader in online classifieds forcars. With its entry into the digital classifieds market, Ringier invested in a business that is close to its core business. While in the print business, Ringier never managed to make its mark in the classifieds market. Today it is a major player in the digital world.

    With regard to e-commerce, Ringier is growing market share in niches such as its online gift shop, pet care, and travel. Recently, Ringier acquired a majority share in the group-buying business, DeinDeal, Switzerland's market leader in this segment. With its entry into the e-commerce market, Ringier is investing in a strongly growing market. In addition, the wide-reaching titles from the core business provide excellent marketing opportunities.

Results of Ringier’s diversification 
 
After two years, one may say that from Ringier Switzerland’s point of view (apart from financial investments), a diversification strategy also requires change management within the company. Existing structures need to be modernised. At the end of the day, you have to create a new corporate culture and make sure it is adopted in everyday practice for the different companies to interrelate productively. Particular attention must be paid to integration during the post-merger phase as management diversification also entails becoming acquainted with entirely new areas of business. Here, Ringier often relies on joint venture business models.
 
To summarise, Ringier Switzerland is now solidly diversified, thanks to its involvement in transaction-based Web activities and in entertainment, adding to its core business of newspapers, magazines, and printing plants. Ringier has become less dependent on economic cycles and the growth of digitalisation by supporting itself in diverse areas of business. 
 
About Ringier
 
Ringier is a multi-national, integrated media company with headquarters in Zurich, Switzerland, and revenue amounts to US$1.6 billion. Founded in 1833, Ringier is a successful player in the printing, entertainment, and Internet business, carrying print, broadcast, radio, online, and mobile media brands. In its domestic market, Ringier successfully controls all dynamic growth markets and occupies top positions in all major media in the core, digital, entertainment, and printing sectors. Ringier is a wholly owned family firm, still led by a member of the family in the fifth generation. 





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