Former Schibsted IT executive shares industry observations from industry headlines: Based on sound business decisions, two European media powerhouses, Axel Springer and Schibsted, show signs of getting out of the journalism business. Based on a personal goal of becoming an old-school media mogul, Amazon CEO Bezos is jumping in.
I am becoming quite the Berliner.
Last week, I attended the INMA European News Media Conference, where speakers from around the world discussed successful revenue strategies on the Web, in mobile, and in print.
Are we seeing the start of a massive newspaper clearance sale? Or are owners just making place for some new inventory? Here are some thoughts on the matter:
1. The Schibsted and Axel Springer sales are simply sound business decisions, part of a long-term strategy to diversify their investment portfolios. But the sales could also signal a gradual shift away from journalism:
But now the time has come to sell it off, a decision, no doubt, sparked in part by the dire outlook for newspaper circulation in Eastern Europe, which was down some -27% between 2008-2012 (against a world average of -2,2 %).
The sale price?
Estonian Media had speculated about a price tag set by Schibsted of between €20 and €456 million, but the final agreement valued Eesti Meedia at approximately €30 million. In the third quarter of this year, Schibsted will see a loss of around €26 million as a result of the transaction.
Schibsted immediately turned its attention elsewhere, acquiring the Swedish personal finance marketplace Compricer.se.
Schibsted will pay in excess of €15 million for Compricer, where operating profit in 2013 is expected to be around €1.5 million. There will be further payments if the performance of Compricer exceeds certain thresholds in 2014 and 2015.
The move is fuelled by the expectation of significant synergies with Schibsted’s existing personal finance operations. The press release notes that Compricer has a nice strategic fit with the fast-growing portfolio of personal finance-oriented online companies in the group.
It also will benefit from becoming part of Schibsted’s network of Swedish online sites, where the online newspaper Aftonbladet.se and the online classifieds site Blocket.se are the largest traffic machines.
For Schibsted, online classified alone generated some 25% of total group revenues in 2012, yielding gross operating margins (EBITDA) of a healthy 30%, compared to 12% for print operations.
“For Axel Springer AG, the transaction is an additional important step in implementing its strategy to become the leading digital media group.”
Germany may not be as hard hit by declining print circulation as some of the Nordic and Eastern European countries, but last year saw the demise of both the Financial Times Deutschland and the Frankfurter Rundschau.
For years, Axel Springer has set the industry standards for operational excellence, and the group is known worldwide for running tight and efficient print operations. But there are limits to how long a newspaper company can sustain profits by reducing operating costs and consolidating operations.
Der Spiegel reports that most of the print publications Axel Springer has sold off are still profitable, but could face the prospect of further erosion of circulation, readership, and ad sales.
With limited prospect for future growth, Axel Springer could be keen to stay ahead of the curve, selling off prime newspaper real estate while it still fetches a good price in the market.
“We can only be pro-active when we’re in good shape,” Axel Springer CEO Döpfner wrote in an internal e-mail to his staff, reprinted in Spiegel Online. “We will remain on track to becoming a leading digital media company.”
Buyers Funke Mediengruppe, Germany’s third largest newspaper and magazine publisher with a total of more than 500 publications in eight countries, will reportedly pay €920 million for its new assets, and Axel Springer will actually be lending it some of that sum.
The official Axel Springer press release also notes that the parties have agreed to form two new joint ventures for advertising marketing of print and digital media products and retail distribution.
Axel Springer has already made great strides in the digital transformation of its business. In the first half of 2013, digital reportedly accounted for roughly 40% of consolidated revenues, while its contribution to consolidated EBITDA rose to about 45%.
As is the case with Schibsted, Axel Springer’s digital transformation could also signal a shift away from journalism: Spiegel reports that in 2012, about two-thirds of Axel Springer’s digital revenues — some €787 million — came from non-media products. The most profitable units include the careers platform Stepstone, the housing portals Immonet and Seloger, and the price comparison portal Idealo.
So in summary, Schibsted and Axel Springer are making some tough business decisions and priorities as they accelerate their transformation into leading digital media companies.
Some see these recent newspaper sales as a move away from traditional print journalism.
Still, as Forbes magazine notes: Bezos is now completing his transition from Internet brat to a full-fledged media mogul, perhaps aspiring to shadow the likes of William Randolph Hearst and K. Rupert Murdoch, billionaires who have seen owning an influential newspaper (or a dozen) as a shortcut to achieving influence in government affairs.
In some ways, Bezos comes full circle to meet up with the legacies of Axel Springer and Christian Michael Schibsted. But as they may be making a quiet exit from the newspaper business, Bezos is making a noisy entry.
Tor Bøe-Lillegraven is vice president/business consulting at CCI Europe, based in Højbjerg, Denmark. He can be reached at email@example.com.
Every conference has a keynote presentation, that one speaker who connects the dots on a key industry issue and brings clarity to chaos. That is what we aspire to do with the Keynote Blog: identify the top strategic issues facing the news media industry and marshal the smartest people behind them. This blog represents INMA’s “keynote presentation” for the month. Begun in January 2013, this content previously resided in Ideas Magazine; for an archive of past magazine cover stories, click here.