Germany: Plight of the print barons

The new economy inflicted serious damage on Germany's publishing behemoths, but the companies that responded the fastest are bouncing back, Irmella Schwab writes.

Not many businesses avoided choking on the poison chalice of the new German economy. But few suffered hangovers quite as nasty as those experienced by the country's publishing behemoths. Executives could only watch in horror as the economic crisis made advertisers disappear. The sharp dip in sales that followed made the headache much worse.

Axel Springer, Germany's second- largest publishing company, fell into the red for the first time in its 50-year history. Profits in 2000 had been fairly healthy at 98 million euros. But 2001 was a truly shocking year, plummeting the company into a loss of 190 million euros.

Perhaps surprising for a company of such size and traditions, Springer's response was swift. It began savagely cutting costs and laying off staff and, by the beginning of 2003, 15 per cent of its 14,000-strong workforce was shown the door. Even the famous tabloid cash-cow Bild (Europe's largest circulating newspaper with 4.5 million copies) had to shut several regional offices.

Germany's - and Europe's - largest publishing concern wasn't spared either.

The Bertelsmann-owned Gruner & Jahr, whose titles include Stern and Brigitte, put a cost-saving programme into place as the crisis began to bite at the beginning of 2001. The initiative had saved the company 120 million euros by the following year, but at some sacrifice. Staff numbers were cut from 13,000 to 11,300. The company sold the Berliner Verlag newspaper group and withdrew from the Eastern European daily newspaper market.

But such brutal culling was not enough. G&J's balance sheet showed that turnover had fallen from three billion euros in 2001 to 2.5 billion in 2003. "You can't get rich by simply saving money," G&J's chief executive, Bernd Kundrun, remarked at a meeting in April. He added: "The difference between a successful company and a less successful company is how quickly it can adapt to changing market conditions and pull itself back into profitability."

Cash-strapped at home, the axe-wielding media executives from Hamburg were forced to focus their attentions on making money abroad. G&J launched 20 titles worldwide including the TV listings mag Tele 2 Semaines in France and Glamour, to great fanfare, in Poland. This year, G&J plans to launch the celebrity title Gala, which it already publishes in four countries, in Spain.

Of G&J's entire business, 63 per cent is already based abroad and it is no secret it wants this figure to grow.

Torsten-Jorn Klein was hired as G&J's first-ever chief executive to oversee the company's international interests. Over the next three years, Klein has 50 million euros to pump into new markets.

Currently, G&J executives are looking at various ways to stretch their brands to reap some much-needed return. Brand extensions of Brigitte and GEO have proved pretty successful while online versions of Brigitte and Stern have also been tipped as potential money spinners.

G&J's rivals have also been keen to invest outside Germany. This is hardly surprising. Even if Germany was not going through one of the most unkind economic periods in its history, its publishing companies will always have growth problems in such a saturated market. There are 2,300 general-interest titles, 3,600 special-interest magazines and 350 daily newspapers in Germany.

Hubert Burda, one of Europe's most charismatic and entrepreneurial publishers, takes this reality very seriously. One hundred and eighty five of Hubert Burda Media's 235 titles (the best known of which are Bunte and Focus) are already published abroad and, despite the economy, Burda launched 30 titles between 2000 and this year. Staff numbers rose from 5,600 in 2000 to 7,400 last year. Turnover is also up, from 1.3 billion to 1.5 billion euros.

H Bauer was another to sail through relatively unscathed. Meticulously controlled finances and a strong sales strategy steadied the ship - the company is Germany's undisputed leader of the copy sales market with a 33 per cent share.

Bauer's core businesses are TV guides such as TV Movie and Auf einen Blick, and women's general-interest magazines such as Tina and Neue Post.

Both are huge markets in Germany; TV Movie shifts more than 2.3 million copies a fortnight. Only the loss of Playboy, which circulates more than 290,000 copies, has been a blow to Bauer. Its founder, Hugh Hefner, transferred the German publishing rights to Burda, but Bauer plugged the gap by launching a rival to Playboy called Matador, which launched in the spring.

Publishing beyond Germany's borders is also hugely important to Bauer.

Of its portfolio of 120 magazines worldwide, it publishes 87 abroad and has a number of new projects in the pipeline. Launches are planned for Spain, Poland and the US, and Russia and China are earmarked as fertile territories.

If launch opportunities such as these never existed, Germany's publishers would now find themselves in much hotter water. Likewise the web, at first the bane of the German publishing business, is once more a land of opportunity for the forward-thinking players such as Burda.

In fact, there's more good news than bad these days. Ask Axel Springer.

The company launched the TV magazine TV Digital and Audio Video Foto Bild in Germany and, in April, introduced Forbes to Russia. Turnover at the company has edged up by 2.7 per cent to 1.23 billion euros, with a healthy 55 million profit in the first half of 2004.

Still, despite happier times at Springer, do not mention the Telegraph Group. A golden opportunity to break into the English-speaking market missed? Not if you listen to Springer's chief executive, Mathias Dopfner.

He told the Suddeutsche Zeitung last month: "The whole company is definitely performing very well at the moment. But I am not enjoying being pushed into making bad deals - especially for prestige reasons."

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