Feature

Germany: Strength in the regions

The internet and outdoor are burgeoning, but that's where the similarity with UK media ends.

Finally, the German economy is on the mend, and the advertising market along with it.

The jobless rate is falling and GDP is growing without the assistance of the World Cup, which gave a short-term lift to last year's economic growth.

This brighter economic outlook has spilled over to the media industry, according to Ian Rotherham, the head of international for Media Planning Group.

"The economy is looking better and media billings are showing a small increase as a percentage of GDP for the first time since 2002," he says.

A developed market with comparable age demographics to the UK, Germany also has similarly high internet penetration. Like the UK, the country has state broadcasters with a strong position in television and radio, although they don't dominate the airwaves to the same extent as the BBC.

But Philip Sloan, the vice-president of client services for Universal McCann, says the biggest difference lies in Germany's federal structure.

"The states and regions are very strong, and there are a huge number of cities with populations of more than 400,000 people, while the UK has very few," he says.

"The biggest city is Berlin with three million, while London is eight million, so the UK is a centralised economy, while Germany is very fragmented. You need to go broader if you want to reach a certain number of people, while in the UK you could focus on a certain region and reach a big proportion."

Newspapers

There are a few newspapers in Germany with national coverage, such as the populist Bild (formerly Bild- Zeitung), the broadsheets Suddeutsche Zeitung, Frankfurter Rundschau, and Frankfurter Allgemeine Zeitung, and the financial papers Handelsblatt and the Financial Times Deutschland. However, most papers are regional.

Although Metro has not launched in Germany, some German publishers have embraced the concept of free newspapers, distributing them in transport hubs in the major cities. "If Metro came in, everyone would quickly launch their own products to defend their positions," Sloan says.

"They've learned from other markets and come up with a business plan to address that."

Publishers have also launched websites, e-papers - subscription-funded PDFs - and Sunday editions in a bid to shore up falling circulation. Still, newspapers are in a long-term decline. There are now 24 million newspaper readers in Germany, compared with 30 million a decade ago.

Television and radio

While TV in the UK has been losing viewers and advertising share, this is not the case in Germany, which saw a 6.7 per cent year-on-year rise in ad revenue in the first half of 2007, according to Nielsen.

The German TV market is fragmented - while the BBC commands about 30 per cent market share, the dominant station in Germany would represent about 15 per cent. And the market leader varies month by month according to the programme schedule.

Thilo Kramer, the chief executive of Mediaedge:cia Germany, says the country is distinctive because of the number of free-to-air TV channels. "There are at least 44 free-to-air TV stations, and around 95 per cent of households have access to these channels," he says. "And there are still new broadcasters entering the market."

For this reason, Kramer adds, digital and pay-TV is quite underdeveloped in Germany, and the rights owners of exclusive content such as 1. Bundesliga - equivalent to the Premier League - and Formula One struggle to recoup their investments.

The two state broadcasters, ARD and ZDF, take limited advertising until 8pm. The big commercial groupings are the Bertelsmann-owned RTL (the owner of five in the UK) and the ProSiebenSat1 group, which recently bought SBS Broadcasting for EUR3.3 billion. Premiere is the pay-TV operator.

International players such as NBC, Viacom and Universal have recently entered the market. Viacom has taken share from the public broadcasters after launching Nickelodeon.

The individual states control media law and some regions such as Berlin-Brandenburg have already switched off the analogue signal, with all states due to convert to digital by 2012.

Meanwhile, in radio, which has very little digital, the market has been buoyed by the release of FM spectrum for new, younger stations such as Frankfurt UFM.

Magazines

"Germany, more than any other country in Europe, has a strong print market, especially in the sheer volume of titles available to the general market," Rotherham says. "There are more than 400 newspapers, almost 900 general magazines, more than 1,000 trade magazines, and almost 1,500 ad journals."

At the moment, there is a flurry of activity in the luxury sector, where launches have included Vanity Fair from Conde Nast, Park Avenue from Gruner & Jahr, 5 to 9 from Handelsblatt, and Die Zeit from Magazine Leben.

Gerrit Rabenstein, the head of international media service at GWP media-marketing, a division of Handelsblatt, says the sector is relatively recession- proof. "Publishers noticed that ad spending and spending for luxury goods did not decrease during the years of recession," he says. "In comparison, B2B ad funding is going up when the economy is good and down very steeply when it's a recession."

Outdoor

Outdoor advertising has been performing well in Germany and is second only to the internet in the pace of growth, although it is suffering from the recent restrictions on tobacco ads.

Some 88 per cent of Germans live in urban areas, making outdoor a particularly relevant ad medium. The key difference with the UK is the geographic spread wich means no single region or contract is dominant.

Major players such as JCDecaux, Wall and Stroer have been introducing modern street furniture, removing tens of thousands of old billboard inventory, and improving the quality of the remaining panels.

Online

Internet penetration is comparable to the UK, with 66.7 per cent of households online and 53 per cent of the population using the internet weekly, according to the PwC Global Entertainment and Media Outlook.

Ad revenue is growing at a rapid rate. Online adspend was EUR1.75 billion in 2006, or 9 per cent of the total ad market, according to figures from the Internet Advertising Bureau/PWC.

Kramer says the rapid growth of online adspend has prompted traditional media owners to make acquisitions and set up new ventures in the online sector. Examples include ProSieben's Maxdome and RTL's Clipfish, which is similar to YouTube.

Axel Springer recently agreed to buy a 41.4 per cent stake for EUR78 million in the French internet portal auFeminin.com, which has the number one position in Germany as well as France and other European markets.

And the publishing group Holtzbrinck paid a reported EUR85 million for StudiVZ, a social networking site for college students, similar to Facebook.

HOW TO TARGET DIFFERENT DEMOGRAPHICS

Mass media is heavily driven by television and, in theory, you can still reach every target through TV in Germany. However, it is not always the most efficient or effective medium.

Teenagers (14-19) TV is important, but there needs to be a strong emphasis on online - instant messaging is the killer application to this audience in Germany. Mobile, cinema and outdoor can also be effective. Print can be used, but there are only a handful of magazines in Germany that focus on bands and celebrities.

Young adults (20-29) This audience is similar to teenagers, but there is completely different online use - it is far more content-driven. Specialist magazines are becoming more important for reaching this audience in Germany.

Young/middle age (30-49) TV is becoming a far more important way of reaching young families in Germany. Less mobility is resulting in higher TV consumption rates. Print is also important for this audience.

Over-50s For a long time an "unloved" audience, the 50-plus consumer is becoming more important owing to its buying power. This target is still best reached in Germany through a combination of TV, newspapers and magazines.

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