CAMPAIGN REPORT ON TOP EUROPEAN NEWSPAPERS: The online future - Websites were once nothing but a marketing tool for newspapers to promote their brands but, as Richard Cook finds out, European publishers now see them as a more lucrative source of revenue

The second half of the current decade has been good for media owners in Europe. According to Zenith Media research, over the past four years alone, advertising expenditure across Europe has grown by 20 per cent to dollars 84 billion. The first half of the next decade promises to be no less sunny. Zenith has forecast annual real growth of 2 per cent for each of the next three years.

The second half of the current decade has been good for media

owners in Europe. According to Zenith Media research, over the past four

years alone, advertising expenditure across Europe has grown by 20 per

cent to dollars 84 billion. The first half of the next decade promises

to be no less sunny. Zenith has forecast annual real growth of 2 per

cent for each of the next three years.



Perhaps newspaper publishers have fared less well than companies in

broadcasting.



TV’s share of advertising is now 33 per cent - up from 31 per cent four

years ago - while newspapers have seen their share drop from 58 to 56

per cent over the same period.



However, it would seem that no-one in the newspaper industry has real

cause for complaint. The second half of the decade has seen the

development of a whole new type of media - the emergence of new, or

electronic media - and what began as a marketing tool for newspapers to

promote their papers’ distinctive brand virtues to as many people as

possible is about to change the face of European media.



It’s difficult to say how quickly and how far everything will change

because, for the moment at least, electronic media is not a consumer

money-spinner. Those companies that do make money out of it - Reed

Elsevier claims that almost a fifth of its entire turnover is new-media

dependent - do so because they are communicating business and technical

information to companies and learning institutions. A conventional

consumer publishing company, such as Germany’s Axel Springer reckons

that just 2 per cent of its turnover can currently be attributed to new

media. But the point is that consumer new media is finally starting to

make inroads, not least into classified advertising revenues.



Those inroads are clearly better developed in some regions than in

others.



In Scandinavia, for example, internet penetration is very advanced.In

countries such as Italy, development is slower. But the whole continent

is witnessing change.





FRANCE



In the mid 80s, French newspaper publishers were given a huge leg-up

into the bold new-media future as a result of government legislation

originally passed to encourage printing press investment in a then

struggling newspaper industry. Under current French tax law, all dailies

and weekly regional titles with a turnover of less than Fr50 million can

set aside 80 per cent of their profits as a reserve fund. These funds

must be used to finance part of the cost of new equipment and

facilities.



Originally they were used to help the papers invest in initiatives like

France’s Minitel home information and retail system. More recently these

subsidies have been used to help structure one of the most comprehensive

online newspaper markets in Europe. The site that claims to be the most

visited belongs to Le Monde, the Paris-based national daily that ranks

fifth in the list of France’s top selling titles. Le Monde Interactif

was launched in June last year and was subsequently established as a

separate company under the presidency of Alain Giraudo in January this

year. It received an immediate boost when the new-media content

provider, Grolier Interactive, took a 34 per cent stake in March.’By

April this year the site was registering a total of six million page

hits a month and it is now getting at least 50,000 daily visitors,’

Giraudo says, ’which is more than four times what it was getting a year

ago.’



Le Monde Interactif runs an archive of more than 555,000 stories culled

from the paper over the last 12 years, charging one Euro per

article.



But it is really as a replacement for the fading Minitel system that

French media owners see their on-line versions working best. Company

research suggests that Le Monde Interactif browsers are attracted to the

site’s news resource first but then tend to use the system for buying

books and CDs through Alapage.com and for buying cinema tickets through

the Cinefil network.



It’s a similar story at other online sites. The success of the Minitel

system, for example, which for years has been a popular way of doing

everything from checking the TV listings to ordering train tickets,

means that even older people in France are not daunted by e-commerce.

The sites themselves are often targeted at the young - a group which

French publishers desperately need to woo from other media.



Although circulation has risen as a whole among national dailies, there

has been a corresponding decline in the regional market, while only a

fifth of all adults now take a daily paper, compared with 80 per cent in

Germany and 74 per cent in the UK. Publishers are hoping that increasing

online browsing will help stabilise readership for the printed

versions.





GERMANY



Germany’s 15, fiercely independent provinces have helped produce one of

the most competitively structured local newspaper markets in Europe.



In fact, overall newspaper readership in the country is extremely well

developed, with more people still reading papers than watching TV

despite the country’s burgeoning cable and digital TV market. But

Germany’s federal make-up has tended to favour regional media

development and is a handicap to the establishment of strong, national

online brands. Rather, a number of regional powerhouses have sprouted

which now dominate the overall marketplace.



The Frankfurter Allgemeine Zeitung group is a case in point. It is

ranked among the top 50 media companies in Europe but the bulk of its

income comes from its traditional newspaper publishing activities in a

single German state - Hessen - where the title is market leader and

where the group also publishes the third-highest circulating paper, the

Frankfurter Neue Presse.



Only six of the country’s 400 daily papers have a national reach, and

the paid-for weekly market, where national titles have stronger

representation - 12 of the 26 titles - are in some disarray. But perhaps

that is not surprising. Germany has the strongest weekly free market in

Europe, circulating more than eight million copies of over 1,200

magazines. The result is that classified advertising occupies an

unusually large part of the total newspaper market - around 60 per cent

of total revenues.For this reason internet penetration is causing a

mixed reaction from newspaper publishers.



On the one hand they have been quick to release online versions of their

own titles in the hope of spreading the local nature of print-based

titles throughout the country.



On the other they see the internet as the birthplace of increasing

competition for crucial classified advertising revenues from which they

traditionally earn a large percentage of their income.



Hans-Joachim Fuhrmann, a spokesman for the BDZV Group, says that in the

next year, newspaper publishers will huddle together in the new-media

marketplace, probably in the first instance by forming a joint marketing

venture for their online ads.



’Total internet ad revenue still represents a small fraction of the

overall advertising figure,’ Fuhrmann says, ’so the internet has not yet

had a negative effect on our business. But with the growing market

penetration of new media, that is going to change. Printed papers are

going to have to expect losses.’



According to the ZMG newspaper marketing group, the total number of

German newspaper ads in the first half of the year was 3.3 per cent

above the same period for last year, while nationwide newspaper

circulation fell by 1.6 per cent in the same period to 31.1 million.





SPAIN



The home of one of the most robust newspaper markets in Europe, Spain

initially lagged behind other markets in the development of an online

newspaper economy. The country’s largest daily newspaper, El Pais, only

launched its new media version, El Pais Digital, to coincide with the

paper’s 20th anniversary celebrations on 4 May 1996.



But Spain has got one in-built advantage in the development of a new

media economy - although only 38 per cent of all adults read a daily

newspaper, 46 per cent of the total readership is under 24, and this

youthful audience has been quick to embrace the digital market. Spain’s

online papers have shifted editorial content towards issues and subjects

of particular interest to the young, such as sports, cinema and

entertainment listings.



In fact, according to the head of its digital advertising department, J

Fermin Larrea, El Pais Digital is now the largest newspaper website in

Spain, receiving around 100,000 daily visitors and recording more than

12 million page hits a month.



The Spanish new-media market pioneer was El Periodico de Catalunya,

whose printed version was originally launched to ride a wave of

Catalonian independence-driven fervour in 1978. The online and printed

versions are both published in Catalan and Castillian. The online

version also allows its publisher, Grupo Zeta, to offer advertisers

truly national ad packages.



During the 90s the group has been the most active predator of regional

newspaper groups in Spain, even building up a presence in the remote

regions of Extremadura and Asturias, for instance. It now uses its web

pages to complement its printed papers and offers a national package to

advertisers based on both the regional titles and online content.



The online service also promotes other Grupo Zeta companies, notably the

regional cable TV provider, Cable Total, and Sport, the second-largest

Spanish sports newspaper which also has its own dedicated interactive

service.



Spain’s second largest broadsheet newspaper, Prensa’s ABC title, was

another early adopter of the internet. Its online edition made its debut

in September 1995 and the group, which had experimented in the early 90s

with editorial CD-Roms, has now built up an impressive catalogue of

online editions.





ITALY



Hamstrung by some of the most expensive call rates in Europe, Italy’s

internet usage lags some way behind the rest of western Europe. For

newspaper proprietors this presents a considerable challenge, since the

internet offers the easiest solution to the biggest problem faced by an

Italian press - an ageing readership which is also on the decline. Daily

newspapers only reach 42 per cent of the adult population according to

Pira International research and, worse, the bulk of existing readers are

over 35 years old.



The number of regional and national titles has declined by almost 10 per

cent over the last decade while,in the last five years, national daily

circulation has declined by 5.7 per cent. Regional papers have tumbled

by 12.5 per cent and local dailies have collapsed by almost 14 per

cent.



RCS Editori publishes Italy’s top selling daily, Corriere della Sera,

and best selling La Gazetta dello Sport, whose modest 400,000

circulation belies a hefty readership of over three million. The company

runs online versions of both papers and says that digital TV trials are

a chance for online papers to prove their worth and lure would-be users

given that internet connection rates remain so high.’We are some way

behind the UK in digital TV but there have been some long running trials

and this is one area that might be important, especially for the sports

newspapers,’ an RCS spokesman says.



In Italy TV penetration is unusually high, while newspaper and magazine

sales are at best static and at worst declining. Experiments with new

media have gone ahead regardless of slow penetration, partly because of

Italy’s complicated media ownership rules which encourage diversity. In

general media owners are restricted to just 20 per cent of the media

market and 20 per cent of their own sector. Despite this RCS currently

manages to account for about 40 per cent of daily national newspaper

sales.Italy’s other leading newspaper publishers whose titles include La

Stampa and the Rome-based daily La Repubblica have all made forays into

the world of electronic publishing, but remain less bullish about the

potential of the internet to generate real profits in the short term.

Sports coverage provides a chink of light, however - one in five Italian

men buys a daily sports newspaper and since sports games were put onto

pay-TV last year, demand has gone up. Non sports papers like La

Repubblica use their websites to encourage Italy’s voraciously

media-consuming football fans to take up regular purchase of

newspapers.





UK



When the Electronic Telegraph launched in 1994 it was championed as a

vehicle for raising awareness of the printed paper and little else. The

internet was seen simply as another form of marketing strategy. Five

years down the line the ET forms part of the most developed online

newspaper community in Europe, with the possible exception of

Scandinavia. It also contributes to an online advertising revenue pot

worth pounds 45 million this year, according to the Internet Advertising

Bureau, which continues to grow at a rate of 225 per cent a year.



The ET itself has grown in that time to encompass 17 separate major

internet sites and a total of 150 smaller sites. The Telegraph, along

with The Guardian and Associated Newspapers have led the way. Now every

national newspaper and 90 per cent of the regional market are online.

Unlike other European countries which are still waiting for the internet

to make an impact, it has already started here.



’There has already been a staggering cannibalisation of the regional

classified advertising market and there will definitely be

cannibalisation of the printed and broadcast media by online products,’

Danny Meadows-Klue, head of Electronic Telegraph, says. ’It’s important

that media owners now start to think in terms of share of voice and

concentrate on the total reach of their products throughout all media.’

He expects total internet advertising revenue to reach pounds 45 million

this year and points to the advent of interactive cable and the

successful BT Kiosk trial as catalysts for growth.



Certainly the development of free internet service providers has helped

in the democratisation of online and to switch consumption from the

office to the home. One issue that is proving a small cloud on this

otherwise clear horizon is the BBC’s aggressive role in the new-media

marketplace.



The British Internet Publishers Alliance, which represents the UK’s

online newspaper industry, has protested to the Culture Ministry about

the BBC encroaching on to the commercial online arena and using the

strength of its editorial product to compete directly with the service

offered by the leading newspaper groups.





El Periodico de Catalunya was a new-media pioneer in Spain while El Pais

Digital is now the country’s largest newspaper website. Germany’s

federal make-up is a handicap to strong, national online brands and

regional powerhouses such as the Frankfurter Allgemeine Zeitung group

dominate the marketplace. In France Le Monde claims to have the

most-visited website.



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