The World: Insider's View - Germany

The German press is giving the first foreign publisher to enter the newspaper market a frosty reception, Dietmar Frantzke writes.

"No sir!" read the terse headline in the Berliner Kurier. The story was that the former Mirror Group chief executive David Montgomery and his consortium of foreign investors were set to take ownership of the paper as part of his investment in the German press.

The two words sum up the wave of animosity that is felt towards Montgomery in Germany. The investment consortium has been portrayed as the "plague of locusts" popularised by the former chairman of the SPD party, Franz Muntefering, in his scathing attack on the rise of globalisation in German industry. Here, takeovers by foreign investors are synonymous with cost savings. And that means job losses.

Until recently, the German newspaper market was a safe haven from globalisation, with no papers owned by anyone other than German publishers.

To say the German press has been icy towards the first foreign publisher to own a German paper is a huge understatement. Editorials have said that "whenever he enters a room, the temperature falls ten degrees". Montgomery has a reputation as a cost-cutter and a man with his own sense of reality.

His £100 million purchase of Berliner Verlag is being eyed very warily.

Montgomery has attempted to mollify these concerns. In his first address to his new employees, he praised Germany, Berlin and the staff of his new papers for their excellent journalism. He also promised investment in new technology and a healthy future for the company. Whether he managed to win over many hearts and minds seems doubtful, though.

In the Berliner Verlag purchase, from the publishing house Holtz-brinck, Montgomery has bought three titles in Germany's most competitive local media market. The Berliner Zeitung has a circulation of 182,000; the Berliner Kurier, 136,000; and Tip, 74,000. The sale was forced by the German Cartel Office, which blocked Holtz-brinck's planned consolidation of the Berlin newspaper market.

The sale raises a number of important questions, not least of which is how Montgomery plans to get his investors the return they want in a very difficult market.

The German newspaper market is still extremely fragmented. The three biggest publishers have a combined market share of just 30 per cent. In countries where consolidation has been allowed free rein, that figure can be as high as 80 per cent. In Germany, there are something close to 300 publishers with around 400 newspapers. Overall circulations are declining, as is ad revenue. With a lack of investment, and pressure from the internet, further consolidation in the German newspaper market - and further foreign investment - is simply a matter of time.

- Dietmar Frantzke is the investment director at Starcom Germany.

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