With a recession looming over more than one Western European economy, many media players will be tightening their belts. To the surprise of the media industry across the Channel, France's leading magazine and newspaper publisher, Lagardere Active, is taking the opposite approach to ride out the credit crunch.
Didier Quillot, the company's chief executive, has set his sights on international expansion, rather than contraction.
Citing difficult advertising outlooks in Europe and the US, Quillot last month outlined his plans to build magazine and related online business in China and Russia.
"When you add growth from the internet, growth from emerging markets and growth from adjustments to our core business, our ambition is to have growth in our turnover in the next three years, despite the recession which has set in Western countries," he says.
By rolling out more titles in China and Russia, Quillot believes that Lagardere will become a better proposition for the ad industry. "We need to transform our cross-media activities into a real commercial advantage with regards to advertisers," he explains.
"To advertisers, we can sell a global audience that is segmented, or aggregated, on different media. Instead of offering media strength, you need to offer media diversity."
Lagardere, the publisher of Marie Claire, Psychologies and France's popular Sunday newspaper Le Journal du Dimanche, has not been slow to adopt this new strategy. Since the beginning of the year, the company has launched six magazine titles outside of France, including Femina in China and Domoi in Russia. In total, 51 per cent of its EUR2.3 billion annual revenue is generated outside of France.
Lagardere is already established in the Chinese magazine market, having launched its first title there 20 years ago. Russia, meanwhile, is not as established in Lagardere's portfolio but the figures are impressive nonetheless: as the major shareholder in the publisher Hachette Filipacchi Shkulev, the French media house has seen profits double every three years thanks to titles such as StarHit and Elle.
Currently, turnover in Russia stands at EUR150 million a year, in third place behind France at EUR500 million and the US at EUR300 million. However, Lagardere estimates that by 2009, Russian turnover could be rivalling that of the US.
ZenithOptimedia's latest forecasts suggest Lagardere is on the right track, predicting a 15 per cent year-on-year growth in adspend for the magazine sector over the next two years in China. Zenith- Optimedia expects online to be the third-largest advertising medium behind TV and print by 2010.
Weiming Cao, the managing director at the publisher Conde Nast China, which publishes national editions of Vogue and Self, concedes that glossy monthlies are still a new phenomenon in his territory. "The Chinese print market for magazines only has 20 years of history and is relatively quite small," he says. "Consumer magazines make up 15 per cent of the country's 9,000 titles, but they are developing very fast while other professional/industry titles and academic titles are decreasing."
Publishers, such as the local Cosmopolitan licence holder Trends Group, China Light Publishing Group, Conde Nast and Hachette, have also been slow to launch digital spin-offs for their titles, but change is on the way. "It's still in its infancy but publishers will realise that it's a big market and they will take only a couple of years to catch up," Didier Guerin, the president and chief executive at the magazine creation and management consultancy Media Convergence Asia-Pacific, says.
By comparison, the Russian market is streets ahead with its digital development. While the launch of niche titles is fragmenting the magazine market, the whole print business has been busy launching complementary digital offerings.
According to ZenithOptimedia, the online sector will grow in Russia by 82.4 per cent this year as internet access speeds up. By 2010, online will leapfrog radio's share of total adspend. By contrast, global online advertising is expected to rise by only 23.7 per cent this year, according to Carat's latest figures.
Raphael de Andreis, the president of BETC Euro RSCG in Paris, sees Lagardere's focus on these two territories as sensible, given global economic conditions. "If you look at the media industry at this point in time, it really is lost," he says. "The print business is so tough that Lagardere is making the jump into digital. They are looking at the best way to monetise an audience and digital seems a pretty logical move."
The jump is not without its dangers. "Our clients all invest in BRIC (Brazil, Russia, India and China) because that's where the growth is, but it's a bit of a jungle," de Andreis says. "The problem in emerging markets is the reliability of audience measurement and whether the economies are viable."
De Andreis maintains that necessity will force Lagardere to overlook the potential dangers. "These countries are filled with opportunities and risk but Lagardere has no choice," he says.
Guerin agrees: "If you want to grow quickly, it's a lot cheaper and less risky to invest in these markets. It costs in excess of $20 to $30 million to launch a magazine in a mature market and you only have a 50/50 chance of it working. In China, you can launch one with just 10 per cent of that and you have a 95 per cent chance of success."
With adspend dramatically slowing down in mature markets, Lagardere will not be the only company looking to invest in emerging territories. "A lot of other publishers will no doubt be thinking the same way too," Guerin says.