When Was The Last Time You Saw A Newspaper Company Report: “Strong Advertising Markets Both on Print and Online”? Welcome To Europe Where Established Media Companies Are Doing Better And More Media Barons Are In The Making

Philip M. Stone May 15, 2007

Norway’s Schibsted reported” Strong advertising revenues and improved circulation figures for the print versions of VG, and Aftenposten.”. Mecom, another media company also headquartered in Norway, has been busy the last year spending close to €2 billion ($2.7 billion) buying up some 100 European regional newspapers. And Mathias Döpfner, chairman and ceo of Axel Springer, told Variety, “At the moment we are not only generating the highest profits with our newspapers in the history of our company, but also we are making money a lot faster with our newly launched newspapers.”

This kiosk is doing better than American newsstands

Welcome to Europe where some newspaper companies are thriving very nicely. Not that they didn’t go through the hard times, but things are looking much better.

As good an example as any to illustrate some of Europe’s success stories is to quote from Schibsted’s Q1 report on its Aftenposten and VG newspapers that had really suffered as online became so popular. “Aftenposten (print edition) increased its advertising revenues by 12% in Q1. All markets improved and recruitment advertising grew by 21% during the period. The morning edition’s circulation figures grew by 1,800 in Q1.”

And at VG, where the print edition suffered large declines in circulation and advertising revenues the past couple of years because readers flocked to its online site, circulation stabilized for the daily (down just 500 compared to Q1 last year,  but the Saturday edition put on 4,100 and circulation revenues stayed the same. But the big news – “VG print edition’s advertising revenues grew by approximately 19% compared to the corresponding period in 2006, when advertising revenues were relatively low.”

And its online operations have become stronger than ever, its readership already surpassing the print edition. The online site’s advertising revenues grew 42% so that its contribution to VG revenue is now 36% -- something that US newspapers would love to achieve.

Schibsted has also been busy consolidating its hold on Norwegian newspapers into a new group called Media Norge, of which it will own 50.1%. The new company would consist of Aftenposten, its FINN online classified advertising sites, Bergens Tidende, Faedrelandsvennen, and Stavanger Aftenblad. But the proposed company has run afoul of Norwegian competition authorities who do not want to see Schibsted owning more than one-third of Norway’s total newspaper circulation. So Schibsted has sold its holdings in another newspaper, Addresseavisen, and assuming that satisfies the competition authorities the new group hopes to list on the stock exchange after the summer.

Meanwhile, Briton David Montgomery did a deal with another Norwegian conglomerate, Orkla, to buy its media business and Montgomery’s company, Mecom – based in Oslo --  has been fast building a new newspaper empire by buying more than 100 newspapers, mostly regional, in the Netherlands, Germany, Poland, Denmark, Norway and Ukraine.

The mention of Montgomery’s name, however, puts fear into most employees at the newspapers he buys for he has a well deserved reputation as a severe cost-cutter. Montgomery met a very public end to his UK media career when, in 1999, he was fired as CEO of the Mirror Group during the merger process with the Trinity Group. Not much was heard of him again until he resurfaced in 2005 as head of Mecom. He first bought the Berliner Zeitung and Berliner Kurier from Holzbrinck.  The journalists at those newspapers and protested but the German authorities passed the deal, and the journalists howled some more when Montgomery replaced the Berliner Zeitung editor without any staff consultation.

Montgomery’s goal seems to be to get costs down everywhere he buys, something not so easy to do on the Continent where in some countries the labor laws are very tough in firing people, much more so than in the UK. Denmark is as good an example as any of what he does.

In buying Orkla he became owner of Denmark’s Berlingske Officin, publisher of Berlingske Tidende, B.T and Arhus Stifstidende and two free newspapers.  Berlingske Tidende, Denmark’s oldest newspaper, achieved a 67 million Danish kroner €9 million, $12 million) profit last year, not bad considering that back in 2002 it lost 100 million Danish kroner (€13 million, $17.5 million). But Montgomery made clear that the group’s profit wasn’t good enough and in April he ordered 350 job losses (13% of the work force).

Since Danish journalists are among the world’s highest paid, it should not have come as any surprise that 87 of the job losses were editorial. And given Berlingske’s tradition of strikes, it probably came as no surprise that the journalists walked out for a couple of days. At the same time the editor-in-chief and the managing editor quit. Dato, the first free door-to-door Danish daily, went dark on April 19, eight months after its launch. Mecom’s target overall in Denmark? To save 175 million Danish kroner ($31 million, €23 million).

And Axel Springer has shown that if you pick the right European market and do your research right there is plenty of money to be made in newspapers, and very quickly. Springer’s FAKT tabloid newspaper launched in October, 2003 on a business plan to sell 300,000 copies within three years. From the beginning it sold 500,000 copies. “In less than two years after launch the paper broke even and is now making money. Can you give me an example in the last 50 years anywhere in the world where a newspaper made money less than two years after its launch? I don’t know of one,” CEO Mathias Döpfner told Variety.

Not satisfied with that success last year Springer launched Dziennik, a quality newspaper printed in a tabloid format with an independent political line, with that business plan calling for sales of 150,000 and already the paper is selling 200,000 copies. So, from nowhere Springer now has 44% of the Polish newspaper market in 3 ½ years.

And he gave one secret of that success. “A newspaper launched today is a combination of online and print. We use the online to cross-promote the print, and vice versa. If you do that properly, then I think newspapers can be a very profitable business model and have a future.”

Newspapers obviously have strategic challenges to overcome, they have to adapt to change, and it would seem European publishers have a leg up on their US counterparts in that. The Americans may need reminding, as per the title of Norwegian author Tor Åge Bringsværd’s book, "Those who have both feet planted firmly on the ground stand still."