It’s Official, At Least In France: Newspapers Are Charity Cases

Philip M. Stone December 13, 2006

France has always had a tradition of very heavily subsidizing its newspaper industry -- in the 2007 budget €274 million is allocated, a 22% increase over two years ago – but the French Culture Minister is worried that newspapers need even more help and so he has come up with a novel idea for reader tax deductible financial support.

Culture Minister Renaud Donnedieu de Vabres has proposed that those “newspapers of opinion” establish either an industry-wide Foundation or that each newspaper establish its own Foundation and he will officially interpret that contributions made by individuals or companies to such foundations as being eligible under his culture department patronage to be tax free.

And, frankly, there are many French newspapers that would not be alive today had it not been for such a heritage for newspaper subsidies.  Subsidies have covered everything from paying a percentage of the cost of a new printing plant, subsidizing newsprint, to exemption on paying corporation tax if the money is reinvested in five years.

Yet for all of that the French national dailies fell on very hard times over the years – the Internet and free newspapers taking their toll -- but something peculiar happened in the past two years -- French businessmen with very deep pockets took on the challenge of trying to stop the rot.

Serge Dassault, who runs France’s most important defense industry of the same name, in 2004 bought around 80% of Socpresse, which owns Le Figaro among other notable titles, for €1.5 billion. The paper has since undergone a re-design and investment includes a new printing plant in southern France.

Le Monde raised €65 million last year via three additional investors including Lagardere, the French media and industrial conglomerate.

But perhaps the most interesting saga is at Libération where investment banker Edouard de Rothschild has just made a third investment at the staunchly left-wing newspaper, but now he seems to have won real control.

When he made his first investment of €20 million in January, 2005, few people could understand what he hoped to achieve. His politics and Libération’s  were about as opposite as they could be; he said he would keep his fingers out of the editorial pie, the staff would basically hold a veto over any major changes he proposed, and even though the newspaper was hemorrhaging red ink cost-cutting really wasn’t on the agenda as far as staff was concerned. It basically  looked like the banker’s money was flowing down a sinkhole. 

When management came back to Rothschild this year asking for more money since what he had already given them was long gone he extracted his price for another €15 million – gaining the resignation of Serge July, the newspaper’s co-founder and editor for 33 years who basically had hardly allowed de Rothschild into the Libération building.  That in turn caused several top journalists to quit but that was okay, the newspaper had to shave further costs, anyway.

But by October the newspaper was again in need, bankruptcy could have closed it at almost any time. Rothschild this time played real hardball. In addition to the 56 jobs that had gone earlier in the year he wanted another 100 of the 280-strong workforce gone although that number has been whittled down to around 80. And he didn’t want the staff having veto power any more over his decisions. For that he would give another €5 million and other investors would provide €10 million.

By mid November, it was make or break but the newspaper’s board, meeting for the sixth time in just two months, adopted Rothschild’s plan and staff, knowing full well if they didn’t accept the newspaper would close, also voted to accept, but by a really narrow margin.

Rothschild is thought to be most interested in Liberation’s web activities, and he hopes to balance the newspaper’s books within two years. But it won’t be easy. Circulation is down to 135,000 copies, a 20% decline in just five years, and the newspaper is expected to report a loss for this year of some €13 million. To blame are the Internet, free newspapers, and a feeling that Libération has lost its editorial way since the days when far-left investors including philosopher Jean-Paul Satre launched the paper in 1973, although it has its roots in the Paris student riots in 1968.

As if French national newspaper publishers don’t have enough to deal with, they only have a few months to really get all of their acts together before a really big gun enters the market to make life even more miserable. Germany’s Axel Springer is planning on launching a French version of Bild, Europe’s largest circulation daily newspaper, and it will announce the date early in the new year.

Springer has had great success in Eastern Europe in recent years launching Bild look-alikes. And when it comes to newspapers, East European countries are far better newspaper markets than France. Springer has a habit of successfully finding holes in the market, and the obvious question on most lips is if that is to be the case in France, then at whose expense?

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