Rich Businessmen Rescue Yet Another French National Newspaper

Philip M. Stone June 30, 2010 Follow on Twitter

Le Monde got rescued just in time. The new owners paid €110 million ($136 million) for France’s most prestigious and influential newspaper but they had to deposit €10 million ($13.6 million) immediately to cover immediate needs including meeting payroll at the end of the week. It was that close.

The new owners are not short of a Euro or two which is good because based on past experiences not just with Le Monde but with other French national newspapers that have been rescued the initial investment is more like a tranche than a one-off.  They now enter some three months of negotiations to agree the final terms.

That Le Monde has a new ownership would be a major story in itself; that President Sarkozy interfered in trying to influence the final decision and the controlling journalists responded by voting heavily to go against his favored choice just makes the story that more juicy.

Sarkozy had the effrontery to call in the current publisher and tell him which bidding group the Le Monde leadership and controlling journalists should choose. And to spice up the bid for that group he got his friends at 27% state-owned France Telecom to stump up some €50 – 60 million to make that bid more credible. That’s all Le Monde’s journalists had to hear and they voted by a 90% margin to accept an opposing bid.

The winners were a three-man investment group of banker Matthieu Pigasse, Xavier Niel who made his fortune from the Internet but before then with the France Telecom Minitel system where he made bundles from sex chat rooms, and Pierre Bergé, the former business and personal partner of the late fashion designer Yves Saint Laurent. Sarkozy has a problem with Bergé because he backed main opposition Socialist candidate Segolene Royal in the 2007 Presidential election which Sarkozy easily won, but he is also good friends with Dominique Strauss-Kahn, the current head of the International Monetary Fund who is thought to be the possible Socialist candidate come the 2012 election. The last thing Sarkozy needs is for Le Monde to change its political center editorial stand to well left of center.

Pigasse, Niel and Bergé are joining a long line of rich French businessmen, industrialists and bankers, who have ridden, and are still riding, to the rescue of national French newspapers. In 2004 Serge Dassault, who runs France’s most important defense industry carrying his name bought around 80% of Socpresse, which owns the right-of-center Le Figaro among other notable titles, for €1.5 billion. It has since undergone a couple of redesigns and it has a new printing plant in southern France.

Then there’s investment banker Edouard de Rothschild who has made three major investments in the left-of-center Libération worth around €40 million but even today the newspaper still has financial troubles.

Three years ago Bernard Arnault, the boss of the LVMH luxury goods maker, bought Les Echos financial newspaper from London’s Financial Times for €230 million. The other French financial newspaper, La Tribune thought it had been saved a couple of years ago when media baron Alain Weill took over but he has just given up the ghost, handing over  78% of the ownership to the newspaper’s managing director for €1.

The French, unfortunately, are not avid newspaper readers. They much prefer their weekly fashion and news magazines (with lots of pictures)  – magazine readership per 1,000 population is said to be the world’s highest with near 60% reading a magazine weekly, and the French are among Europe’s most avid radio listeners.

But when it comes to newspapers they are near the bottom of the European table with just 46% reading a daily newspaper, way below, for instance, Germany where the figure is closer to 80%. Le Figaro is the largest circulation national newspaper and it saw circulation drop in 2009 by 1.56% to 314,947. Compare that to Germany where circulation leader Bild has more than 3 million daily and in the UK where the Sun is just shy of 3 million.  Le Monde was down 4.14% to 288,049, and Libération got slaughtered seeing its circulation drop by 9.51% to 111,584. Les Echos held its own at 121,357, up 0.3% but La Tribune was clobbered, down 10.62% to 67,295.

French national newspapers for many years have been terrible money losers, not the least reason being extraordinarily high production and distribution costs under legacy union agreements with the unions knowing full well they can hardly be touched. Getting rid of union workers can cost close to €500,000 ($615,000) each. It’s one reason why the French government provides one way or another about 10% of a newspaper’s revenues via such diverse subsidies as paying for the delivery of a free newspaper to 18-year-olds for one year, to very low postage rates, to huge amounts of government advertising, to reducing social taxes for newspaper delivery workers, and providing large tax breaks for investing in digital media and capital investments.  The annual subsidy is usually worth around €1.5 billion ($1.9 billion) but under Sarkozy that has been upped by an additional €200 million ($250 million) annually.

And yet for its share in all that Le Monde would not have met payroll this week if not for the new owners. When the new rich owners took over at other newspapers they were able to make some cost savings although arguably not enough. At Le Monde there is a general recognition its troubles stem from over-staffing plus some bad previous business decisions.  The new owners have pledged to honor the newspaper’s editorial integrity, and at the moment they’re not talking about a round of layoffs, but whereas in the past the journalists controlled  business decisions  including the right to hire and fire the editor and the publisher that power is now gone.

So for now Le Monde is saved, but this is just the beginning of the process and there will probably be much pain to come. It has been estimated that to get the workforce size right could cost around €50 million ($62 million) in severance payments alone – which is why we said that at the end of the day the initial €110 million is probably just the first tranche of much more to come.

See also in ftm Knowledge

Media in France

French audiences are moving fast to every new platform. Mobile and Web media challenges the old guard while rule makers seek new directions. Media life in France... and a few secrets. includes updated Resources 103 pages PDF (November 2009)

ftm Members order here

Available at no charge to ftm Members, others from €49
Order