When It Comes to Print, Norway’s Schibsted Has It All -- The Country’s Biggest Daily Newspapers; Its Most Successful Newspaper Web Sites, And It Operates the 20 Minutes Free Newspaper Franchise In Several Countries. Even Its Share Price Is Doing Ok. Care To Guess What Part of That Business Is Starting to Fall On Hard Times?

Philip M. Stone March 30, 2006

Norway’s Schibsted is recognized as one of the world’s best-run media companies with multi-platform operations not just in the Nordic area but also within several European countries. Its 20 Minutes free newspaper franchise goes from strength to strength, its newspaper web sites are profitable and its newspapers VG and Aftenposten have normally held their own in a tough economic market.

But a couple of cracks have appeared in the armor recently showing that the strength of newspaper web operations cannot be restrained – that should be good news – but in Schibsted’s case not necessarily. It tried all it could to try and prevent its largest newspaper, Verdens Gang, popularly just called VG, from being hurt by the success of its own web site, but new figures just released show the web site going from strength to strength and circulation and revenues at the VG newspaper taking a dive.

And now management is in talks with the newspaper’s unions looking for about €2.5 million in cutbacks, which may be somewhat difficult since in Nordic countries it’s not easy to fire people. But it does show that whether it’s Norway, the US, Britain it really doesn’t matter, the web marches on and print has to pay.

Last year was horrible for VG. Its circulation of 360,000 dropped about 10%, and even though there was a higher ad volume, advertising revenue also dropped about 10%.

Tabloid VG is an interesting case study because management took specific steps last year to strengthen the print brand at the expense of its web site. In an article last year titled, “Can A Newspaper’s Web Site Be Too Successful” ftm noted:

 “In Norway, Verden Gangs (VG), the country’s leading newspaper with 360,000 circulation, has already decided its own web site is to blame for the newspaper’s 4% annual circulation decline, and it has taken steps to reduce the newspaper’s flow of copy to its web site.

The front pages of the hardcopy and the web site will now look different. No consumer stories from the newspaper will get filed on the web site before lunchtime; no newspaper feature story nor any column will now make it to the web site at all. Time will only tell if that will be enough to have those missing newspaper readers come back and pay for the hardcopy news product."

Well, time has told, and the web site continues gaining strength while the print edition suffers even more than before.

VG Nett started in 1998 and its  first four years saw increasing annual operating losses, But the situation started turning around in 2002, the site made its first operating profit in 2003 and 2005 was spectacular no matter how you look at it. Year-on-year advertising revenues grew 75% to around €15 million – that’s a 42% operating profit -- and management says that Q1 this year has continued in the same vein.

The more staid Afternposten saw its web site do well, too,  but the morning national newspaper (it also prints a Oslo PM newspaper)  kept its advertising revenues pretty much on par with the year before, with continued growth in recruitment ads but a decline in real estate and brand advertising. Volume declined a bit due to higher pricing.

But both newspapers obviously take the view that if you can’t beat the web then you might as well join it, and they are launching together a new web site in April – N24.no which management hopes will become the largest and most frequently updated business web site in Norway. Aftenposten will own 60% of the operation, VG, 40%

Schibsted’s share price had a pretty good 12 months – it’s now basically midway between the high and low for the year at the equivalent of €23.20, but the company has just undergone the indignity  of being put under review by Cheuvreux, the equity broking arm of Crédit Agricole because of the VG problems and because of its announced aggressive international investments. Like media companies the world over Schibsted has also been busy buying up its own shares to boost its share price, and within the past 10 months it purchased 3.287 million of its own shares.

Schibsted also rather shocked Europe’s media world when it announced last week it was delaying the launch of its 20 Minutes free newspaper in Germany. You could hear the champagne glasses clinking in the Axel Springer Hamburg headquarters!

There are no free newspapers in Germany – Schibsted tried it once a few years ago in Cologne and got run out of town by local media ganging up on it,  so perhaps it is a case of once bitten and twice shy. But Schibsted was said to have been far along with its plans for a German launch taking full advantage of the upcoming World Cup football championships hosted by Germany starting in June.

But Axel Springer made it perfectly clear it did not welcome the Norwegian intrusion, and talk in Germany said that Springer was ready to launch its own competitive free newspaper within days of any 20 Minutes launch.

Schibsted’s management may well have taken the view of why get into such a competitive mess as that when it needs to pay attention to its 20 Minutes operations elsewhere – especially in Spain and France. And besides there are other markets easier to expand in – Schibsted just this week paid $3.3 million for a 67% share in the St. Petersburg free newspaper, Moi rayon, and it plans to export the Moi rayon concept to Moscow in Q3 which will probably require a further $4.5 million investment.

Schibsted’s interest in Russia is obvious – it is one of the few countries in the world that saw a 16% gain in print advertising last year, from $1.2 billion to $1.39 billion, according to the Association of Russia’s Communication Agencies.

In Spain, 20 Minutes now claims to be the most read general newspaper with approximately 2.3 million daily readers. It launched in eight new Spanish cities in 2005 alone, in addition to Madrid and Barcelona, increasing circulation from 660,000 to 1.1 million. In Madrid where competition is fierce with several free and paid-for newspapers, 20 Minutes claims to lead in readership with just over 1 million readers daily. It plans to relaunch its 20minutes.es in the spring.

In France it owns a 50% stake in 20 Minutes and while losses were cut to €4.3 million last year the truth is that France is one of the world’s most difficult newspaper markets in which to make a profit. Le Monde still nips 20 Minutes in the daily readership stakes, 1.899 million to 1.885 million readers daily with Le Parisien closely behind at 1.771 million readers, according to March, 2006 figures, but 20 Minutes claims a huge margin over Metro as being number 1 in the all-important 15 – 34 year-old target group. It is going to relaunch 20minutes.fr in the autumn.

One of the more interesting statistics from Norway is how readership is migrating from newspapers to the web.  In 1996 readership at the VG print newspaper was 1,371,000 with just 9,000 web readers. During the ensuing years readership of print alone went down each year, joint readership of print and the web went up each year and readership of the web only sky-rocketed each year.

Remembering that 1,371,000 print figure in 1996, last year print alone had 927,000 readers and another 410,000 read both print and the online site and combined those numbers are just shy of the 1996 total figure. . But today there are also an additional 540,000 that read the online site alone.

The good news from that is a whole lot more people than ever before are reading VG news, but the trend line for the newspaper’s readership alone has been down every year while its web readership has increased every year.

It’s a global print phenomenon, and there seems to be no real solution in sight except to get those increased web revenues to equal those lost print revenues as quickly as possible. Easier said than done.

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