Paper chase

German publishers cozy up to weather social media storm

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All snuggled up. Source: DPA

Seven of Germany’s largest publishers unveiled a new powerhouse alliance that they hope will bolster print media against the growing dominance of social media.

Three of Germany’s three largest media groups — Burda, Bauer and Funke Group — have joined forces with other well-known imprints such as Axel Springer and Spiegel Publishing, behind the investigative magazine Der Spiegel, in what’s being called a “publishers coalition”.

Under the guise of the German Association of Independent Press Distributors, the publishers have negotiated a new five-year contract that bulks up an earlier, less detailed agreement that ran out at the start of this year. It will represent three-quarters of Germany’s print media market.

Essentially, they have agreed to cut costs by working together in advertising and sales, and to a degree of consolidation. The move sets aside a historic rivalry that was unsustainable in the current, competitive environment.

It’s no secret that social media platforms such as Facebook, Instagram and YouTube have critically changed the nature of the newspaper business, becoming much more attractive spaces for marketers in terms of cost and outreach.

Only few details are available about the plan thus far, namely that Burda subsidiary BCN would be acquired by Bauer and Funke each for a 10 percent stake. BCN would be run by the Hamburg-based Bauer while the other two groups would take stake in Bauer’s companies, creating a tie-up worth almost €6 billion if it succeeds.

According to Burda boss Philipp Welte, who spearheaded the movement to collaborate more closely, the watershed deal already has the green light from German antitrust authorities.

“Our industry is fit as a fiddle,” Mr. Welte told Handelsblatt in an exclusive interview, adding that it was about time for publishers to “strongly re-emphasize the power, fascination and value of their products.”

“Today’s structure is not efficient and therefore too expensive.”

Philipp Welte, Hubert Burda Media boss

Mr. Welte said the current system “would sooner or later collapse”. The current structure is not efficient and therefore too expensive, he told a Handelsblatt subsidiary. Investments into modern technology make sense in larger units but are not practical in small ones. “Fragmentation is ultimately hostile to innovation.”

Burda owns more than 250 digital and media brands internationally. In Germany, it owns news magazine Focus, the Huffington Post and XING, a professional networking site that’s essentially the German LinkedIn, with a total net worth of €2.26 billion. But according to Mr. Welte, it’s not enough. Building the “modern publishing house of the 21st century” can only be accomplished through cooperation and casting the industry’s history of egotistical competition aside.

“Our common vision was and is that we want to preserve the truly unique variety of newspapers and magazines in Germany,” he said. “We are convinced that the distribution system must be made sustainable and more crisis-resistant. So we have broken with the mechanics of the past, in which each publisher has negotiated for itself, to look together for ways into the future.”

Mr. Welte’s goal is to ensure that publications stop undercutting each other for advertising. He also thinks an Association of Publishers would be as a good idea to uphold journalistic ethics in the age of fake news.

This could be just the beginning of closer cooperation in Germany’s publishing business. According to industry rumors, Bauer has also been in talks with Funke about pact that would reach even further, although there’s no official confirmation.

Hans-Jürgen Jakobs is a senior editor at Handelsblatt based in Munich and a former co-editor in chief of the paper. To contact the author: jakobs@handelsblatt.com

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