The Berlin-based Springer newspaper and magazine publisher is internationalizing and digitalizing in a bid to modernize its business strategy. It's responding to a shift of revenue to the Internet.
"I had a look around in England, Scandinavia and the US, and I realized that publications for the masses have to be designed differently from the way they were in previous decades," said Axel Springer, the son of a Hamburg-based media dynasty, in a speech. The experience gathered during his journeys went into the launch in 1952 of the mass-circulation "Bild" newspaper, the best-known newspaper in Germany, a pillar of the Springer publishing company's power, with a circulation of over 2.5 million and.
Towards the end of July 2013, the company's current CEO, Mathias Döpfner, made an equally visionary statement. "We're convinced that journalism, ad marketing and our classifieds business can also work in the digital world." The result of this view emerged with the slogan "online first."
For nearly ten years, Springer executives have pushed for more digital content and investments in international markets. For 2013, management cited three corporate priorities - digital transformation, digital subscriptions and a corresponding corporate culture, meaning a complete overhaul of the publishing business in the direction of an online media company.
The company's first-quarter turnover in 2013 came in at 804 million euros ($1.07 billion), marking an almost 2-percent increase on the same period a year earlier. For the second quarter, CEO Mathias Döpfner warned in advance that structural changes in the print business and investment in digitalization would put a strain on earnings.
Springer has recently been earning more money with online products than with its conventional print titles: first-quarter circulation figures fell by 4 percent over the same period in 2012. The digital business by contrast saw a 20-percent increase.
"We can find companies with a similar digitalization drive in eastern Europe and the US," said analyst Christoph Schlienkamp from the Lampe banking group. He said in Germany, though, Springer had a pioneering role. Only recently, Springer sold a package of regional print editions for about one billion euros. Lampe says the firm might use the money to try and acquire market leader Scoutgruppe. Users buy classified ads on Scoutgruppe's car and real estate portals.
In 2012, Springer secured one billion euros in revenues with online content, including the transfer of its classifieds to the Internet. Interactive and user-friendly portals are attractive to users and have the additional benefit of lower staff costs. And tailor-made ads also mean more clients at the end of the day.
For Springer, that equation has worked fine. The classified ads market on Internet portals made a profit of 136 million euros, more than the journalistic content proper. That's led Döpfner to include price comparison portals in his strategy.
The new policy emerged from an earlier defeat. Springer wanted to become the majority shareholder of a big German private broadcaster, the Pro7-Sat1 Group. But the move was stopped by the German anti-trust authorities.
"We've always said there are two potential growth avenues for our company," Döpfner told public broadcaster Deutschlandfunk back in 2006. "Now we're focusing on the second option, that is the internationalization of our newspaper and online business."
Today, France's biggest real estate portal, Seloger, its Belgian counterpart and Britain's largest job exchange, Totaljobs, are all part of the Springer Group. The company's earnings secured abroad amounted to 300 million euros in the first quarter.
In Poland, Springer invested in women's publications such as "Olivia" and "Pani domu", in Spain it allocated resources to "Computer hoy." At the beginning of the new millennium, Springer added additional publications to its portfolio, such as the Polish and Russian editions of "Newsweek." Licensed editions of the firm's "Auto-Bild" are published in 12 countries.
In 2006 the Polish newspaper "Dziennik" and the Russian edition of "Computer Bild" were added. In the same year, Springer secured a 25-percent stake in the Turkish TV station "Dogan TV" and in the Polish TV group "Polsat."
A year later, the firm took over 12 TV guides of the Swiss Ringier Group and acquired a majority stake in the French women's portal "Aufeminin." In 2010 Springer announced investments in India and a joint venture with Ringier in eastern Europe, exploiting Springer's experience and production capacity in Poland, Hungary and the Czech Republic, as well as Ringier's similar position in Hungary, the Czech Republic, Serbia and Turkey.
Analyst Christoph Schlienkamp believes that when it comes to digitalization, Springer's main emphasis is currently on building up a dominant position in Germany itself. "Digitalization is not just a German topic, but if you are the market leader in Germany, you're bound to be in a privileged position," Schlienkamp argued. "Springer should be able to get there in three to four years."
Profitable online business
Springer has been criticized for parting with a number of its regional publications, seen as a departure from its core publishing business. But there have also been supporters of the move.
"If a company sees that digital revenue has soared from zero to 50 percent of the overall turnover within a decade or so, with print sector profitability going down steadily, it seems only logical it should focus on the new growth market," said the head of the Berlin branch of the journalists' trade union DJV, Bernd Lammel. Concentrating on the more profitable digital world was "not the end of civilization as we know it," he added, "and definitely not the end of journalism. It could even rescue journalism in the long run."