Sixty years ago in June, Axel Springer, Germany’s own Citizen Kane, launched Bild. The new daily unashamedly copied the style and tone (but not the politics) of Britain’s left-leaning Daily Mirror, right up to the red-top logo. As Springer proudly watched his new paper roll off the presses in 1952, he felt confident about its prospects. After all, the Mirror, which had been founded (like the Daily Mail before it) by newspaper pioneer Lord Northcliffe, had become Europe’s biggest-selling newspaper. It had a circulation of more than 4.5million, with all the power and profit that Springer craved.
How things have changed.
Today, it is Bild that is Europe’s best-selling newspaper with a daily circulation of 3million (having peaked at 5m). The Daily Mirror is an altogether sadder story. Having also peaked at 5m circulation in the 1960s, the pioneering red-top tabloid is now struggling even to sell 1m copies.
The performance of these flagship dailies symbolises a tale of two media dynasties whose fortunes have sharply diverged. Axel Springer, the right-wing campaigner for post-War reconciliation with Israel and reunification with East Germany, died in 1985 leaving a legacy of a strong newspaper and magazines group effectively in the hands of his children’s former nanny Friede who had become his fifth and final wife 10 years before.
Marrying Friede, who was 30 years his junior (and inevitable shareholding spats with similarly-aged Springer offspring) has been good German gossip for years. But Axel Springer secured longterm family-control of his now-public group in Randolph Hearst-like ways. Today, Axel Springer Verlag is one of Europe’s leading media groups with a turnover of c£2bn and newspapers, online, TV and magazine businesses across 36 countries. A rising 25% of revenue is from outside Germany and, with an on-off history of would-be newspaper deals in the UK, most observers expect Springer to expand further and further in the UK from an existing stake in online marketing. Springer execs know the Schibsted story well (see Flashes & Flames post).
US-immersed Mathias Doepfner, the quietly-spoken former editor-in-chief of the group’s Die Welte quality daily, was plucked from relative obscurity in 2002 to become Springer CEO. He shares with Friede Springer’s late husband a background in journalism, musical virtuosity, and the boast of being “a non-Jewish Zionist”. The old man would be proud of his widow’s choice of CEO. Doepfner is already one of Europe’s longest-serving and most successful media bosses. He is also one of the leaders of a new breed of distinctly international bosses of what were formerly parochial German businesses.
The contrast with the fate of the Daily Mirror group could not be greater, even if its years since the 1950s have also been punctuated by plenty of the colour that has preoccupied Germany’s chattering classes with Axel Springer’s life and legacy.
For the Daily Mirror, the past 50 years had first seen the newspaper soaring with the skills of its most celebrated editor Hugh Cudlipp, bounce around as part of magazines group IPC, be neglected by industrial conglomerate Reed International, before being snaffled and then robbed by larger-than-legend Robert Maxwell. Along the way, in 1968, the Mirror Group sold a struggling newspaper called The Sun (formerly the Daily Herald) to one Rupert Murdoch. He (and editor Larry Lamb) turned the world of tabloid journalism upside down (page 3 et al) and took just 10 years to turn The Sun into the UK’s best selling daily. It may, soon enough, become its own headline: the killer of the Mirror.
Journalistically too, things have been pretty mixed for the Mirror: It managed to laud Maxwell as the paper’s saviour on the day he died in 1991, only to admit a few days later that he had looted its employees’ pensions. The self-satisfied Piers Morgan (editor before TV star) was suckered in 2004 by a crude hoax claiming to picture UK soldiers abusing Iraqi prisoners – and fired. Before that, there had been a smelly story of Daily Mirror tips and insider share-dealing. Corporately, things had gone from bad to worse since the 1999 “merger” of Mirror Group Newspapers with regional press group Trinity to form Trinity Mirror. The result was an unconvincing and unworkable strategy, a pile of debt, a pension scheme deficit – and steadily falling circulations all round.
Next came Sylvia (Sly) Bailey the classified sales director-turned CEO who had polished up IPC, the then private equity-owned magazines monolith, for sale to Time Warner for £1.2bn (three times its value today). That was in 2001, two years after she had become CEO. Two years later, Sly became CEO at Trinity Mirror.
The blonde, baubled Bailey brought glamour to the business pages with profiles that chronicled her spells at the Italia Conti stage school and as a make-up artist for Revlon. But Sly was smart and had learned fast at IPC how to cut costs and get profit growth from a mature media business. But this was a move into the big league.
As Sly, 41, settled into her shiny new Canary Wharf office as the youngest CEO of a major UK company, she will have noted some of the anniversaries of her first year. It was 100 years since the launch of the Daily Mirror, 50 years since the company was first floated on the London Stock Exchange and, poignantly, 45 years since it had been bought by her former employer IPC, before being absorbed into Reed International and then snatched by Robert Maxwell.
Sly typically hit the ground running. Her first annual results in 2004 featured a presentation of her strategy, summarized as “Stabilise, Revitalise, Grow”. Enthusing about the “tremendous potential” of her company, she breathlessly reported revenues 6% up and profits up 17%.
Unfortunately, that first, rave-reviewed presentation to analysts proved to be a high water mark of the company’s performance. It was also the last year when Trinity Mirror managed to increase its revenues. This is one depressing story of a traditional media company falling to pieces in a new world for which it was not equipped.
Look at the facts of Sly Bailey’s first eight years: revenue is down by 30%, operating profit down by 40%, earnings per share down by 30%. In 2003, the company paid a dividend of 18.3p per share, in 2010 it paid nothing. The flagship Daily Mirror, which once sold more than 5m copies, is now struggling to stay above 1m, less than half of its close rival (and former stable-mate) The Sun.
Trinity Mirror is laboring under debt of c£150m and a pensions deficit of c£100m, legacies of the Maxwell days, the merger of two tired and failing businesses, and the modern UK perils of so many age-old final salary pension schemes.
The share price that, just 7 years ago, was more than £6 is less than 50p and the company that once graced the FTSE 100 top companies is now not even in the top 350.
But no one can say Sly hasn’t been busy. She has been champion cost-cutter in old-fashioned, still-bloated Fleet Street. In the past eight years, she has cut almost £200m from Trinity Mirror’s fixed costs – curiously, in more or less equal annual salami slices. And, last week, the CEO announced another 75 editorial job cuts (18% of the staff) in a move to combine the journalist teams of the group’s national dailies. Everybody who knows the arcane world of UK national dailies (where many lossmaking dailies still have 500+ journalists) would regard this cost reduction as a real achievement. And, this year, for the first time there may even be a bit of operating profit growth courtesy of the News of the World closure which has boosted all Sunday tabloids.
But will that be enough to save Sly Bailey?
The vultures are circling. There have been the inevitable attacks on the Trinity Mirror chief’s £1m+ total earnings, a legacy of FTSE 100 days – and probably twice the going rate for CEO of a company with a market capitalization now of £120m. So you should expect fund managers to get their way on that particular piece of cost-cutting.
Then there’s Sly Bailey’s curious and embarrassing insistence that there is neither evidence of Mirror phone hacking nor any reason to investigate persistent allegations. Two things will shake her intransigence on this: any one single piece of hard evidence of phone hacking; and the appointment of new Chairman David Grigson (ex Reuters and Emap Finance Director) who will want more solid assurances than we have so far heard. These don’t seem like the best of times for Sly Bailey to imitate James Murdoch’s former “see no evil” posturing. The rising cost of News Corp legal settlements ($200m and counting) somehow gets lost in Rupert Murdoch’s soaring film and TV profits. But Trinity Mirror would have no such latitude: a single legal claim would rock the company to its foundations.
But, for now, Sly Bailey is insisting (and hoping) that the Daily Mirror has got nothing to hide and has not been like the News of the World. But, then, Trinity Mirror is not a lot of things like other media companies. For all the dabbling in digital investments and some genuinely good web operations, it simply does not look much like a long-term business. It’s not alone in that, of course. But some newspaper groups in the UK and elsewhere look so much better than others. So what has gone wrong with Trinity Mirror?
Well, history has dealt Sly Bailey a bad hand. Notwithstanding the bloody history and debt of the group, she has had to wrestle with the cataclysmic decline of regional newspapers – and UK legal barriers to any kind of meaningful consolidation in a world where life-blood classified ads for homes, jobs and cars, have evaporated and are not coming back. And the woes of her flagship national, the Daily Mirror, symbolise the advertising and circulation declines right across the old Fleet Street. These may be recessionary times, but this is different: daily newspapers have lost sales and, in the UK, popular support at an alarming rate. The UK’s legendary newspaper reading habit is slowly dripping away. But more damaging still is the whole market’s loss of credibility, achieved almost single-handedly (so far) by the dark arts of News International. There seems little reason to believe that the damage is finished. And for the already-wounded Trinity Mirror, that is pain piled upon pain.
Boardroom colleagues across time know Sly as a sharp, incisive and focused operator. But she has seemingly had to spend her time hacking (sorry!) through the undergrowth of historic costs. Nothing about that has been easy. But contrast Trinity Mirror with the public company Daily Mail & General Trust, the only other UK group to be weighed down by national and regional newspapers – chaired by Lord Northcliffe’s great-great grandson.
DMGT too is depressed by newspaper trends. Its $1.5bn one-time valuation of its stricken regional newspapers prompted a walk-away from a c£1bn offer only to be faced soon by having to accept only £150m. And daily advertising and copy sales are not great, either. But look at the sheer range of DMGT activity from the profitable Metro free newspapers, the continuing gold-mine of Euromoney, to the divestment of the London Evening Standard, the gutsy worldwide push of search-fuelled Mail Online (huge audiences but no profit in sight), growing ecommerce in the Daily Mail, and the burgeoning international business-to-business group which itself accounts for well over half of DMGT profits.
That partial list underlines not just the plethora of ventures and ideas to contrast with the same-old, same-old Trinity Mirror. But DMGT’s success also reflects a style of media group management that is suited to churning times. DMGT has long managed what began as ancillary investments to the Daily Mail itself as if it were actually a private equity group, selling almost as often as it was buying. Execs describe their “light touch” management that has helped DMGT to build non-newspaper earnings and find profit growth in unpromising times.
It is an approach that dates back at least to the 1969 arm’s length launch of Euromoney. But the DMGT philosophy has come into its own in an era when legacy media companies struggle to find ways of competing with new baggage-free operators. For Trinity Mirror, It seems almost too ironic that DMGT has been able not only to maintain the still-profitable leadership of its Daily Mail, but has also been able to reduce sharply the group’s exposure to newspapers. And Axel Springer’s heirs have done the same. Both of these family-led, listed groups continue to get results from newspapers (mostly) and are striking out in plenty of other promising new directions.
Trinity Mirror today publishes 200 or so regional newspapers and five national dailies in the UK and Scotland. By some measures, it is the UK’s largest newspaper group. It sounds a mighty business and, of course, it once was.
It’s all about the easier-said-than-done task of media diversification – while hacking costs to slow the decline of legacy businesses. And, importantly, accepting the inevitability of media cannibalisation: do it or have it done to you. Sly Bailey has errr got some of it dead right, driving out costs from her centrally-controlled business. But that’s the end of the scoring. The promise of “Stabilise, Revitalise, Grow” has long gone. So, dividend-less Trinity Mirror shareholders are left to worry in a nicely-fashionable way about their CEO’s salary and whether the UK phone hacking inquiry will hasten the demise of a once all-conquering newspaper business. Those shareholders will now get angry about the fading horizons of Trinity Mirror. But it might all be too late. A tale for our times.
3 May 2012 UPDATE: (from the Financial Times):
Sly Bailey, the chief executive of Trinity Mirror who was facing a shareholder revolt about her £1.7m pay package, unexpectedly handed in her notice to the board on Thursday. A statement from the company said that Ms Bailey, who has held the job for 10 years, would leave by the end of the year. Ms Bailey’s departure followed a meeting of directors, who had held talks with investors earlier on Thursday.
In a statement, Sir Ian Gibson, the Trinity Mirror chairman, thanked Ms Bailey for “her immense contribution and leadership over an extended period”. She said in a statement: “Newspapers are a business like no other. Now I feel the time has come to hand over to someone else to take up the challenge and for me to seek new challenges and opportunities elsewhere.” Investors in the publisher of the Daily Mirror and The People have repeatedly demanded a substantial cut in Ms Bailey’s pay in the light of the group’s market capitalisation, which has dwindled from £1.1bn when she joined in 2003 to £83.7m currently. Trinity has paid no dividend since 2008.
The company, which has been the target of allegations of phone hacking, has seen its shares fall 90% over the past five years amid the economic downturn, migration of readers to the internet and the fragmentation of advertising spending. (www.ft.com)