The Berlin-based Axel Springer is selling its 51% share in the @Leisure Group, of Amsterdam, a rental company which offers more than 100,000 holiday homes across 50 countries. The buyer is OYO Hotels & Homes which is paying Springer €180m – equivalent to 15 x EBITDA – for the company which generated €24m profit in 2018. The divestment signals the German group’s decision to concentrate on its digital classifieds in jobs, real estate and cars.
The deal coincided with softer revenues and profit from Axel Springer in the first quarter of 2019: a strong performance from online classifieds failed to offset the weakness of news media. Total revenue fell slightly to €771.8m, while EBITDA fell 7% to €113.4m, partly as a result of last year’s sale of the French site aufeminin.
But the family-controlled, listed Axel Springer is a star performer. A 10-year financial comparison makes the point. First quarter revenue in 2019 was 24% ahead of the the comparable period for 2009, EBITA was double, and margin was up from 13% to 22%. Digital media which, in 2009, was a mere 17% of revenues now accounts for 74% (and 87% of EBITDA). The company whose revenues less than 20 years ago were almost 100% German, is now 45% international (more than doubled since 2009). It employs some 16,000 people – 50% more than in 2009.
In 2018, it made €738m EBITDA on revenue of €3.2bn.
It is difficult to exaggerate the significance of these stats and the transformation behind them. It is only 21 years since Mathias Döpfner, a music critic, became editor-in-chief of Die Welt (Springer’s quality daily which is published alongside Europe’s most successful tabloid Bild). Not many years before, he had been playing bass guitar in a rock band, and also managed a concert agency. Döpfner was different and maybe not just because he was a musicologist who loved James Brown, Aretha Franklin and also Mahler. But some signs of the future media leader could be seen in his comprehensive revamp of Die Welt. In 2000, his editorial comment outlined the three priorities of business leaders in the future: “First Internet, second Internet, third Internet.” Then, he got the chance to put it into practice in a company that had lost its way – even before the internet had taken hold.
In 2002, he took over from former News Corp boss Gus Fischer, after rising print costs and advertising cutbacks had pushed Axel Springer into its first-ever annual loss. The new CEO cut jobs, and integrated print and online newsrooms. But, even while he was cutting back, he pushed into new markets, launching the Polish tabloid Fakt that became the country’s bestseller in its first year. And the restless search for new opportunities has been snowballing ever since. In the past 15 years, the CEO’s strategy for the digitalisation and internationalisation of Springer has been characterised by active digital investment in:
- Online classifieds, especially outside Germany where it is a disruptor with no legacy media to defend
- English language digital media, especially in the US
- Its core daily newspaper brands Die Welt and Bild
- Startups in the US and Europe
Döpfner has sold swathes of magazines and regional newspapers while investing some €5bn in the acquisition of more than 40 digital companies including including jobs site StepStone, French real estate site SeLoger.com, and ads aggregator Awin. One important symbol of the company’s success in transforming its legacy media is Bild which had often accounted for more than 100% of the company’s profits. While the racy tabloid (which also spawned a raft of bestselling specialist magazines across sport, motoring and computers) now sells less than 30% of its peak 5m circulation, its Bildplus web site has more than 400,000 subscribers paying up to €13 a month.
For all the worldwide profits from digital classifieds (60% of EBITDA), Axel Springer and its CEO still live and breathe journalism. Its web site declares: “The soul and spirit of Axel Springer is journalism. Our mission: The successful establishment of independent journalism in the digital world. We want to become the most successful digital publisher worldwide.”
More than a decade ago, Döpfner spoke about Riepl’s Law, named after the German newspaper editor who had declared: “New media do not replace existing media. Media progress is cumulative not substitutive.” In some ways, the key to Springer’s success has been its determination equally to preserve its news legacy and to buy and build new profit streams. It’s reflected in the digitalisation of Bild and Die Welt, and investment in the all-digital Politico, Business Insider, Upday, and eMarketer.
The company’s journalism now reaches 300m – x3 in five years. While much of that growth has come from the unpaid audiences of Business Insider and Upday, the paid-for Bild and Die Welt have together built 500k subscriptions. Bildplus itself is claimed to rank fifth worldwide among paid-for journalism and to have the largest number of paying subscribers outside the English-speaking territories. The three-year-old Upday (embedded in Samsung smartphones and tablets) claims to be the largest news app in Europe with more than 25m monthly uniques in 16 countries. At a time when BuzzFeed, HuffPost et al are struggling to make digital news pay, Mathias Döpfner is bullish: “Digital journalism is becoming increasingly profitable at Axel Springer.”
Like Hearst in the US, the German company has proved to be a particularly good partner, collaborator and investor in joint ventures, partnerships and startups. Individuals and companies like doing deals and working with Springer. The fusion has paid-off with increasingly successful investments and a culture shaped by the best of Silicon Valley.
But there have been some expensive slips. German regulators blocked the company’s bid to buy ProSieben TV in 2006 and the following year it spent hundreds of millions on an unsuccessful bid to create a mail order rival to Deutsche Post. In 2015, Springer paid €450m for Business Insider (which always seemed like an inflated price) on the rebound from its failed €900m bid for the Financial Times. But BI is said now to be profitable, with some 15 editions, a worldwide audience of 140m, and a push into paid-for content.
Axel Springer’s overall transformation from a German newspaper and magazine publisher to a global digital media company with strong ties to the US has helped Döpfner publicly to challenge the practices of tech giants Facebook and Google. He has earned the right to be a powerful advocate for the business of journalism in a messy world of fake news and tech muscle.
That’s why it is easy to speculate that Döpfner still has ambitions to acquire a daily newspaper either in the UK (where he once bid for the Daily Telegraph, as well as the FT) or in the US, where Jeff Bezos owns the Washington Post and was formerly a fellow shareholder in Business Insider. What might a JV between the increasingly international New York Times and Axel Springer look like? Or some kind of Springer-led monetising merger of BuzzFeed and MailOnline?
For now, Döpfner may be keen to pay down a bit more of his €1.2bn debt before any big new deal. But the 73-year-old company is in great shape.
The Axel Springer reinvention has certainly required a lot of strategic courage, especially early on when the family-controlled company sold the TV listings magazine Horzu and the newspaper Hamburger Abendblatt, the two publications first launched in the 1940s by the late Axel Caesar Springer. With the acquisition of Die Welt, they had been the start of the company whose influence, reputation and profitability was transformed by the 1952 launch of Bild. Fierce criticism of the tabloid’s dog whistle populism punctuated Herr Springer’s life as a newspaper proprietor. He also fervently supported Israel and the reunification of Germany – and, symbolically, built his headquarters overlooking the Berlin Wall, which came down four years after his death.
Today, the controlling shareholder of the €5bn Axel Springer SE is Friede Springer, fifth wife of Axel (30 years her senior), whom she met when hired as a nanny to his two sons. They were married in 1978, seven years before Springer’s death. The relationship has, inevitably, provoked gossip, humour and litigation over the years. Frau Springer was, to say the least, unprepared for the demands of the business she inherited in 1985, the year of its IPO. The company lurched from one crisis to another across the next 15 years. And, then, along came Mathias Döpfner whose meteoric rise ended an extraordinary spell of erratic management, expensive adventures, and shareholder manoeuvres that might have consigned the whole company to the history books had they occurred a decade later, in the heat of digital challenge.
Döpfner became CEO the year after it made losses of almost €200m. Back then, he did not seem likely to become a global industry leader. But neither did his company. Wow.