Media Fortune Fame & Folly

The Brit who changed Bauer

Paul Keenan, president of Bauer Media Audio, has been appointed chief operating officer of Europe’s Bauer Media Group (effectively deputy to owner Yvonne Bauer), succeeding Veit Dengler who had been appointed to the post in 2019. A characteristic announcement said the outgoing COO had “completed” his task at the Hamburg-based company. The evidence is a company whose revenue may have decreased 50% in five years and 17% during 2018-20:

202020192018
Revenue2.0bn2.3bn2.4bn
Operating profit 300m 400m 450m
Margin15%17%19%
Employees14,00015,00015,000
Flashes & Flames estimates

The UK-based Keenan’s appointment reflects the growth of audio into Bauer’s largest business, reaching 57m listeners through more than 100 radio brands in the UK, Ireland, Poland, Slovakia, Denmark, Sweden, Finland, and Norway. Audio accounted for 23% of the Bauer revenue in 2020 and the majority of the non-German profit. Outside Germany, magazine publishing which once accounted for most of Bauer international revenue and profit is in virtual freefall having lost 18% revenue in 2020. Even digital – with the exception of the price comparison sites in Scandinavia, Spain and Eastern Europe – has not been growing. In 2020, almost 70% of Bauer revenue was from the company’s international business; in 2021, it may have been nearer 80%.

What was once the world’s largest magazine publisher has found – outside Germany – a new core business and a new leader. CEO Yvonne Bauer says the former journalist is “the perfect match”.

It is 30 years since Paul Keenan was editor of the privately-owned Local Government Chronicle, a B2B news weekly read by local authority CEOs across the UK. It was a momentous time for his readers who were reeling from the imposition by Prime Minister Margaret Thatcher of the so-called “poll tax” which caused riots and, ultimately, Thatcher’s own downfall.

For Keenan, though, 1992 meant something else: the sale of “his” highly-profitable magazine to EMAP Plc, then the UK’s fastest-growing media group. The ambitious editor couldn’t believe his luck.

Within a year, he had launched the company’s first online service. LGC Net delivered news to Keenan’s readers via a dial-up modem on the long-forgotten clunky Minitel system. For the editor – whose only previous job had been as a journalist writing for the “groundsmen” who maintain England’s grass cricket pitches – it was the start of a soaring single-company career that took him from local government politics, to fashion trade magazines and the high-flying consumer glossies Elle, Red, FHM, Empire, Mojo, and Heat that were powering EMAP.

Along the way, he tried to manage the digital developments of his company which, among all else, failed because it was unable to cope with the onrush of the web. By 2001, when digital was in full flow, Keenan became CEO of all EMAP’s consumer magazines. Within four years, he had also taken charge of the company’s growing radio stations. He was a commanding and creative leader of the business in a company which incentivised innovation and encouraged disruption. But it didn’t last.

In 2008, Bauer Media acquired EMAP’s consumer magazines and radio networks after the listed company had been all but crippled by a disastrous US acquisition.

That was the start of a few years during which Keenan himself may have been surprised to have kept his job in the family-owned media group.

When Bauer swooped to buy EMAP Plc’s consumer magazines and radio stations for £1.14bn in the 2007 break-up auction, nobody could miss the stark differences between Bauer UK and EMAP. Bauer were based in North London’s low-rent Camden Town, and published Take a Break for socio group C1-C2 women. EMAP were based in London’s theatre-land and published Closer for fashionable ABC1 women. The paper, print and staffing levels seemed to reflect the differences in location, management, style and profile of the two companies.

EMAP had not always been so fashionable. It had grown from its roots as a regional newspaper publisher to become the UK’s second largest magazine group through building brands like Heat, Grazia, Closer, Q, Mojo, Empire, FHM, Kerrang, Motorcycle News and Max Power. Despite also developing strong commercial radio and B2B operations, the high-flying EMAP had fallen to earth, victim of its hubristic US acquisition of Petersen magazines – and assault from the web.

News of Bauer’s acquisition of the EMAP operations sent the UK media scurrying for information on the almost unknown German company that had overnight become the country’s leading magazine publisher and the second largest radio station owner.

The EMAP success had been based on being adventurous, creative and collegiate. Most of its people had been shareholders. Now, UK executives found themselves confronted by the serious faces of Heinz Bauer and his daughter Saskia who would spend hours picking through the specific detail of individual items in the trading accounts on even the smallest magazines. “They would just go on and on about the smallest details and it was very difficult to get their approval for, say, the choice of an editor for even the smallest magazines. They would demand to know why there were so few pictures on this page or that, when more pictures would supposedly be better value. They were passionate about the print quality. But the discussions were almost always about quantitative things not qualitative, almost the opposite to EMAP. We could spend 4-5 hours discussing a single caption on page 36 of my smallest magazine.”

But everything changed in 2010:

  1. The 72-year-old Heinz Bauer reportedly passed control and an 85% shareholding in the company to his elder daughter Yvonne.
  2. In 2012, Bauer bought the German editions of Cosmopolitan, Joy and Shape from Swiss publisher Marquard. Yvonne Bauer said: “We are breaking new ground with this move, putting Bauer Media Group directly into a strong position in the premium magazine market.”
  3. Bauer sprang, seemingly from nowhere, to acquire ACP Magazines, Australia’s largest magazine publisher, for A$500m – to the obvious relief of private equity firm CVC which had blown billions of dollars on its disastrous 2007 purchase of ACP and Channel Nine TV from the Packer family.

Although observers believed Bauer over-paid for ACP, the 5-6 x EBITDA price was almost half the multiple of the EMAP deal – or would have been if only the ACP profits had materialised. But the ACP teams were so much more receptive, after months of threatened insolvency and the pressures of private equity debt.

Yvonne Bauer was euphoric “Right from the outset, Bauer Media and ACP shared a passion for high-quality and well-produced magazines because we love the printed medium. …With its cleverly devised digital strategy, ACP is a perfect component of the Bauer Media Group – and that’s not all: through the acquisition…. our hope was also to boost our international business…ACP represents our vision for the future…”

Bauer also echoed her father’s faith in the future of magazines: “Print is our core business: we make popular, emotional magazines that are read by millions of people every week. Well-made magazines will always find their readers…”

But it didn’t work out like that.

Six CEOs in Sydney, 10 magazine closures, write-offs, and trading losses, was followed by the 2020 giveaway sale of its AsiaPacific companies. Bauer had “spent” an estimated A$650m on investment and trading losses in its seven years in Australia. and New Zealand.

But – while ACP Magazines upset Bauer’s reputation as a cautious investor and prompted its strategic re-set – the former EMAP radio stations have created a whole new future.

In 2021, the audio group may have achieved €550m+ of revenue and some €150m of profit – perhaps 30% of the entire Bauer Media Group – and 45% of its international profit.

Some 50-60% of Bauer’s radio is in the UK and Ireland, which has been boosted by this year’s €100m acquisition of Ireland’s Communicorp whose 1.75m weekly audience is equivalent to almost 40% of the population. The acquisition fitted perfectly with Bauer’s 50 UK radio brands including Magic, Kiss and Absolute.

Although Communicorp made just €1.6m profit on revenue of €43.8m last year, it is thought that management cost savings will more than double the profit under Bauer ownership. But the big pay-off may come in the future: Irish radio is considered behind the UK in digital development and is more heavily regulated. Irish radio groups must get senior appointments approved by the regulator and have to compete for licence renewals every 10 years. Expected deregulation over the next few years may pay dividends for Bauer.

So it’s increasingly all about audio – and the international markets that generate some 80% of all Bauer revenue. The UK and Ireland may now be Bauer’s largest market – ahead of Germany. You might not have guessed that – until Paul Keenan’s appointment last week.

Having exited from magazines in Australia, New Zealand, Romania, Czech, Slovakia, and Russia – Bauer is much smaller than it was and – having for many years had revenue of €3bn+ – is almost certainly less than €2bn in 2021. But things are looking up.

Audio is growing almost everywhere, spurred on by podcasts, music and technology. But the emphasis may now be on the organic development of new services in existing countries and, perhaps, unregulated online launches in new places. But cutting back on the sprawling publishing business in the UK and even Germany may have the added advantage of enabling acquisitions in broadcast and audio.

The anti-Spotify push towards personalised radio (being trialled by Bauer in Poland) may require large-scale investment but can help audio to become a global business for Bauer. It’s a big prize.

Bauer teams producing magazines (many of which remain profitable) in Germany, UK, US, Poland and France might be reassured by the historic commitment to print. But its latest financials were candid about the need “to keep the publishing business profitable for as long as possible…” And that was before the post-pandemic inflation in print, paper and distribution costs.

That’s why the 146-year-old company’s future is audio and why its new non-family boss is Paul Keenan, the Brit who has changed Bauer. What’s next?

Bauer Media Group