Axel Springer has agreed the long expected divestment of its classified advertising business to investor KKR. Under the deal, the Germany-based media company will again become a private company 98% owned by Friede Springer and CEO Mathias Döpfner and valued at €3.5bn. Its major brands include the German newspapers Bild and Die Welt, and Politico, Business Insider and Morning Brew, in the US.
KKR and the Canada Pension Plan Investment Board will become majority owners of the classifieds business (Stepstone Group, Aviv Group, finanzen.net and Awin) – valued at $10bn – with Axel Springer retaining a 15% shareholding. The demerger comes five years after KKR paid €3bn for a 49% stake in Springer which then delisted from the Frankfurt stock exchange.
Döpfner told staff yesterday that the KKR deal fulfilled the best hope he had for the business back in 2019 and was “a great success”. He also recounted how the company had changed in the two decades since he became CEO: “Back in 2002, Axel Springer was a German newspaper and magazine publisher that was losing money. In 2021 and 2022, the company achieved double-digit revenue growth for the first time in four decades. And, in the past five years, the value of the company (now €13.5bn) has almost doubled.”
Much of the growth has, of course, come from the classified ads business now being divested. But the Axel Springer news brands do have a digital reach of some 400mn monthly uniques, 1mn paying subscribers and are undisputed leaders in Germany and among the top four in the US.
But there have been some expensive mis-steps in Döpfner’s 20-year revolution.
In 2006, German regulators blocked the company’s bid to buy ProSieben TV and the following year it lost hundreds of millions of euros in an unsuccessful bid to create a mailing rival to Deutsche Post. But neither the CEO nor the owner were discouraged.
Having joined the Springer board in 2000 and become CEO two years later, Döpfner worked tirelessly to transform the Berlin-based domestic newspaper and magazine publisher into a primarily-digital, increasingly international provider of news, classifieds and marketing services through a powering strategy of M&A and organic development including:
- Acquiring: US-based digital media, including Politico, Business Insider, and Morning Brew for a total of some $1.5bn. Digital classifieds in jobs and real estate, starting with the then pan-European StepStone in 2009 and the UK’s Total Jobs in 2012. Working with private equity (first General Atlantic during 2012-15 and, then, with KKR) to make acquisitions and ramp-up the growth of the classifieds business. In total, he has spent €3.5bn on ore than 50 digital companies.
- Converting: German daily newspapers Bild and Welt into digital brands, with hundreds of thousands of subscribers.
- Divesting: The €920m sale to Funke Group of the Springer women’s and TV listings magazines and regional newspapers including Berliner Morgenpost, Hamburger Abendblatt, and Horzu.
The reinvention required real strategic courage, especially early on when the family-controlled company sold Horzu and Hamburger Abendblatt, the two publications first launched in the 1940s by the late founder 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, based on the UK’s then all-powerful Daily Mirror.
Herr Springer’s business career had been punctuated by fierce criticism of the fiery Bild. But there were many other facets of the man who fought for the reunification of Germany and, symbolically, built his headquarters overlooking the Berlin Wall, which came down four years after his death. (It is now the site of the company’s stunning Rem Koolhaas-designed Axel Springer Campus.)
On Axel’s death in 1985, his fifth wife Friede Springer became the company’s largest shareholder.
The newly-listed company lurched from one crisis to another in the following 15 years, with a succession of bosses and disastrous strategies. Then, along came its unlikely saviour, Mathias Döpfner. Having studied musicology, literature and theatre science in Frankfurt and Boston, he began his career in 1982 as the music critic of the Frankfurter Allgemeine Zeitung. After working as a news correspondent in Brussels – and also as manager of a concert agency – he moved to Gruner + Jahr in 1992.
Four years later, he became editor-in-chief of the tabloid Hamburger Morgenpost. In 1998, he joined Axel Springer as editor-in-chief of Die Welt. He sharply reduced its losses. Within four years, the seemingly unambitious Döpfner found himself propelled into the Springer senior management.
But some signs of the future CEO could be seen in his comprehensive revamp of Die Welt. In 2000, his editorial comment outlined the three priorities of future business leaders: “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 succeeded former News Corp UK boss August Fischer, after rising print costs and advertising cuts had pushed Axel Springer into its first-ever annual loss, of some €200m. Döpfner became CEO at 38, half the age of his predecessor. He set about cutting costs and, in 2004, increased Springer profits by 23%. He also managed to rid the company of its hostile 40% shareholder, the former TV entrepreneur Leo Kirch.
Döpfner is now one of the most admired media CEOs, the 21st century heir to a cast of news barons from Hearst to Northcliffe, Beaverbrook and Murdoch. Back in 2002, he looked nothing of the kind. His sudden, fast-track executive career prompted colleagues to identify the characteristics he shared with the company’s late founder: his passion for music (in Döpfner’s case, everything from Mahler to James Brown), his “non-Jewish Zionism”, and strong personal convictions about almost everything in media and politics.
He is said, early on, to have given Frau Springer a copy of former Washington Post owner Katharine Graham’s autobiography, chronicling her close working relationship with legendary editor-in-chief Ben Bradlee. “Perhaps this is a good role model for our corporation,” he reportedly had told her.
The relationship between proprietor and CEO blossomed.
In 2019, after KKR had become its largest single shareholder, Frau Springer sold a 4.1% stake to Döpfner and gifted 15% more – bringing his shareholding to 22%. She also transferred to him voting rights for her remaining 23% shareholding.
The CEO’s restless drive to harness the best instincts of companies everywhere had prompted him to send senior executives to California, on a mission that has left an indelible mark on the rejuvenated company’s strategy. The Springer team roomed in Palo Alto, a stone’s throw from Stanford University, and networked with its graduates across Silicon Valley. They studied the habits of US start-up culture, learning the lessons of success and failure in the California sun. Then they flew home and helped to change the German company and its culture. But not before the CEO had staged a theatre play in which he played the founder Springer in “today’s world”. He dressed up in a hoodie and a t-shirt, like a startup founder, and thought out loud how to disrupt the media, daring to criticise his own company’s prospects if it did not change.
Then came the pain as he made a point of recruiting senior executives from outside the company in order to change the culture. He 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 through acquisitions, disposals, and digital startups.
The once sleepy Axel Springer group has – alongside the New York Times and Norway’s Schibsted – become a standout in the transformation race by daily newspaper companies.
Like Schibsted, Springer expanded its digital classifieds strongly in countries where it was an insurgent with no traditional media to defend. Unlike the Norwegian company – which created a large number of new classified sites in ‘new’ countries – Springer based its growth on significant acquisitions in many of the key markets. It was a bold strategy, supported by General Atlantic, and KKR which helped to fund the delisting of Axel Springer and also the $1bn (5x revenue) acquisition of Politico.
In 2015, Springer had paid a splashy €450m for Business Insider on the rebound from its failed €900m bid for the Financial Times. It has been described by Döpfner variously as “the Wall Street Journal of the business elite”, “business journalism with a twinkle in its eyes” and “the largest business destination in the world”. He has also predicted that “It’s going to be one of the most attractive and best positioned digital native brands in the world”. And there are big plans to expand Politico beyond the existing bases in Europe and the US.
Like Hearst in the US and the Daily Mail Group in the UK, the German company has proved to be a particularly good partner, collaborator and investor in joint ventures, partnerships and start-ups. Individuals and companies like doing deals and working with Springer. And the company has been able to retain strongly independent founders.
Axel Springer (before the classifieds divestment) has revenue of some €4bn and EBITDA of €1bn. It employs 18,000 people across the world.
But it’s not all been plain sailing for the CEO.
In 2022, he was sharply criticised in the US for everything from the delayed dismissal of the Bild editor-in-chief for sleazy conduct to seemingly incautious (supportive) remarks about former President Trump and Elon Musk, and a strange joke about paywalls: “We’re from Berlin, we don’t like the concept of walls”. The public mis-steps smacked of arrogance to US journalists who didn’t know much about either Springer or its CEO. He knew the US well but seemed strangely unprepared for the questioning after years of being courted by respectful reporters and politicians back home in Germany.
It may take newspaper sleuths in Washington and New York a while to forget the Döpfner stumbles. But they will eventually be impressed by his consistent support for independent journalism (“not every journalist writes what I think is right”) and for his strategy smarts. Critics might never actually like the CEO’s towering self-confidence but they will come to admire his straight-talking, his vision and the success it is bringing to the company. Even in bumpy times, it continues to be a brilliant performance, now crowned by the KKR deal.
There was always an inconsistency in the way that Mathias Döpfner had told his teams (especially in the US) that the Axel Springer dependency both on news and classified advertising was a digital version of its traditional business model – but that the Classifieds and also the Marketing (eCommerce and Price Comparison) sites will eventually be divested.
But he always wanted the company to be a pureplay news provider and believed the “non-core” earnings would pay for the journey. Döpfner simply loves the news business. He was among the first to articulate the need for publishers to ‘get’ tech before the tech firms became publishers; he recognises that advertising corrupted so much traditional media. A one-time ancillary revenue became the dominant stream which distorted reader relationships and wrecked the business model. But, even now with soaring levels of digital subscriptions, most daily news brands do still need some of the revenue from pre-digital times: print (for now) and some advertising (perhaps for ever).
Whether Döpfner admits it or not, the Axel Springer news portfolio may always need ancillary revenues beyond the core subscriptions. But it’s about even more than money. The fact is that eCommerce, price comparison sites, advertising, online learning, and events can be integral to the sense of belonging (even membership) so important in building long-term readership. Media companies must have an interactive relationship with reader-users. They need to be connected. Versatile revenue streams come from versatile products and services.
But, now, the biggest challenge begins.
The debt-free Axel Springer wants to challenge the New York Times and The Guardian for a leading role as quality news provider to the world – or at least the English-speaking parts of it.
Can we expect more big deals?
This week, Springer strategists were excited about Puck’s eye-catching gossip that some Nikkei board members had grown impatient with the Financial Times performance and were pushing for consideration of a sale. And (who knows?) the mighty Dow Jones/ Wall Street Journal could conceivably be sold as an eventual result of this week’s Murdoch family stoush in Reno.
Axel Springer dreams of having large, truly global digital brands, including Business Insider and Politico, and also audio and video channels to challenge the dominance of old-style broadcasters like CNN and even the BBC. In times when the UK’s state-owned broadcaster is having difficulty funding its international broadcasting, could a world news partnership with Axel Springer be one stretchy possibility? And what about an alliance with CNN whose reforming CEO Mark Thomson was previously an advisor to Axel Springer?
Beyond the wilder ambitions, insiders expect the Springer portfolio eventually to include major new Politico-like global verticals in sectors like sport, finance, education, and health. The global footprint might also be amplified by networks like those established by TED and the World Economic Forum.
But amid the euphoria of this week’s deal, nobody will have wanted to point out that Axel Springer’s 30% revenue growth in the past five years has actually not been that great, especially with acquisitions. The company’s digital news transformation is real but – as elsewhere – it has been propelled by non-core revenues (classifieds) which have also brought in the investment to make chunky acquisitions like Politico and Business Insider. Lest we forget, the news business has been generating about 50% of Axel Springer revenue but only one-third of the profit.
Mathias Döpfner dreams of becoming the world champion of news. But it’s his biggest challenge yet.
