World Newspaper Congress 11: Session Finance, Gregor Waller

63rd WORLD NEWSPAPER CONGRESS Session: Finance Titel: How do we get through the next crisis Speaker: Gregor Waller Mark your calendar64th WORLD NEWSPAPER CONGRESS19th WORLD EDITORS FORUM Vienna, Reed Messe Wien www.wan-ifra.org/kiev2012

How do we get through the next crisis Some Landmarks Gregor Waller Consultant and Entrepreneur Principal Consultant at Frenemies Consul7ng, a WAN-‐IFRA ac7vity www.wan-‐ifra.org

The double dip “monster” (recession) that will hit the world economy 2012 will bring Europe’s newspaper publishers in the red ﬁgures* – it even can get worse Large Newspapers >200k Midsize Newspap. > 100k Local Newspapers <50k -‐20% -‐40% -‐20% -‐30% -‐40% -‐5% REVENUES -‐30% -‐10% -‐5% -‐30% -‐5% -‐10% -‐10% -‐30% -‐10% -‐10% -‐10% -‐10% -‐10% -‐10% -‐1% -‐2% -‐3% -‐4% -‐1% -‐2% -‐3% -‐1% -‐2% -‐3% -‐4% -‐4% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 EBITDA CirculaIon Display Ads Classiﬁed Ads * Average of 4 newspapers in each class WAN-‐IFRA Finance Session -‐ Thesis* 2011-‐10-‐14 2

2012 the „2. Exitus“ will begin:Discerning the “prepared” potential winners of the Digital Trans-formation from the “passive” stakeholders “at print speed” Unable for challenges of PotenIal Winner of the Digital TransformaIon Digital TransformaIon §  Focus on dividends/noninvest §  Commi_ed to a Ime of invest Shareholders §  No cooperaIon with dislikes §  Digital in all top posiIons suitable for financing the §  AUachment to CE, CEO, long-‐ §  OK to deep cut layoffs transi7on into the Digital Age term companions (legacy) §  OK to „digital overhead“ §  Avoidance of cannibalizaIon §  All “Head-‐of” must be digital Top Management §  No digital experiment budget §  Best PracIce Restructuring capable of managing the §  „Passive“ digitza7on approach §  Coop-‐Network with publishers transi7on into the Digital Age §  No digital restructuring plans §  Digital Think Tank Editors in Chief §  No evaluaIon of digital editor §  Digital all-‐channel workflow willing and capable of §  No best pracIce learning trip §  Customer & compeIIon focus transforming a „print-‐culture“ §  I hire a digital deputy chief ed. §  „get digital or get out“ editorial in a digital editorial §  Conference @ 10 – no metrics §  Commercial whilst integrity 2011-‐10-‐14 WAN-‐IFRA Finance Session -‐ Thesis 3

Take Over Targets 1: How to identify newspapers with bad management1. LiUle RESTRUC-‐ •  Li_le or no signiﬁcant RSTRUCTURING PROJECTS in the past 5-‐7 years TURING in the past •  No / li_le BENCHMARK PROJECTS in the past 5-‐7 years 2. No clear DIGITAL •  No DIGITAL STRATEGY FOCUSSING company ac7vi7es into the Digital Age STRATEGY executed •  Li_le / No EXPERIMENTING with KEY ELEMENTS of media Digital Strategy 3. No vision for •  Editor-‐in-‐chief is NOT the DRIVER of the digital transforma7on DIGITAL EDITORIAL •  No CRITICAL MASS of 20% DIGITAL EDITORS 4. No DIGITAL edi-‐ •  NEWSROOM & WORKFLOW do not allow to serve ALL digital channels torial WORKFLOW •  Editorial has no strategic CONTENT PLANNING strategy – linked to online 5. No DIGITAL PRO-‐ •  Digital Product Diversity is neither strategized nor implemented DUCT STRATEGY •  Paid/Free Content debate is not decided 6. No DIGITAL •  No ACTIVE SALES FORCE– integra7ng digital products & know how SALES know-‐how •  “Space” selling rather than SOLUTION, TARGET GROUP selling 2011-‐10-‐14 WAN-‐IFRA Finance Session -‐ Thesis 4

Take Over Targets 2: Newspapers with pure advertising based digital business models are „easy prey“ for investors leveraging targets via Paid Content BUY ANY „FREE-‐PHILOSOPHY“ newspaper & LEVERAGE it Paid Content works by over 100% by introducing a smart PAID CONTENT model 2012 2022 Free Paid Cont. Free Paid Cont. # of free apps 30,000 -‐-‐-‐ 300,000 -‐-‐-‐ # paid apps (15% of free) -‐-‐-‐ 4,500 -‐-‐-‐ 45,000 Abendbla_.de 7,95 €/mo & Morgenpost.de 5,95 €/mo CPM/month (30 views) 100 € 100 € 50 € 50 € week week week week week week week 51/09 10/10 20/10 30/10 40/10 01/11 13/11 Digital ad revenues 1,08 m€ 0,16 m€ 5,4 m€ 0,81 m€ Price/month -‐-‐-‐ 15,99 € -‐-‐-‐ 24,99 € 120.000 subs 3,99 €/mo Paid Content revenues -‐-‐-‐ 0,73 m € -‐-‐-‐ 11,34 m € OVERALL REVENUES p.a. 1,08 m€ 0,89 m€ 5,4 m€ 12,15 m€ 244.000 subs 15 $/month > 100% 2011-‐10-‐14 WAN-‐IFRA Finance Session -‐ Thesis 5

If today we had the market penetration of tablets we will have in 5 to 10 years, no western newspaper CFO would give an OK to a new print plant with circulation dropping at least 50% in the next 10 years. Output (mio sheets) 4.000 3.000 2.000 1.500 1.000 Salaries (m€) 200 m€ 200 m€ 200 m€ 200 m€ 200 m€ Invest (m€) 30 m€ 30 m€ 30 m€ 30 m€ 30 m€ 100% Variable cost/sheet (10 ct) 800 m€ 600 m€ 400 m€ 300 m€ 200 m€ Total cost of ownership 1.030 m€ 830 m€ 630 m€ 530 m€ 430 m€ Cost per sheet 0,26 € 0,28 € 0,32 € 0,35 € 0,43 € Progressive Preissteigerung 22% 28% 37% AmorIzaIon period 20-‐28 years 50% Total Cost of ownership 40% 50 cent 80 cent 130 cent 200 cent Printed sheets 2011-‐10-‐14 WAN-‐IFRA Finance Session -‐ Thesis 6

Next Steps? •  Work out Digital Strategy •  Work out a Restructuring plan and project •  Work out Transforma7on Cost 1. Shareholders •  Get an o.k. to cooperate with other newspapers •  Do a manager appraisal •  Discuss the key necessity of an editor-‐in-‐chief truly understanding digital •  Found a joint M&A unit 2. CooperaIon-‐ •  Found a joint IT-‐unit (backend IT & produc7ve IT) Network •  Found a joint service unit •  Work out your Digital Strategy •  Scope and Cost of Transforma7on •  Shareholder ok to Digital Strategy & Digital Transforma7on 3. Steps •  If “no” – convince them to sell NOW •  Pimp the bride (execute restructuring) – you have to do it anyway •  Look for investors that understand both the opportuni7es of the Digital Transforma7on and the “7me to invest” 2011-‐10-‐14 WAN-‐IFRA Finance Session -‐ Thesis 7

Thank you for your kind attention! Gregor Waller Digital Age Consul7ng / Entrepreneur Associated Principal Consultant Frenemies Consul7ng, a WAN-‐IFRA ac7vity Digital Age ConsulIng Hoeltystrasse 17 22085 Hamburg Germany Phone: + 49 160 90.410.654 eMail: waller.gregor@googlemail.com Twi_er: wallergreg 2011-‐10-‐14 WAN-‐IFRA Finance Session -‐ Thesis 8

World Newspaper Congress 11: Session Finance, Gregor Waller

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