World Newspaper Congress 11: Session Finance, Gregor Waller
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The document summarizes Gregor Waller's presentation at the 63rd World Newspaper Congress on how newspapers can survive the next economic crisis. Waller predicts European newspapers will see large declines in revenue from 2012-2015 due to an expected "double dip" recession. He identifies several signs that a newspaper has poor management unprepared for the digital transition, such as a lack of restructuring, digital strategy, or vision for digital editorial workflow. Waller also argues newspapers relying solely on advertising for digital revenue are vulnerable to takeover by investors who can leverage paid content models to significantly grow profits.
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World Newspaper Congress 11: Session Finance, Gregor Waller
- 1. 63rd WORLD NEWSPAPER CONGRESS Session: Finance Titel: How do we get through the next crisis Speaker: Gregor Waller Mark your calendar 64th WORLD NEWSPAPER CONGRESS 19th WORLD EDITORS FORUM Vienna, Reed Messe Wien www.wan-ifra.org/kiev2012
- 2. 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
- 3. 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
- 4. 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
- 5. Take Over Targets 1: How to identify newspapers with bad management 1. 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
- 6. 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
- 7. 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
- 8. 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
- 9. 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