Thursday, August 21, 2008

Where Publishers Are Thriving

Where Publishers Are Thriving
Germany's papers are doing fine despite the ad flight to the Web. What's their secret?
by Jack Ewing
Here's a scene you don't see at many U.S. papers these days. The publisher settles into his office sofa, glances over his shoulder at the bustling metropolis below, and says casually: "We're doing good!"
True, there are definitely some aspects of the business model at Bild, a Berlin daily with 12 million readers, that might not fly in the U.S. (the photos of nude women on page 1, for example). Still, it's worth asking publisher Kai Diekmann how, when U.S. newspaper revenue is going off a cliff, Europe's largest paper managed to have its most profitable year ever in 2007.

It's not as if Bild hasn't been hit by the same problems as U.S. papers, including advertisers lost to the Web. So it's tempting to credit Bild's double-digit profit margin solely to sensationalism. The day I met Diekmann, Bild's lead story concerned managers of public health-insurance funds helping themselves to free Viagra. One of the top online stories asked: "Which female celebrity has the nicest breasts?"

But Germany's prestige papers are doing reasonably well, too. National-affairs daily Die Welt, a chronic money-loser that, like Bild, is part of the Axel Springer empire, made the first profit in its 60-year history last year. "I wouldn't say we don't have challenges, but we are not nearly as hard-hit by the advertising crisis as the U.S.," says publisher Peter Wurtenberger.

Even accounting for the quirks of the local market, Bild and other German papers are doing something right. For an American print guy like me, it was a bracing experience to visit a newsroom where the journalists don't look like they're ready to jump out the window. The lesson seems to be that there are ways for papers to survive the shift to digital if they're willing to take risks.

Germany's newspaper industry had its own existential crisis in 2001 when that country's economy tanked. Ad revenue slumped, and papers did all the painful things their U.S. counterparts are doing now, such as cutting staff and getting used to new owners. In retrospect, the crisis had its upside.

It forced German papers to take a hard look at their businesses before the Web started to hurt big time. Staunchly gray Frankfurter Allgemeine Zeitung risked alienating readers by printing color photos on the front page and launched a sassy Sunday edition. The measures helped stop a slide in readership. Die Welt created a tabloid edition that helped lure younger readers. And the papers dared to raise prices. Even Bild, aimed at a working-class audience, in July boosted its newsstand price by 20%, to about 90 cents in most markets. The hikes, along with digital revenue, helped offset the loss in ads.

German papers also took advantage of how slowly Europeans embraced the Web, which gave editors a chance to learn from U.S. mistakes. Bild used a partnership with Deutsche Telekom, Germany's biggest Internet provider, to gain a foothold online at minimal cost. Now most of Bild's Web readers go straight to the site rather than via a search engine or portal. Diekmann says YouTube is sufficiently impressed to mull working together.

I'm impressed by the way Bild is staking out the mobile Web. Via a partnership with Vodafone Group , Bild became a mobile-phone provider, selling prepaid airtime at the same newsstands that sell the paper. Bild Mobile gives customers unlimited surfing and downloads as long as they stay tuned to That's a compelling way to keep users glued to your site, and it has made Bild Germany's No. 1 mobile Web news destination.

I suspect the real reason German papers still thrive is their embrace of competition. Unlike so many U.S. papers, Bild was never part of a quasi-monopoly that allowed complacency. It's telling that Bild doesn't deliver -it depends on newsstand sales. "Bild has to prove itself at the kiosk every day," says Deputy Editor-in-Chief Michael Paustian.

That pressure helped Bild maintain its focus on original content. It uses almost no wire copy and brags that every story is an exclusive. Even during the crisis years, Bild kept its 800-strong editorial staff intact. What advice does Diekmann have for American newspapers? "It's too late."