Germans Aren't Reading All About It

The news is bad for newspapers. Consolidation, anyone?

When U.S. occupation authorities began trying to build a free press in Germany after World War II, the first license they granted went to an undernourished team of editors at the Frankfurter Rundschau. Operating from a basement in the bombed-out city, the newspaper quickly gained a following as an advocate of democracy when the concept was still foreign to many Germans. The Rundschau would go on to become the leading left-of-center daily in West Germany, the bane of conservative politicians from Konrad Adenauer to Helmut Kohl.

So it was a bitter irony when, earlier this year, the financially strapped newspaper was forced to seek a bailout from the conservative state government of Hesse. Battered by a steady decline in readership and a steep slide in advertising, the Rundschau is a victim of what may be the worst crisis the German press has endured since the 1940s.

It's by no means the only casualty. Last year, Die Woche, a public affairs and culture weekly, ceased publication after years of losses. The Frankfurter Allgemeine Zeitung, the country's leading conservative daily, has laid off dozens of journalists to compensate for a decline in executive recruitment ads, its bread and butter. And Munich's Süddeutsche Zeitung, which has the largest circulation of Germany's serious dailies, lost $40 million last year and was forced to sell an 18.75% stake to regional publisher Southwest German Media Holdings. "The bigger the newspaper, the harder it's been hit," says Jörg Laskowski, executive director of the National Association of German Newspaper Publishers, noting that regional papers face less competition from other types of media.

Even media giant Bertelsmann has found the going tough. Based in Gütersloh, the company agreed last year to sell its two Berlin newspapers to Stuttgart rival Holtzbrinck. Antitrust authorities are holding up the merger, but no matter what the outcome, it's clear the industry is the midst of a brutal consolidation.

For a few publishers with deep pockets, the crisis offers a chance to form big newspaper chains for the first time in German postwar history. The nation currently has nothing like Gannett Co. and its empire of 100 U.S. dailies. "I'm sure we will have American conditions in 10 years," says Torsten-Jörn Klein, publisher of the Berliner Zeitung and Berliner Kurier, the papers Bertelsmann is unloading. He and other industry watchers figure the spoils will go to three groups: Holtzbrinck, which publishes Handelsblatt, the No.1 financial daily; Axel Springer Verlag, which puts out the tabloid-style Bild; and Essen's WAZ Group, which dominates in northwestern Germany. Already, there is speculation that Springer, known for conservative politics, will buy a stake in the Rundschau.

Consolidation will be good for profits, but not necessarily for readers. Germans enjoy an astonishing variety of newspapers, ranging from sober broadsheets such as the Frankfurter Allgemeine to racy tabloid-style papers such as the 4-million-circulation Bild, which features female nudes on page one. Berlin alone boasts nine dailies, while even a midsize city like Bielefeld in northwest Germany has two.

That's more than the German market can handle long term. Circulation has been falling for a decade, a trend also seen in the U.S., as younger people look elsewhere for their news. Ad volume, meanwhile, fell 12.3% last year for subscription newspapers, those that rely on home delivery for most of their circulation and derive the lion's share of their revenue from ads. Once-lucrative employment advertising has plunged 41% amid double-digit unemployment. No doubt some of the business will come back when the economy improves, but some probably won't. A chunk of job and auto advertising has already migrated to the Internet, and papers haven't been able to lure it back by investing in their own Web sites.

But is the high quality of German journalism threatened? Publisher Klein claims that cost-cutting at the Berlin newspapers actually rid the dailies of deadwood and led to sharper journalism. And some of the industry's problems stem from complacency and poor cost controls during the fat years of the 1990s. Still, the public debate is bound to be less lively. Trailblazers like the Rundschau are learning the hard way that independence also depends on a healthy balance sheet.

By Jack Ewing in Frankfurt

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE