That might have seemed like a bold, even foolhardy, statement, given the tortured history of the now-broken federation. But Gruner + Jahr, majority-owned by media giant Bertelsmann, was following a strategy that had already paid off for it and other Western European publishers. Gruner + Jahr also owns half of the biggest daily in Rumania, while Switzerland's Ringier controls both the largest tabloid in Budapest and the largest "serious" daily. In Poland, foreigners own three-quarters of the provincial daily newspapers and dominate the magazine market.
Now, the global slump in ad spending is setting the stage for a new round of acquisitions in the East. Meanwhile, the novelty effect of an unfettered media has worn off, leaving a surfeit of titles. For deep-pocketed Western companies, that offers an opportunity to build market share. Germany's Axel Springer Verlag, for example, has already bought a majority in Hungary's biggest business daily and 75% in a chain of Czech auto magazines. "If you could attach a global positioning device to every German publishing executive, most of the signals would be emanating from Eastern Europe," says Karl Ulrich, a media specialist at Munich-based Roland Berger Strategy Consultants.
Ripe targets could include two independent Hungarian publications: Heti Vilaggazdasag, a politics and economics weekly modeled on The Economist, or PestiEst, an entertainment listings handout. Last year, Hamburg-based Heinrich Bauer Verlag paid $14.5 million for Polish lifestyle magazine Tw?j Styl. Its owner, Warsaw-based Interim Group, was having trouble paying its bank loans. The acquisition helped make Bauer the market leader in Polish magazines. Earlier this year, Lausanne (Switzerland)-based Edipresse bought two established women's magazines: Pani and Uroda.
West Europeans--particularly the Germans and Swiss--already dominate the consumer magazine market in Poland and Hungary. Those are the most attractive markets because of their burgeoning middle classes. And they're cheap. "In Western Europe, many segments are saturated or too expensive," says Andreas Tilk, president for Eastern and Southern Eu-rope at Springer. "With the same money, we can do five magazines in Poland." Women's magazines like Olivia have pushed Springer to No. 2 in Poland. So far, Central Europe contributes just a few percentage points to Springer's total revenue of $2.5 billion, but the company expects that to increase, especially after the introduction last year of a Polish edition of Newsweek. (BusinessWeek also appears in Poland under a licensing agreement with Warsaw-based Wprost.)
Not all the Western efforts pan out. Springer just shuttered a Polish home-improvement magazine. But Westerners have been successful enough to trigger grumbling among politicians and native publishers. In Poland, local publishers worry about standing up to the foreigners' financial might in a tough economy. "It's going to be another difficult year for the ad market," says Wanda Rapaczynski, CEO of publishing company Agora, which owns Poland's most popular daily, Gazeta Wyborcza.
For now, the Western companies are shrugging off such criticism. They point out that they employ almost exclusively local journalists. Moreover, most West European owners are apolitical--perhaps to a fault. Budapest daily Nepszabadsag, former mouthpiece of the Communist Party, remains close to the successor Hungarian Socialist Party, even though it's controlled by Ringier and Gruner + Jahr. That's not worrying the Germans. The new owners are too busy modernizing the paper with color graphics and photos and upgrading the format to feature shorter, punchier articles. For most of the Western companies, making money in the East is clearly more important than influencing politics. By Jack Ewing in Frankfurt, with Bogdan Turek in Warsaw and Christopher Condon in Budapest