Magazine

Springer Steps Up Its Eastward Push


Fakt, Poland's top tabloid daily, is published by a German company. And not just any German company: Its founder, Axel Springer, was such a rabid anticommunist that he chose to erect the company's West Berlin offices near the Berlin Wall so that he could look down, literally, on East Germany's leaders.

Since the Wall's collapse, Germany's leading newspaper publisher has stepped up its eastward march, buying up magazines and papers and launching new ones, such as Fakt and Reggel, a daily that hit Budapest newsstands this fall. And Axel Springer Verlag recently inked licensing deals to put out local-language editions of Newsweek and Forbes. "Our priority for 2005 will remain Eastern Europe, and that means Hungary, Poland, and the Czech Republic," says Springer Chief Executive Mathias Döpfner.

That's the eastern flank of an international campaign aimed at boosting the Berlin publisher's global sales to one-third of total revenues. With advertising spending stubbornly weak at home, Springer has little choice but to look abroad for growth. International sales rose nearly 8% to $364 million in the first nine months of 2004, a figure equal to 14.6% of overall revenues of $2.45 billion. Total earnings before taxes rose 60% to $356 million in the same period. "In the past two years we started 36 new titles, and there wasn't a single flop," boasts Döpfner, 41, who ascended to the top job in January, 2002. The market likes the story: Springer shares rose 28% in 2004.

Still, with lingering anti-German sentiment in Eastern Europe, Springer has had to tread softly to avoid a political backlash. The company has learned from past cultural faux pas. Döpfner cites a predecessor's failed attempt at launching a daily in Spain in the 1990s. Modeled after Springer's top German tabloid, Bild, the Spanish paper featured topless women and poked fun at the Spanish monarchy. Neither went over well in a Catholic country that cherishes its royalty. "The potential is much greater if you give local management clear business targets but grant it a maximum of freedom," says Döpfner.

ON THE LOOKOUT

Springer's international strategy is designed to minimize risk. In Eastern Europe the German company prefers to negotiate joint ventures with local players, introducing local editions of top brand magazines and only occasionally launching new publications. Döpfner explains that putting out local-language editions of best-selling Springer titles like Auto Bild and Computer Bild is cost-effective, since most of the content, from text to photographs, does not need to be customized for local audiences. In 2004, Springer also cut deals with Newsweek and Forbes to publish editions of those magazines in Russia -- both of which already break even, the company says. Springer's boss says he is always on the lookout for profitable expansion opportunities. "We don't proceed geo-strategically, but rather with clear business targets," he says. "We will grow where there is a chance, a niche, or a favorable opportunity to make an acquisition."

Döpfner spotted one such niche in Hungary. In October, Springer launched Reggel, a daily with a USA Today look that bills itself as the country's first politically independent newspaper. Jozsef Bayer, a Hungarian of German descent who heads Springer's local operation, says Reggel is on track to meet its circulation target of 55,000 by the end of 2005.

Springer's international expansion has run into some bumps. In early 2004 it tried to buy Britain's Daily Telegraph but retreated when the British tabloids lashed out with anti-German invective. Döpfner shrugs off the defeat, saying the British market is "more than saturated." Springer's boss also says he wants to knit together the European business before venturing into the hypercompetitive U.S. For now, this German is content to troll for opportunities closer to home.

By William Boston in Budapest


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