[...] FTR #298: Ger­man cor­po­rate con­trol over amer­i­can media [...]

Ger­man pub­lish­ing giant Axel Springer just gob­bled up Busi­ness Insid­er and, accord­ing to the arti­cle below, despite the rather high price paid, Axel Springer’s appetite for more US media firms has yet to be sat­ed:

Mash­able
The Ger­man media barons who want to buy up more U.S. media com­pa­nies

By Jason Abbruzzese
9/29/2015

Busi­ness Insid­er founder Hen­ry Blod­get had­n’t ever real­ly heard of Axel Springer until a year ago.

Now, they’re his boss­es.

Axel bought BI on Tues­day in a deal that stunned many media watch­ers for its hefty $442-mil­lion price tag — almost dou­ble what Jeff Bezos paid for the Wash­ing­ton Post just two years ago.

What is less sur­pris­ing is the buy­er. Axel Springer SE might not be a house­hold name in the U.S., but it’s a major play­er in Europe.

With impe­r­i­al fer­vor to expand its scope to U.S. read­ers, Axel Springer has also been steadi­ly invest­ing in U.S.-based dig­i­tal star­tups includ­ing Ozy.com, Mic.com and NowThis Media.

Axel is based in Berlin, has about 14,000 employ­ees and brought in around $3.4 bil­lion in rev­enue in 2014. Its main hold­ings are in Ger­man news­pa­pers includ­ing Bild, a tabloid, and Die Welt, a high-brow dai­ly paper.

Blod­get made the admis­sion about his ear­ly igno­rance of Axel dur­ing a con­fer­ence call fol­low­ing the announce­ment of the acqui­si­tion, not­ing that the com­pa­ny first came up on his radar when BI Pres­i­dent Julie Hansen vis­it­ed the com­pa­ny’s head­quar­ters.

...

Axel’s acqui­si­tion of BI imme­di­ate­ly gives the Ger­man com­pa­ny a place in the U.S. dig­i­tal media mar­ket. Many of the oth­er major dig­i­tal media star­tups includ­ing Vice, Buz­zFeed and Vox have tak­en hun­dreds of mil­lions of dol­lars in invest­ments that have effec­tive­ly made them too expen­sive for oth­er com­pa­nies to buy. BI remained among the few that were big enough to make a dif­fer­ence but afford­able enough to go after.

While most of Axel’s Euro­pean hold­ings are of the lega­cy news­pa­per and mag­a­zine type, the com­pa­ny has been mak­ing inroads on dig­i­tal media through a vari­ety of invest­ments.

In Octo­ber 2014, Axel made a $20 mil­lion invest­ment in Ozy Media, a dig­i­tal news start­up. Its also dip­ping its toe in some pure tech such as its invest­ment in vir­tu­al real­i­ty com­pa­ny Jaunt. Its dig­i­tal prop­er­ties now account for around 70% of its prof­its.

Dan O’Keefe, gen­er­al part­ner at ven­ture cap­i­tal firm Tech­nol­o­gy Crossover Ven­tures, which has stakes in oth­er dig­i­tal media com­pa­nies, said that there is a clear fit between what Axel has been look­ing for and what BI does.

“I thought it made a lot of sense,” he said. “It gives Axel Springer a nice toe hold in a com­plete­ly dig­i­tal, eng­lish-speak­ing prop­er­ty here in the Unit­ed States.”

Springer’s inter­est in busi­ness-focused media was laid bare when reports began to emerged ear­li­er in 2015 that it was in talks to buy the Finan­cial Times. It came as some sur­prise when it was out­bid by Japan­ese media con­glom­er­ate Nikkei that end­ed up pay­ing $1.3 bil­lion for the salmon-col­ored insti­tu­tion.

O’Keefe not­ed that there aren’t too many oth­er com­pa­nies like BI that have been able to cap­ture a younger, online audi­ence.

“It’s chal­leng­ing. Few have done it suc­cess­ful­ly,” he said. “I do think that assets such as those deserve a pre­mi­um val­u­a­tion.”

...

That being said, Axel paid about nine times as much as BI’s pro­ject­ed rev­enue for 2015 — con­sid­ered pricey for this kind of media deal. On the oth­er hand, it is far less than the price tag for the FT, which sold for near­ly 35 times its prof­it.

The deal had pro­duced some­thing of a nar­ra­tive that Axel had set­tled for BI after miss­ing out on the FT.

Not so, said Axel Exec­u­tive VIce Pres­i­dent Christoph Keese.

Keese said talks with BI began well before the FT sit­u­a­tion, although he could not com­ment on Axel’s report­ed bid on the salmon-col­ored paper.

As for where the com­pa­ny is head­ed next, Keese said Axel has kicked the tires on a wide vari­ety of media com­pa­nies in the Eng­lish-speak­ing world. They’re not nec­es­sar­i­ly thirst­ing for anoth­er, but they’re far from out of the game.

“We have looked into almost every inter­est­ing prospect on the US mar­ket that has been talked about for the past 18 or 24 months,” he said. “We decid­ed not to go with some and we decid­ed to go with oth­ers.”

“As for where the com­pa­ny is head­ed next, Keese said Axel has kicked the tires on a wide vari­ety of media com­pa­nies in the Eng­lish-speak­ing world. They’re not nec­es­sar­i­ly thirst­ing for anoth­er, but they’re far from out of the game.”
So Axel Springer might be done with its cur­rent round of cor­po­rate feast­ing. Or not. It has­n’t decid­ed yet. But if it does decide to make more inroads into for­eign media mar­kets, Axel Springer may find it has com­pe­ti­tion from the oth­er Ger­man media giant with an appetite for for­eign acqui­si­tions, Ber­tels­mann. Although, since Ber­tels­mann appears to be try­ing to diver­si­fy away from pub­lish­ing with its numer­ous pur­chas­es over the past year, com­pe­ti­tion with Axel Springer for for­eign media firms may not be a prob­lem:

The Wall Street Jour­nal
Ber­tels­mann Says Its Buy­ing Spree Isn’t Over
Media giant’s many piece­meal deals are an effort to diver­si­fy amid chal­lenges to pub­lish­ing

By Ellen Emmer­entze Jervell
May 5, 2015 12:05 p.m. ET

BERLIN—Media con­glom­er­ate Ber­tels­mann SE & Co. is hedg­ing its bet on pub­lish­ing.

The com­pa­ny last year spent more than €1 bil­lion ($1.12 bil­lion) world-wide on acqui­si­tions, buy­ing a tele­vi­sion-pro­duc­tion com­pa­ny, a ser­vice provider for fash­ion e‑retailers, a logis­tics firm and a bill-col­lec­tion agency. It also acquired U.S. e‑learning com­pa­ny Relias Learn­ing, pay­ing rough­ly $540 mil­lion, accord­ing to a per­son famil­iar with the mat­ter, mark­ing Bertelsmann’s biggest Amer­i­can acqui­si­tion since it bought pub­lish­er Ran­dom House in 1998. Since ear­ly 2014, it has bought com­pa­nies at a pace of more than one a month.

“We want to diver­si­fy even more,” said Chief Exec­u­tive Thomas Rabe. “We will keep up this brisk pace.”

As a close­ly held com­pa­ny, Ber­tels­mann doesn’t have to appease activist share­hold­ers, although it does have bond­hold­ers. Mr. Rabe says run­ning a pri­vate com­pa­ny lets him avoid mov­ing rash­ly, even as he reshapes Bertelsmann’s core media busi­ness­es for the dig­i­tal age. He is grad­u­al­ly sell­ing wan­ing busi­ness­es like print-pub­lish­ing and expand­ing in online video, through deals like the acqui­si­tion of Van­cou­ver-based YoBo­Ho, a pro­duc­er of fam­i­ly pro­gram­ming on YouTube, announced on April 21. As with its oth­er acqui­si­tions, terms weren’t dis­closed.

The ques­tion for Ber­tels­mann is whether scat­ter­ing efforts over a wider area is smarter than a tight focus on pub­lish­ing, espe­cial­ly when the pub­lish­ing busi­ness is nav­i­gat­ing tricky new Inter­net and e‑book waters. An indi­ca­tion of how well Bertelsmann’s strat­e­gy is work­ing may come Thurs­day, when it reports first-quar­ter earn­ings.

Aside from a brief for­ay into chick­en farm­ing in the 1960s, diver­si­fi­ca­tion out­side of the media indus­try is new for Ber­tels­mann. For most of its 180-year his­to­ry, Ber­tels­mann was a book pub­lish­er. Found­ed in 1835, the com­pa­ny for a cen­tu­ry pub­lished Chris­t­ian lit­er­a­ture and hym­nals.

In the 1930s it sup­port­ed the Nazi regime, pub­lish­ing nation­al­is­tic and some­times anti-Semit­ic lit­er­a­ture, and grew rich as the military’s main book sup­pli­er, accord­ing to an offi­cial com­pa­ny his­to­ry. Shut by the Allies, Ber­tels­mann soon reopened, launched a book club and by the 1950s was boom­ing.

The book club recent­ly closed, a vic­tim of the Inter­net. Mr. Rabe believes diver­si­fi­ca­tion will help ensure Ber­tels­mann itself doesn’t share that fate. In light of that, Ber­tels­mann has moved into busi­ness­es includ­ing TV pro­duc­tion, call-cen­ter oper­a­tion, music-rights man­age­ment and online edu­ca­tion.

Media still account­ed for rough­ly 70% of Bertelsmann’s €16.7 bil­lion in rev­enue last year. It is co-own­er of the biggest con­sumer book-pub­lish­ing com­pa­ny in the world, the Pen­guin Ran­dom House joint ven­ture with Pear­son PLC, ham­mered out in 2012. Online learn­ing and ser­vice-out­sourc­ing are rel­a­tive­ly new fields for the com­pa­ny, but those two new “pil­lars” of its busi­ness already boost­ed com­pa­ny mar­gins last year, said the 49-year-old Mr. Rabe. He aims to boost annu­al rev­enue to €20 bil­lion with­in five years.

Asked whether Ber­tels­mann is inter­est­ed in tak­ing full con­trol of Pen­guin Ran­dom House, Mr. Rabe says that hinges first on what Pear­son does. In Octo­ber, Pear­son will have the option to sell its stake, and Ber­tels­mann would then have the option of buy­ing it. Ber­tels­mann hasn’t decid­ed what to do, but says the book pub­lish­ing busi­ness is doing very well, and that it seems sen­si­ble for Ber­tels­mann to take over the shares because pub­lish­ing has been its core busi­ness for almost 200 years.

Bertelsmann’s 2014 rev­enue was its high­est in sev­en years. Its net prof­it, how­ev­er, was hurt by one of its “declin­ing busi­ness­es,” in Mr. Rabe’s words: the print­ing busi­ness. Rev­enue at its mag­a­zine pub­lish­er, Gruner + Jahr, also declined last year. Mr. Rabe said he is strug­gling to mon­e­tize the mag­a­zine busi­ness, but that he is “look­ing at ways to turn it around.” Ber­tels­mann is work­ing on trim­ming down its print­ing busi­ness.

Bertelsmann’s approach con­trasts with some rivals that have been com­pelled by activists to pare ancil­lary oper­a­tions. Once-sprawl­ing French con­glom­er­ate Viven­di SA, for exam­ple, recent­ly bowed to investor pres­sure and sold its videogames and telecom­mu­ni­ca­tions units—assets that account­ed for more than half of its revenue—to focus on media.

Mr. Rabe’s strat­e­gy gets sup­port from the company’s share­hold­ers: three foun­da­tions that togeth­er hold 80%, and heirs to founder Carl Ber­tels­mann, the Mohn fam­i­ly, who hold 20%.

...

His acqui­si­tions are pos­si­ble in part thanks to some can­ny dis­pos­als. In 2000, Ber­tels­mann decid­ed to sell its 50% stakes in AOL Europe and AOL Aus­tralia to Amer­i­ca Online Inc. short­ly before the dot-com bub­ble burst, pock­et­ing fat prof­its. In 2008 it sold its 50% stake in the record music com­pa­ny Sony BMG Music Enter­tain­ment to Sony Corp. before online stream­ing gut­ted the music indus­try.

Ber­tels­mann has been acquis­i­tive for more than a decade, but it has been under Mr. Rabe that it aggres­sive­ly branched out beyond media.

The objec­tive, Mr. Rabe says, is “find­ing the right seg­ments” for invest­ment.

Soon after becom­ing CEO he iden­ti­fied edu­ca­tion as a promis­ing field, par­tic­u­lar­ly online and in the U.S. In 2014, he bought a stake in online-course provider Udac­i­ty. Last year he des­ig­nat­ed edu­ca­tion as one of Bertelsmann’s three future core busi­ness­es, along­side media and ser­vices.

In the ser­vices seg­ment, he expand­ed into busi­ness­es relat­ed to sup­ply-chain man­age­ment, pay­ment pro­cess­ing and bill-col­lec­tion for online busi­ness­es.

Mov­ing judi­cious­ly and tak­ing the long view are hall­marks of pri­vate com­pa­nies but “we know that being pri­vate­ly owned can bring prob­lems,” said Zacharias Saut­ner, a finance pro­fes­sor at Frank­furt School of Finance and Man­age­ment. With lim­it­ed out­side pres­sure, man­agers of diver­si­fied pri­vate firms face less scruti­ny of deci­sions on how to allo­cate resources among divi­sions, he said. “Who’s to con­trol that the mon­ey ends up where it should?”

But crit­i­cism of diver­si­fi­ca­tion has come “under much rethink­ing” over the past decade, says Har­vard Busi­ness School Pro­fes­sor Bharat Anand. While diver­si­fi­ca­tion may destroy val­ue on aver­age, he said “there are sub­stan­tial dif­fer­ences across diver­si­fied firms” and his research indi­cates that up to 40% of diver­si­fied com­pa­nies cre­ate val­ue.

Diver­si­fi­ca­tion “works very well for some, not at all for oth­ers,” said Prof. Anand, who has taught pro­grams for senior Ber­tels­mann exec­u­tives.

Mr. Rabe said he is con­fi­dent Ber­tels­mann is doing what is best for its own­ers.

“I would say we’re already a very broad com­pa­ny,” he said. “But we want to become even broad­er.”

“I would say we’re already a very broad company...But we want to become even broad­er.”
Broad­en­ing Ber­tels­mann through fur­ther acqui­si­tions also prob­a­bly won’t be a prob­lem.

Read this arti­cle from the Novem­ber 4, 2016 Dai­ley Mail (UK) “Mark Zucker­berg and Sheryl Sand­berg are inves­ti­gat­ed by Ger­man pros­e­cu­tors for ‘fail­ing to remove racist posts that vio­late anti-hate speech laws’ from Face­book”

- The arti­cle is loaded with psy­cho­log­i­cal inu­en­do The both the founder Marc Zucker­berg and his Chief Oper­at­ing Offi­cer are Jews an Amer­i­cans who are the tar­get in this article/investigation. This can sub­con­cious­ly cause a neg­a­tive bias a lib­er­al or anti ‑Nazi Ger­man Cit­i­zen.

The fol­low­ing excerpt is sad­ly com­i­cal when one con­sid­ers that Ber­tels­mann is owned by the Under­ground Reich.

“They include what some might con­sid­er mere­ly angry polit­i­cal rants but also clear exam­ples of racist hate speech and calls to vio­lence laced with ref­er­ences to Nazi-era geno­cide. Fol­low­ing a pub­lic out­cry and pres­sure from Ger­man politi­cians, Face­book this year hired Arva­to, a busi­ness ser­vices unit of Ber­tels­mann, to mon­i­tor and delete racist posts.”

One has to ask the ques­tion if the Nazi linked Face­book investor Peter Thiele had any influ­ence on this selec­tion.

http://www.dailymail.co.uk/news/article-3906588/German-prosecutors-investigate-Facebook-hate-postings.html

Mark Zucker­berg and Sheryl Sand­berg are inves­ti­gat­ed by Ger­man pros­e­cu­tors for ‘fail­ing to remove racist posts that vio­late anti-hate speech laws’ from Face­book

Ger­man pros­e­cu­tors are inves­ti­gat­ing Face­book founder Mark Zucker­burg over alle­ga­tions that the site failed to remove racist posts.

Attor­ney Chan-jo Jun has filed a com­plaint to courts in Munich alleg­ing the com­pa­ny broke nation­al laws against hate speech and sedi­tion.

Face­book’s rules for­bid bul­ly­ing, harass­ment and threat­en­ing lan­guage, but crit­ics say it does not do enough to enforce them.

The site has also been accused of fail­ing to staunch a tide of racist and threat­en­ing posts on the social net­work dur­ing an influx of migrants into Europe.

Pros­e­cu­tors in Ham­burg ear­li­er this year reject­ed a sim­i­lar com­plaint by Jun on the grounds that the region­al court lacked juris­dic­tion because Face­book’s Euro­pean oper­a­tions are based in Ire­land.

A spokesman for Jun’s legal team said: ‘There is a dif­fer­ent view in Bavaria.

‘Upon Jun’s request, Bavar­i­an Jus­tice Min­is­ter Win­fried Baus­back said that Ham­burg’s view was wrong and Ger­man law does indeed apply to some of the offences,’ it said.

Jun’s com­plaint named Face­book founder and chief exec­u­tive Zucker­berg and nine oth­er man­agers at the com­pa­ny, includ­ing Chief Oper­at­ing Offi­cer Sheryl Sand­berg.

Face­book said it had not vio­lat­ed Ger­man law and was work­ing on fight­ing hate speech online.

A spokesman said: ‘We are not com­ment­ing on the sta­tus of a pos­si­ble inves­ti­ga­tion but we can say that the alle­ga­tions lack mer­it and there has been no vio­la­tion of Ger­man law by Face­book or its employ­ees.’

Jun has com­piled a list of 438 post­ings that were flagged as inap­pro­pri­ate but not delet­ed over the past year.

They include what some might con­sid­er mere­ly angry polit­i­cal rants but also clear exam­ples of racist hate speech and calls to vio­lence laced with ref­er­ences to Nazi-era geno­cide.

Fol­low­ing a pub­lic out­cry and pres­sure from Ger­man politi­cians, Face­book this year hired Arva­to, a busi­ness ser­vices unit of Ber­tels­mann, to mon­i­tor and delete racist posts.

A rash of online abuse and vio­lent attacks against new­com­ers to Ger­many accom­pa­nied the influx of hun­dreds of thou­sands of migrants last year, which led to a rise in the pop­u­lar­i­ty of the anti-immi­grant Alter­na­tive for Ger­many (AfD) par­ty and has put pres­sure on Chan­cel­lor Angela Merkel.

There’s a pret­ty notable sto­ry in the pub­lish­ing busi­ness emerg­ing: Ger­man pub­lish­ing giant Axel Springer is effec­tive­ly tak­ing itself pri­vate. The part­ner in this process of tak­ing Axel Spring pri­vate is Kohlberg Kravis Roberts (KKR), which is going to buy out all of the minor­i­ty share­hold­ers at a 40% pre­mi­um. This will leave just KKR and the main share­hold­ers led by Axel Springer’s 76-year-old wid­ow Friede Springer. Friede and CEO Math­ias Doepfn­er con­trol 45.4% between the two of them. Axel Springer’s grand­chil­dren own anoth­er 9.8%, and the remain­ing 44.8% is free float­ing. It’s that 44.8% that KKR is going to buy out, but the stakes owned by the grand­chil­dren could also be sold to KKR, poten­tial­ly giv­ing it a major­i­ty stake. As part of the deal, Friede would be guar­an­teed a say in com­pa­ny’s strat­e­gy even if KKR secures a major­i­ty stake.

As the fol­low­ing arti­cle notes, KKR also part­nered with Ber­tels­mann in 2009 when they cre­at­ed a joint music ven­ture. Ber­tels­mann bought out KKR’s share in 2013 (for a nice prof­it for KKR), so KKR has a recent his­to­ry of part­ner­ing with Ger­man media giants. KKR has pledged to stay in this busi­ness with Axel Springer for at least 5 years. So it sounds like we might be see­ing a sim­i­lar strat­e­gy here, where KKR acts as the finan­cial mus­cle for a new cor­po­rate strat­e­gy and if it works KKR will get to cash out with a hefty prof­it. It also sug­gests that Axel Springer will almost be entire­ly owned by its main share­hold­ers if KKR ends up sell­ing its shares back to them in five years.

As the arti­cle also notes, Axel Springer’s main share­hold­ers are also plan­ning on an acqui­si­tion spree. This is at the same time the com­pa­ny issued a prof­it warn­ing. So at the same time Axel Springer is warn­ing about its prof­its, it’s also part­ner­ing with KKR (which has very deep pock­ets) to buy up more media prop­er­ties. Keep in mind this in tak­ing place in the con­text of a indus­try melt­down across the dig­i­tal pub­lish­ing sec­tor so there’s prob­a­bly quite a few good deals avail­able for an enti­ty with deep pock­ets. And that appears to be the broad­er sto­ry here: one of the biggest pub­lish­ers in the world appears to be get­ting ready to take part of the inevitable con­sol­i­da­tion of the deeply trou­bled dig­i­tal pub­lish­ing indus­try and KKR is going to be financ­ing it:

Reuters

KKR offers 40% pre­mi­um to buy out Axel Springer minori­ties

Dou­glas Busvine
June 12, 2019 / 12:44 AM

FRANKFURT (Reuters) — U.S. pri­vate equi­ty investor KKR on Wednes­day offered a 40% pre­mi­um to buy out minor­i­ty investors in Axel Springer in a deal that entrench­es the influ­ence of the main share­hold­ers at the pub­lish­ers of Germany’s Bild news­pa­per.

The buy­out offer of 63 euros per share puts an equi­ty val­ue of 6.8 bil­lion euros ($7.7 bil­lion) on the busi­ness. It will be sub­ject to accep­tances for 20% of Springer’s share cap­i­tal — a thresh­old one ana­lyst said was with­in reach.

The offer, made in con­cert with main share­hold­ers led by founder Axel Springer’s 76-year-old wid­ow Friede, would guar­an­tee her a say over strat­e­gy even if KKR secures a major­i­ty stake.

“It’s a part­ner­ship of equals,” CEO Math­ias Doepfn­er told reporters on a con­fer­ence call.

Between them, Friede Springer and Doepfn­er con­trol 45.4% of Axel Springer. Axel Springer’s grand­chil­dren, Axel Sven and Ari­ane who own a fur­ther 9.8%, are not par­ty to the KKR deal and may decide to sell or reduce their hold­ings, Doepfn­er said.

The remain­ing 44.8% is in free float and is worth 3 bil­lion euros at the ten­der price. Sub­ject to suc­cess­ful clos­ing, KKR, Friede Springer and Doepfn­er would joint­ly con­trol the com­pa­ny while man­age­ment would remain in place.

BUYING TIME

KKR has pledged to stay invest­ed for at least five years.

This would buy time for Springer, which also pub­lish­es finan­cial news web­site Busi­ness Insid­er, to prospect for acqui­si­tions and build its dig­i­tal clas­si­fieds port­fo­lio, which earns more than four-fifths of its core prof­it.

“In light of the fast pace of change in the media sec­tor, Axel Springer now needs con­tin­ued organ­ic invest­ments and suc­cess­ful exe­cu­tion of its strat­e­gy,” said KKR’s Philipp Freise, adding that KKR would sup­port this “in a long-term and sus­tain­able man­ner”.

A banker famil­iar with the deal said Springer’s main own­ers want­ed to uphold the company’s her­itage in news and take their time to expand its clas­si­fieds busi­ness, eschew­ing the idea of a breakup.

Springer shares jumped by near­ly 12% to trade almost at the buy­out price. They had ral­lied by 20% last week on news of the KKR plan before steady­ing to close at 56 euros on Tues­day.

“Our growth plans will require sig­nif­i­cant invest­ment in peo­ple, prod­ucts, tech­nol­o­gy and brands over the next years,” said Doepfn­er, adding that the strate­gic part­ner­ship with KKR would cre­ate head­room for organ­ic invest­ments and acqui­si­tions.

Springer is not in any active merg­er talks now but is on the look­out for oppor­tu­ni­ties, Doepfn­er said. He added that, despite spec­u­la­tion to that effect, eBay’s Euro­pean clas­si­fieds busi­ness was not yet up for sale.

Ana­lyst Ian Whit­tak­er at Liberum said KKR’s offer for Springer shares would almost cer­tain­ly be accept­ed, adding that it would fuel M&A spec­u­la­tion in Euro­pean dig­i­tal clas­si­fieds at a time of grow­ing eco­nom­ic head­winds.

PROFIT WARNING

Even as it dis­closed the KKR buy­out deal, Springer issued a prof­it warn­ing, say­ing it saw a drop in rev­enue in the low sin­gle-dig­it per­cent­age range this year. Its adjust­ed earn­ings before inter­est, tax­a­tion, depre­ci­a­tion and amor­ti­za­tion (EBITDA) face a mid-sin­gle-dig­it drop.

Look­ing ahead to 2020, the Ger­man pub­lish­er said its invest­ment plans meant that adjust­ed EBITDA would be “sig­nif­i­cant­ly below” the cur­rent year, before an improve­ment expect­ed in the ensu­ing years.

Doepfn­er said the down­grade was due to the impact on Springer’s flag­ship jobs por­tal, Step­stone, of cycli­cal eco­nom­ic weak­ness and of Britain’s plans to leave the Euro­pean Union.

Step­stone has also com­plained to the Euro­pean Union over Google’s recent launch of a jobs prod­uct in Ger­many that has grabbed a mar­ket lead overnight, in a reminder of the threat posed to lega­cy media firms by Sil­i­con Valley’s dig­i­tal plat­form giants.

In bring­ing in KKR, Friede Springer has cho­sen a coun­ter­part with a track record of long-term invest­ments in the Ger­man media sec­tor.

KKR, togeth­er with Per­mi­ra, bought con­trol of ProSiebenSat.1 in 2007 and sold out in 2014, hav­ing broad­ened the broadcaster’s enter­tain­ment offer­ing and launched a for­ay into e‑commerce.

The pri­vate equi­ty firm also entered a music rights joint ven­ture with Ber­tels­mann in 2009, sell­ing its stake back to the pub­lish­er four years lat­er.

...

———-

”
KKR offers 40% pre­mi­um to buy out Axel Springer minori­ties” by Dou­glas Busvine; Reuters; 06/12/2019

“The offer, made in con­cert with main share­hold­ers led by founder Axel Springer’s 76-year-old wid­ow Friede, would guar­an­tee her a say over strat­e­gy even if KKR secures a major­i­ty stake.”

As we can see, KKR is being brought in a major part­ner, but this is being done in a way that appears to guar­an­tee that ulti­mate con­trol over Axel Springer remains in the hands of its pri­ma­ry share­hold­ers who hap­pen to be the Springer fam­i­ly and CEO Math­ias Doepfn­er:

...
“It’s a part­ner­ship of equals,” CEO Math­ias Doepfn­er told reporters on a con­fer­ence call.

Between them, Friede Springer and Doepfn­er con­trol 45.4% of Axel Springer. Axel Springer’s grand­chil­dren, Axel Sven and Ari­ane who own a fur­ther 9.8%, are not par­ty to the KKR deal and may decide to sell or reduce their hold­ings, Doepfn­er said.

The remain­ing 44.8% is in free float and is worth 3 bil­lion euros at the ten­der price. Sub­ject to suc­cess­ful clos­ing, KKR, Friede Springer and Doepfn­er would joint­ly con­trol the com­pa­ny while man­age­ment would remain in place.

...

In bring­ing in KKR, Friede Springer has cho­sen a coun­ter­part with a track record of long-term invest­ments in the Ger­man media sec­tor.

KKR, togeth­er with Per­mi­ra, bought con­trol of ProSiebenSat.1 in 2007 and sold out in 2014, hav­ing broad­ened the broadcaster’s enter­tain­ment offer­ing and launched a for­ay into e‑commerce.

The pri­vate equi­ty firm also entered a music rights joint ven­ture with Ber­tels­mann in 2009, sell­ing its stake back to the pub­lish­er four years lat­er.
...

And the plans for this new part­ner­ship appear to revolve around build­ing up Axel Springer’s dig­i­tal clas­si­fieds, which earns the bulk of the com­pa­ny’s prof­its, and acquir­ing new com­pa­nies, which is where KKR’s deep pock­ets could be very use­ful:

...
BUYING TIME

KKR has pledged to stay invest­ed for at least five years.

This would buy time for Springer, which also pub­lish­es finan­cial news web­site Busi­ness Insid­er, to prospect for acqui­si­tions and build its dig­i­tal clas­si­fieds port­fo­lio, which earns more than four-fifths of its core prof­it.

“In light of the fast pace of change in the media sec­tor, Axel Springer now needs con­tin­ued organ­ic invest­ments and suc­cess­ful exe­cu­tion of its strat­e­gy,” said KKR’s Philipp Freise, adding that KKR would sup­port this “in a long-term and sus­tain­able man­ner”.

A banker famil­iar with the deal said Springer’s main own­ers want­ed to uphold the company’s her­itage in news and take their time to expand its clas­si­fieds busi­ness, eschew­ing the idea of a breakup.

...

“Our growth plans will require sig­nif­i­cant invest­ment in peo­ple, prod­ucts, tech­nol­o­gy and brands over the next years,” said Doepfn­er, adding that the strate­gic part­ner­ship with KKR would cre­ate head­room for organ­ic invest­ments and acqui­si­tions.

Springer is not in any active merg­er talks now but is on the look­out for oppor­tu­ni­ties, Doepfn­er said. He added that, despite spec­u­la­tion to that effect, eBay’s Euro­pean clas­si­fieds busi­ness was not yet up for sale.

Ana­lyst Ian Whit­tak­er at Liberum said KKR’s offer for Springer shares would almost cer­tain­ly be accept­ed, adding that it would fuel M&A spec­u­la­tion in Euro­pean dig­i­tal clas­si­fieds at a time of grow­ing eco­nom­ic head­winds.
...

It’s all pret­ty big news for the dig­i­tal pub­lish­ing indus­try. It’s also worth not­ing one of the ironies here: Recall how Axel Springer has been the pri­ma­ry cor­po­rate force push­ing the EU to imple­ment poli­cies designed to either reign in the pow­er of the Sil­i­con Val­ley giants like Google or Face­book at least extract some sort of pay­ment from them (via a ‘link tax’ or some­thing sim­i­lar) that flows back to the dig­i­tal pub­lish­ing indus­try. Well, now that Axel Springer is shop­ping around for new dig­i­tal acqui­si­tions it’s hard to ignore the grim real­i­ty that the fire sale prices Axel Springer is prob­a­bly going to be for these dig­i­tal pub­lish­ing com­pa­nies is due large­ly to the dev­as­tat­ing impact Google and Face­book have had on jour­nal­is­m’s busi­ness mod­el:

The Week

How to stop Google and Face­book from stran­gling jour­nal­ism

Ryan Coop­er
June 11, 2019

The last two decades have been per­haps the worst in Amer­i­can his­to­ry for jour­nal­ism. After years of decline, news­room employ­ment fell a fur­ther 23 per­cent from 2008–2017 — a trend which shows no sign of stop­ping.

There are three big rea­sons why. First, the rise of the inter­net, which under­mined tra­di­tion­al news­pa­per rev­enue mod­els, espe­cial­ly clas­si­fied ads. Sec­ond, the Great Reces­sion, which tanked employ­ment of all kinds. Third and most impor­tant­ly, the rise of online monop­o­lies like Google, Face­book, and Ama­zon.

It rais­es a ques­tion: How can we stop these cor­po­rate behe­moths from stran­gling the life out of Amer­i­can jour­nal­ism? A good place to start would be break­ing up the tech giants, and reg­u­lat­ing the online adver­tis­ing mar­ket to ensure fair com­pe­ti­tion.

Spend­ing on dig­i­tal adver­tis­ing is pro­ject­ed to sur­pass the tra­di­tion­al sort in 2019 for the first time, and you will not be sur­prised to learn where that mon­ey is going. Last year, Google alone was esti­mat­ed to make more than $40 bil­lion in online adver­tis­ing with $4.7 bil­lion of that com­ing from news con­tent, accord­ing to a new report from the News Media Alliance. That is near­ly as much as the $5.1 bil­lion the entire Amer­i­can news indus­try earned in online ads. What’s more, Google “only” accounts for 37 per­cent of the online ad mar­ket. Face­book makes up anoth­er 22 per­cent — an effec­tive duop­oly that has only been par­tial­ly dis­rupt­ed by (who else?) Ama­zon, which has moved aggres­sive­ly into the mar­ket over the last few years and now takes up 9 per­cent.

That is why jour­nal­ism has con­tin­ued to floun­der even as the broad­er econ­o­my has improved a lot, and why even dig­i­tal native com­pa­nies like Buz­zfeed and Vox are strug­gling to keep their heads above water. For instance, as Josh Mar­shall of Talk­ing Points Memo explains, Google runs the major ad mar­ket (Dou­bleClick), is the largest pur­chas­er on that mar­ket (through Adex­change), and has priv­i­leged access to all the valu­able data thus obtained. Its “monop­oly con­trol is almost com­i­cal­ly great,” he writes — and that’s just one com­pa­ny. Just as online ad rev­enue got to the point where it might replace print ads, inter­net behe­moths have sucked up a huge major­i­ty of it, leav­ing news com­pa­nies to fight over scraps, or des­per­ate­ly piv­ot to alter­na­tive rev­enue mod­els like video con­tent or sub­scrip­tions.

Remark­ably, there appears to be some bipar­ti­san sup­port for reg­u­la­to­ry action to give news com­pa­nies a leg up. Hear­ings are sched­uled on Tues­day for a bill which would grant news com­pa­nies an exemp­tion to antitrust law, reports CNN, “allow­ing them to band togeth­er in nego­ti­a­tions with online plat­forms.”

This would prob­a­bly be worth try­ing, but it’s like­ly not near­ly aggres­sive enough. The jour­nal­ism indus­try is frag­ment­ed, dam­aged, and cash-poor, and would sure­ly strug­gle to com­pete with Google and Face­book even if it could coor­di­nate prop­er­ly. It’s telling that only Ama­zon — anoth­er gar­gan­tu­an, huge­ly prof­itable tech colos­sus — has man­aged to com­pete even a lit­tle.

A bet­ter approach would be to sim­ply break up and reg­u­late these com­pa­nies. Fol­low­ing Amer­i­can antitrust law, force Alpha­bet (Google’s par­ent com­pa­ny) to break all its major parts into sep­a­rate com­pa­nies — Google for search, YouTube for video, Dou­bleClick for ads, Ana­lyt­ics for audi­ence analy­sis, and so on. Do the same for Face­book, forc­ing it to split off Insta­gram and What­sapp.

Then reg­u­late the online ad mar­ket. It is out­ra­geous for one com­pa­ny to both run the major ad mar­ket and have first bite at sales on that mar­ket, because it puts oth­er sell­ers and buy­ers at an unfair dis­ad­van­tage — as Mar­shall notes, “the inter­play between Dou­bleClick and Adex­change is text­book anti-com­pet­i­tive prac­tice.” Break­ing Dou­bleClick out into a dif­fer­ent com­pa­ny would solve that par­tic­u­lar instance of abuse of mar­ket pow­er, but it prob­a­bly would­n’t be the end of it. An online ad sales plat­form (like many inter­net busi­ness­es) has high fixed costs but very low mar­gin­al costs — mean­ing it costs a great deal to set up all the servers and net­works, but almost noth­ing to serve one addi­tion­al ad. Once a com­pa­ny has achieved mas­sive scale, like Google has with Dou­bleClick, it has an ever-increas­ing advan­tage over any would-be com­peti­tors. That’s the clas­sic def­i­n­i­tion of a nat­ur­al monop­oly, which if left to its own devices will cer­tain­ly abuse its mar­ket pow­er just like Gild­ed Age rail­roads.

There­fore, abuse of mar­ket pow­er should be banned out­right with com­mon car­ri­er reg­u­la­tions man­dat­ing equal prices for equal ser­vices across the whole online ad busi­ness — either that, or Dou­bleClick should be nation­al­ized out­right and run as a pub­lic util­i­ty.

...

———-

“How to stop Google and Face­book from stran­gling jour­nal­ism” by Ryan Coop­er; The Week; 06/11/2019

“The last two decades have been per­haps the worst in Amer­i­can his­to­ry for jour­nal­ism. After years of decline, news­room employ­ment fell a fur­ther 23 per­cent from 2008–2017 — a trend which shows no sign of stop­ping.”

The worst two decades in US his­to­ry for jour­nal­ism. That’s the indus­try trend back­drop for Axel Springer’s acqui­si­tion plans. And the pri­ma­ry cul­prit for this sor­ry state of affairs is unam­bigu­ous­ly the near-monop­oly sta­tus over the dig­i­tal adver­tis­ing busi­ness achieved by Google and Face­book. Google alone almost made as much from news ads as the rest of the entire Amer­i­cans news indus­try com­bined:

...
Spend­ing on dig­i­tal adver­tis­ing is pro­ject­ed to sur­pass the tra­di­tion­al sort in 2019 for the first time, and you will not be sur­prised to learn where that mon­ey is going. Last year, Google alone was esti­mat­ed to make more than $40 bil­lion in online adver­tis­ing with $4.7 bil­lion of that com­ing from news con­tent, accord­ing to a new report from the News Media Alliance. That is near­ly as much as the $5.1 bil­lion the entire Amer­i­can news indus­try earned in online ads. What’s more, Google “only” accounts for 37 per­cent of the online ad mar­ket. Face­book makes up anoth­er 22 per­cent — an effec­tive duop­oly that has only been par­tial­ly dis­rupt­ed by (who else?) Ama­zon, which has moved aggres­sive­ly into the mar­ket over the last few years and now takes up 9 per­cent.

That is why jour­nal­ism has con­tin­ued to floun­der even as the broad­er econ­o­my has improved a lot, and why even dig­i­tal native com­pa­nies like Buz­zfeed and Vox are strug­gling to keep their heads above water. For instance, as Josh Mar­shall of Talk­ing Points Memo explains, Google runs the major ad mar­ket (Dou­bleClick), is the largest pur­chas­er on that mar­ket (through Adex­change), and has priv­i­leged access to all the valu­able data thus obtained. Its “monop­oly con­trol is almost com­i­cal­ly great,” he writes — and that’s just one com­pa­ny. Just as online ad rev­enue got to the point where it might replace print ads, inter­net behe­moths have sucked up a huge major­i­ty of it, leav­ing news com­pa­nies to fight over scraps, or des­per­ate­ly piv­ot to alter­na­tive rev­enue mod­els like video con­tent or sub­scrip­tions.
...

Even worse, it’s entire­ly pos­si­ble that break­ing up Google in order to sep­a­rate the dif­fer­ent com­po­nents like Dou­bleClick and Adex­change that cre­ate this mar­ket stran­gle­hold still might not real­ly address the fun­da­men­tal prob­lem of hav­ing a monop­oly run­ning the dig­i­tal adver­tis­ing mar­ket. Why? Because the nature of the online ad busi­ness is such that there’s a very high fixed costs to get it set up but min­i­mal costs for expand­ing and that’s a recipe for the cre­ation of a nat­ur­al monop­oly. Some ser­vices, like deliv­er­ing elec­tric­i­ty of water to homes, are nat­ur­al monop­o­lies sim­ply due to the phys­i­cal require­ments of pro­vid­ed those ser­vices. But in this case we have a nat­ur­al monop­oly due to mar­ket dynam­ics that make it effec­tive­ly impos­si­ble for com­peti­tors to dethrone the exist­ing indus­try leader. Dou­bleClick is still going to be dom­i­nat­ing the online ad busi­ness and effec­tive­ly stran­gling the jour­nal­ism indus­try whether it’s a part of Google or not:

...
A bet­ter approach would be to sim­ply break up and reg­u­late these com­pa­nies. Fol­low­ing Amer­i­can antitrust law, force Alpha­bet (Google’s par­ent com­pa­ny) to break all its major parts into sep­a­rate com­pa­nies — Google for search, YouTube for video, Dou­bleClick for ads, Ana­lyt­ics for audi­ence analy­sis, and so on. Do the same for Face­book, forc­ing it to split off Insta­gram and What­sapp.

Then reg­u­late the online ad mar­ket. It is out­ra­geous for one com­pa­ny to both run the major ad mar­ket and have first bite at sales on that mar­ket, because it puts oth­er sell­ers and buy­ers at an unfair dis­ad­van­tage — as Mar­shall notes, “the inter­play between Dou­bleClick and Adex­change is text­book anti-com­pet­i­tive prac­tice.” Break­ing Dou­bleClick out into a dif­fer­ent com­pa­ny would solve that par­tic­u­lar instance of abuse of mar­ket pow­er, but it prob­a­bly would­n’t be the end of it. An online ad sales plat­form (like many inter­net busi­ness­es) has high fixed costs but very low mar­gin­al costs — mean­ing it costs a great deal to set up all the servers and net­works, but almost noth­ing to serve one addi­tion­al ad. Once a com­pa­ny has achieved mas­sive scale, like Google has with Dou­bleClick, it has an ever-increas­ing advan­tage over any would-be com­peti­tors. That’s the clas­sic def­i­n­i­tion of a nat­ur­al monop­oly, which if left to its own devices will cer­tain­ly abuse its mar­ket pow­er just like Gild­ed Age rail­roads.

There­fore, abuse of mar­ket pow­er should be banned out­right with com­mon car­ri­er reg­u­la­tions man­dat­ing equal prices for equal ser­vices across the whole online ad busi­ness — either that, or Dou­bleClick should be nation­al­ized out­right and run as a pub­lic util­i­ty.
...

So that’s all going to be a major part of the indus­try con­text in Axel Springer’s upcom­ing acqui­si­tion spree: Google and Face­book have already starved the indus­try of rev­enues and that’s going to be mean a lot of bar­gains. Then there’s the fact that Face­book sys­tem­at­i­cal­ly lied to pub­lish­ers dur­ing the 2016 cam­paign sea­son about the num­ber of view­ers that were watch­ing videos on Face­book, inflat­ing the num­ber of view­ers by up to 900 per­cent accord­ing to a law­suit. As a con­se­quence of these inflat­ed video view­er­ship num­bers, dig­i­tal pub­li­ca­tions made the switch to pro­duc­ing video, which sucked resources away from tra­di­tion­al jour­nal­ism, result­ing in the lay­offs of jour­nal­ists. This lie was told by Face­book from July 2015 to June 2016, a pret­ty cru­cial peri­od of time for jour­nal­ism giv­en the US elec­tion. And accord­ing to the law­suit, inter­nal doc­u­ments show this was a lie Face­book was know­ing­ly telling. So Face­book effec­tive­ly lied the dig­i­tal media indus­try into a busi­ness dead end a few years ago which is also part of the indus­try con­text of Axel Springer’s upcom­ing acqui­si­tion spree:

The Atlantic

How Facebook’s Chaot­ic Push Into Video Cost Hun­dreds of Jour­nal­ists Their Jobs

As media com­pa­nies tried to divine the desires of the world’s biggest plat­form, they fired writ­ers and lost their way.

Alex­is C. Madri­gal and Robin­son Mey­er
Oct 18, 2018

Face­book egre­gious­ly over­stat­ed the suc­cess of videos post­ed to its social net­work for years, exag­ger­at­ing the time spent watch­ing them by as much as 900 per­cent, a new legal fil­ing claims. Cit­ing 80,000 pages of inter­nal Face­book doc­u­ments, aggriev­ed adver­tis­ers fur­ther allege that the com­pa­ny knew about the prob­lem for at least a year and did noth­ing.

The com­pa­ny denies the alle­ga­tions. “This law­suit is with­out mer­it and we’ve filed a motion to dis­miss these claims of fraud. Sug­ges­tions that we in any way tried to hide this issue from our part­ners are false,” said a spokesman for Face­book in a state­ment, adding that the com­pa­ny noti­fied adver­tis­ers as soon as it dis­cov­ered the prob­lem.

Dur­ing the peri­od of pur­port­ed wrong­do­ing, from July 2015 to June 2016, jour­nal­ists and news­room lead­ers across the coun­try worked to cov­er an unprece­dent­ed pres­i­den­tial cam­paign in an infor­ma­tion land­scape that Face­book was con­stant­ly, and errat­i­cal­ly, trans­form­ing. Even if, as Face­book argues, it did not know­ing­ly inflate met­rics, it set up new and fast-chang­ing incen­tives for video that altered the online ad mar­ket as a whole. As media com­pa­nies des­per­ate­ly tried to do what Face­book want­ed, many made the dis­as­trous deci­sion to “piv­ot to video,” lay­ing off reporters and edi­tors by the dozen. And when views plunged and video’s poor return on invest­ment became more appar­ent, some com­pa­nies piv­ot­ed back, fir­ing video pro­duc­ers by the dozens.

First was Upwor­thy, once a a ben­e­fi­cia­ry of Facebook’s algo­rith­mic largesse, which rang in 2016 with 14 lay­offs, part of a move into “orig­i­nal video con­tent.” Four months lat­er, Mash­able laid off 30 employ­ees in a piv­ot to “non-news video con­tent.” That Novem­ber, Fusion laid off 70 peo­ple, in part because big bets with­in social video did not gen­er­ate enough rev­enue.

In Feb­ru­ary 2017, Thril­list’s par­ent com­pa­ny let more than 20 peo­ple go, but was “con­tin­u­ing to dream in video.” In June 2017, Voca­tiv laid off 20 edi­to­r­i­al staff mem­bers “in an orga­ni­za­tion­al shift to an entire­ly video-first strat­e­gy.” Lat­er that month, MTV News laid off at least nine employ­ees and free­lancers, “with an eye toward cre­at­ing more video.” Fox Sports also released 20 writ­ers and edi­tors on the same day, “replac­ing them with a sim­i­lar num­ber of jobs in video.” The next month, Vice fired 60 employ­ees while promis­ing to focus on video pro­duc­tion. In August, Mic dis­missed 25 peo­ple from its news and edi­to­r­i­al depart­ments to refo­cus on “new mixed-media for­mats in social video.”

But then the bets on video start­ed fail­ing. After fir­ing its writ­ers and edi­tors in June, Fox Sports had hem­or­rhaged 88 per­cent of its audi­ence by September—a stag­ger­ing feat, as traf­fic to sports web­sites usu­al­ly grows when foot­ball returns. That month, Digi­day report­ed that a “side effect of the piv­ot to video” was “audi­ence shrink­age,” cit­ing sim­i­lar declines at Mic and Voca­tiv. Some of these traf­fic slides have con­tin­ued: In April 2018, Mic’s traf­fic sat at 5 mil­lion uniques, down from 17 mil­lion a year ear­li­er.

In Feb­ru­ary of this year, Vox Media, the pub­lish­er of SB Nation, Eater, and Vox, laid off 50 employ­ees. “Face­book does not offer a viable path to mon­e­tize our in-depth video work,” its chief exec­u­tive lament­ed in a memo. CNN Dig­i­tal elim­i­nat­ed “few­er than 50” posi­tions, includ­ing in the video depart­ment.

By our count, nation­al media com­pa­nies laid off more than 350 peo­ple from 2016 to 2018, at least part­ly as a result of Facebook’s herky-jerky incen­tives. Sig­nif­i­cant­ly, this num­ber doesn’t include local news­pa­pers that dropped staff while chas­ing video dol­lars. Since 2014, news­pa­pers across the Unit­ed States have lost more than 7,000 jobs, shrink­ing by 15 per­cent, accord­ing to the Bureau of Labor Sta­tis­tics.

***

Face­book can’t shoul­der the blame for these lay­offs alone. Media exec­u­tives ulti­mate­ly made these deci­sions, and jour­nal­ism was an unsta­ble indus­try long before the first Face­book video. In a Tues­day Wall Street Jour­nal arti­cle, many pub­lish­ers dis­missed the argu­ment that the social net­work was sole­ly to blame for lay­offs.

But Face­book wrote the rule book, owned the field, and served as the ref­er­ee for the game that strug­gling pub­lish­ers were try­ing to win. If what the suit alleges is true, it now looks like a dis­hon­est umpire, too.

Start­ing in 2014, Face­book began to report enor­mous video-view­er­ship num­bers, a feat made pos­si­ble by its new­ly alleged infla­tion of met­rics, and also through the company’s con­scious deci­sion to show more videos to users. This sud­den sur­feit of atten­tion was attrac­tive to media com­pa­nies, and espe­cial­ly to those fund­ed by ven­ture cap­i­tal­ists, who often demand fast-grow­ing traf­fic num­bers. But pro­duc­ing video requires more time and resources than writ­ing words, so most com­pa­nies had to cut jobs in oth­er areas to allo­cate new resources to the plat­form.

Around this time, Face­book also began favor­ing videos uploaded to its ser­vice over links to oth­er video sites, such as YouTube and Vimeo. This effec­tive­ly forced out­lets that already had video depart­ments into upload­ing their films to Face­book and play­ing by the social giant’s rules. Then, in August 2015, it debuted Face­book Live, a fea­ture that first let celebrities—and even­tu­al­ly every­one else—stream live video from their mobile phone.

A few Live videos became enor­mous suc­cess­es, and the media’s own cov­er­age of them—coupled with its undy­ing hope for a tech­no­log­i­cal savior—helped fan the hype. When 800,000 peo­ple watched a pair of Buz­zFeed staffers explode a water­mel­on on April 8, 2016, Mash­able report­ed that the stunt earned “sig­nif­i­cant­ly more view­ers than were turned into all of cable news in the Unit­ed States.” Wired, mean­while, list­ed sev­en TV shows with few­er view­ers than the explod­ing water­mel­on, includ­ing HBO’s Girls. But the com­par­i­son was inapt: A U.S.-based Nielsen view­er watch­ing TV is just not the same as an anony­mous Face­book user, who could be any­where on the globe, dip­ping in and out of a viral video on Facebook’s News Feed. In any case, Buz­zFeed nev­er repeat­ed its suc­cess. But that didn’t stop reporters from being tak­en off the line of duty, while a pro­mo­tion­al video of water being poured on per­me­able con­crete racked up 100 mil­lion views.

Yet even before the lat­est rev­e­la­tion, it was obvi­ous that Facebook’s video met­rics were not com­pa­ra­ble to indus­try stan­dards. Face­book defined a “view” as some­one watch­ing some­thing for any longer than three sec­onds. YouTube, the company’s main com­peti­tor, defined a view as 30 sec­onds or more. From a retail per­spec­tive, this was like count­ing win­dow shop­pers as con­sumers. It “fun­da­men­tal­ly deval­ues the num­ber-one met­ric of online video,” the YouTu­ber Hank Green wrote in August 2015, dis­cussing view counts. “Ad agen­cies and brands are con­fused enough with­out Face­book mud­dy­ing the waters by call­ing some­thing a view when it is in no way a mea­sure of view­er­ship.”

Of course, mud­dy­ing the waters in this way was also use­ful for media com­pa­nies look­ing to sell growth sto­ries to investors. “There’s that sense that not all of these dig­i­tal news start-ups will see con­tin­u­ing hock­ey-stick-like growth,” Ken Doc­tor, a prin­ci­pal ana­lyst at the ana­lyt­ics firm Out­sell, told Digi­day in 2016. “Fall behind in growth, and the cur­rent val­ue of these com­pa­nies may plum­met; it’s a momen­tum game, win or lose.”

Grow­ing view­er­ship on YouTube is a painstak­ing, time-con­sum­ing process. Doing it on your own site is even hard­er. Grow­ing an audi­ence organ­i­cal­ly on Face­book had also become remark­ably dif­fi­cult. There were only two path­ways to grow: Pay to run ads, or make a lot of Face­book video.

The video views came easy. You could stack up mil­lions in hours, and those three-sec­ond views looked the same in a bar chart as YouTube’s 30-sec­ond ones. New media start-ups like AJ+, NowThis, Mic, and many oth­ers rushed to cre­ate as much Face­book Video as pos­si­ble. At Fusion, where he was edi­tor in chief, Alex­is saw this hap­pen first­hand. Fusion’s text team stopped grow­ing, while the video side explod­ed. Many of Fusion’s video pro­duc­ers were seri­ous jour­nal­ists, but the very labor-inten­sive nature of video meant the news­room had few­er peo­ple out report­ing and more peo­ple mak­ing text slide in and out of the frame.

It was not just newish, video-heavy play­ers that found them­selves in a bind. Estab­lished pub­lish­ers that had man­aged to build large, link-based Face­book Pages found them­selves star­ing at a News Feed that had been trans­formed into a stack of videos. There was a real dan­ger of text sto­ries get­ting crowd­ed out. Mean­while, Face­book was eat­ing up all the growth in dig­i­tal adver­tis­ing, due in large part to all the con­tent that pub­lish­ers were putting on the plat­form. Our chaos was Facebook’s con­tent. So even if you didn’t run to Face­book Video, it reshaped the infor­ma­tion ecosys­tem in ways that made it hard­er for jour­nal­is­tic insti­tu­tions.

Facebook’s mis­ad­ven­tures in video par­al­lel oth­er sit­u­a­tions where the com­pa­ny has moved fast to beat a com­peti­tor but bro­ken things along the way. In 2013, it was Face­book muscling into the media-dis­tri­b­u­tion busi­ness to cut back Twitter’s growth; the com­pa­ny was, to put it mild­ly, unpre­pared for the prob­lems that result­ed. In the company’s effort to push its Live video offer­ing to com­pete with YouTube’s and Twitter’s, the prod­uct launched with­out ade­quate mod­er­a­tion tools. Even this week, after announc­ing new video-call­ing hard­ware that takes aim at sim­i­lar prod­ucts from Alpha­bet and Ama­zon, Face­book gave a mis­lead­ing answer in the press roll­out about the obvi­ous cen­tral con­cern with the device: how the com­pa­ny would use the data it gen­er­at­ed.

...

Face­book over­sees what is prob­a­bly the world’s largest mar­ket for human atten­tion. Time and time again, it has added a new rule to this mar­ket, or cre­at­ed some new way of scor­ing points, seem­ing­ly with­out think­ing about how play­ers would react or adjust to the change. In the past, we’ve assumed Face­book ignored the sys­temic con­se­quences of its actions out of neg­li­gence. Per­haps, as this new law­suit alleges, it was a neg­li­gence so extreme that it rose to the lev­el of fraud.

———-

“How Facebook’s Chaot­ic Push Into Video Cost Hun­dreds of Jour­nal­ists Their Jobs” by Alex­is C. Madri­gal and Robin­son Mey­er; The Atlantic; 10/18/2019

“Face­book egre­gious­ly over­stat­ed the suc­cess of videos post­ed to its social net­work for years, exag­ger­at­ing the time spent watch­ing them by as much as 900 per­cent, a new legal fil­ing claims. Cit­ing 80,000 pages of inter­nal Face­book doc­u­ments, aggriev­ed adver­tis­ers fur­ther allege that the com­pa­ny knew about the prob­lem for at least a year and did noth­ing.”

Yep, Face­book was telling dig­i­tal pub­lish­ers that videos were get­ting 900 per­cent more view­ers than they actu­al­ly were and the com­pa­ny know­ing­ly told this lie for at least a year. And not just any year. This was from July 2015 to June 2016, accord­ing ot the law­suit, when dig­i­tal pub­lish­ers were going to be mak­ing huge invest­ments in the upcom­ing elec­tion cov­er­age. But Face­book began report­ing enor­mous video-view­er­ship num­bers in 2014, so it sounds like the lie start­ed at least by that point. So dig­i­tal pub­lish­ers did what Face­book advised and switched to cre­at­ing videos. But the promised rev­enues nev­er mate­ri­al­ized:

...

The com­pa­ny denies the alle­ga­tions. “This law­suit is with­out mer­it and we’ve filed a motion to dis­miss these claims of fraud. Sug­ges­tions that we in any way tried to hide this issue from our part­ners are false,” said a spokesman for Face­book in a state­ment, adding that the com­pa­ny noti­fied adver­tis­ers as soon as it dis­cov­ered the prob­lem.

Dur­ing the peri­od of pur­port­ed wrong­do­ing, from July 2015 to June 2016, jour­nal­ists and news­room lead­ers across the coun­try worked to cov­er an unprece­dent­ed pres­i­den­tial cam­paign in an infor­ma­tion land­scape that Face­book was con­stant­ly, and errat­i­cal­ly, trans­form­ing. Even if, as Face­book argues, it did not know­ing­ly inflate met­rics, it set up new and fast-chang­ing incen­tives for video that altered the online ad mar­ket as a whole. As media com­pa­nies des­per­ate­ly tried to do what Face­book want­ed, many made the dis­as­trous deci­sion to “piv­ot to video,” lay­ing off reporters and edi­tors by the dozen. And when views plunged and video’s poor return on invest­ment became more appar­ent, some com­pa­nies piv­ot­ed back, fir­ing video pro­duc­ers by the dozens.

...

By our count, nation­al media com­pa­nies laid off more than 350 peo­ple from 2016 to 2018, at least part­ly as a result of Facebook’s herky-jerky incen­tives. Sig­nif­i­cant­ly, this num­ber doesn’t include local news­pa­pers that dropped staff while chas­ing video dol­lars. Since 2014, news­pa­pers across the Unit­ed States have lost more than 7,000 jobs, shrink­ing by 15 per­cent, accord­ing to the Bureau of Labor Sta­tis­tics.

...

Start­ing in 2014, Face­book began to report enor­mous video-view­er­ship num­bers, a feat made pos­si­ble by its new­ly alleged infla­tion of met­rics, and also through the company’s con­scious deci­sion to show more videos to users. This sud­den sur­feit of atten­tion was attrac­tive to media com­pa­nies, and espe­cial­ly to those fund­ed by ven­ture cap­i­tal­ists, who often demand fast-grow­ing traf­fic num­bers. But pro­duc­ing video requires more time and resources than writ­ing words, so most com­pa­nies had to cut jobs in oth­er areas to allo­cate new resources to the plat­form.

...

Grow­ing view­er­ship on YouTube is a painstak­ing, time-con­sum­ing process. Doing it on your own site is even hard­er. Grow­ing an audi­ence organ­i­cal­ly on Face­book had also become remark­ably dif­fi­cult. There were only two path­ways to grow: Pay to run ads, or make a lot of Face­book video.
...

This was an indus­try-wide phe­nom­e­na which means it’s an indus­try-wide deba­cle based on Face­book’s lies. And as the arti­cle reminds us, at the same time Face­book lied the indus­try into this mas­sive strate­gic mis­take, Face­book was eat­ing up more and more online adver­tis­ing con­tent much like Google:

...

It was not just newish, video-heavy play­ers that found them­selves in a bind. Estab­lished pub­lish­ers that had man­aged to build large, link-based Face­book Pages found them­selves star­ing at a News Feed that had been trans­formed into a stack of videos. There was a real dan­ger of text sto­ries get­ting crowd­ed out. Mean­while, Face­book was eat­ing up all the growth in dig­i­tal adver­tis­ing, due in large part to all the con­tent that pub­lish­ers were putting on the plat­form. Our chaos was Facebook’s con­tent. So even if you didn’t run to Face­book Video, it reshaped the infor­ma­tion ecosys­tem in ways that made it hard­er for jour­nal­is­tic insti­tu­tions.
...

As we can see, between Face­book and Google, the dig­i­tal pub­lish­ing indus­try has become a lot less sta­ble an indus­try. And this trend appears to be going strong. The indus­try is only get­ting more dis­tressed. It makes for a inter­est play­ing field for a com­pa­ny with Axel Springer’s size. Because it’s clear that the dig­i­tal pub­lish­ing indus­try is going to be fac­ing a big shake­out and it’s going to be the giants like Axel Springer who obvi­ous­ly suri­v­ive that shake­out, but unless some­thing is done to address the monop­o­lis­tic pow­er of Google and Face­book on the online ad busi­ness it’s still unclear what it’s going to take to end the dark times for pub­lish­ing beyond sim­ply hav­ing a large per­cent of the com­pe­ti­tion going out of busi­ness and leav­ing a few sur­vivors. So Google and Face­book are basi­cal­ly dri­ving the dig­i­tal pub­lish­ing indus­try into a peri­od of dis­tress and con­sol­i­da­tion and right into the arms of giants like Axel Springer with the cash need­ed to pick up dying pub­li­ca­tions for cheap.

So while gov­ern­ments should def­i­nite­ly be look­ing into antitrust moves against Face­book and Google and inves­ti­gate whether or not the online ad indus­try is effec­tive­ly a nat­ur­al monop­oly that requires spe­cial reg­u­la­tions, keep in mind that Axel Springer is already the largest pub­lish­er in Europe and plan­ning on buy­ing up the com­pe­ti­tion Face­book and Google already crushed. It’s a reminder that the sur­viv­ing media giants might need some antitrust inves­ti­ga­tions of their own after the upcom­ing peri­od of indus­try con­sol­i­da­tion that Google and Face­book made inevitable. Google and Face­book should­n’t have a monop­oly on gen­er­at­ing antitrust con­cerns.

Here’s a set of arti­cles on a poten­tial­ly sig­nif­i­cant shake­up in the US polit­i­cal media mar­ket­place. A shake­up and a cap­ture of that mar­ket by none oth­er than Friede Springer and Math­ias Doepfn­er, the two main share­hold­ers of Axel Springer. Recall how Doepfn­er and Springer took Alex Springer pri­vate in 2019 after a pri­vate equi­ty buy­out by KKR, who togeth­er hold approx­i­mate­ly 45.4% of Alex Springer’s cap­i­tal. And part of the log­ic behind tak­ing the pub­lish­ing giant pri­vate at that point at the time was to ease the future acqui­si­tion of new com­pa­nies. This was four years after the com­pa­ny acquired Busi­ness Insid­er. Doepfn­er and Springer had plans. Big plans. And those big plans fell into place in a big way last month with the acqui­si­tion of Politi­co for more than $1 bil­lion.

And as we’re going to see, part of what makes this deal so sig­nif­i­cant is that this clear­ly isn’t the last major media acqui­si­tion Axel Springer is plan­ning on mak­ing in the near future. Axios is also on Doepgn­er and Springer’s wish list. So by the time Axel Spring is done with this media buy­out spree, it could end up own­ing a sig­nif­i­cant chunk of the US polit­i­cal opin­ion-form­ing media:

The New York Times

Politi­co Is Sold to Axel Springer for More Than $1 Bil­lion

The pub­lish­ing giant will take con­trol of Politi­co, Politi­co Europe and Politico’s tech news site, Pro­to­col.

By Edmund Lee
Aug. 26, 2021

Politi­co, the Wash­ing­ton news site that has pros­pered for years as Belt­way pro­fes­sion­als gob­bled up its scoops and inside-base­ball-style report­ing, will have a new own­er.

The Ger­man pub­lish­ing giant Axel Springer agreed to buy Politi­co in a deal announced on Thurs­day that could shake up the Wash­ing­ton media scene.

Springer will take con­trol of Politi­co and its sis­ter site, Politi­co Europe, as well as Politico’s tech news site, Pro­to­col, a rel­a­tive­ly new ven­ture, the com­pa­nies said. The deal, expect­ed to close by the end of the year, is val­ued at more than $1 bil­lion, two peo­ple with knowl­edge of the mat­ter said. The New York Times report­ed last week that Politico’s own­er, Robert Allbrit­ton, was seek­ing $1 bil­lion for the deal. The com­pa­nies did not pub­licly dis­close finan­cial terms.

Math­ias Döpfn­er, the chief exec­u­tive of Springer, described Politi­co as an “out­stand­ing media com­pa­ny” that has “dis­rupt­ed dig­i­tal polit­i­cal jour­nal­ism.” He added the impor­tance of main­tain­ing Politico’s “edi­to­r­i­al inde­pen­dence and non­par­ti­san report­ing.”

Mr. Allbrit­ton, who helped found Politi­co in 2007, will remain pub­lish­er of the site, and it will oper­ate sep­a­rate­ly from Springer. “I reach this mile­stone with a sense of sat­is­fac­tion that I hope is shared by every Politi­co,” he said in a state­ment. He also took a jab at oth­ers in the dig­i­tal media space: “We have put the empha­sis on doing rather than boast­ing, and what mul­ti­ple com­peti­tors have aspired to — a con­sis­tent­ly prof­itable pub­li­ca­tion that sup­ports true jour­nal­is­tic excel­lence — we have achieved.”

Mr. Allbrit­ton and Springer had been in talks for sev­er­al months about a deal for Politi­co, which gen­er­ates about $200 mil­lion a year in rev­enue and has been con­sis­tent­ly prof­itable. The site is avail­able to read­ers free of charge, and its flag­ship newslet­ter, Play­book, is wide­ly read by Washington’s pow­er bro­kers. A high-end sub­scrip­tion ser­vice, Politi­co Pro, gen­er­ates more than half the company’s annu­al rev­enue.

With a val­ue of more than $1 bil­lion, the deal is one of the most expen­sive media merg­ers in recent mem­o­ry, the equiv­a­lent of five times Politico’s year­ly sales. Buz­zFeed, one of the largest dig­i­tal pub­lish­ers in the coun­try, recent­ly announced a finan­cial trans­ac­tion that would take it pub­lic at a val­u­a­tion of $1.5 bil­lion, or about three times its annu­al rev­enue.

Springer has been pur­su­ing deals in the Unit­ed States as a way to expand its port­fo­lio. The pub­lish­er has become par­tic­u­lar­ly attract­ed to sub­scrip­tion-based news busi­ness­es. After Springer acquired Busi­ness Insid­er for around $500 mil­lion in 2015, it remade the com­pa­ny to become a sub­scrip­tion-based news out­let and put its scoops behind a pay­wall. (For that deal, Springer paid almost nine times Busi­ness Insider’s rev­enue.) Last year, the com­pa­ny acquired a con­trol­ling stake in Morn­ing Brew, a newslet­ter pub­lish­er.

Politico’s sub­scrip­tion busi­ness made it an even more attrac­tive tar­get for Springer. The Ger­man pub­lish­er already had a part­ner­ship with Politi­co as a joint own­er in Politi­co Europe. Springer had been look­ing to expand Politi­co Europe, but it couldn’t do so with­out Mr. Allbritton’s con­sent.

The Politi­co deal has appar­ent­ly quashed Springer’s talks to acquire Axios, a com­pet­ing news start-up found­ed by Jim Van­de­Hei, Mike Allen and Roy Schwartz, all vet­er­ans of Politi­co. (Mr. Van­de­Hei and John F. Har­ris start­ed Politi­co in 2006 after they left The Wash­ing­ton Post.) Axios’ lead­er­ship has not aggres­sive­ly pur­sued the deal, accord­ing to one of the peo­ple.

But Mr. Döpfn­er has said that the acqui­si­tion of Politi­co would not pre­vent him from con­tin­u­ing his pur­suit of Axios, accord­ing to two peo­ple with knowl­edge of his think­ing. How he would resolve the con­flicts that go with own­ing two close­ly com­pet­ing pub­li­ca­tions is unclear.

When asked in a town-hall-style meet­ing on Thurs­day with Politi­co staffers why he had cho­sen Politi­co over Axios, he described Axios as “an impres­sive­ly suc­cess­ful prod­uct” before say­ing that, when there was the chance to acquire Politi­co, “Why would you con­sid­er any oth­er alter­na­tive?”

Mr. Döpfn­er still needs to find a top exec­u­tive to man­age the new prop­er­ty. In Feb­ru­ary, Politico’s chief exec­u­tive, Patrick Steel, announced that he would depart. Buy­ing a prop­er­ty like Axios could help Mr. Döpfn­er solve the pend­ing man­age­ment search by installing its lead­ers to run both oper­a­tions, the two peo­ple said.

Mr. Döpfn­er could not be reached for com­ment. Axel Springer offered a state­ment: “We acquired Politi­co because we believe in its poten­tial. At the same time as a glob­al media com­pa­ny we are always look­ing at strong dig­i­tal pub­li­ca­tions to part­ner with.” Lat­er, Springer updat­ed its state­ment to read: “Axel Springer will not acquire Axios.”

Mr. Allbrit­ton has lost some of his big-name jour­nal­ists in recent years, either to rivals or to upstarts. Three of Politico’s top staff mem­bers — Jake Sher­man, Anna Palmer and John Bres­na­han — left this year to start Punch­bowl News, a com­pet­ing news site. Mr. Sher­man and Ms. Palmer were the hands behind the Play­book newslet­ter. In June, Car­rie Bud­off Brown, a long­time edi­tor at Politi­co, said she would be leav­ing to join NBC News.

Politico’s near­ly 400 jour­nal­ists are also in the throes of a union­iz­ing effort that could add to the cost of the busi­ness. It’s unclear how Springer will man­age the mount­ing labor issues.

...

————

“Politi­co Is Sold to Axel Springer for More Than $1 Bil­lion” by Edmund Lee; The New York Times; 08/26/2021

“Springer has been pur­su­ing deals in the Unit­ed States as a way to expand its port­fo­lio. The pub­lish­er has become par­tic­u­lar­ly attract­ed to sub­scrip­tion-based news busi­ness­es. After Springer acquired Busi­ness Insid­er for around $500 mil­lion in 2015, it remade the com­pa­ny to become a sub­scrip­tion-based news out­let and put its scoops behind a pay­wall. (For that deal, Springer paid almost nine times Busi­ness Insider’s rev­enue.) Last year, the com­pa­ny acquired a con­trol­ling stake in Morn­ing Brew, a newslet­ter pub­lish­er.”

Spinger is par­tic­u­lar­ly attract­ed to sub­scrip­tion-based news out­lets. That sure sounds like a busi­ness mod­el pred­i­cat­ed on putting more and more con­tent behind a pay­wall. It’s an exam­ple of the kind of changes we can prob­a­bly expect to see in the US polit­i­cal media as a con­se­quence of Springer’s grow­ing own­er­ship of the US media land­scape. On top of all the qui­et edi­to­r­i­al changes that might be tak­ing place behind the scenes. It’s those edi­to­r­i­al changes that are part of what makes the poten­tial buy­out of Axios so dis­turb­ing. Springer and Doepfn­er would end up own­ing two of the major DC-pol­i­tics focused US out­lets. That’s part of why it’s hard to take very seri­ous­ly the vague assur­ances from Springer that the buy­out of Politi­co put an end to their Axios ambi­tions:

...
The Politi­co deal has appar­ent­ly quashed Springer’s talks to acquire Axios, a com­pet­ing news start-up found­ed by Jim Van­de­Hei, Mike Allen and Roy Schwartz, all vet­er­ans of Politi­co. (Mr. Van­de­Hei and John F. Har­ris start­ed Politi­co in 2006 after they left The Wash­ing­ton Post.) Axios’ lead­er­ship has not aggres­sive­ly pur­sued the deal, accord­ing to one of the peo­ple.

But Mr. Döpfn­er has said that the acqui­si­tion of Politi­co would not pre­vent him from con­tin­u­ing his pur­suit of Axios, accord­ing to two peo­ple with knowl­edge of his think­ing. How he would resolve the con­flicts that go with own­ing two close­ly com­pet­ing pub­li­ca­tions is unclear.

When asked in a town-hall-style meet­ing on Thurs­day with Politi­co staffers why he had cho­sen Politi­co over Axios, he described Axios as “an impres­sive­ly suc­cess­ful prod­uct” before say­ing that, when there was the chance to acquire Politi­co, “Why would you con­sid­er any oth­er alter­na­tive?”

Mr. Döpfn­er still needs to find a top exec­u­tive to man­age the new prop­er­ty. In Feb­ru­ary, Politico’s chief exec­u­tive, Patrick Steel, announced that he would depart. Buy­ing a prop­er­ty like Axios could help Mr. Döpfn­er solve the pend­ing man­age­ment search by installing its lead­ers to run both oper­a­tions, the two peo­ple said.

Mr. Döpfn­er could not be reached for com­ment. Axel Springer offered a state­ment: “We acquired Politi­co because we believe in its poten­tial. At the same time as a glob­al media com­pa­ny we are always look­ing at strong dig­i­tal pub­li­ca­tions to part­ner with.” Lat­er, Springer updat­ed its state­ment to read: “Axel Springer will not acquire Axios.”
...

Next, here’s a Bloomberg piece from 2019 about KKR tak­ing Axel Springer pri­vate that gives us an insight into part of the motive for the move at the time: being shield­ed from the addi­tion­al scruti­ny that comes with being a pub­licly trad­ed firm will make it eas­i­er to make future acqui­si­tions:

Bloomberg News

KKR to Buy Pub­lish­er Axel Springer for $7.7 Bil­lion

Thomas Muli­er
Jun 12, 2019

(Bloomberg) — KKR & Co. agreed to acquire Axel Springer SE in a buy­out that val­ues the Ger­man pub­lish­er at about 6.8 bil­lion euros ($7.7 bil­lion).

KKR offered to pay 63 euros a share in cash, and the board of the com­pa­ny said it wel­comed the agree­ment in a state­ment Wednes­day. KKR said the price is 32% high­er than the aver­age over the three months before the announce­ment the com­pa­nies were in nego­ti­a­tions over a deal.

Friede Springer — the wid­ow of the company’s founder with the largest stake — and Chief Exec­u­tive Offi­cer Math­ias Doepfn­er sup­port the poten­tial invest­ment and plan to keep their hold­ings.

A buy­out of minor­i­ty investors would see Axel Springer join Ber­tels­mann, the Ger­man pub­lish­er that owns Pen­guin Ran­dom House, in being shield­ed from the scruti­ny of pub­lic mar­kets.

With KKR on board, it could also make it eas­i­er for the com­pa­ny to fund acqui­si­tions and cap­i­tal­ize on a bout of tur­moil and retrench­ment in the dig­i­tal media indus­try.

More pub­lic com­pa­nies are being tak­en pri­vate thanks in large part to buy­out firms’ swelling cash reserves. The pri­vate equi­ty indus­try, includ­ing real estate, debt and ven­ture funds, is sit­ting on about $1.4 tril­lion in unspent cash, accord­ing to data com­piled by Bloomberg, as insti­tu­tion­al investors pour client mon­ey into the funds seek­ing returns.

Last year, the num­ber of pub­lic-to-pri­vate deals hit its high­est in more than a decade, accord­ing to Bain & Co.’s annu­al pri­vate equi­ty report.

Dig­i­tal Push

Doepfn­er has spent almost two decades turn­ing Germany’s biggest pub­lish­er into a dig­i­tal media com­pa­ny, shed­ding print­ing, news­pa­per and mag­a­zine oper­a­tions to push into online news with prod­ucts such as Busi­ness Insid­er and clas­si­fieds sites includ­ing job por­tal Step­stone. It now makes almost three quar­ters of its sales from dig­i­tal busi­ness­es.

The sec­tor has been look­ing shaki­er in recent years, with sev­er­al news sites clos­ing or cut­ting jobs as their own­ers try to staunch years of loss­es. Old­er news titles are fight­ing back with an increas­ing­ly suc­cess­ful sub­scrip­tion-based busi­ness mod­el, and Alpha­bet Inc.’s Google and Face­book Inc. are look­ing to mus­cle in on the prof­itable clas­si­fieds busi­ness.

...

———–

“KKR to Buy Pub­lish­er Axel Springer for $7.7 Bil­lion” by Thomas Muli­er; Bloomberg News; 06/12/2019

“Friede Springer — the wid­ow of the company’s founder with the largest stake — and Chief Exec­u­tive Offi­cer Math­ias Doepfn­er sup­port the poten­tial invest­ment and plan to keep their hold­ings.”

Math­ias Doepfn­er and Friede Springer had big plans in 2019. That’s what the KKR buy­out sig­ni­fied: much big­ger plans for the future. And those plans includ­ed main­tain­ing their sub­stan­tial hold­ings while tak­ing the com­pa­ny pri­vate. In oth­er words, Deopgn­er and Springer desired rel­a­tive­ly greater unchecked pow­er to make deci­sions, includ­ing deci­sions like buy­ing more com­pa­nies:

...
A buy­out of minor­i­ty investors would see Axel Springer join Ber­tels­mann, the Ger­man pub­lish­er that owns Pen­guin Ran­dom House, in being shield­ed from the scruti­ny of pub­lic mar­kets.

With KKR on board, it could also make it eas­i­er for the com­pa­ny to fund acqui­si­tions and cap­i­tal­ize on a bout of tur­moil and retrench­ment in the dig­i­tal media indus­try.
...

So with the 2021 buy­out of Politi­co we’re see­ing the real­iza­tion of those mys­te­ri­ous plans the com­pa­ny strong­ly hint­ed at in 2019. Plans that seem to include the even­tu­al buy­out of Axios, despite what we’re hear­ing to the con­trary. Friede Springer and Math­ias Döpfn­er are going to have one of the most pow­er­ful voic­es in the US polit­i­cal media land­scape. At least indi­rect­ly. We’re being assured there will be no edi­to­r­i­al med­dling by the new own­ers. Let’s hope so. Because as the fol­low­ing 2015 Alter­Net arti­cle by Max Blu­men­thal reminds us, the his­tor­i­cal edi­to­r­i­al slant of Axel Springer-owned pub­li­ca­tions has an alarm­ing num­ber of par­al­lels to that of Rubert Mur­doch’s own media empire:

Alter­Net

Could the Pos­si­ble Sale of Huff­in­g­ton Post to Right-Wing Com­pa­ny Affect Its Edi­to­r­i­al Line?

by Max Blu­men­thal
June 03, 2015

This month, Newsweek qui­et­ly report­ed that a Ger­man media con­glom­er­ate called Axel Springer was the “most seri­ous” con­tender to buy the Huff­in­g­ton Post in the pro­posed sale of the magazine’s cor­po­rate par­ent, AOL, to Ver­i­zon. While Newsweek detailed Springer’s siz­able media hold­ings in Ger­many and beyond, from the tabloid Bild to the news­pa­per Die Welt, it failed to note the strin­gent­ly enforced right-wing edi­to­r­i­al line that makes Springer the Ger­man equiv­a­lent of Rupert Murdoch’s News Corp.

Among the five pre­am­bles of Springer’s cor­po­rate prin­ci­ples is the require­ment that employ­ees “sup­port the vital rights of the State of Israel.” Jour­nal­ists are also expect­ed to “uphold the prin­ci­ples of a free social mar­ket econ­o­my” and “sup­port the Transat­lantic Alliance and main­tain sol­i­dar­i­ty with the Unit­ed States of Amer­i­ca in the com­mon val­ues of free nations.” The web­page out­lin­ing Springer’s pre­am­bles mys­te­ri­ous­ly dis­ap­peared from the web months before the com­pa­ny entered the bid­ding for the Huff­in­g­ton Post. (An archived ver­sion of the page can be viewed here.)

The Huff­in­g­ton Post is one of America’s most wide­ly read online news out­lets. While the site’s var­i­ous niche por­tals earn much of their traf­fic through click­bait head­lines and celebri­ty news, the Huff­in­g­ton Post’s pol­i­tics sec­tion has made its mark with slash­ing cov­er­age of the Trans Pacif­ic Part­ner­ship (TPP) trade deal, Likud­nik mega-donors and police bru­tal­i­ty. Huff­in­g­ton Post reporters have not shied from tar­get­ing Demo­c­ra­t­ic sen­a­tors who pro­mot­ed war on Iran or high­lighting Pres­i­dent Barack Obama’s sup­port for a pro­vi­sion in TPP that would reward com­pa­nies that prof­it from slav­ery. Ear­li­er this year, Oba­ma urged House Democ­rats not to read the Huff­in­g­ton Post, com­plain­ing that the out­let report­ed unfair­ly on the free trade agen­da he has been pro­mot­ing. (Full dis­clo­sure: my broth­er, Paul, is a staff writer for the Huffin­gon Post.)

Springer’s edi­to­r­i­al line offers a stark con­trast to the pro­gres­sive tone of the Huff­in­g­ton Post. Found­ed in 1946 by the jour­nal­ist Axel Springer, the com­pa­ny now holds about $3 bil­lion in assets and over­sees a col­lec­tion of low-brow pub­li­ca­tions most­ly asso­ci­at­ed with what lib­er­al-mind­ed Ger­mans deri­sive­ly refer to as “the boule­vard press.” It was dur­ing the late 1960’s when Springer took a turn to the pop­ulist right, with Axel Springer sic­c­ing his most pop­u­lar tabloid, Bild, against the rad­i­cal left-wing stu­dent move­ment in West Ger­many. The paper homed in on Rudi Dutschke, one of the movement’s most vis­i­ble lead­ers, accus­ing him of con­spir­ing to bring down West Ger­many through vio­lent rev­o­lu­tion while call­ing on patri­ot­ic Ger­mans to “elim­i­nate the trou­ble mak­ers.”

On April 11, 1968, a lone­ly neo-Nazi mechan­ic and avid Bild read­er named Josef Bach­mann rid­dled Dutschke with bul­lets as he bicy­cled through Berlin. Bach­mann lat­er tes­ti­fied in court that he had devel­oped his view of Dutschke exclu­sive­ly through arti­cles appear­ing in the Springer press and assort­ed jin­go­is­tic rags. As protests explod­ed across West Ger­many, with stu­dents chant­i­ng, “Springer pulled the trig­ger!” Axel Springer direct­ed his edi­tors to call for harsh police crack­downs on the demon­stra­tors while white­wash­ing Bach­mann as a lone mad­man as deranged as his vic­tim, the “red mani­ac” Dutschke. (Dutschke died of injury-relat­ed com­pli­ca­tions in 1979; Springer’s deeply anguished son com­mit­ted sui­cide months lat­er.)

With the onset of the so-called war on ter­ror, Springer has shift­ed its sights from the rad­i­cal left to the Mus­lim men­ace. A Bild arti­cle warn­ing last August of an epi­dem­ic of Ebo­la import­ed by black migrants from Africa was typ­i­cal of Springer’s cov­er­age. A month ear­li­er, the paper ran a screed by Nicholaus Fest argu­ing that with their “far dis­pro­por­tion­ate crim­i­nal­i­ty of young peo­ple with a Mus­lim back­ground” and sup­posed ten­den­cy toward “anti-Semit­ic pogroms,” Mus­lims had no place in Europe. Fest’s tirade earned cen­sure from the Ger­man Press Coun­cil, which ruled that its big­ot­ed con­tent “was incom­pat­i­ble with the rep­u­ta­tion of the press.”

Even Springer’s most sup­pos­ed­ly respectable paper, Die Welt, has become a repos­i­to­ry for neo­con­ser­v­a­tive edi­to­ri­al­iz­ing and naked­ly Islam­o­pho­bic dia­tribes. Welt recent­ly anoint­ed the hyper-repres­sive Egypt­ian dic­ta­tor Abdel Fat­tah El-Sisi as “the Luther of the Arab world”; it has pro­claimed that “we should be thank­ful to drone pilots,” accused Mus­lims of insuf­fi­cient oppo­si­tion to ISIS and claimed that ISIS rep­re­sents the true face of Islam. Dur­ing the 2012 cer­e­mo­ny where anti-Mus­lim for­mer Dutch law­mak­er Ayaan Hir­si Ali received the Axel Springer Prize, she appeared to blame lib­er­al defend­ers of mul­ti­cul­tur­al­ism for the killing spree com­mit­ted by the Nor­we­gian extrem­ist Anders Breivik, claim­ing they left Breivik with “no oth­er choice but to use vio­lence.”

In keep­ing with its stat­ed com­mit­ment to “uphold the prin­ci­ples of a free social mar­ket econ­o­my,” Springer pub­li­ca­tions have aggres­sive­ly cam­paigned for eco­nom­ic aus­ter­i­ty through­out the Euro­zone. In Feb­ru­ary, Springer’s Bild launched the “We say NO!” cam­paign against new loans to Greece with a giant front-page head­line read­ing, “NEIN!” The tabloid then pub­lished self­ies of hon­est-look­ing, hard-work­ing Bild read­ers hold­ing the paper in defi­ance, grant­i­ng the cam­paign to hol­low out the Greek pub­lic sec­tor with a pop­ulist veen­er. Bild was wide­ly panned for the stunt, includ­ing by the Ger­man Jour­nal­ists Asso­ci­a­tion, which accused the paper of “cross­ing the bor­der into polit­i­cal cam­paign­ing.”

...

———–

“Could the Pos­si­ble Sale of Huff­in­g­ton Post to Right-Wing Com­pa­ny Affect Its Edi­to­r­i­al Line?” by Max Blu­men­thal; Alter­Net; 06/03/2015

“Springer’s edi­to­r­i­al line offers a stark con­trast to the pro­gres­sive tone of the Huff­in­g­ton Post. Found­ed in 1946 by the jour­nal­ist Axel Springer, the com­pa­ny now holds about $3 bil­lion in assets and over­sees a col­lec­tion of low-brow pub­li­ca­tions most­ly asso­ci­at­ed with what lib­er­al-mind­ed Ger­mans deri­sive­ly refer to as “the boule­vard press.” It was dur­ing the late 1960’s when Springer took a turn to the pop­ulist right, with Axel Springer sic­c­ing his most pop­u­lar tabloid, Bild, against the rad­i­cal left-wing stu­dent move­ment in West Ger­many. The paper homed in on Rudi Dutschke, one of the movement’s most vis­i­ble lead­ers, accus­ing him of con­spir­ing to bring down West Ger­many through vio­lent rev­o­lu­tion while call­ing on patri­ot­ic Ger­mans to “elim­i­nate the trou­ble mak­ers.””

Axel Springer nev­er end­ed up pur­chas­ing Huff­in­g­ton Post, going with a Busi­ness Insid­er pur­chase instead that year. But we don’t have to wild­ly guess how the pur­chase of the left-lean­ing Huff­in­g­ton Post would have gone. Axel Springer has decades of his­to­ry and an estab­lished edi­to­r­i­al bent that its pub­li­ca­tions have held over those decades. An estab­lished right-wing edi­to­r­i­al bent that put its pub­li­ca­tions in direct com­pe­ti­tion with Rupert Mur­doch’s media empire:

...
With the onset of the so-called war on ter­ror, Springer has shift­ed its sights from the rad­i­cal left to the Mus­lim men­ace. A Bild arti­cle warn­ing last August of an epi­dem­ic of Ebo­la import­ed by black migrants from Africa was typ­i­cal of Springer’s cov­er­age. A month ear­li­er, the paper ran a screed by Nicholaus Fest argu­ing that with their “far dis­pro­por­tion­ate crim­i­nal­i­ty of young peo­ple with a Mus­lim back­ground” and sup­posed ten­den­cy toward “anti-Semit­ic pogroms,” Mus­lims had no place in Europe. Fest’s tirade earned cen­sure from the Ger­man Press Coun­cil, which ruled that its big­ot­ed con­tent “was incom­pat­i­ble with the rep­u­ta­tion of the press.”

...

In keep­ing with its stat­ed com­mit­ment to “uphold the prin­ci­ples of a free social mar­ket econ­o­my,” Springer pub­li­ca­tions have aggres­sive­ly cam­paigned for eco­nom­ic aus­ter­i­ty through­out the Euro­zone. In Feb­ru­ary, Springer’s Bild launched the “We say NO!” cam­paign against new loans to Greece with a giant front-page head­line read­ing, “NEIN!” The tabloid then pub­lished self­ies of hon­est-look­ing, hard-work­ing Bild read­ers hold­ing the paper in defi­ance, grant­i­ng the cam­paign to hol­low out the Greek pub­lic sec­tor with a pop­ulist veen­er. Bild was wide­ly panned for the stunt, includ­ing by the Ger­man Jour­nal­ists Asso­ci­a­tion, which accused the paper of “cross­ing the bor­der into polit­i­cal cam­paign­ing.”
...

How will this long-estab­lished right-wing edi­to­r­i­al bent bleed into Politi­co’s cov­er­age of US pol­i­tics? Again, we’re told it’s going to be a hands-off own­er­ship. But those decades of right-wing Axel Springer con­tent sug­gests oth­er­wise. And that’s why we should prob­a­bly expect a steady trick­le of arti­cles in the rest of the US polit­i­cal press talk­ing about this or that sur­pris­ing right-wing stance tak­en by Politi­co. At least, we can prob­a­bly expect a trick­le of those kinds of arti­cles in the rest of the US polit­i­cal press that isn’t already owned by Axel Springer.