German media house Axel Springer’s news brands have suffered a 10.6% advertising revenue shortfall in the year leading to Q2 2019, an issue which could force a rethink of its business model.
The group is comprised of classified, marketing and news media businesses. Its news media segment is formed from Bild and Welt newsbrands in Germany, and internationally, Insider, Techbook, eMarketer, Politico and Rolling Stone. It is suffering a sharp steady decline in ad revenue 10.6% year on year to (€295.5m).
Meanwhile, circulation revenues fell by 5.9% to €277.6m hinting that it is yet to crack the subscriptions market despite the steady growth of its digital portfolio. This was slightly cushioned by ‘other revenues’ increasing by 5.9% to €112.9m.
This will be the last results the group is likely to post after US private equity firm KKR announced it will buy up 27.8% of company shares. Axel said it hopes the takeover will help it fulfill its “long-term growth and investment strategy” – which at a glance could be less dependent on advertising dollar than it once was.
Across the three business segments, the group saw a 23% decline in net earnings, showing the scale of the issue now facing the PE. It still makes a majority of its income from its classifieds businesses, jobs boards and property sites. It blamed a weakening economy on the hit these businesses took.
Mathias Doepfner, chief executive of Axel Springer, said: “We are focusing on long-term growth. That’s why we’re investing - in a difficult economic environment - in people, products and technology where we see growth potential.”
Coinciding with its results, Axel Spinger conducted a study into the German economy, noting that “there is an increasing willingness to pay for digital content in Germany”. It said that the economic models of The New York Times, Netflix or its own, “prove that media content can be monetized not only via reach-based models, but also via subscriptions”.
PwC study ‘German Entertainment and Media Outlook 2018-2022’ put the nation's full digital subscription pot at €419m in 2019.
Total paid newspaper and magazines circulation was down 5.7% - this decline will continue, according to the PwC study. Meanwhile the online distribution market is projected to grow on average by around 4% each year from 2019 until 2022.
The full group boasts 16,233 employees around the world. Reuters reports that the media giant is on the lookout for acquisitions, despite the influx of PE money into the business.
Media analytics firm Parse.ly told The Drum that publishers are increasingly side-stepping views to embrace loyalty metrics best placed to help sell news subscriptions.
Ad revenues are generally falling around Europe. Top broadcasters and publishers are having to rethink their models and open up no branded content and data offerings - or make the leap and ask consumers to pay up.