Oh, dear. Why, O why, when business models fail, do bankers and businessmen fall victim to the idea that if we did things bigger, cheaper, or louder then the old magic would return? These thoughts came to mind while attending Marco Rodzynek’s wonderful NOAH investment show this week: inside the hall we were all pondering how to invest in innovation, while our newscreens were full of images of David Montgomery, looking as inscrutably Calvinist as ever, getting ready to cut jobs and take the hard decisions necessary to keep the newspaper industry alive. Local World, the Montgomery vehicle, is prepared to absorb Northcliffe and the tiny Iliffe – as long as Lord Rothermere and Lord Iliffe leave some money on the table – and just about everyone else in British regional papers. The idea is that if one builds Size, and removes any local overlaps, and removes the distraction of too many advertising opportunities, and concentrate production in a handful of regional centres, and raise prices, then the regional press will once again become an attractive possibility for UK investors. Trinity Mirror are reported as havering, Johnston Press have said “no” (Ashley Highfield, its CEO, remains my best bet for “Inventor of Whatever It Is Which Replaces Local Newspapers” – remember you read it here first!). And I have to add that the last Montgomery vehicle, Mecom, did valiantly with this idea in Northern Europe before it too succumbed to circulation falls, advertising downturns, and the sad, underlying truth that not enough people of the right age like local newspapers anymore. A German victim of this process once claimed to me that Monty did more damage to the German newspaper industry than the eponymous Field Marshal did to the German economy, but for a brief while it looked all right. Then it looked all wrong and hit the buffers.
So Local World has form. But does it have a chance? My own view, after the Fish4 experiment of the 1990s, is that the UK regional press has lost touch with “local” – and rather than rationalization, it needs to rediscover the proximity, recency and inter-activity which will characterize the services that they next offer. Just “going digital” doesn’t cut it. You can “migrate” into a cul de sac on the web – as Johnston Press have demonstrated. You can “transition” into pure opacity, as Trinity Mirror have shown. If your future is on the screen of a smartphone then even laying claim to being a newspaper may be pointless. But these businesses need to do something while they still have profits (aka re-invention time) to shelter them into the next phase. The £1 bn plus price for Northcliffe that DMGT’s board refused just six years ago now equates to a £200 m stake in Monty’s Local World. Surely that is a sign of the sands of time running out quicker towards the end of the game?
Now if Mr Montgomery had taken time out from all of this exciting dealmaking he could have encountered the future at NOAH. Not the future as described by people like Rupert Murdoch, whose online newspaper, The Daily, appears to be losing touch with its targets. The Independent last month reported it as having 120,000 unique users, while it needs, after 9 months, some 650,000 subscribers at $39.9 to break even. Smaller than the Ohio paper, the Toledo Blade, sneered the Indie, from the advantageous position of being smaller than both. They should all have sat still and listened to Jens Mueffelmann, Head of Digital at Axel Springer Verlag. Here the game is partnership and investment – not picking winners, but getting some skin in lots of activities which, as they iterate, will give direction and confidence to building futures. Can you do this as a sideshow? No, they have invested over 1 billion euro in 140 companies. Do they own everything? By no means. They always leave the management with a stake, and now partner with General Atlantic, who have 30% of the business for 237 m euro. This in turn enlarges the investment pot and brings more skills to bear on further acquisition. Axel Springer Digital Classifieds now dominate classifieds in Europe as the largest European player with 80 million uniques per month. With revenues forecast at 982 m euro, and EBITDA now edging up towards 30% something really interesting is happening here, and happening at real scale. But throughout the session the keywords were “experimentation” and “collaboration” – we are not the “colonial masters” in this new empire, said the speaker – we are a digital shareholder learning as we go.
And yet, of course, parts of Axel Springer, owner of Bild and Die Welt, really are traditional media. But they are run by businessmen prepared to stand back, listen, and catch at the drift of history. Later in the day I listened to a panel talking about television, and once more found myself astonished by the confidence that existing players have in brands and positioning – and the enduring power of channel and broadcast and intrusive advertising. All that the television world lacks is really good metadata in order to enable a programme guide which would allow you to follow the television that you like, and arrange it into time patterns that suit you. Once that tagging can be ascribed automatically, we shall be able to test whether most people really do want to see the event when it is broadcast – or cheaper and later and ad-free. This panel was superbly complacent about piracy, and had no thought that their industry was overpricing, over-bundling, and too inflexible to change. In fact, just like the newspaper industry of the 1990s. Or the music industry. In the next three years these forerunners will seem mild exemplars compared to what happens when television unravels in the networks. Then Mr Murdoch really won’t know which section of his empire is the Good bank and which is the Bad!