Renewal, Reorientation, Redundancies: Plan A

Michael Hedges November 4, 2013 Follow on Twitter

Big media houses are finishing 2013 with a sense of renewal. The financial picture for most isn’t getting much better but it isn’t getting much worse. Digital transition is a foregone conclusion but the end result remains hazy. Possibilities, once so numerous, all lead one direction.

When multi-national publisher Sanoma reported Q3 operating loss of €240 million there was little doubt among executives, shareholders and analysts that times had changed. The company would now focus on operations in Finland, the Netherlands and, of course, digital. Everything else in the company’s portfolio will be “under strategic review” or “under strategic reorientation.”

Sanoma is not the first major publishing house – or media house, for that matter – to embrace digital transition and economic uncertainty by shedding unprofitable operations. The company is present in twenty countries with newspaper and magazine publishing, radio and television channels and online portals. Net debt has doubled since the 2011 SBS radio and TV acquisitions in the Netherlands and Belgium while revenues have remained stagnant.

Overall the company plans further cost reductions of about €100 million a year by 2016. “There will be redundancies,” said Sanoma CEO Harri-Pekka Kaukonen. In Finland, where Sanoma is the dominant media company, sharpest cuts will be directed at the news operation of television channel Nelonen. Staff from Helsingin Sanomat and Metro will be called to TV duty, which will migrate to the web.

“We have to renew ourselves,” said Helsingin Sanomat senior editor-in-chief Kaius Niemi in a statement. “It is important for us to also keep our operations financially profitable. It is a prerequisite for independent journalism.”

The company’s significant holdings in the Netherlands will feel the sharp blade of down-sizing, 32 magazine titles will likely be shuttered if buyers aren’t found. Roughly one-third of the workforce at Sanoma Media Netherlands (SMN) will be shed, out of 1,600, mostly from editorial, sales, marketing and human resources. Spared were 17 titles, including Margriet, Libelle, Flair and Donald Duck, with profit potential and “digital possibilities,” said SMN COO Henk Scheenstra to news portal NU.nl (October 31). SMN owns websites NU.nl and kieskeurig.nl, untouched in the restructuring though moving to a new international digital division next year.

Protected also, it seems, is the Dutch and Belgian television business. In April 2011, Sanoma paid €1.225 billion for stakes in SBS broadcasting operations in the two countries, part of a sell-off of non-core assets by ProSiebenSat.1 Group. Sanoma is majority stakeholder (67%) in the Netherlands television business with Talpa Media as minority partner. The Belgian television channels are held in equal partnership with publisher Corelio and TV production house Woestijnvis.

Peter de Mönnink from Reed Business becomes SMN CEO at the first of January, replacing retiring Dick Molman who said in March 2013 the company had spent too much for the broadcasting business. The company replaced SBS Netherlands CEO Eric van Stade in October 2011, shortly after the acquisition and, thereupon, a “difference of opinion.” Georgette Schlick became the new CEO and lasted 15 months. Advertising sales during that period plummeted and Sanoma wrote-off €392 million in “good will.” By the time Mr. de Mönnink arrives a new CEO for the SBS Netherlands operation is expected to be named. Some media watchers in the Netherlands and Belgium are crossing the fingers for a possible take-over by Talpa Media founder Jon de Mol. Others note private equity funds beginning to circle and publishers not aligned with Sanoma looking at exit possibilities themselves.

The company’s Belgian subsidiary, publishing several magazines and operating two TV channels, is a possible sell-off target. “Our thinking allows us several options,” said Sanoma Media Belgium CEO Aimé van Hecke, in a statement (October 31), “ranging from targeted divestiture to creating joint ventures through targeted acquisitions. We see a great opportunity to become a major player in the consolidation of the Belgian media landscape.” The strategic reorientation in Belgium could “go fast, but it can also take several months,” he added in an interview with agency Belga.

Sanoma operations in Central and Eastern Europe are most certainly “under review.” A month ago the Hungarian educational publishing business was sold “after a long period of adverse conditions.” The company exited a Bulgarian joint venture in August. Assets in Russia known at Sanoma Independent Media (SIM), mostly magazines and joint ventures, are almost certainly on the block. Moscow Times founder Dirk Sauer indicated to the Moscow Times (November 1) an interest in repurchasing certain titles, particularly business daily Vedomosti, the joint venture with the Financial Times and Dow Jones. In the first half this year revenues in Russia dropped 10% from the ban on alcohol advertising. Of course, there are other issues with the media business in Russia.

See also in ftm Knowledge

Media Business Models Emerging

After a rough transition media business models are emerging. Challenges remain. There are Web models, mobile models, free models, pay models and a few newer models. It makes for exciting times. This ftm Knowledge file examines emerging business models and the speed-of-light changes. 137 pages PDF (January 2013)

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