Business Technology

Friday 21 October 2016

German media giants may unite to fight a common online enemy

Published 12/07/2015 | 02:30

Axel Springer's CEO Mathias Dopfner has publicly compared Google to the mafia
Axel Springer's CEO Mathias Dopfner has publicly compared Google to the mafia

Last year, Germany's biggest news publisher Axel Springer picked a foolish fight. Its beef was with Google, who it claimed should pay a fee every time a snippet of an article was displayed in search results.

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Axel Springer and a host of other publishers blocked Google from displaying short article extracts using fancy new German legislation called Das Leistungsschutzrecht für Presserzeugnisse, or the Intellectual Property Rights in Press Products Bill.

It was a bold step. Bold and ultimately self-defeating. After two weeks they called the whole thing off and asked to be welcomed back into the search giant's bosom.

The reason?

Their web traffic fell off a cliff.

Here's what a Google spokesperson said at the time: "We are convinced that we support publishing best when we transfer millions of readers to their sites by making their content more visible and easier to find on the Internet".

Translation: welcome to the internet. It's our world, you just live in it.

This must have stuck in the craw of Axel Springer's CEO Mathias Dopfner who has publicly compared Google to the mafia, George Orwell's Big Brother, and a violent giant from Wagner's Ring of the Nibelung, who plots to overthrow the gods.

But Dopfner may have given up on name calling and hit on a new tactic to take on his online nemesis. There are reports that Springer is now in talks with Germany's biggest commercial broadcaster ProSiebenSat.1 about some form of merger.

Together, the duo would own almost a quarter of the German advertising market. With that sort of scale, Dopfner and Co would be in a position to take on Google.

But there's a sense of deja vu about the whole thing. In 2005, Springer agreed a €4.2bn takeover of ProSieben - only for the deal to be blocked by Germany's competition authority. In the intervening years, however, things have changed.

ProSieben is now the larger company with a market value of €9.72bn, compared with Axel Springer's €4.68bn.

So if the whole thing was called off 10 years ago, how could it possibly get the green light now?

Well, there's a chance the authorities might look kindly on the deal given the utter failure of the Leistungsschutzrecht legislation. Publishers and broadcasters lobbied hard to have this law enacted, only to find that it has done nothing to help them compete with Facebook, Google and others.

One idea that has been mooted is for any deal to combine the digital businesses of the Springer and ProSieben into some new structure. This approach may help to allay fears regarding plurality of media ownership, and create an entity designed specifically to compete in the digital sphere.

So are mega-mergers like this indicative of how indigenous publishers and broadcasters need to team up to take on the common online enemy? Will we see more deals like this in individual markets?

It's an interesting question, and particularly pertinent in Ireland given the relative size of our market and the Government's recently announced new guidelines on media mergers.

These guidelines set out how the Minister for Communications, Energy and Natural Resources can handle any proposed consolidation in the Irish media market. Alex White said the guidelines guard against any proposed media merger that would be against the public interest.

"Media plurality is essential to the health of our democracy," he said. "The Competition and Consumer Protection Act significantly enhances the regulation of media mergers in Ireland by introducing a requirement to consider the impact of a proposed merger on media plurality."

Plurality is important. But, hey, so is a functioning media that isn't utterly reliant on multinational search engines and social networks to ensure its on-going viability.

If commercial forces are driving the bigger players in a large market like Germany to consider consolidation, what hope is there for news outlets and broadcasters in smaller markets like ours?

And what use is legislation and guidelines to protect plurality?

But there's another approach to right-sizing for the online age. It's one that is only available to entities that had gotten too big for their boots, and can afford to cut loose loss-making print businesses.

Time Inc and Time Warner split apart last June. Similarly, Rupert Murdoch's News Corp has split off from its larger parent company 21st Century Fox. And Gannett, the largest news publisher in the US, has split its newspaper titles from its local broadcasting business.

This isn't what's happening with Axel Springer and ProSiebenSat.1, however. The proposed Springer/ProSieben deal offers us an intriguing glimpse of what might happen if indigenous news outlets and broadcasters were to work together to compete with sophisticated and highly efficient external forces.

Together they may be able to offer peerless insight and access to their market and develop advertising strategies across a range of titles and platforms.

On their own, they can stand by and watch Google, Facebook and their ilk hoover up more and more of their livelihood.

No wonder they're trying to unite. They have nothing to lose but their links.

Sunday Indo Business

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