Burda Holding GmbH. & Co.

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Burda Holding GmbH. & Co.

Arabellastrasse 23
81925 Munich
Germany
(49) (89) 9250-3422
Fax: (49)(89) 9250-2745
Web site: http://www.burda.de

Private Company
Employees: 4,342 (1996)
Sales: DM 1.72 million (US$1.1 billion) (1996)
SICs: 2711 Newspapers, Publishing or Publishing and Printing; 2721 Periodicals; 2752 Commercial Printing—Lithographic; 7379 Computer Related Services

Burda Holding GmbH. & Co. is a conglomerate, wholly owned by the Burda family, comprised of companies involved in magazine and newspaper publishing, television, and radio broadcasting, online computer services, and commercial printing. Publishing is the heart of Burda’s business. In Germany it publishes over 20 magazines and newspapers, read by an audience of 24.85 million annually. Burda has the third largest circulation among German periodical publishers, behind Gruner & Jahr and Bauer; its 19.2 percent share of advertising revenues in Germany ranks second in Germany. In addition, the company publishes numerous foreign titles in eastern and western Europe and Asia. The company has started an online travel service, and despite disappointments in the computer field, remains committed to the medium. In 1996, Burda invested DM 325 million in a modernization program in its printing companies.

Early 20th-Century Founding

Burda got its start in 1908 when Franz Burda I, the grandfather of the present owner, opened his own print shop in the Bavarian town of Offenburg where he and his family lived. It was a small business with only three employees. In 1925 Burda’s son, Franz, then working on his Ph.D. in economics, started working at the shop. Radio was just beginning to boom as an entertainment medium at that time, and in 1927 the junior Burda conceived of printing a radio program guide for southwestern Germany. The magazine S rag was the Burdas’ first venture into publishing with an initial circulation of 3,000.

In 1929 the elder Burda died, and the business was taken over by his son, then only 26 years of age. It still had only three employees, but the company began to grow in the 1930s. Thanks to the popularity of radio, S rag’s circulation had reached 60,000 by 1933. In 1935, Burda recognized the importance of the rotogravure process for the printing of mass circulation publications, and built a new printing plant in Offenburg equipped with state-of-the-art machinery. After that, the business expanded rapidly. By the end of the decade, Burda had acquired a printing facility in Mannheim where he employed 350 workers. 250 were employed workers in Offenburg by then. S rag’s circulation had nearly tripled to 179,000. Everything turned around rapidly during World War II. Nazi censorship of radio caused S rag’s circulation to drop so sharply that in 1941 Burda terminated publication of the magazine. For the remainder of the war the company was limited to printing maps for the German General Staff. The company’s multicolored aerial maps were among the first ever produced in Germany.

Postwar Activities

After the war German printing and publishing, because of its potential for disseminating Nazi propaganda, was tightly controlled by the Allies, and would-be publishers had to have untainted pasts. Franz Burda went to work under the occupation. From 1945 to 1947, he was limited to printing stamps and school books for the French occupation forces. But in 1948, with the creation of the Federal Republic of Germany, Burda dove back into publishing. In 1948 he launched Das Ufer, a weekly illustrated magazine that specialized in photo stories on the rich and famous and was aimed primarily at female readers. In 1954 its name was changed to Bunte, which became the flagship of the Burda publishing company until Focus was introduced in 1993. Another Burda publication, Das Haus, launched in 1949, capitalized on the desire of many Germans for a beautiful and comfortable home at a time when much of the country still lay in rubble. S rag resumed publication the same year.

In 1949 Franz Burda’s wife Aenne started her own publishing house, the Modenverlag A. Burda, known in the 1990s as Verlag Aenne Burda. “Modenverlag” means fashion publisher, but its first magazine, burda MODEN (Burda Fashion ), released in 1950, not only presented pictures of the latest fashions but included tips and patterns for making them at home. Burda MODEM became one of the most successful of the Burda family of publications. By the mid-1990s, together with its sister publication—BURDA International begun in 1953—it was sold in about 100 countries where it had more than one million readers every month. In fact, in 1987, after Aenne Burda met with Raissa Gorbachev in Moscow, burda MODEM became the first western magazine to be published in the Soviet Union. And so powerful was the force of A. Burda’s personality that in 1989 her publishing house, together with Burda GmbH, took over the sale of advertising for Isvestia, the newspaper of the Communist Party of the Soviet Union.

By 1950, Burda GmbH had 13 production sites in the Federal Republic, and more were planned. Circulation of Burda magazines was climbing gradually: S rag and its new Bavarian edition Bild + Funk were selling a quarter of a million copies every month and Das Haus 136,000 copies. At the same time, Franz Burda cultivated the role of a caring employer. In 1952 he introduced a comprehensive health care package for his workers that included coverage of preventative examinations for cancer; in 1955 he provided employees with paid sick leave. Both plans were instituted years before they were required by German law.

By 1957 the staff of Burda’s printing and publishing companies had grown to 1,400; its annual turnover passed DM 50 million. Its three best-selling magazines, Bunte, Das Haus, and S rag (the latter retitled Bild + Funk ), were each selling about a half million copies every month. At the start of the 1960s Burda geared for growth, and Franz Burda increased the capital invested in the company from DM 450,000 to DM 8 million. Expansion was necessary in part to handle the explosive growth of Bunte, whose circulation had doubled in three years time, reaching one million in 1960.

Expansion in the 1960s–70s

Burda made a series of acquisitions, in both publishing and printing, during the 1960s as well. It bought the Klebe Printing Company in Darmstadt in 1960 and built a new facility in that city in 1967. It constructed a new printing facility in its home city of Offenburg in 1968. Between 1958 and 1963, Burda obtained a number of local and regional magazines, Deutsche illustrierte (1958), Munchner Illustrierte (1960), Frankfurter Illustrierte (1962), and Osterreich Illustrierte (1963). In 1960 Burda bought Neue Verlagsgesellschaft, a publishing house that published freundin, a magazine that would become one of the leading women’s magazines in Germany in the following decades.

In 1965 Burda, then employing nearly 3,000 workers, moved into new headquarters in Munich. In 1966 a new era was in the making. That year Franz Burda’s third son, Hubert, joined the company, 26 years old and fresh out of graduate school with a Ph.D. in art history. Hubert Burda, who would oversee Burda’s rapid growth in the 1990s, got his start in the family company as the head of publishing and advertising at Bild + Funk, Burda’s national TV guide publication. Hubert moved through a variety of jobs acquiring experience: in 1969 he took over product management, and in 1972 he became head of sales and advertising for all of Burda GmbH. In 1973 Franz Burda made his three sons managing partners of Burda GmbH, and each was given his own area of responsibility: Franz III was put in charge of the printing operation, Frieder headed up administration, and Hubert was given the publishing arm. In addition to overseeing all Burda publishing, Hubert edited Bunte from 1975 until 1985.

The 1970s were a time of continued growth for Burda. Three magazines were founded that went on to become established in the German publishing world. Freizeit Revue (1970) was another gossipy illustrated weekly with slightly less edge than Bunte. Mein schoner Garten (1972) was a magazine for home gardeners, who in Germany numbered in the millions. Meine Familie und ich (1974) was aimed at homemakers, with a heavy concentration on cooking. All three magazines quickly established themselves with German readers.

Burda Druck, the printing company, made the big jump across the Atlantic Ocean in 1971, when it signed a joint venture deal with Meredith Corporation. The two companies opened a rotogravure plant in Lynchburg, Virginia. Between 1976 and 1978, Burda Druck, initiated a modernization program in its German facilities, investing DM 100 million in new printing equipment.

Company Perspectives:

Burda is a company focused on publishing, printing and new media. The evolution of the classic Burda publications, together with the development of successful new magazines and novel means of communication have made Burda one of the most innovative companies in German media.

Legal Challenges in the 1980s

By 1979 Burda had quietly become one of the largest German publishing houses. That same year it was involved in a minor controversy when the German Cartel Office, the German antitrust agency, fined three of the country’s three leading publishers a total of $14.2 million. The office charged Burda Verlag, Axel Springer Verlag and Heinrich Bauer Verlag with price fixing, after they simultaneously raised the prices of their TV guides. The $7 million fine levied against Springer was, at the time, the second largest in Cartel Office history. Burda, whose Bild+Funk had about ten percent of the market, was fined $1.4 million. Executives at the three publishers were fined $54,300 each as well.

In June 1981, Axel Springer and Franz Burda began negotiating the sale of a portion of Springer Verlag stock. Company founder Axel Springer, the sole owner of the company, was then 69 years of age and was said to be arranging business so that his company would survive his death. His only son had died the year before, and he felt he did not have any heirs who could take over the company. Burda, whose turnover had surpassed DM 750 million the year before, was anxious to expand into the national newspaper market, and Springer’s Bild Zeitung was the largest-selling daily newspaper in the entire Federal Republic. Under the plan Burda and Springer worked out, Burda GmbH would purchase an initial 26 percent of Springer stock and would later acquire a total of 51 percent. The Cartel Office blocked the sale, however, maintaining it would “create excessive market dominance in the publishing field by both companies,” as the Wall Street Journal reported at the time.

Burda appealed the ruling to the West German Monopoly Commission, which in February 1982 upheld the Cartel Office’s decision. The publishers even considered selling the Springer or the Burda TV guide to a third party to encourage a positive decision. After the appeal, it was reported that the two companies intended to use their combined resources to break into the German cable TV market, which was considered underdeveloped then. The Springer controversy extended into the political realm as well. The final ruling had to be made by the Economics Minister, Otto Lambsdorff, a member of the Free Democratic Party. It was alleged, particularly by his Social Democratic opponents, that Lambsdorff had made a deal with the two publishers; he would approve the merger in exchange for favorable press coverage in the upcoming federal election. Finally, in January 1983, the Cartel Office approved a revised plan, in which Burda would acquire only 25 percent of Springer stock, not enough, the Cartel Board said, for a blocking minority on the Springer board of directors.

The Springer stock deal made news again in 1988. Axel Springer had finally divided the shares between his family, the Burda family, and Leo Kirch. After Springer’s death, a three-way struggle for control of his publishing empire erupted. After the Burdas and Kirch were unable to reach an agreement that would have let them share control of Springer Verlag, the Springer heirs continued the battle with Kirch alone. The Burda sons, Franz III and Frieder, eventually agree to sell their 25.6 percent of Springer stock to the Springer heirs, an amount that would give the heirs a majority interest in the company.

New Leadership and New Markets in the 1980s

In 1985, Franz Burda II divided the remaining shares of Burda stock among his three sons, and in October 1986 he died. In 1987 Hubert Burda became the sole owner and chairman of the board of Burda GmbH. The ascendancy of Hubert Burda changed the course of the Burda company. He diversified the company, becoming involved in television broadcasting; he expanded the palette of magazines; he started online computer services; he used the opening of East Germany in 1989 to establish Burda as a force to be reckoned with in German publishing; and, he challenged—and won—against the most “unchallengeable” magazine in Germany, a popularity battle. To provide the basis for the empire he envisioned, the Burda Holding GmbH. & Co. KG was founded in 1990.

Under Franz Burda II, Burda magazines had had a plebeian feel. Their appearance and content were aimed at readers, primarily housewives, without intellectual pretensions; readers of Bunte and Freizeit Revue were likely to be the same people who read the sensationalist Bild Zeitung tabloid. Hubert Burda, however, began to alter the company profile. One of his first moves, in 1988, was to sign a deal with France Editions et Publications, the French publisher of the haute couture fashion magazine Elle. Burda obtained the rights to develop a German Elle, a magazine that afterwards proved hugely successful for Burda. By the mid-1990s the magazine had a circulation of 220,000 a month and had spun off three other publications, Elle Decoration, Elle TopModel, and Elle Bistro with a combined circulation of over 550,000 in 1996.

Forbes von Burda was a less successful venture. In 1990 Burda received the license to publish a German edition of Forbes, the American business magazine. Burda planned a business magazine that would be livelier and more colorful than the rest of the German business press. After five years, however, Forbes von Burda was discontinued, having lost most of its credibility, the result of questionable business advice it had offered its readers, dubious rankings of executive salaries it published, and interviews and editorials that had left the German business community shaking their heads. The Forbes U.S. parent withdrew Burda’s license, complaining that Burda had failed to maintain Forbes quality. “Burda is primarily a mass-market publisher,” a Forbes spokesperson explained to the Wall Street Journal, “while Forbes has a highly focused, upscale approach.” In its five years of publication Burda’s Forbes never once turned a profit; in fact, the company was suffering monthly losses in the DM 1 million range. Afterwards Burda announced that it planned to withdraw from business publishing completely to concentrate on the online market.

Hubert Burda’s successes outweighed his failures however. He was quick to grasp the significance of the fall of the Berlin Wall in 1989 for Burda. He used the new German markets in East Germany to move Burda “from provincial obscurity to be taken seriously at last,” as Frederick Studemann wrote in International Management in 1991. Burda had failed once in his bid to enter newspaper publishing, when the Burda takeover of Axel Springer Verlag was prohibited by the German Cartel Office. The East provided a second chance, and he jumped at it. He quickly acquired two regional papers, the Schweriner Volkszeitung in Schwerin and the Norddeutsche Neueste Nachrichten in Rostock. While other publishers accused Hubert Burda of exploiting his political connections to influence the Treuhandanstalt, the federal agency that was charged with privatizing and selling off assets of the old East German state, Burda countered that his company had simply showed more initiative.

With Rupert Murdoch, Burda started Super! Zeitung (SZ ), a paper modeled on Murdoch’s sensationalist Daily Sun tabloid and meant to compete with Springer’s Bild Zeitung, What made SZ different was that it was produced specifically for East German readers; the paper was not even sold in West Germany. After six months, the paper was selling 465,000 copies daily and soundly beating Bild Zeitung.

Unfortunately SZ lacked the proper advertising support. Western German companies with money knew neither the paper nor its readership; companies in eastern Germany were in the grip of a deep recession. Despite its promising beginnings, the paper lasted less than one year. In 1990 Burda developed a new magazine for the eastern market, called Super Illu, which was similar to Bunte, only for East Germany. Its coveres and articles featured the stars they had known and followed in the German Democratic Republic. The magazine was an overwhelming success. After a year, it had a circulation of one million. Sales declined somewhat after that, but leveled off around 600,000 per month, making it the best-selling magazine in the five eastern states by the late 1990s. Burda also introduced a TV guide for eastern Germany, Super TV, with similarly high sales.

On the topic of publishers making the most of the opening of the east, a spokesman for rival publisher Bauer Verlag told Frederick Studemann of International Management, “There’s no question that Hubert [Burda] has come out of this best.” Burda developed editions of many of its magazines—Mein schoner Garten, Lisa, Meine Familie und ich, for example, as well as Burda Moden —for Russia, Poland, and other nations in Eastern Europe.

Success withFocus in the Early 1990s

Perhaps the most notable of all Burda’s achievements during this time, however, took place on January 18, 1993, when the first issue of Focus was published. Focus, a newsmagazine, was going up against Der Spiegel, a German institution that for years had not had any competition. Most critics predicted that Focus would fail, but the magazine, conceived by Burda and editor Helmut Markwort, made a special appeal to the adult children of the television generation. Eschewing the long, often densely written articles presented in Der Spiegel, Focus offered short pieces, punctuated with color photographs and graphs. Its audience was waiting for it. By 1994 circulation had reached the break-even point at 300,000 a week, and by 1996 circulation was at 800,000, a serious challenge to Der Spiegel’s readership of 1.1 million.

Interestingly, Focus seemed to attract readers who were not generally newsmagazine readers at all, and 1993 circulation of Der Spiegel fell by only 100. However, Focus advertising revenues jumped from number four, after Der Spiegel, Stern, and Wirtschaftswoche, to number two behind Der Spiegel in April 1994. Some analysts speculated that this success reflected a protest from advertisers in such industries as banking and Pharmaceuticals, who had long been dissatisfied with Der Spiegel’s liberal politics. By 1997 some 5.76 million Germans were reading Focus every week, about nine percent of the country’s population.

Burda moved with varying success into the computer online services market in the 1990s. The company entered a partnership with AT&T and the British Pearson Group to start Europe Online (EOL) in 1994. EOL was to have been a multilingual service marketed for PC users throughout Europe. As planned, it would have been accessible in English, German, and French from the onset, but problems plagued the enterprise early on. Development fell 18 months behind its start-up schedule, and then, once the service was made available, the estimated number of subscribers to the service fell well below expectations, attracting only 20,000 customers, rather than the 70,000 that had been confidently predicted. In 1996, with its other partners pulling out and no others on the horizon, Burda withdrew from the project. A similar fate befell Health Online, a project planned as a free online research and information service exclusively for physicians and hospitals expected to pay for itself through advertising and sponsorship. Burda pulled out of that service abruptly at the end of 1997. Nevertheless, the company continued to maintain web sites for its most popular magazines, Focus, Bunte, Meine Familie und ich, Lisa, and Freundin, as well as overseeing a popular online travel service known as TRAXXX.

In 1995, Burda signed an agreement of cooperation with Rizzoli, Italy’s second largest publisher. Under its terms, the two companies agreed to work jointly in developing magazines for the international market. As part of the agreement, Burda obtained an interest in Verlagsgruppe Milchstrasse in Hamburg, a company with about DM 250 million in annual sales that published the trendy Fit For Fun. At the same time, Rizzoli received a 20 percent stake in Burda’s Eastern European activities (excluding Burda MODEN ). A 50–50 joint venture for magazines in Asia was formed as well, and the agreement as a whole was expected to increase Burda’s annual sales from DM 1.54 billion to DM 1.8 billion.

Burda made an unsuccessful move to break into the video rental market in 1995 when it signed a joint agreement with Blockbuster Video to open a chain of Blockbuster stores in Germany. Blockbuster predicted the chain would grow to between 250 and 300 stores by the year 2000. The first store was opened in Berlin in mid-1996, and was followed by 19 more in Berlin and Munich over the next year and a half. Blockbuster failed to reckon with the nature of the video business in Germany, however, in which one-fifth of all video rentals were X-rated films, or “adult movies,” which Blockbuster had a policy of not stocking. By the summer of 1997 the implications of that missed calculation were clear, and in December of that year Burda announced that retroactive to April 1997, it was ending its participation in the venture. The Berliner Kurier reported that only one store out of the entire chain had made a profit. As a result of the closings, 90 full-time and 160 part-time employees lost their jobs. Still, as it approached a new century, Burda’s role as a major player in German media was secure. In fact, despite the intensely competitive climate in the 1990s, many wondered whether Burda might be in a position to overtake rivals for the top spot in German publishing.

Principal Subsidiaries

Burda GmbH; Aenna Burda Verlag GmbH; Bunte Verlag GmbH; Burda Druck, GmbH; Imprimerie et Editions Braun S.A.; Burda Online Service BOS GmbH; Focus Magazin Verlag GmbH; Burda Moden Inc. (U.S.); Burda Moden-Riga GmbH (Latvia).