WAZ Media Group

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WAZ Media Group

Friedrichstrasse 34-38
Essen, 4512
Germany
Telephone: (49) (201) 804-0
Fax: (49) (201) 804-1644
Web site: http://www.waz-mediengruppe.de

Private Company
Incorporated: 1948 as Westdeutsche Allgemeine Zeitungsverlagsgesellschaft E. Brost und J. Funke
Employees: 16,000
Sales: EUR 2 billion ($2.5 billion) (2005)
NAIC: 51111 Newspaper Publishers; 51112 Periodical Publishers; 323110 Commercial Lithographic Printing; 513112 Radio Stations; 49211 Couriers

WAZ Media Group (WAZ) is Germany's second-largest newspaper publisher headquartered in Essen. The company's flagship publication Westdeutsche Allgemeine Zeitung (WAZ) achieves an average circulation of 580,000 copies in southwest Germany's Ruhr region, its core market. WAZ publishes three other major newspapers in the same area: Neue Ruhr Zeitung/Neue Rhein Zeitung, Westfälische Rundschau and Westfalenpost. Together they reach approximately 2.9 million readers in Germany's most populous state North-Rhine Westphalia. The company also controls three regional newspapers in Thuringia. WAZ is a major player in the newspaper markets of southeastern Europe, including Hungary, Bulgaria, Romania, Serbia and Croatia, and holds a 50 percent stake in Austria's largest newspaper Krone Zeitung. In addition to 38 daily newspapers, the company publishes more than 100 popular magazines and trade journals, over 130 free advertising journals and roughly 250 customer magazines for corporate clients. WAZ runs its own printing facilities and distribution networks, is involved in radio broadcasting, online services, direct marketing, and postal services and has its own school for journalists. The company is owned by the heirs of Erich Brost and Jakob Funke, the two journalists who founded Westdeutsche Allgemeine after World War II.

A NONPARTISAN NEWSPAPER IN POSTWAR GERMANY

Three years after Germany's defeat in World War II, the cluster of cities that formed the Ruhr region—Bochum, Bottrop, Castrop-Rauxel, Dortmund, Duisburg, Essen, Gelsenkirchen, Gladbeck, Herne, Mülheim, Oberhausen, Recklinghausen, Wanne-Eickel, Wattenscheid and Witten—still carried the scars of severe destruction from almost 2000 bombing raids. Still under the British Military Administration, Germany's most important industrial center slowly came back to life. The British had launched two newspapers after the war: Die Welt with national coverage and Essen-based Neue Ruhrzeitung geared to the Ruhr region. Written by German journalists, their content was still under British control. In 1946 a number of licenses were issued to German newspaper publishers with close ties to the main political parties.

In 1948 Erich Brost, at that time editor-in-chief of the Essen-based Neue Ruhrzeitung, which was sympathetic to the Social Democratic Party, was approached by the British administration if he was interested in founding the first nonpartisan newspaper in the Ruhr region. Brost, an experienced journalist with a social-democratic background who had barely managed to escape the Nazis and worked for the British Broadcasting Corporation (BBC) during his exile in England, agreed. He hooked up with Jakob Funke, a journalist about his age who worked for the German news agency Deutsches Nachrichtenbüro in the same office building. Funke had learned the art and craft of making a newspaper from scratch at the Essen-based Essener Anzeiger, where he finally became editor-in-chief in the late 1920s. After the Nazis had shut the newspaper down in 1941, Funke served as a reporter in Belgrad during the war. He was an excellent organizer and had all the local connections necessary to get a new business venture off the ground under conditions of extreme adversity and scarcity.

On April 3, 1948, the first issue of Westdeutsche Allgemeine Zeitung (in short WAZ ) was published. In a programmatic piece which appeared on the front page of the first issue, publisher and editor-in-chief Brost outlined his editorial principles. Although a Social Democrat by heart, he had internalized the idea that news reporting should not be influenced by a particular worldview during his exile years in England. WAZ, the first nonpartisan newspaper in the British zone, intended to keep its reporting as objective as possible, was to participate in the creation of a socially oriented democratic order based on the rule of law in Germany and Europe, and to take into account and reflect the particular interests of the Ruhr region's population. News articles were supposed to be short and to the point, as well as easy to read and understand by everyone. News reporting was strictly differentiated from opinion pieces.

After years of censored reporting and party propaganda during the Nazi era people were starving for information that was not colored by any ideology. The editorial concept outlined by Brost quickly gained the approval of the Ruhr population. However, producing a newspaper and delivering it to its readers in the postwar era was an adventurous undertaking. Westdeutsche Allgemeine started out in Bochum, where Brost shared an office in the back of the building with his secretary and another employee at the site of Laupenmühlen & Dierichs, a commercial printing company. Co-owner Dr. Paul Dierichs became a WAZ shareholder for a number of years while a large part of it was printed on the only rotation printing machine with enough capacity to handle the print run of 250,000 to 300,000.

Not only food was still rationed, paper was too. In the beginning Westdeutsche Allgemeine came out three times a week with content and advertising crammed into four to six pages. Editors worked in a room missing a wall; a large wooden board set on a stack of bricks served as a desk. Manuscripts were written on scrap paper and trainees had to bring their own typewriter if they wanted to be hired. The local editorial team in Duisburg had to go across the street to the central train station to use the bathroom. Mostly women delivered the paper on foot or bicycle to its readers in the Ruhr cities where one half to two thirds of all housing units was destroyed and part of the population lived in basements and other improvised spaces. Beginning in September 1949 WAZ was published Monday through Friday. Two months later the British Administration lifted the licensing requirement for newspaper publishing.

COMPANY PERSPECTIVES

There remains much to be written about the future of the newspaper, but one thing is clear: the new paper must be a clever synthesis of very old tradition, perhaps even be rediscovered, but also truly modern. The newspaper is unique in localities and regions. Even advertising is seen here less as advertising than as a source of information about what is on offer today, what is new in town. A new focus for newspapers will have to be set here, because young people, too, not so au fait with newspapers, demand more information from their immediate surroundings.

BUILDING A REGIONAL NEWSPAPER EMPIRE

With the free market came immediate competition, for example from Essener Allgemeine Zeitung, one of the well-known pre-war newspapers. When Essener Allgemeine launched a Sunday edition in the summer of 1950 to attract new readers, WAZ followed suit. The battle was won when WAZ acquired the competitor, including 38,000 additional subscribers, four years later. By that time the Ruhr population had far outgrown pre-war numbers, due to the influx of refugees from the lost German territories in East Prussia who found work in the booming coal and steel industries, and to the beginning baby boom. Thanks to the aggressive marketing approach of sales manager Albert Lümmen the readership of Westdeutsche Allgemeine grew even faster than the Ruhr population. The increasing purchasing power of almost five million people combined with their hunger for new clothing, new furniture and new household appliances resulted in soaring advertising revenues from consumer goods manufacturers and department stores. In 1953 WAZ headquarters were moved to a brand-new office building in Essen. In 1958, ten years after its foundation, Westdeutsche Allgemeine's distribution covered the whole Ruhr region with 24 local editions. No other newspaper in Germany had as many subscribers as WAZ did.

The onset of the 1960s marked the beginning of a series of takeovers of ten local competitors by WAZ. The acquisition of the Recklinghausen branch of Westdeutsche Rundschau, one of WAZ's remaining major competitors, in the early 1970s pushed sales over the mark of half a million sold newspapers. Finally, in 1975 WAZ acquired a majority share in Dortmund-based Westfälische Rundschau and took over Neue Ruhrzeitung / Neue Rheinzeitung (NRZ) headquartered in Essen the following year. Besides its nonpartisan flagship publication, the publishers of WAZ also had control over the two major regional newspapers with a Social Democratic orientation.

CONQUERING NEW MARKETS UNDER NEW LEADERSHIP

Cofounder Jakob Funke died in 1975 at age 73. Under his leadership the WAZ publishing house had emerged from a single-publication start-up to a regional newspaper empire that included numerous local and four regional newspapers as well as several modern office buildings and printing facilities. After his death he was replaced by Günther Grotkamp, an experienced lawyer who had earned the respect and trust of the Funke family after he joined WAZ in 1960 and who worked closely with Jakob Funke up until his death. Grotkamp was considered the architect of the WAZ Group which was formed in 1978 to incorporate the acquired publishing houses into the company. The editorial departments of the four major newspapers the company owned in the Ruhr region retained their independence while production, the acquisition of advertising clients, marketing and administration were centralized. This business model proved to be very successful and became known as the WAZ Model.

When Erich Brost retired from his active role in the business in 1978, he was succeeded by Erich Schumann, another business lawyer who left a successful practice in Bonn to become the second executive director of WAZ Group. A strategic thinker by heart, Schumann envisioned WAZ Group expanding beyond the world of print media and across the German border. In a bold move Brost and his wife Anneliese adopted Schumann in the mid-1980s while their son Martin—who in Brosts opinion was not suitable to succeed him—was paid a cash settlement. In 1986 Grotkamp married Petra Funke, the youngest of the three Funke daughters. Under the leadership of Grotkamp and Schumann WAZ Group greatly expanded its activities into other print media, such as popular and customer magazines, advertising and trade journals. WAZ also conquered newspaper markets in eastern Germany and southeastern Europe and ventured into electronic media.

KEY DATES

1948:: Nonpartisan newspaper Westdeutsche Allgemeine Zeitung is established in Bochum.
1953:: Company headquarters are moved to Essen.
1975:: WAZ takes over daily newspaper Westfälische Rundschau.
1976:: Essen-based Neue Ruhr Zeitung / Neue Rhein Zeitung is acquired.
1977:: Advertising journal subsidiary Anzeigenblat-tgesellschaft WVW is founded.
1978:: WAZ Group is formed.
1986:: WAZ Group buys a 10 percent share in private TV station RTL+.
1987:: The company acquires a 45 percent share in Austrian tabloid Kronen-Zeitung
1990:: Radio broadcasting holding Westfunk is established and a majority share in Hungarian publisher PLT acquired.
1991:: WAZ Group takes over a customer magazine publisher and three regional newspapers in Thuringia.
1996:: Bulgarian publisher 168 hours is acquired and online service Cityweb is launched.
1998:: WAZ buys shares in Croatian publisher Europa Press Holding.
2000:: Munich-based TV-magazine Gong is taken over.
2001:: WAZ establishes commercial courier services and expands into Serbia and Romania.
2003:: The company obtains major newspaper shares in Montenegro and Macedonia.
2005:: WAZ Media Group sells its stake in RTL Group.

International expansion began in 1987 when the company acquired a 45 percent share in Austrian tabloid Neue Kronen-Zeitung. One year later followed a second acquisition in Austria with a 45 percent share in Kurier AG Vienna. After the Berlin Wall fell in 1989, Grotkamp and Schumann took a trip to East Germany to get an idea of the newspaper market there and to scout out new business opportunities. In 1990 they acquired two newspapers in the state of Thuringia: Thüringische Landeszeitung and Thüringer Allgemeine. When their attempt to take over Ostthüringer Nachrichten —a third newspaper in the same state—encountered strong political resistance, they bought out the whole editorial staff and founded Ostthüringer Zeitung instead. With an investment of roughly $200 million in new printing facilities and other infrastructure, the WAZ Model was established there too. During the 1990s WAZ Group became a dominant force in southeastern Europe where the company acquired major newspaper interests in Hungary, Bulgaria, and Croatia.

WAZ Group's activities in the emerging electronic media markets began in 1986 with the acquisition of a 10 percent share in commercial TV channel RTL+, launched in 1984 by Luxembourg-based Compagnie Luxembourgeoise de Télédiffusion (CLT) and the German Bertelsmann group's film and TV production subsidiary UFA. WAZ Group began to feed regional TV programming from the Ruhr, produced in the newly established TV production subsidiary Westfilm Medien GmbH, to the station. When CLT and UFA merged in 1997, WAZ Group traded its share in RTL TV and its own TV production arm for a 20 percent stake in Bertelsmann's BWTV-Holding which owned half of CLT-UFA as well as shares in more than 40 German and European TV and radio stations. The deal was financed through the sale of WAZ Group's majority share German paper manufacturer Holtzmann & Cie valued at about $300 million. When CLT-UFA merged with British Pearson TV in 2000, WAZ' share converted into a 7.4 percent stake in the newly formed RTL Group.

In 1990 the radio broadcasting holding Westfunk was established as an umbrella for the ten regional radio stations WAZ Group acquired an interest in. Unfortunately, this business branch continued to produce losses. Online Service Cityweb was launched in 1996. To reflect its expanded range of activities, the company was renamed WAZ Media Group in 1997.

GENERATION CHANGE, MISSED DEALS AND LEGAL BATTLES

In 1995 WAZ cofounder Erich Brost died at age 91. By that time WAZ Media Group had become Germany's third largest publishing house. Five years later Günther Grotkamp retired from the business. The Funke and Brost families hired two additional top managers to head the group. Grotkamp was succeeded by Lutz Glandt and Detlef Haaks, two experienced media managers. Bernd Nacke became the second manager who represented the Brost family together with Erich Schumann. In 2002 Bodo Hombach became managing director of the WAZ Group as a possible predecessor of Erich Schuman. Hombach, a former minister in Gerhard Schröder's Social Democratic administration who later headed the European Union-led Balkan Stability Pact, used his excellent connections in the Balkans to advance WAZ Group's further expansion in Serbia, Rumania, Montenegro, and Macedonia.

As the new millennium arrived WAZ Group seemed ready to cease new growth opportunities. According to the company's policy, launching new publications was too expensive and risky. Consequently, WAZ Group's top management was on the lookout for takeover candidates. Unfortunately, when major stakes in two large German newspaper publishers became available, WAZ missed out. When the media empire of Leo Kirch crumbled in 2002, his 40 percent stake in Germany's largest newspaper publisher Axel Springer Verlag was put up for sale. Some WAZ managers viewed the deal as an excellent growth opportunity, but not all shareholders agreed. Despite the fact that a EUR 200 million loss in 2001 made Springer shares much less attractive for investors, majority shareholder Friede Springer was not interested in a publisher with close ties to the Social Democrats as a major shareholder in her conservatively oriented company. Although a hostile takeover was seen as potentially winnable, WAZ decided against it. Only a few months later Süddeutscher Verlag, publisher of the national daily newspaper Süddeutsche Zeitung, approached WAZ and other potential investors to consider buying a stake in the company which had slipped into the red in 2001. A deal was finally sealed with Stuttgart-based Südwestdeutsche Medien Holding—not WAZ.

In the summer of 2005 WAZ sold its stake in RTL Group to Bertelsmann for roughly EUR 530 million. The money was intended to boost WAZ Group's funds to enhance its position in the consolidating newspaper markets. However, only a few months later it became apparent that a full-fledged family war had broken out over this issue. All but one party among the company's shareholders agreed to cash out, since they had helped fund the acquisition with their private money in the first place. This led to the most serious conflict among WAZ owners in the company's history.

It had been the desire of the founders that all major decisions be approved unanimously by all shareholders. Designed to keep the balance between the Brost and Funke family branches, each of whom owned half of the company, this rule had caused much friction between the two families when it came to strategic decisions. Petra and Günther Grotkamp fiercely resisted the wish of the other shareholders to withdraw any cash from the business generated by the RTL sale. They were also strongly opposed to changes in the legal structure of the family-owned business such as the transformation of WAZ Group into a publicly traded corporation. So far, the company's cash flow had been sufficient to finance most of its growth and bank debt was minimal.

When the rest of WAZ shareholders took a large sum out of the business in September 2005 without her approval, Petra Grotkamp went to court. At the end of 2005 it looked as if the decision about WAZ Group's future structure could be determined by a court ruling. At the same time, the Funke family had not yet appointed the managers who were to succeed Lutz Glandt and Detlef Haaks. Yet, with Schumann and Grotkamp in their late 70s, it was only a matter of time until a new manager generation would take over WAZ leadership.

PREPARING FOR AN UNCERTAIN FUTURE

Meanwhile, WAZ Group was taking steps to meet the many challenges on the horizon. Thanks to growing competition for advertising revenues from Internet marketplaces and the lingering economic stagnation in Germany, newspapers suffered severe losses in advertising revenues—and WAZ newspapers were no exception. The company reacted with a number of measures. Distribution in the Ruhr region was reorganized and brand teams were formed to work on the strategic positioning and marketing controlling of the group's flagship publications. Westdeutsche Allgemeine received a face-lift and invested in a massive campaign to sign up new readers. A new editor-in-chief was hired while seven local editorial offices were shut down. Part of the local content was moved from the print version to the Internet. In the future, a central news desk was to be set up to bundle the information streams and mobile editorial units were intended to create closer contact with readers. Whether these measures were sufficient to consolidate revenues was up in the air.

Another possible problem child was Austrian tabloid Kronen-Zeitung, where a disagreement between 84-year-old founder, owner and editor-in-chief Hans Dichand about his successor and connected issues resulted in another lawsuit. The atmosphere between the two sides was tense, as if the disturbing market trends were not enough. Although the paper still yielded healthy profits, they had declined sharply a few years running, according to Frankfurter Allgemeine Zeitung. Readership was aging along with the editorial team and the paper's content and design had grown more and more old-fashioned.

Another looming uncertainty was the expected launch of very low-priced or even free newspapers in Germany, which would break loose a new round of fierce competition. To successfully compete in such an environment or to launch its own version of a low-priced compact tabloid for young urban readers, WAZ Group needed more capital. It could come from selling the two 12.5 percent stakes the Funke and Brost families held in German direct mail empire Otto Versand valued at well over one billion Euro. For the time being, WAZ Group focused on the new market that opened up when it was announced that the German Post Office monopoly for delivering letters would end. Using its comprehensive distribution network in the Ruhr region, the company, whose courier services subsidiary WPS Westdeutsche Post Service GmbH already served local clients such as Essen's city government in 2005, announced plans to launch a national mail delivery service together with the publishers Springer and Holtzbrinck in 2006.

PRINCIPAL SUBSIDIARIES

Westdeutsche Allgemeine Zeitungsverlagsgesellschaft E. Brost & J. Funke GmbH u. Co.; Zeitungsverlag Ruhrgebiet GmbH & Co. Essen KG; Zeitungsverlag Niederrhein GmbH & Co. Essen KG; Zeitungsverlag Westfalen GmbH & Co. KG Essen-Dortmund; Westfalenpost GmbH und Co. Verlags KG; OTZ Ostthüringer Zeitung Verlag GmbH & Co. KG; Thüringer Allgemeine Verlag GmbH & Co. KG; Krone-Verlag GmbH & Co. Vermögensverwaltung KG (Austria; 50%); Kurier Zeitungsverlag und Druckerei GmbH (Austria; 49.4%); Verlagsgruppe Pannon Lapok Társasága (PLT) (Hungary; 51%); Pressegruppe 168 Stunden EgmbH (Bulgaria; 51%); Zeitungsverlag Politika AD (Serbia; 550%); Westdeutsche Zeitschriften-Verlag GmbH & Co. KG; WVW Westdeutsche Verlags- und Werbegesellschaft mbH & Co. KG; SZV Spezial-Zeitschriftengesellschaft mbH. & Co. Verlag KG; Westfunk GmbH & Co. KG; Westdeutsche Zeitungs- und Zeitschriftenvertriebs-Ges. E. Brost & J. Funke GmbH u. Co.; Cityweb Online GmbH; Korneli-Werbung GmbH & Co. KG; WPS Westdeutsche Post Service GmbH; Journalistenschule Ruhr GmbH.