Digital frontier

The modern German word for newspaper, Zeitung, originally referred to a tiding, or a piece of news, that was spread verbally in the Middle Ages. It was only when those news snippets were printed on paper that the word's meaning shifted to refer to the medium itself.

But now the newspaper's 400-year history is at a crossroads. Like other classic media, the newspaper and magazine industries are being forced to redefine themselves in the digital age - and in the wake of economic tumult.

Struggling with stagnation

Germany is the largest newspaper market in Europe and the fifth largest in the world. 20 million daily newspapers are sold across the nation every day, with another 5 million weeklies and weekend editions on top of that.

But the news publishing sector is struggling. Sales and subscriptions are declining, and the economic downturn has forced many companies to slash their advertising budgets. Advertising income currently accounts for about half of a newspaper's revenue - just one decade ago it financed two-thirds of a publisher's operation.

"Over the course of 2009, the advertising market in regional daily newspapers dwindled by 12.1 percent with a similar decline in advertising-related sales," Anja Pasquay of the BDVZ, the Federation of German Newspaper Publishers, told Deutsche Welle.

If the economy doesn't take an upswing soon, Pasquay warns, publishers can expect to see households canceling their newspaper subscriptions or sharing them with others.

The good news

But there is hope on the horizon. The arrival of e-readers such as Amazon's Kindle, the Sony eReader, and Apple's iPad is "good news for publishers," according to the VDZ, Germany's largest trade association of magazine publishers. Creating digital content for e-readers is one way for publishers to boost business.

"E-publishing can be a real game-changer for publishers looking to tap into new sources of revenue from content, reach new target groups, and attract new advertisers," Alexander von Reibnitz, the VDZ'S Director of Digital Media and New Markets, told Deutsche Welle.

E-readers with mobile internet capability can even transmit data about the user's location and online behavior, helping publishers and advertisers provide content tailored to the user.

The bad news

But having electronics manufacturers join the publishing game has its downsides: Apple could take as much as a 30 percent chunk of the profit pie, according to some estimates. The company already eats up 10 to 15 percent of every US$0.99 cent music download, which is hard enough for music labels to swallow.

"Publishers need to control the distribution platforms and not merely serve as content providers to fully reap the fruits of this new business area," von Reibnitz said.

Publishers rely heavily upon knowing their readership. But as third-party platforms such as Amazon's Kindle Store or Apple's iBookstore position themselves between publishers and consumers, the direct relationship between producers and readers is ceasing to exist.

Five major publishers in the US have joined forces to sidestep possible price controls. News Corporation, Conde Nast, Hearst Corporation, Meredith, and Time Inc. set up Next Issue Media as a platform to sell and distribute content directly to consumers. Germany's Gruner + Jahr recently announced a similar initiative.

Good deal, or rotten Apple?

Another potential problem involves the freedom of press, von Reibnitz says: "Apple tends to take a close look at the content, and in some cases, remove content providers, even when it's not entirely clear why they're taking out one or the other application."

"It's very important to publishers (that they) retain ownership of the content and can decide what can be published – according to the extent of the law, of course."

Earlier this year, Apple "cleaned up" its App Store, removing 5,000 "dirty" apps. The German newspaper Bild was affected, which is known for its flashy and fleshy front-page photos. The VDZ criticized Apple's behavior as "unfair, arbitrary, and damaging to business."

Shifting their core

However publishers will work with third parties in the future, one thing is certain: selling the printed or virtual page alone will not suffice. Over the past 15 years, major German newspaper publishers have been shifting away from their core business of printing papers and reinventing themselves as media production companies.

But the majority of newspaper publishing houses in Germany are small or mid-sized - local or regional operations - each with its own distinct style. "That's what gives the German newspaper industry its charm and diversity," said Pasquay.

"You're not talking about just two or three different business strategies, but rather 200 or 300 industry-wide."

Diversification is essential for magazine publishers as well, says von Reibnitz: "I think the publishers are very innovative in testing new business models and expanding into completely new areas of business, which in some cases don't have much to do with publishing anymore."

Von Reibnitz points to the Axel Springer publishing house, whose digital endeavors, including classified ads, now account for 20 percent of its total sales.

Meanwhile, around 50 percent of revenue at magazine publisher Hubert Burda's digital subsidiary are transaction-based thanks to its stakes in an online pet supply store and other e-commerce platforms including Xing, a European social networking site for professionals. Similarly, the Stuttgart-based Holtzbrinck now owns StudiVZ, the German rival of Facebook.

As German publishers develop new business models for digital frontier markets, the Zeitung business looks set to change forever.

Author: Brian Louis Ramirez
Editor: Sam Edmonds