New Delhi: Hubert Burda, chairman of Hubert Burda Media, a privately-held German media group with interests in publishing and digital, was in India to inaugurate the company’s first high-tech, printing plant in a joint venture with HT Media Ltd , Mint’s publisher. The chairman and his chief executive officer, Paul-Bernhard Kallen, talked about the future of the media and the venture in India. Edited excerpts:
Burda Media has 250 magazines. With print readership in decline, how do you keep them going?
Kallen: In the mature markets, readership is declining only extremely slowly. If you do your products with passion and with mastery you can be financially successful for (a) long period of time. Most of our 250 magazines we don’t do in mature markets, we do them in growing markets like east Europe, Turkey and Asia. So the mature markets are of little importance.
What about Germany?
Kallen: The growth rate in Germany is close to zero. In good times we grow by 1 or 2% and in difficult times we lose a percent. In magazines, we are the market leaders in Russia, Kazakhistan and Ukraine. We are in a market-leading position in Turkey and in a nice position in Korea and Thailand. We are about to go to Singapore. But the significant growth we are seeing right now is in the Internet. Today, 40% of the total turnover that we see is in Internet. As the Internet growth rate in Germany is 25%, our growth rate is quite significant.
You have niche portals, but do you transfer your magazine content online?
Kallen: We don’t believe that you can transfer content from one media to another. Every media has a way to tell a story. So we don’t transfer from the magazines to any other media. We decided 15 years ago to build a position in Internet platforms, advertising and e-commerce.
Are advertising spends in Germany growing?
Kallen: Television is growing for the last two years, but we are really coming out of a financial crisis so it is more like recovery. Internet is growing at 25% a year, radio at 2-3% a year and magazine is stable. So it (advertising) will grow mildly but not very significantly.
You have a very small presence in television space. Why?
Kallen: The important area to invest in TV was in the second half of the 80s and the first half of the 90s. At that time, the focus of the company was different. To invest in television today, especially in Germany, is extremely expensive. You are talking about billions, which is beyond the dimension we would like to put into one asset.
How do you see the tablet revolution vis-a-vis the publishing business—newspapers and magazines using iPad applications.
Kallen: Is there a tablet revolution? First of all, what Steve Jobs and his team did with the iPad...is a fantastic innovation. It already stands for 16% of Apple’s turnover. It is a wonderful success story. What does it mean to the media? It means those who do some kind of apps can make some kind of money. But will it ever replace publishing business? I don’t believe. For significant media businesses like HT Media or like ourselves, there is not much money to earn (from iPad apps).
How is Burda Media performing?
Kallen: Last year we grew at 7%. This year we intend to grow by 15% or 16%. We have a strong position in Internet which we try to further build.
There’s fundamental growth in digital business and we try to be present in growing countries. Taking these two things and saying the other 40% of the company is stagnant, it takes us to 15-17% (growth) this year and beyond 10% next year.
Mr Burda, what is your vision for the company for the next 10 years?
Burda: You have a good opportunity in traditional media. You cannot expand content from newspaper and magazines directly to the Web, therefore, we split the company into two parts.
The main problem is that in online our idea of getting revenue in advertising comparable to traditional paper market (newspaper and magazines) did not come true. Magazines still have $100-150 million and online $23 million...or more like $18 million.
But Mr Kallen said 40% of your revenue comes from online.
Kallen: It will come this year. What Mr Burda is referring to is, if you compare a newspaper brand like Mint and do your classical advertising business, this business is still significantly bigger than if you do a Mint portal. For instance, we have a news magazine Focus. The portal is one-tenth of the advertising of Focus, the magazine. And that is not changing.
So the ad rates have not gone up?
Kallen: There are two problems. First, there is no scarcity of content. The second is that Google measures the effectiveness of advertising by clicks, and (there) are enough statistics to suggest that banner advertising does not click. Only 6% of the people who watch a advertising banner click on it. So we have the wrong measure. The ECPM (effective cost per million) that we are getting for the last 6-7 years is stable. Prices have not gone up at all.
Do you plan to grow your relationship with HT Media?
Kallen: Yeah. I think once you have found a good partner, it makes a lot of sense to discuss what else can you do. And the two natural fields are magazines and digital business. We expect that India will reach a situation where we can earn money online by 2012 or beginning of 2013 because then you have a reach in the population that should justify meaningful business.
Mr Burda, you are an art historian. Do you collect art?
Burda: I don’t collect art as investor. Art history gave me more understanding of the migration of images, what we call the iconic turn.
There are these new devices such as iPhone...people are taking pictures of what happened in Tunisia, Egypt, Libya... These pictures are migrating and they are so strong.
I saw a YouTube video—a (Moammar) Gadhafi speech. But it was overlaid with music and two girls dancing. This ridicule made the whole power of dictators relative. In 10-20 years, historians will describe this as a revolution of Facebook and Twitter. It started with Google, of course.
If you have a historical background, you see that every new screen, every new interface had its own content. The movie industry thought that it could take a book and stretch to the screen. Or opera thought it could transmit to radio. Nonsense. Any new screen will have its own historical value. This will happen with the Internet as well.