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Axel Springer's Transformation and the Chances of Digitization

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Axel Springer's Transformation and the Chances of Digitization Axel Springer’s transformation and the chances of digitization Capital Markets Day Dr. Mathias Döpfner, Chairman and CEO Berlin, October 6, 2008 EBITDA on record high (in €m) 3,500 800 3,000 700 600 2,500 500 2,000 400 1,500 300 1,000 200 500 100 0 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Revenues (left-hand scale)1) EBITDA (right-hand scale)1) 1) 1991 – 2002 HGB, 2003 – 2007 IFRS 2 October 6, 2008 Capital Markets Day EBITA on record high (in €m) Revenue (IFRS) EBITA (IFRS) Revenue (HGB) EBITA (HGB) 2,864 2,777 2,578 2,321 2,402 2,392 2,376 422 375 336 338 215 110 33 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 Margin (%) 1.2 4.0 9.3 14.0 14.1 15.8 16.4 3 October 6, 2008 Capital Markets Day Excellent top line growth in Q1-2/2008 (in €m) Total Revenues EBITDA +11.1% 1,343.1 1,208.5 +7.2% 213.9 199.4 Q1-2/07 Q1-2/08 Q1-2/07 Q1-2/08 4 October 6, 2008 Capital Markets Day Clear strategy with traceable success Strategy Market leadership in Internationalization Digitization German-language core business Profitable Growth Creativity Entrepreneurship Integrity Corporate values 5 October 6, 2008 Capital Markets Day Growth driven by internationalization and digitization (in €m) 70% 30% of revenues stable of revenues growing with high margins with growing margins Print Newspapers Magazines Digital Inter- National National Media Q1-2/2008 national Revenue 627.0 287.4 207.9 171.5 Growth yoy -1.3% -3.0% +6.4% >+100% EBITDA margin 25.4% 17.8% 5.0% 3.5% EBITDA target >25% >12% >10% >20% 2010 6 October 6, 2008 Capital Markets Day Competitive advantages of Axel Springer 1. Less exposure to advertising and classifieds Positioning 2. Strong media brands is paying off in difficult markets 3. Consistent digitization strategy 7 October 6, 2008 Capital Markets Day German newspaper advertising revenues have been stable since 2003 120 100 80 60 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (1998=100) USA UK Germany Source: USA NAA; UK NMA; Germany Nielsen and ZMG; Revenue Growth of Q1-Q2/2008 taken for full year 8 October 6, 2008 Capital Markets Day Axel Springer is less dependent on advertising and classifieds than its competitors Advertising revenues Classified revenues as % of total revenues as % of total advertising revenues 80%1) 2) 57% 5) 54%3) 52%4) 56% 46% 36%4) 19% USAUK Germany Axel USAUK Germany Axel Springer Springer 1) In 2004, Source: Newspaper Association of America 2) In 2006, Source: Zenith, Advertising Association Yearbook 4) JP Morgan estimates, company data 3) in 2007, Source: BDZV 5) in BDZV, local and regional subscription papers (69% of circulation in Q2/2008) 9 October 6, 2008 Capital Markets Day Classified revenues benefiting from online contribution (Revenues in €m, illustrative) 2002 2003 2004 2005 2006 2007 Online classified revenues (real estate / jobs) from national brands (Immonet, Stepstone [50%]) Print classified revenues (strong regional focus on Hamburg and Berlin) 10 October 6, 2008 Capital Markets Day Competitive advantages of Axel Springer 1. Less exposure to advertising and classifieds Positioning 2. Strong media brands is paying off in difficult markets 3. Consistent digitization strategy 11 October 6, 2008 Capital Markets Day Dominant market position in German newspaper market with extremely strong brands German newspaper market1) Core newspaper segments Market share1) 7% 3% Newsstand No. 1 81% papers 21% Sunday No. 1 70% newspapers 68%69% National quality No. 3 18% Regional subscription papers papers Newsstand papers National quality papers Regional No. 12) 59% Sunday newspapers subscription papers No. 12) 25% 1) Daily newspapers based on BDZV/IVW Q2/2008 / Based on paid circulation Q2/2008 2) Source: Hügel Statistik. Based on gross advertising volumes among all regional newspapers in Hamburg/Berlin, Q2/2008. 12 October 6, 2008 Capital Markets Day 12 Unique brand expansion path: example BILD 13 October 6, 2008 Capital Markets Day Competitive advantages of Axel Springer 1. Less exposure to advertising and classifieds Positioning 2. Strong media brands is paying off in difficult markets 3. Consistent digitization strategy 14 October 6, 2008 Capital Markets Day Successful digitization ahead of market Core competences Development unique visitors (m) in Germany 17.0 1) Q2/08: 1. Content / brands + 20.6% pro forma digital 2. Ad sales / marketing revenues 10.2% of total 14.1 Market Growth: revenues. 3. Classifieds / + 6.2%1) marketplaces Q2/07 Q2/08 1) Source: Comscore (development unique visitors). 15 October 6, 2008 Capital Markets Day Core competence 1: Content/brands Infotainment Quality Regional Cars Women TV Business Consumer Electronics Sports Youth 16 October 6, 2008 Capital Markets Day Core competence 2: Ad sales/marketing Reach-based (CPM) Performance-based (CPC, CPL, CPA) 17 October 6, 2008 Capital Markets Day Core competence 3: Classifieds/marketplaces Performance- Jobsbasiert (CPC, CPL, CPA) Performance- RealImmobilien:basiert Estate (CPC, CPL, CPA) Performance- Marketplacesbasiert (CPC, CPL, CPA) 18 October 6, 2008 Capital Markets Day Digitization through acquisitions & organic growth Organic 2006 2007 2008 Total Acquisitions 5 16 6 27 Organic 3 19 11 33 Disinvestments 1 1 0 2 Total 7 34 17 58 2006 2007 2008 Acquisitions 19 October 6, 2008 Capital Markets Day Case study: WELT-Group – successful transition from newspaper to multimedia brand Single Newsroom web-to-print workflows create content for all channels and media Mobile Online Video Online-first strategy Quality journalism Articles and photos are distributed for three national and a regional newspaper online first and across several channels seven days a week 20 October 6, 2008 Capital Markets Day Transformation of WELT brand into digital multi- media family increases both, print and online reach WELT Group: WELT/WELT KOMPAKT Total reach (gross) across all media Reach: 0.73m contacts + 4% since 2006 5.4m1) +74% WELT am SONNTAG Reach: 1.285m contacts 3.1m1) + 19% since 2006 WELT ONLINE Reach: 3.37m contacts 2006 2008 + 155% since 2006 Source: Print: AWA 2006, 2008; Online: AGOF 2006-I, 2008-I (NpM), Addition of Contacts 21 October 6, 2008 Capital Markets Day Total reach (gross) of WELT / WELT am SONNTAG grows while competitors decline (in m) WELT1)/WamS FAZ/FAS SZ 2.07 2.07 2.01 2.04 1.84 1.82 1.92 1.83 1.54 1.36 1.35 1.26 2005 2006 2007 2008 Source: AWA 2005 to 2008; 1) since 2006 DIE WELT / WELT Kompakt 22 October 6, 2008 Capital Markets Day Profit improvements by integrated editorial workflow and innovative advertising solutions EBITA Circulation Advertising Merchandising Cost EBITA 2004 revenues revenues and other reduction 2007 revenues 23 October 6, 2008 Capital Markets Day Total reach growth driven by online activities Total reach (gross) across all media1) 79.4 75.5 +5.2% Magazines 35.6m reader (+2.0%) Newspapers 26.8m reader (+1.1%) Online 17.0m user (+20.6%) Q1-2/07 Q1-2/08 1) In million gross contacts for consolidated assets., Source: MA, AWA, Comscore. 24 October 6, 2008 Capital Markets Day Seven reasons why Axel Springer is best positioned for monetization of media convergence 9 Paradigm shift: online first 9 Aggressive attacker instead of depressed defender 9 Transformation of existing business into digital multimedia brands 9 Acquisition of new businesses according to core competences 9 Integrated content producer 9 Centralized multimedia sales 9 Ownership of digitization – everybody is responsible 25 October 6, 2008 Capital Markets Day.
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