Just two weeks ago we wrote about French publisher Lagardére’s plans to offload 10 of its magazine titles as it tries to build a digital future.
Now Finnish publisher Sanoma announced its own wide-ranging plans to close 32 of its 250 magazines and focus on 17 brands which “share the capability to transcend into digital media formats”, along with a restructure of the whole business that will also affect its Finish newspaper and TV portfolio.
The move is driven by the firm’s stuttering financial performance:
— Losses: For the first nine months of 2013, Sanoma lost €294.3 million, compared to a profit of €158.6 in 2012.
— Print ads: Down 20 percent.
— Revenues: Total revenues down 7.1 percent to €1.7 billion.
CEO Harri-Pekka Kaukonen summed up the core challenge Sanoma faces:
New technologies are fundamentally changing the behavior of media consumers. Advertisers are following consumers. This implies a rapid increase in advertising in digital channels that enable targeting, measuring and performance-based pricing.
That’s a concise description of the problem, but what’s Sanoma’s solution?
Sanoma is increasing its cost saving target of €60 million to €100 million by 2016, and it looks like the bulk of those savings are going to come from staffing costs. Sanoma expects to cut 500 full-time equivalent posts in the Netherlands, a big chunk of its Dutch workforce, and there will also be around 70 redundancies as a result of plans to merge the Finnish TV and newspaper businesses Helsingin Sanomat, Nelonen news and Metro.
The company has already reduced its workforce by six percent from 10,590 this time last year to 9,884 now. Expect that figure to fall below 9,000 in the near future as that 2016 target approaches.
Sanoma is splitting the company into three divisions from the beginning of next year. Two of these will contain Sanoma’s magazine portfolio, Sanoma Media Finland and Sanoma Media Netherlands.
Within the consumer divisions, Sanoma chief strategy and digital officer John Martin is creating a unit called Sanoma Digital tasked with “speeding up the growth of digital services and developing digital competences, as well as to accelerate the commercialisation of innovations“.
The third division will be the currently profitable Sanoma Learning, which provides resources for teachers and individuals. That unit will be led by Martin once he has established Sanoma Digital. His job is to continue the Sanoma Learning’s expansion “from publishing to providing solutions and services”, something Sanoma’s board clearly think will be aided by his digital experience.
Like Lagardére, Sanoma is culling the brands it doesn’t think will make it on the web. but a focus on building digital versions of its existing brands isn’t its only plan for making money online. As we wrote earlier this year, Sanoma has been running a digital incubator programme giving staff from across the company the chance to develop and launch new products.
Some of Sanoma’s existing brands may have a bright future online, but all the evidence suggests that ad revenue from these publications online won’t compensate for the loss of print advertising. That makes getting some of these new products off the ground the best chance for Sanoma’s consumer divisions to grow long-term.
Two magazine culls do not make a trend, but what both Sanoma and Lagardére are doing is the logical response to the collapse of print circulations and ad revenue.
Choosing which brands have a future, and where to invest to build new brands and services, is the central question on the minds of legacy consumer media organisations. There are many more brand culls and restructures to come.