Axel Springer Verlag AG

1877–1996

Over the course of its more than 50 years in business, Axel Springer Verlag AG has evolved from a publisher of local radio transcripts into Europe's largest publisher of newspapers and magazines. By the late 1990s, the company's media and communications holdings also included interests in radio; broadcast, cable and digital television; book publishing; premium telephony; and electronic information as well as a vast German distribution system. The company is an enduring monument to its founder, Axel Springer, who was an influential and controversial figure in German public life for nearly 40 years. Since his death in 1985, the company has been guided by his widow, Friede Springer, who with his family owns just over 50 percent of the company. Rival German media mogul Leo Kirch owned 35 percent of the conglomerate plus one share in 1996.

Post-World War II Origins and Early Development

Born in Hamburg in 1912, Axel Springer brought a lifetime of experience to his eponymous company, having worked in his father's firm, Hammerich & Lesser, a publisher of local newspapers, until it was closed by Joseph Goebbels in 1941. At the war's end, Springer was among a select group of well-connected publishers who were not stained by Nazism. In fact, Springer's politics would become a hallmark of his media empire. With permission from the Allied occupation leaders, Springer began in 1946 to publish the Nordwestdeutsche Hefte, a monthly magazine made up of transcripts of broadcasts on the radio station Nordwestdeutsche Rundfunk. In the same year he followed up with Hîr Zu!, a more populist publication providing radio program listings alongside articles for a family audience, which has since become a television listings magazine. In 1948 he launched his first newspaper, Germany's first evening daily, the Hamburger Abendblatt. Within just two years, the daily had grown to become Hamburg's top paper.

Springer was happy to take ideas from any source if they seemed likely to be workable and profitable. His most famous innovation, the daily Bild Zeitung, was launched in 1952 and was similar to the U.K.'s Daily Mirror in its tabloid style but not in politics. It soon became, and has remained, the largest selling daily in Europe, with a circulation of about six million at its zenith. Springer was careful not to over-specialize, and in 1953 balanced Bild Zeitung by acquiring the quality daily, Die Welt, which had been established in April 1946 by the British occupation authorities. Heinrich Schulte, who joined Die Welt as publishing manager in 1948, had begun to diversify by printing other publications, including Springer's Hîr Zu! But with circulation falling and debts mounting in the early 1950s, Die Welt sought a buyer, and in 1952 found Axel Springer more than willing. Not coincidentally, it was the sudden withdrawal of Springer's printing contracts with Die Welt that had precipitated the crisis; his bid was made in secret and was anywhere from DM2 million to DM6 million; and it is widely believed that what tipped the scales in his favor was the intervention of the Christian Democratic Chancellor Konrad Adenauer. The British allowed the deal to go through on condition that Springer share ownership with an independent trust. In any event, the trust never had more than 25 percent of the shares, and was abolished in 1970.

Springer's choice as chief editor was Hans Zehrer, who had been editor of the extreme right-wing, but not Nazi, paper Die Tat before World War II, and who had been prevented from becoming editor in 1946 after protests from the U.K.'s Labour government and from the Social Democrats then governing Hamburg. Springer concentrated on building up Bild Zeitung, launching its Sunday version, Bild am Sonntag, in 1956. Under Zehrer's control, Die Welt began publishing a Berlin edition in 1955, and promoted the notion that Germany could be reunified as a neutral state at peace with both East and West. Perhaps surprisingly, this divergence from the 1950s Cold War consensus did not damage circulation, which rose from 165,000 in 1954 to 217,000 five years later. Heinrich Schulte still retained some influence at the paper, and resisted Springer's pressure to push the paper toward being a vehicle for Springer's views right up until his death in 1963.

By 1959 Zehrer's enthusiasm for neutrality was wearing off in the face of Soviet intransigence, and Springer himself, who had always been staunchly anti-communist and had always insisted that his publications place quotation marks around the term "German Democratic Republic," began to get more involved in the paper. That year saw the laying of the foundation stone for the Springer group's new offices in Berlin, in the heart of the prewar newspaper district, intended as a symbol of the continuity of German culture in the face of the Soviet threat. The move to Berlin was not purely idealistic, but reflected the takeover in the same year of the publishing group Ullstein, which had been founded in 1877 and which published two local daily papers, Berliner Morgenpost and B.Z. (originally Berliner Zeitung), as well as books. The Springer group's headquarters continued to be in Hamburg, rather than Berlin, until 1967. Throughout the crisis over the building of the Berlin Wall, Springer and his papers were active in demanding a strong response from the West, including a ban on exports from the federal republic to East Germany, a proposal his Christian Democrat friends in the federal government did not carry out.

Ascent to Dominance in 1960s

Between 1970 and 1985 the paper lost more than $100 million, and its circulation remained below 250,000.

1964–1987

By 1964 Springer controlled more than 40 percent of daily papers sold in Germany, more than 80 percent of Sunday papers, 45 percent of magazines for young people, and 48 percent of radio and TV listings publications. Bild Zeitung's circulation rose to 5.3 million under its new young editor Peter Boenisch and Die Welt was at the height of its influence and circulation--290,000. Its reputation as a highly partisan right-wing organ was further enhanced by the appointment of Dr. Herman Starke as editor after Zehrer's death in 1966, as allegations about his past record of pro-Nazi and anti-Semitic views led to an international scandal.

From 1967 onward, the "Extra-Parliamentary Opposition" (APO) began protesting against the American incursion into Vietnam and the conservative values that dominated West Germany. Springer's delivery vans were blocked, turned over, or set afire and the APO demanded that Springer be expropriated. The protests reached their peak in April 1968 when the most famous APO leader, Rudi Dutschke, was shot and seriously injured by a deranged reader of Bild Zeitung, and discount sales of Die Welt to students collapsed, along with sales to teachers, so that by 1970 the paper was losing money for the first time since Springer had taken it over. Springer's own reaction to the campaign, in a speech he gave in 1972, was to claim that the radicals had been inspired by the East German leader, Walter Ulbricht--whom Dutschke and his comrades hated as much as they hated Springer--and to portray his company as the guardian of the federal republic's economic and political freedoms. It might be noted at this point that both Springer and his enemies have always overestimated the importance of his newspapers and magazines. Although, for instance, one-third of the Bild Zeitung, the day before the 1972 elections, consisted of anti-government advertising, the Social Democrats stayed in power, albeit in coalitions through to 1982.

Springer announced in 1967 that his papers would adhere to the following four principles, which were written into the company articles in 1985 and included in every Springer journalist's contract: the peaceful reunification of Germany; reconciliation of Germans and Jews and support for Israel; rejection of totalitarianism or extremism; and support for a free market economy. For almost all citizens of the federal republic the first two were uncontroversial. The fourth sounded a little ironic, in view of Springer's monopoly position: indeed, he sold off several of his titles in the late 1960s in order to keep his total share of the print media market just below the 40 percent threshold which would attract the attentions of the Federal Cartel Office. As for opposing dictatorships, the Springer papers, led by Die Welt, hardly mentioned the reign of terror that followed Ugarte Pinochet's coup in Chile in 1973, their journalists accepted fees from the Greek colonels' junta to write favorable stories, and they cooperated with the Shah of Iran's secret police to the extent of publishing reports on opposition activities taken straight from their files. Springer's real target was the Soviet Union. He saw the 1970 treaty with the Soviets as a blow to any hopes of unification, since it made permanent the borders created after the war. He was so convinced of the likelihood of a Russian invasion that he invested most of his considerable wealth outside the federal republic, mostly in North America.

Vertical Integration and Diversification Via Acquisition in 1970s

Starting in 1972 with the building of Germany's first offset printing plant for newspapers, Springer, along with its rival Gruner & Jahr, led the way in establishing vast new printing centers, taking advantage of the new technology and the chance to cut labor costs. Unlike their largely non-unionized colleagues in the United Kingdom or the United States, German journalists refused to undertake composition on video terminals, thus helping to save at least some jobs which elsewhere have been lost. Throughout the 1970s the group expanded its holdings in local newspapers and specialist magazines, including a majority stake in Gilde-Verlag, publisher of Rallye Racing and Sportfahrer (1975); the new Springer publications Tennis Magazin and Ski Magazin (1976); and a majority stake in the Kunst und Technik Verlag of Munich (1979), which has since been renamed Weltkunst Verlag GmbH and now publishes the fortnightly art magazine Weltkunst. In 1976 another new subsidiary, Cora Verlag, was created to publish translations of the romantic fiction published by the Canadian company Harlequin. Springer was determined to keep abreast of changes in tastes and leisure interests in Germany, a policy confirmed by the launches of new magazines for women--Journal für die Frau (1978) and Bild der Frau (1983).

By 1974 Die Welt's sales had fallen to 196,000 and its annual losses were over DM20 million. In 1975 the paper's offices were moved from Hamburg to Bonn and the Berlin edition was closed down. From 1979 to 1981 Springer experimented with allowing a guarded shift to the left in Die Welt's editorial policy, under Peter Boenisch, who led the paper into a more critical approach to the shah of Iran and a more supportive view of détente with the Soviet bloc, but then Springer returned control to the "cold warriors," Herbert Kremp, Wilfried Hertz Eichenrode, and Matthias Warden, in spite of the protests of the staff. Staff feelings were expressed in their arranging the headlines in the paper, on the day Boenisch was fired, to read: "The Good Times Are Over; Big Setback for the World; The People Don't Back the Junta; Decree from the Top." Once again the paper swung into action against the peace movement, the Greens, and the left, in tandem with Bild. Between 1970 and 1985 the paper lost more than $100 million, and its circulation remained below 250,000. The changes at Die Welt were accompanied by the first breach in Springer's almost complete control of the company, as continuing financial problems forced him first to offer a majority shareholding to his rivals in the publishing business, the brothers Franz and Frieder Burda, in 1981, and then, when the Federal Cartel Office vetoed the plan, to sell them 24.9 percent instead, in 1983.

In 1970 Springer had become one of the first of the European press barons to enter the electronic media, establishing a subsidiary, Ullstein AV Produktions--und Vertriebsgesellschaft, which was renamed Ullstein Tele Video (UTV) in 1981. One of the main obstacles to Springer's further expansion into the field of television was the constitutional provision that placed broadcasting under the control of the Lander (states) rather than the federal government. No one state was willing to give up its powers over television and radio to any commercial interests, least of all to such a threateningly large organization as Springer. Accordingly Springer had to enter a consortium set up in 1983 by the leading German newspaper publishers to finance the satellite ECS 1, from which the commercial television station SAT 1 has been broadcast since 1987. Until then the station was limited to the cable network owned by the German postal authorities, and made no money for its investors. In 1985 Springer took stakes in the cable television company Teleclub, specializing in showing films, and in two Munich radio stations, as well as 35 percent of the shares in SAT 1's news service.

1968–1989

Management Transition Begins in Mid-1980s

In 1984, after nearly 38 years in charge of expanding and diversifying an empire, Springer went into semi-retirement, handing over the running of the group to his wife Friede and to Bernhard Servatius, Ernst Cramer, and Günter Prinz, who sat on the supervisory board of the group alongside the Burda brothers. The group was restructured in the summer of 1985 via an initial public offering of 49 percent of the shares in Axel Springer Verlag by the holding company, Axel Springer Gesellschah für Publizistik KG, founded in 1970. The sale was heavily oversubscribed, but the 7,000 new shareholders found themselves holding registered voting shares, with the provision that any sale of a holding of more than 0.5 percent could not go ahead without the board's approval. Thus Springer's personal holding fell to 26.1 percent, but his, and therefore his heirs', control covered 75.1 percent. It was also arranged that a majority of 80 percent would be needed to alter the four principles the founder had laid down for his publications. The official reason for these arrangements was to preserve the company's independence, although it was not being threatened at the time; in addition, the Springer family wanted to minimize the payment of death duties when Springer died.

Axel Springer died in September 1985, having ensured that his empire would remain in the hands of his chosen successors, including his second wife, Friede, whom he had married in 1978, his daughter, his younger son, and his two grandchildren, who were directed in his will to keep their holdings together for at least 30 years. Servatius and Cramer received holdings of 3 percent each in the Springer holding company, while Peter Tamm became chairman of the executive board, having been chief executive since 1968.

In 1985 the Springer group accounted for 29 percent of the domestic newspaper market. Expansion did not stop with Springer's death. The 20 book publishing divisions acquired over the years were reorganized in 1985 into Ullstein Langen Müller, the third-largest publisher of general books in the federal republic, while a particularly successful new magazine was Auto-Bild (1986), from which have developed, via joint ventures or franchising, similar magazines in the United Kingdom, France, and Italy.

A dispute developed in March 1987 between Tamm and his deputy, Günter Prinz, over the future of Springer's stake in SAT 1, which was then running at a loss, and of the new magazine Ja, which had been an expensive flop. At first Prinz appeared to have won his case for closer supervision of Tamm's executive board by the supervisory board. However, in May Prinz was dismissed and Tamm was free to press on with expansion of the television business; the closure of Ja; new investments in the Spanish company Sarpe, which publishes women's magazines; a new Austrian newspaper, Der Standard; and a joint-venture printing and publishing firm in Hungary.

The boardroom rows that broke out in March 1988 were more serious, since they involved threats to Springer's elaborate arrangements for protecting the shareholding pattern established just before his death. Leo Kirch, the owner of an enormous feature film library, had built up his own stake in the Springer group to 10 percent, and had some influence over another 16 percent. Having arranged in 1987 to cooperate with the Springer executors, he now sought to gain overall control by forming an alliance with the Burda brothers against them. The outcome, in April 1988, confirmed the determination of the Springer executors, led by Servatius and Friede Springer, to keep control of the group: they bought the Burda brothers out for DM530 million&mdash compared to the DM255 million the Burdas had paid five years before. They were by no means out of danger with regard to voting control, however; by the end of the decade, Kirch had accumulated a 35 percent stake in Springer, including right of first refusal to seven percent of the family's shares.

These financial battles did not prevent the group from achieving its highest ever profits in the 1987-88 financial year. In 1989 the group took a 60 percent share in Capitol Film + TV International, created to buy and sell films, TV series, and TV productions, including those of Springer's own production subsidiaries Commerzfilm, Multimedia, and Cinecentnum. It also bought the New York-based Medical Tribune Group, a leading publisher of medical and health-care literature worldwide.

1989–1997

The 1990s and Beyond

The 1990s brought continued challenges to Springer's second generation of owner/managers. The long-awaited reunification of Germany in 1990 left a dramatically changed environment in its wake. Like its fellow competitors among the nation's "big four"--Gruner & Jahr, Bauer, and Burda--Springer wasted no time in moving into this market. Bild Zeitung's circulation in the east had already reached one million copies per day by the spring of 1990. But rival Burda's May 1991 inauguration of its own daily tabloid, Super! Zeitung, burst Springer's bubble; Bild's sales in the former East Germany were halved by the end of the year. Furthermore, declining circulation forced the closure of three Springer papers in the former East Germany in 1991.

Early in that year, Springer chairman Peter Tamm ended his bitter and often personal feud with Leo Kirch by resigning to take a position with rival Burda. Gunther Wille, formerly of Philip Morris, was appointed to succeed Tamm and Gunther Prinz returned to Springer's editorial board after a six-year hiatus. Kirch's growing influence over the Springer management team was felt again in 1994, when new supervisory board chairman Bernhard Servatius and Friede Springer ousted three longtime members of the managing board over the protestations of Axel Springer's son and grandchildren. Jürgen Richter emerged as executive chairman, president, and CEO that July and continued to serve in that capacity into 1997.

Despite frequent shifts in upper management, Axel Springer Verlag's annual turnover grew rapidly in the early 1990s, advancing from DM2.8 billion (US$1.87 billion) in 1989 to DM4.14 billion (US$2.9 billion) by 1995. Losses at Die Welt and SAT.1 were offset by new magazine launches in Eastern and Central Europe, boosting net income from DM65 million in 1990 to DM142 million in 1995. And although the company had purchased significant stakes in everything from Internet access services to digital television, newspaper and magazine revenues continued to contribute 87 percent of total sales.