Kristine Lowe

Kaupthing Bank promotional video: kaupthinking in retrospective

Kaupthing was the poster child for confusing audacity and financial nous with reckless growth and easy credit, says Investoralist on Twitter, and links to this brilliant must-see video.

Blogger Ultimi Barbarorum describes it thus: "Mildly tragic promotional video from Kaupthing Bank, back when Iceland was in the process of leveraging itself into, well, whatever it is now. Forget Lehmans and Bear Stearns, Kaupthing was the real poster child for the debt bubble of the mid Noughties. On Acid."

Problem is, I'd really like to believe this video. I've previously said Icelandic investment group Baugur's newspaper adventure reads like classic tale of hubris and nemesis, but I must admit that when I was younger I always used to think nemesis was rather unfair. In my mind I've archived nemesis as unjust punishment meted out by capricious gods to stop humans or other creatures, like Promotheus, from striving to be more than what they are, for enlightenment etc. But the financial mess on Iceland was very much a man-made mess, no divine retribution involved there. In retrospective, this line from the promo video explains it all: 

Kaupthinking is beyond normal thinking

Another Icelandic Media Baron Bites the Dust

Björgólfur Gudmundsson is not only a bank chief in hot water,as The Telegraph describes him today: with his bankruptcy an era in Icelandic media history comes to an end.

Now that both Jon Asgeir Johannessen's investment vehicle Baugur and Björgólfur, also the former owner of West Ham FC, have been declared bankrupt, Iceland's media moguls are officially dead. Between them they used to control most of the tiny island's media, including leading newspapers such as Fréttablaðið, Morgunbladid and DV.

"You know, the sugar daddy behind DV and Fréttablaðið was Baugur, but the sugar daddy behind Morgunbladid was Björgólfur Guðmundsson? Every media here has its problem. We had Jon Asgeir, they have Björgólfur," said Reynir Traustason, Editor-in-chief of DV, when I interviewed him during my reporting trip to Iceland in December last year.

"Our sugar daddies are all dead", he asserted, describing Icelandic media as "alcoholics on detox" (my feature on Ragnarok for Icelandic media ran as the lead story in Journalisten's December issue, and my story on the role online media played in the "fleece revolution for Journalism.co.uk can be found here). I also chronicled the Icelandic newspaper saga for IFRA Magazine last year, as the story is quite amazing.

When I interviewed Metro International's CEO Per Mikael Jensen about the company's Q2 results recently, I solicited questions on Twitter, and when I asked him if there ia a future for free newspapers in the economic downturn, given advertising is in decline - a question submitted by fellow freelance journalist Gwladys Fouché - he said those freesheet closures people referred to "that's those Icelandic guys". A bit rich given how Metro shocked the market by closing its entire Spanish operation in January, but you got to love how he phrased it:

"Remember the crazy guys from Iceland? There was a time there where all of them wanted to buy a football team or a newspaper," he said and remarked how Metro at least closed down Spain in a mature way (more on that here).

 

I'm reminded of these sculptures along the road to Keflavik Airport, some of which seemed to be close to falling down, but I have no idea what they actually represent (snapped from behind the bus window)

Metro International: fast becoming the McDonald's of newspaper companies?

Metro International divests Italian operation but enters into franchise agreement to maintain global advertisment reach.

I was going to call his post "Metro International shrinks further", but felt depressed about the prospect of writing yet another gloomy post on newspapers when it struck me that isn't  Metro International just taking one more step towards becoming the McDonald's of media companies? With new franchise agreements in place in the US, Portugal and Ecuador this year, other places last year, the world's largest publisher of free dailies seems to be moving steadily towards a franchise model akin to McDonald's: global brand, local franchises bearing the financial risks.

With the Italian deal, Metro has successfully divested another unprofitable market, as Piet Bakker's excellent blog rightly predicted would soon be announced earlier this week - which might help improve the company's somewhat gloomy financial results. I still think those numbers are far from fantastic, as indicated here, even though Metro's CEO, Per Mikael Jensen did his best to convince me they were during our talk after the company presented its 2nd quarter (Q2) and half year results 20 July.

"A 12 per cent decline in net revenues is a great result! It's a pretty good result compared to a lot of other media companies," he told me, adding that it was down from minus 16-17 per cent in Q1. Of course, Q2 is usually a better quarter than Q1 for media companies, but the main reason for his exuberance was how a substantial amount of the costs dragging down the result (read the key figures here) was restructuring costs:

"We lost 20 million Euros in 2008, but 11 of those were in the US and Spain. When you close down those operations you have to take the cost, but these are one-off costs: they will not come back. This is why we are reasonably optimistic about the future," he said, and pointed out that at least Metro paid people the money they were owed: "We closed down Spain in a mature way, paid all or dues." Yes, that thick sarcasme is all about Nyhedsavisen, and those "crazy Icelandic guys" as Jensen dubbed them, but that's perhaps a topic for another post (parts of the interview with the Metro boss is available in Norwegian here).

However, I was going to write about Metro International and McDonald's. Mind you, not about McJournalism or the McDonaldization of news, in this case I'm much more interested in the business model. Of course, McDonald's does operate some of its own restaurants, especially in the UK. I don't know if these are the most profitable restaurants or are in markets the company knows intimately, but Metro's strategy has certainly been to hold on to core markets where they've managed to turn over a profit and reduce financial losses and risk by entering into franchise agreements and/or joint ventures in so-called non-core markets.  

Now, McDonald's is so often used to describe everything that's wrong in this world that comparing Metro to it makes it sound like I'm slagging the freesheet publisher off, but one thing you can't take away from McDonald's is its global reach and popularity. The guarantee of getting the same diet, though often with local options on the menue, everywhere has proved to have worldwide appeal. Also, it's the kind of low-cost brand which should prosper in the current downturn as more healthy options becomes too expensive for some - which, if the comparison holds true, at least sounds like good news for Metro's shareholders...

Update 01.08: Michael Jennings pointed out on Twitter yesterday that this comparison is far from perfect, I obviously know the media business better than the fast food business. Apparently McDonald's owns the real estate on which most of its franchised restaurants sit, then the franchisee uses their business model to increase property value.

A Conspiracy of Paper and the Spiderweb of Credit

"A system of credit is like a great spiderweb - you cannot see it until you are trapped within it, and you cannot see the spider until she dangles above you, poised to devour."

Now here's a description that fits like hand in glove for the many personal accounts I've heard on people who've found themselves trapped in the credit snare, and I wonder if the description doesn't feel familiar to all those (media) company owners currently struggling to restructure the mountain of debts they've accumulated in happier times. The memory of Mecom-boss David Montgomery telling a group of journalists, myself included, that the company didn't have enough debt back in April 2007 springs to mind, but I'm digressing.

The quote is from a book I was reading last week, called "A Conspiracy of Papers", and, even though it is set in eighteenth-centry London and deals with the origins of today's financial markets, I was struck by the parallels to today's financial realities. The book is historical crime of the kind I must admit I have penchant for, Neal Stephenson's triology "The Baroque Cycle" is another good example, and, amid all the action, the characters find time to discuss things like the soundness, or lack thereof, of shifting from coin to banknotes e.g in paragraphs such as this:

"But silver is silver. Coins are clipped because you can take them to Spain or India or China and exchange it for something that you desire. You cannot do that with a banknote, because there is nothing to support the promise outside its point of origin... these financial institutions are committed to divesting our money of value and replacing it with promises of value. For when they control the promise of value, they control all wealth itself."

Now, it gets rather philosophical, most things do if you look deep enough, but this currency-debate has not gone away: you still find those who advocate that currency should be based on real or objective values, like gold, today. More to the point, imagine how we've gone from debating a gold-based vs paperbased economy to one where a complicated web of derivatives and credit can bring down the global economy, as happened with sub-prime, collateral debt obligations (CDOs), credit default swaps and what have you not.

I'm reminded of this brilliant visualisation of the credit crisis, and I'm afraid I belong to those who think we're not out of the woods from that crisis yet, far from - especially not media companies who are struggling to deleverage, find a more viable business model and at the same time suffering the effects of the collapse in the advertisement market. Things are not looking great.

But back to the macroperspective: while reading the book I found myself wondering how much and how little has changed, and how, even if the financial market and its instruments have grown ever more complex, many of the arguments remain very similar. Just listen to this bit from Newsweek International editor Fareed Zakaria:

Finance has a history of messing up, from the Dutch tulip bubble in 1637 to now. The proximate causes of these busts have been varied, but follow a strikingly similar path. In calm times, political stability, economic growth and technological innovation all encourage an atmosphere of easy money and new forms of credit. Cheap credit causes greed, miscalculation and eventually ruin. President Martin Van Buren described the economic crisis of 1837 in Britain and America thusly: "Two nations, the most commercial in the world, enjoying but recently the highest degree of apparent prosperity and maintaining with each other the closest relations, are suddenly plunged into a state of embarrassment and distress. In both countries we have witnessed the same [expansion] of paper money and other facilities of credit; the same spirit of speculation...the same overwhelming catastrophe."

Who's robbing us now, Mr Montgomery?

So, Mecom boss David Montgomery has pulled it off again: another covenant extension, his fourth this year, and prospects of raising new equity to the tune of £140 million, despite presenting grim preliminary financial results for 2008 this morning.

Yet it seems the company is still treading water, and yesterday The Norwegian Journalist Union (NJ) was up in arms (in Norwegian) over news Montgomery would transfer roughly £80 m from the saving funds of his Norwegian papers to help appease the company's creditors. As NJ was holding its annual conference yesterday, it reminded me of Montgomery's visit to the same conference in 2007 (which I covered for Propaganda) and this exchange of words:

Moderator: "Many feel you are robbing Edda Media papers: you are emptying the coffers, aren't you?

Montgomery: "That is simply not the case. I don't own the company, the shareholders do, and the shareholders are the pension funds of Europe... Mecom is a conventionally listed company. Money goes back to pension funds, which means ultimately it goes back to you and me."

Moderator: "We are being robbed by pension funds then."

That's only one of many colourful anecdotes from following this company closely for years. Of course, the journalist union has campaigned against Mecom owning Norwegian papers since it first emerged as a potential buyer for Orkla Media in early 2006 - partly because of its high gearing. Some will see proof of "the folly of believing that newspapers can be successful on a sea of debt" in Mecom's recent woes, others will be cheered the company's steered clear of isolvency yet again - but I can see no cheers from the smalltime shareholders so far today...

Update 09:55 CET: news that Independent News & Media (INM) has failed to reach a deal with its bondholders and says there's a "strong likelihood" it will breach its covenants without a deal, brings me another flashback from that 2007 NJ conference.

I asked Montgomery if it really was his opinion, as The Telegraph had suggested the previous day, that there was no rationale for The Guardian or The Independent to exist: "I didn't say that. The Telegraph did. But in general I think companies should make money. I think it's demeaning for people to work for companies that don't," he said.

Update 11:14: CET: Actually, looking over my transcript just now (I always try to find time to type up my notes), that was the conference, and we're talking April 2007, when Montgomery also told the audience that Mecom was a very well-funded company and didn't have enough debt at the moment....

 

Montgomery reading one of his Norwegian newspapers, Drammens Tidende (original photo by Martin H. Jensen, edits by me).

"The depressing but inevitable demise of Press Gazette"

Today, Wilmington Media announced that Press Gazette, the UK’s journalism trade mag, will be closing.

In a statement this lunchtime, proprietors Wilmington Group announced that next month's edition of the magazine would be the last hard copy edition, reports Holdthefrontpage. Dave Lee, from whom I, stuck for time as I'm in the middle of a few other stories, have stolen the title and intro, has more. I will only add that hiring Martin Stabe back in 2006 or so was a brilliant move and what got me reading Press Gazette's online in the first place (keeping in mind that I only know Martin via his blog, which I stumbled across via a former tutor, Andrew Grant-Adamson's, blog).

On a less positive note, a key industry player recently told me he felt former PG-man Jon Slattery's blog was at times doing a better job of covering the media industry than PG these days as Slattery was calling people up to get tidbits rather than just reproducing press releases - a fact I mention only because it's a trap too many news sites seem to fall in these days.

I will also add to Dave's thoughts on Media Guardian playing such a dominant role in the UK's media journalism market that there are aspects of that I find a bit odd: I would for instance have expected FT to cover especially the European media market better, and yet they're beaten again and again by Media Guardian - even on M&As and company results, issues where FT long has been heralded for having the market leading coverage. That said, The Independent also has good media stories from time to time, though they tend to "hide" them in the business section, and The Telegraph has been doing a better job of covering the media industry since they hired Amanda Andrews (or since they set up a seperate RSS-feed for media and technology, not sure which). I also get many of my favourite UK media tidbits from Journalism.co.uk, Paid Content and media bloggers.

On that note, if not even an online shred of Press Gazette will be kept alive, I shall thoroughly miss Peter Kirwan's blog - even though I was not entirely happy about a piece he interviewed me about Mecom for, I've come to really enjoy his writings on Media Money as it covers one of my favorite aspects of the media industry so well. 

For the record: of the sites mentioned here, I've been paid for article commissions from Press Gazett, The Independent business section and I'm a regular contributor to Journalism.co.uk (and, if I shall be really strict on disclosures, I've also been paid for articles I wrote for The Guardian/Observer)

Update 07.04-09, 13:00 CET: On this topic I also enjoyed reading Press Gazette Insider’s View: Why Journalism’s Trade Bible Failed by Patrick Smith 16:55 CET: and Jon Slattery's Old Bell tolls for Press Gazette via Thoughts of Nigel

17:07 CET: isn't it interesting how many people, like here, say they will miss the blogs? I singled out Media Money above, but I shall miss the other blogs too.

What did I say?

Pleased to come out of a meeting and find, as I predicted would happen yesterday, that Mecom has secured another covenant test date extension from its banks - this one until 30 April. Not that you had to be a wizard to see that coming, but following the company closely helps. Now for the bigger question: which asset(s) will Mecom sell next? Its minority stake in Dutch AD Niewsmedia, its majority stake in Polish PressPublica, or something else entirely? 

Update 02-04/09, 10am CET: The Telegrahp has an interesting take on yesterday's RNS.

Calling out the next stops towards recession central

These are desperate media times. Late Friday night, news broke Mecom was planning a rights issue within the next month. The story surfaced just as the ailing pan-European company was preparing for a crucial week, with its EGM taking place today and its covenant test extenstion expiring early next week. 

Earlier this month, Norwegian media speculated another pan-European media player, Schibsted, may be forced to consider to ask shareholders for a capital injection, a move which would be less than straighforward due to its coroporate bylaws. However, Schibsted's CEO Kjell Aamot denied such a move was on the agenda, and said the company was instead looking to sell assets - such as taking a partner into its lucrative classified media online advertising business.

In today's market such moves look rather desperate, but so far Mecom's share price is certainly on the rise - perhaps aided by this bit of news.    

On approaching recession central
"Ladies and gentlemen, fasten your seatbelts. We're making our final approach to recession central," wrote Peter Kirwan in early February as we were coming closer to the financial reporting season with all its expected doom and gloom.

I was quite taken by that metaphore, and thought it would be a great way to visualise the history of events later: a ghost train moving relentlessly forward, making unwelcome stops at most media companies along the way. Except it's still a bit of a mystery train, and we don't quite know when we'll reach recession central or what it'll look like.

Interestingly, as we're currently debating why financial journalism failed to spot the storm brewing, if the nature of the meltdown was not forewarned, at least 247wallstreet.com's Jon Ogg blogged about how tired he was of predictions about recession central in December 2007 - not long after we had started to see the footprints of the subprime induced ghost in the share prices and results of European media companies. Framed that way, it's not been such a speedy train at all, and, as I've said before, I thought we would have seen the downturn much earlier, but because I was focusing narrowly on key cyclical indicators such as (ads for) property and jobs and the media industry I was not prepared for the scale.

 
Photo by Ben McLeod from Flickr, published under a Creative Commons license

Mecom secures another covenant test extension

I have a feeling Mecom-boss David Montgomery will have a very interesting visit to Norway next week.

After selling off its operations in North-Western Norway, the pan-European newspaper group today announced it had won a further reprieve from its lenders and now has until the end of March to get its finances back within agreed limits.

I can't imagine union reps, some of whom were rather hoping the troubled media company would sell all its Norwegian newspapers to the national newspaper group A-pressen, will take to well to the news of yet another month of uncertainty. Nor does it bode too well for Mecom's share price, down 16 per cent at the time of writing, at least in the short term.

For more thoughts on the shareprice, check this bit of analysis - it concludes that only two events would propel the SP any higher from here: (1) Further sale of assets (Polish assets are next in line, but timescale is uncertain, and (2) A covenant pass at the end of the 'extension' period - which rings true to my ears (latter via Searcher, no link available).

But, back to Montgomery's scheduled visit to Norway next week: it's a good thing he has become so used to taking abuse from Mecom journalists these last few years.

Talking to the Norwegian Journalist Union's annual convention in April 2007, he was told "I have to warn you this is a very hostile crowd, and they have been drinking 'til 4am, so this is a pretty mean bunch... Now, Norwegian journalists think you're a ruthless stranger who just rode into town to upset all that has been built over the last 60 years. How do you feel about that?"

"In the round of my career I've created more jobs than what I've destroyed," he answered then. However, I'm sure he'll be met with plenty of questions in a similar vein next week, and even though the audience will probably not have been drinking til 4am, I doubt it will be any less hostile.

(For the record: I covered this debate as a journalist, though I'd much rather have (live) blogged it, as I did with this debate, and the quotes here are previously unused ones from my private transcripts)

Welcome to the year of the castrated bull

Before the clock strikes midnight, let me take a moment to contemplate how we are now exactly one month into the year of the castrated bull - and how there's rarely been a year more aptly named than this.

If you're not following my logic, I'm talking about how we entered the Chinese Year of the Ox on 26 January, and, as an ox is simply a castrated bull, and a bull in financial jargon is used to describe  (often overtly) optimistic investors who play hard and take big risks, what better metaphore to describe the year so far.  

This is of course a post I should have written a month ago, and by now I'd thought this metaphore would be all over the place - but my quick google search indicates it isn't so. The closest thing I can find is this piece in The Economist on how China's economy economy is like a castrated bull.

A herd of castrated bulls
Now, I should have had a look at what Lexis Nexis might throw up, but as it's not at my disposal... Why only China? How about Iceland, dubbed the Nordic hedge fund masquerading as a country? How about the countries in Eastern Europe and elswhere tethering on the brink of catastrophe induced by the collapse of their credit bubbles?

How about households all over the Western world staggering under the burden of the credit crunch and debts turned bad? How about companies, not at least in the media industry, who until recently went on massive spending sprees and invested recklessly in expansions and extravagant, some would say meglomaniac, business ideas? How about all those bullish investors, small and big, who banked on the good times continuing forver?

Like a house of cards
From my own beat, Baugur is a name that easily springs to mind. Not to mention the Baugur-funded Nyhedsavisen, or as I wrote last August:

"The very idea of starting a newspaper, a freesheet nonetheless, in a time when experts are overbidding each other to predict the death of newspapers and the demise of advertisement-funded business models - such as Dagsbrun did, backed by Baugur... in 2006 - reeks of hubris. From the beginning and to this very day, when Nyhedsavisen is the most read newspaper in the country, Danish media has been waiting for the construction to fall apart like a house of cards. Enter American venture capitalist Tim Draper and his self-composed tune, The Riskmaster, with this enticing refrain: "He is the Riskmaster, Lives fast drives faster, Skates on the edge of disaster, He is the Riskmaster".

Well, as regular readers know: despite his bullish outlook, in the end Nyhedsavisen was apparently too risky a project even for Draper, the partnership that was to save the freesheet never happened, and the newspaper went bankrupt just a month after that post was written.

Nemesis?
In fact, the story of Baugur and its many spin-offs reads like a classic tale of hubris and nemesis. Now, for some reason I associate the concept of nemesis, or divine retribution, with unjust punishment meted out by capricious gods to stop humans or other creatures, like Promotheus, for striving to be more (educated, enlightened etc) - for things that I've always considered man's greates virtues - but then, I have a feeling my grip on Greek mythology is not what it used to be.

However, the bigger theme that runs through everything I've described so far is one that rhymes all too well with the concept of hubris and nemesis: there is, with so many of the businesses and fancy schemes collapsing around us, a strong sense of a staggering fall, a very humiliating defeat - grand plans gone ever so wrong, revealed to be a house of cards or worse.

It's the abject and bitter humiliation that goes with realising you've been living a lie: you've completely overestimated your ability to handle the debts you've amassed; your bank sold you a ponzi scheme and you failed, against your better judgement, to read the small print; you discover your partner is a jerk and it turns out everybody else knew it, you'd just failed to see the writing on the wall.

The opposite of the bull in financial jargon is the pessimistic bear - analysts will tell you financial markets are cyclical and move in and out of bull and bear phases - but, metaphorically speaking, I think the sentiment of humiliating punishement, summed up in the symbol of the castrated bull, describes 2009 better: castrated the bull is chastised, domesticated, tamed - and perhaps displayed for public amusement as in the picture here - but there's no turning a bull into a bear.

Ex-Mecom bosses condemn Norwegian sale, while the divested operations vow not to become Redneck papers

"This is yet another sad chapter in Mecom's short and tragic history as a media owner in Norway and other countries," Kjell Johnsen, the former CEO of Mecom's Norwegian division, Edda Media, told Dagens Naeringsliv.

Johnsen breaks his silence
His comments in the wake of yesterday's disposal of Edda's North-Western operations, is a departure from his usual reluctance to comment on his former employer's dealings, a reluctance he has maintained since leaving Mecom in protest against David Montgomery in 2007.

However, speaking to Dagens Naeringsliv, he asserted that buying media operations in Norway and other countries at the top of the business cycle, paying a premium price with borrowed money, as Mecom has done, was a recipe for disaster.

Disappointed ex-CEO
"It is sad to see Edda Media being dismantled," Jan Moberg, who resigned just after Mecom's German deal at the start of this year, told the paper. Moberg was relieved of his administrative duties as CEO of Edda Media in October 2008 "in order to focus on new ownership solutions" for Edda, and it was rumoured it was his opposition to breaking up the Norwegian media group that spurred his resignation.

Moberg and Montgomery in happier times (photo copyrighted to and courtesy of Martin H. Jensen), edits by me

From Mecom's point of view, yesterday's deal with Polaris Media should help the ailing media group meet its debt covenant test this month, and also puts an end to speculations that Norwegian media group A-pressen was poised to take over Mecom's entire Norwegian division, which is the most profitable divison in the pan-European company.

No moustaches
Meanwhile, my favourite take on yesterday's news was Sunnmørsposten's management vehemently denying that being acquired by Polaris would turn the paper into a "Trønder" newspaper - which I, for lack of a better word, has translated to "Redneck newspaper" (have a look at this photo of a typical "Trønder" and see if you think my translation fits the bill).

Polaris, which submitted an indcative bid for Mecom's North-Western divison as early as 29 September 2008, has its power centre in Trondheim in "middle Norway" (still far north if you look at the map, much further north than I've ever been).

The region is associated with a typical "redneck" look, a prominent part of which is a moustache. Hence, Sunnmørsposten's fabulous illustration photo of yesterday, indicating that Polaris' takeover won't lead to moustaches coming into fashion among its management. For pictures of Mecom-boss David Montgomery visiting the North-Western newspapers he's now agreed to sell, check the links in the last paragraph here.

As a quick search doesn't turn up any photos on Flickr of a typical "Trønder" with a Creative Commons lincense, here's a moustache man from deneyterrio:

Now, as soon as the news of Mecom's latest divestment hit the wires yesterday, I got an email from a long-time reader who suggested I take a look at the story, "When you're ready with the snowstorm" (alluding to my dateline).

Well, it's still snowing heavily where I am, and I'm afraid I had my head down in another project yesterday, hence the delay, but since I've followed this company so closely for such a long time I can always add more context and colour than the wires...;-)

Icelandic media: "like alcoholics on detox"

So, Icleand has a new government, this one headed by Johanna Sigurdardottir.

Who's controlling who? Interestingly, what struck me the most when I was in Rekjavik in mid-December was the lack of agreement and uncertainty I encountered over who were actually running the place: you could call it lack of regulation of course, but it came across as a more fudamental uncertainty about who controlled the watchers and who controlled those who were supposed to watch the watchers.

Surreal After I described my visit there as "surreal" in this post, Ashok asked me in which way, and I answered surreal as in walking into a bad dream wide awake or into a surrealist painting where familiar forms are melting before your eyes into something unrecognisable: not necessarily malevolent, but dizzying perhaps; disturbing. Now, this impression could of course have something to do with the fact that it was my last reporting trip in a very busy year; the fact that neither of the three editors I met with while there seemed to know who owned the newspapers they were charged with running - or a combination of the two. 

Who owns what? As I got off the bus from Keflavik airport my emninent photographer, Hari, kindly picked me up and drove me to my appointment with Ólafur Stephensen, editor-in-chief of Iceland's second biggest newspaper, Morgunbladid. Ownership status at the time: the paper's mother company, Posthusid Arvakri, was technically broke, the editor was among several employees who hadn't received their December salary and they were in talks to find new owners.

Then, it was straight on to Frettabladid, who had been in talks to merge with Posthusid Arvakri, but a reporter told me Baugur's Jón Ásgeir Jóhannesson had paid off a big debt for the paper (also previously controlled by a Bagur-led consortium) and now probably owned it. I was asked to verify the situation with the editor-in-chief, Jón Kaldal, who said he was uncertain about the actual ownership structure and could I please check with his boss Ari Edwald (clarified here).

Editor-in-chief Reynir Traustason of DV, a tabloid, was also rather unclear on the specifics of the ownership issue, but said the paper was working to cut all its connections to Baugur.

"Our sugar daddies are dead"
"In Iceland we are a split nation," the DV-editor explained: "there are those who follow David Oddson [head of the central bank] and those who are against him. Same for Baugur's Jón Ásgeir Jóhannesson. We have our own word for those who follow Jón Ásgeir: Baugsmidlar.

Incidentally, the taxi driver who recommended I get in touch with Traustason in the first place, claimed Iceland was controlled by Baugur - due to its dominant role in Icelandic media.

"You know, the sugar daddy behind DV and Fréttablaðið was Baugur, but the sugar daddy behind Morgunbladid was Björgólfur Guðmundsson? Every media here has its problem. We had Jon Asgeir, they have Björgólfur, said the tabloid editor:

Like alcoholics on detox
"Cross-ownership has been a big problem in the media here. Now everyone is on his or her own because our sugar daddies are dead. Every company which gets money out of the blue gets sick, so Icelandic media was very sick. Now we have to stand on our own feet. We are like alcoholics on detox," he asserted.

Some would of course argue that is descriptive of the state the entire country is in, due to easy and high-risk credit (such as foreign currency loans), but my mind also jumped to a similar sentiment by Clay Shirky, from this interview:

A lot of working journalists, and especially print journalists, are in the position of being sort of kept women. They don’t really understand where the money comes from but, you know, their particular sugar daddy seems pretty flush, so they just never gave it much thought. And then one day the market crashes and they suddenly discover, “Wait a minute, we were a business? And our revenues had to exceed our expenses every year? Why wasn’t I informed?"

In DV's case, Traustason explained that with its sugar daddies dead, the tabloid had to downsize from 48 to 24 pages and cut about ten journalists. "Now we can probably live," he said, adding that 40 per cent of the paper's revenues came from advertisement, and it was hard to get as companies were collapsing, falling over, all around them.

Who's to blame?
Also, like all over the Westerns world, the Icleandic are asking why the media didn't spot the storm brewing - except, with the country in such a mess, much more so than in other countries. "Only in May, we covered the government's report on the good health of the economy," said Kaldal, who admitted media was guilty, but said; "We are guilty of believing hype, but that's a guilt the whole society should shoulder. The state is the one who really failed."

Still, it is perhaps no wonder the country's population increasingly turning to social media such as political blogs and Facebook to inform each other and vent their frustrations, as I describe in this article (I also  reported on the story in Norwegian here before Christmas, but this blog post contains additional thoughts and previously unused material)

Postludium:
It must be said that everyone I met and talked to on Iceland were very helpful and accomodating: both to see me on very short notice and to give me so much of their time.

After I got back to Oslo and my story was published, a journalist I'd been in touch with emailed me to tell me about a new development:

He: "You might be interested to know that editor xx have come under fire since you were here. A reporter came forward and told the public how he had buried his story regarding a former manager of Landsbanki, the bank responsible for the Icesave debacle. At first he denied this but the reporter played a recording of a conversation where the editor tries to explain that if they run the story the newspaper will be 'killed'."

Me: "Interesting. Thanks for the tip. Seems the cross-ownerships /cross-interests of Icelandic media makes for the most fascinating intrigues, twists and turns."

He: "That´s true. Somtimes it feels like a bad soap opera."

The David Montgomery Appreciation society

Mecom shareholders launch fan club for David Montgomery on Facebook.

Fed up with all the negative media coverage of former Mirror boss David Montgomery's struggling pan-European media group, Adam Billiald, a small shareholder in Mecom, has set up nothing less than The David Montgomery Appreciation Society (thanks to Christoph for alerting me to the fan club on Twitter).

At the time of writing, some eight hours after the group launched, it has 40 members.

In an email, Billiald explained to me that he was tired of the markets and press slating Montgomery and wanted to show that the Mecom-boss has support, a point he claimed was proved by the first few comments on the group's Facebook wall.

"I am sure he can get them through this mess and wipe the debts. We are all also (small) shareholders... but we are all supporting him, as did the major ones..." he said. Billiald, who works for Yell Group when he's not dabbling in shares, is an active contributor to this Mecom Group Share Chat Forum where the news of the new group was met with much praise.

Reacting to the news on the chat board, another regular contributor, petertee, whom I'm guessing is the same person as the Facebook profile Peter Robert Tee, wrote: "Hope we get many more members - search Facebook under Mecom - David Montgomery Appreciation to join - its free and you can add comments, news, whatever - anything relating to Mecom under DM leadership. He is like our modern day Buzz Lightyear, and he will lead MEC to infinity and beyond!"

In a Facebook message, Billiald told me he hoped Montgomery himself would be in touch at some point.

For the record: I have followed the discussion on the chat forum on and off since some time around Christmas, and Billiald emailed me his thoughts on Mecom's forthcoming disposals last week in response to this post.Several of the people who contribute to the forum follow the company very closely, so closely that Christoph has been kind enough to set up a Yahoo Pipe which provides an RSS-feed for the news articles they share with each other as we all know, at least those of us who've followed the company for a long time, that UK media coverage of the group tend to be patchy and limited.

Old grievances die hard

"Life is too short to be a minority shareholder in a company controlled by Erik Must. I don't have the health for it," said Norwegian media proprietor and investor Trygve Hegnar after selling his 30,2 per cent stake in Gyldendal Publishing House to his arch rival Erik Must on Monday.

Hegnar, who's held shares in the publishing giant for six years, has unsucessfully fought to gain a seat on board of the company for some time. He attributed the animosity between himself and Must to an incident some 30 years back when he, as a young journalist, wrote a less than flattering novel about the finance industry where one of the characters bore close resemblance to Must.

Sounds like a classic case of how old grievances die hard. However, Must refused to comment on Hegnar's claims. (links in Norwegian)

Mecom: no quick fix for Edda Media divestment

Mecom's management is aiming for a resolution for Edda Media before Christmas or New Year, according to employee representatives who spoke with Mecom-boss David Montgomery in Amsterdam today.

"We have received an update: it did not contribute to clarify the situation. Various alternatives are being explored further with the aim of reaching a conclusion before Christmas or New Year," an employee representative told Journalisten.no, expressing doubts that we'd see a resolution before 2009. Apart from selling Edda Media, other options that have been/are being explored: selling Mecom's stake in Rzeczpospolita to Alex Springer; selling a newspaper and a few printing operations in The Netherlands and inviting Mecom investors to invest more money.

Mecom: no news is bad news

All quiet from the Mecom camp, should there not be an RNS due today to clarify the situation??

The sentiment is taken from this share discussion for Mecom Grp (MEC.L) where commenters, presumbaly shareholders, are getting desperate for an update from Mecom on what's happening. So 'desperate' they turned to Google-translating Norwegian news articles, such as Journalisten's, yesterday, to find out what happened at yesterday's board meeting.

As I mentioned in the last update on my post from yesterday: it seems not much happened in regard to Edda Media, and Truls Velgaard, the current day-to-day boss of the Norwegian newspaper group, who attended the boardmeeting, later told employee reps that no decision was made about Edda's ownership structure. If you haven't followed the bidding process for Edda and that wording sounds less than straightforward, it's not: Mecom has actively explored ways of entering into a bigger parnertship or coalition in Norway, thereby increasing its assets, either in cash or holdings, while still retaining a stake in its Norwegian operation.

Update 15:54 CET: Employee representatives in Edda Media hope to get some answers from the management in a scheduled meeting in Amsterdam tomorrow, though Edda's future is not on the agenda. There's frustration among employee and union reps, some of whom desperately wanted a new owner for Christmas.

One commenter on the aforementioned chat board asked why Norwegian employees were so eager to leave Mecom. The short answer is that they were never eager to join. In some respects, this whole situation is a re-run of the drawn out process leading up to Orkla selling to Mecom in 2006: ironically, apart from Orkla, even the players are the same - A-pressen and Dagbladet's owners (Berner Gruppen) are the strongest prospective buyers now and were Mecom's strongest competitors back then.

Mecom expected to decide on sale of Norwegian division today

It is believed Mecom, the pan-European newspaper company led by former Mirror-boss David Montgomery, will conclude the drawn out bidding process for its Norwegian arm, Edda Media, in a board meeting today.

Rumours that moves were afoot to try to bring Edda Media, the Norwegian arm of Orkla Media, acquired by Mecom in 2006, back on Norwegian hands, have circulated in the country's media all year. In the last few weeks, it has become evident that the courting phase is drawing to an end, and Mecom's board may decide to enter into more formal sales negotiations with one of the interested parties. As reported a colleague of mine at Journalisten.no, A-pressen, the local newspaper group owned by Norway's Labour Union and Telenor, will conclude its due diligence process today, and Mecom's board is also expected to meet in London today.

Of the parties still vying for Edda, A-pressen is said to have offered roughly 2,3 - 2,5bn NOK for the entire group, Berner Gruppen, owners of Norwegian tabloid Dagbladet, a bit less, and Polaris Media about 600m NOK for Edda's North-western division. All parties are reported to have had access to a data room at Mecom's Norwegian lawyer, Thommessen, to scrutinize the financial health of the group mainly comprised of local and regional papers.

It has also been speculated that Polaris Media may team up with Berner Gruppen to submit a joint bid. Now, I guess an apology is due: I know many Mecom journalists and other Mecom followers read my blog as it has been, to my best knowledge, the only English news source consistently covering the company since the spring of 2006. However, I've refrained from blogging about it for some time, as it seemed pointless to repeat all the rumours circulating in Norwegian press this year.

And while we are on the issue of rumours: it has been put forward that the Alex Springer group may want to buy Mecom as a whole, a rumour vehemently denied by a spokesperson for the German group; and, alternatively, that they are keen to buy Mecom's stake in Rzeczpospolita, a rumour not so vehemently denied, but Truls Velgaard, the British company's Polish CEO who's recently taken over the day-to-day running of Edda Media, told me this was just loose speculations:

"There are no corresponding process in Poland to that taking place in Norway; Poland is not specifically defined as a sales object. The bidding process is furthest advances and most concrete in Norway. Mecom will consider selling certain other parts of its business, but not entire country divisions," he said.

In either case, divesting its Norwegian division may provide a welcome influx of cash for the highly geared pan-European media group, which has seen its share price plummet on the back of the financial crisis.

However, should Mecom decide to sell Edda to A-pressen, we can look forward to several new chapters in this colourful newspaper saga, as Norwegian media cross-ownership laws will demand high-level political negotiations for the acquisition to be approved.

Update 15:44 CET: its seems Mecom's board meeting is dragging out (link in Norwegian), the board is said to be discussing both the budget for 2009 and possible divestments, and could last until after LSE stops trading for the day.

Update 21:30 CET: looks like Norwegian journalists, both those employed by Edda and writing about the company, were waiting in vain for big news from London today: Velgaard, who attended today's board meeting, told employee representatives no decision on Edda was reached.

Montgomery may have to prepare for more talks with Norway's culture minister, Trond Giske (pictured here pouring the coffee) if Mecom's board opts for A-pressen's Edda bid.

(Photo courtesy of, and copyrighted to, my colleague Martin H. Jensen, who has allowed me to use it here for a beer)

The best take on Reed Elsevier cancelling RBI sale

"You missed your chance to buy me. Maybe getting a whole B2B publishing company thrown in was offputting? :)," Reed Business Information (RBI) blogging supremo Adam Tinworth commenting the news on his blog.

Do also check Rafat Ali's piece on the Reed Business Auction process and the possible next steps and Paul Conley's gloomy predictions for the future of B2B publishing (which I suspect adds up to: there is none, not in the industry's current form, but only had time to skim the post very superficially so far).

Media & The Credit Crunch; Media Industry Outlook 2009

Catching up with some of the many unread posts in my newsreader yesterday (busy days), I found this interesting Bloomberg-interview with ContentNext founder and publisher Rafat Ali, well worth listening to.

Paidcontent sums it up neatly as as Ali "giving a frank forecast of the climate for media and the economy in the next few months. It boils down to: layoffs, consolidation and pay-back time for social media.":

Today's food for thought

I stumbled across two great SlideShare presentations that really gave me something to think about today - in the best possible way as they are both quite uplifting takes on the times we are living in (the first via Fred Wilson, the second from Neil Perkin).

Despite the disparate titles, they're also vaguely related:

Credit Crisis to Collaborative Capitalism

View SlideShare presentation or Upload your own. (tags: internet collaboration)

Goodness And Happiness - Why Generosity Is The Future Of Marketing Strategy

View SlideShare presentation or Upload your own. (tags: digital planning)