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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.

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.

High cost of UK libel cases shackles freedom of speech worldwide

When the headline "High cost of UK libel cases shackling UK newspapers, says study" popped up in my RSS-reader, it gave me an immediate urge to rephrase it:

We have ample evidence to conclude that this is not only a problem confined to Albion's green isle, it's a threat to freedom of speech worldwide.

In the interest of accuracy, one commenter was quick to point out that the problem here is English, not UK, libel law. However, because something is libellous where it is read, English libel law has become a global problem.

Several of the commenters on this article also point to that the survey it described was commissioned by Daily Mail publisher Associated Newspapers, and that maybe the high costs associated with such cases was just what was needed to deter newspapers from printing lies and libels, which is a valid point.

Still, the problem with English libel law is that due to the high cost of fighting a libel case in England AND because the law reverses the burden of proof - you're guilty until proven innocent - it has become an effective means to threathen people into silence.

Also, because something is libellous where it is read that threat is as effective in Scandinavia, or in theory in Kuala Lumpur, as in England - in the US lobbyists and politicians are even trying to get new laws in place that will protect US citizens from facing libel suits in England, motivated in part by the case of Dr. Rachel Ehrenfeld and others (cases some have dubbed legal jihad or libel tourism ). For more examples, check my posts tagged libel and my delicious bookmarks tagged libel.

For the record, the study mentioned in the Guardian article is specifically focused on Conditional Fee agreements (CFA), but even without CFAs the cost of libel cases is still many times higher than in European countries it would be natural to compare England with. An interesting point from the study, called "A Comparative Study of Costs in Defamation Proceedings Across Europe", however: it concludes that the use of CFAs potentially contravenes articles 6 and 10 of the European Convention on Human Rights in defamation and privacy cases - so could be interesting to see what happened if the matter was brough in for the European Court of Human Rights in Maastricht.

Update 25-02/09: see also Ministry of Justice consults on 'excessive' libel costs and Libel costs threatening regional newspapers, MPs told

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...;-)

How to get somewhere these days

Originally uploaded by Kristine_Lowe

I have to disappoint you if you thought this post would give any insights into climbing social ladders or getting ahead in life.

I'm thinking of the the more trivial, yet important matter, of getting from point A to B these days - easier said than done in light of the weather the last few weeks.

I'm currently based at a seaside resort which town centre is so tiny it's normally overkill to use anything but your legs to go somewhere. That's all changed with the truckloads of snow we've had recently: here's why I'm keeping my head in a book this weekend. Okay, my bank accounts are all in the red, but even if that wasn't the case my skiing skills are more than a little bit rusty - and that IS the safest way to get around town at the moment, provided, of course, you don't have one of these handy:


What I've been reading and pondering of late

Obviously, this is not a complete list. Usually I just save my favourite links to delicious, but, since this blog revolves around the many facets of how the communcations industry is changing, here's a few really interesting links to chew on:

Eirikso: "Free, but not that free…" Eirik Solheim's contribution to the blograce leading up to Wednesday's Media Evolution 2009 where they're dicussing Chris Anderson's thought on the economics of free.

Mediainfluencer: "Brand as identity and branding as behaviour",
excellent as always from Adriana on branding and its role in business strategy. "..the bad news for the branding folks is that messages and projections are not what they used to be. The good news is that a company can define its identity and behave according to who they want to be. That sounds like a good trade-off to me."

Richard Burton: Is Fleet Street a Dead End or the New Super Highway? The former editor of the Daily Telegraph online, now managing editor of The JC, on the challenges of getting the Telegraph to embrace the online mindset and opportunities, and on the media future. Richard warned me this was a transcript and as such not entirely accurate, but that the general gist was correct. It does make for fascinating reading (I may still find time to post some of my thoughts on it later).

Handbook for Bloggers and Cyber-Dissidents
Not so much a link to ponder perhaps, but still an interesting development: Reporters Without Borders has published a Handbook for Bloggers and Cyber-Dissidents (pdf, 81 p.), intended for citizen reporters in countries where the mainstream media is censored or under pressure. According to Gisle Hannemyr, it provides some rudimentary technical advice on how to to remain anonymous and how to get around certain types of censorship.

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)

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."