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.

Is Mecom on the road to hell?

Today former Mecom-optimist, media analyst Henrik Schultz, told a colleague of mine he had yet to recover his faith in the pan-Europaen newspaper company despite the rights issue completion, which reminded me of a recent Danish Mecom controversy with an interesting twist:

Ealier this month Jyllands-Posten (JP), a comptetitor to Mecom's Danish flagship Berlingske Tidende, commissioned an independent analysis of the British-based company's accounts and prospected earnings from Dansk Aktie Analyse. The analysis concluded that the company was steering towards bankruptcy and would not be able to meet the next covenant test in 2010.

JP's article on this provoked strong reactions from Mecom, including one especially interesting one from Mecom's Danish CEO, Lisbeth Knudsen."You draw completely irresponsible conclusions without knowing our development plans," she wrote in her repy to the newspaper (my translation) - a reply (at least the bit that JP printed) which didn't contest the actual figures and calculations, including the conclusion that Mecom needed a significant increase in ad revenue to meet the covenant test, but seemed to insinuate that the budgetary goals would be met by cost-cutting and/or increased revenues from innovation.

I am perhaps reading too much into that statement, but the only "innovations" I know of on the agenda for Mecom Denmark are charging for online content and making all journalists online journalists from September on. Will that be enough? Knudsen is a very clever lady, I'm sure the whole industry would pay very close attention if it turns out she has found some new ground-breaking money making scheme to improve the balance sheets of Mecom's worst performing newspaper market, but we'll just have to wait and see.

Mecom boss David Montgomery called JP's accusations "irresponsible and selfish speculations from a rival media player" and said the agreement reached with the company's lenders was sensible and realistic, taking continued financial turbulence into account.

Still, Schultz is not impressed: "Mecom is bankrupt already in the sense that the shareholders have lost their money. In reality the shareholders have lost money by having to put up money for the rights issue," he said, adding that the rights issue gives the company a new chance but that there certainly are challenges ahead (including that ad market the whole industry seems to be hoping against hope will recover soon)- and he wouldn't recommend buying Mecom shares now.

I've seen several positive shareholder reactions to today's RNS though, the gist of it being that to hold a conference call after presenting its half year results 6 August, surely, the company must have some good news to convey. Let's hope that's not another false hope....      

Some believe "confidence is creeping back on the menu" at adlands lunch tables, which should also benefit of the starving media hounds so dependent on those almighty ad masters in the end, but, so far, not much evidence of that is forthcoming.

For one, as the first media company I've seen, Metro International posted second quarter earnings today - and it made for pretty gloomy reading. I'll return to that later, but, in the meantime, here's a quick look at what it actually looks like out there in media-ad-land: 

Whenever I'm forced to use news sites - I get most of my news via RSS and Twitter, but unfortunately the latter often takes me through to news sites - I often find myself thinking that advertisement also comes with news content these days. Sometimes I'm even so turned off by wading through all the advertisement I give up trying to read that particular article.

I know these are desperate time, but with news sites turning their frontpages into ads; running whole page ads you have to watch before you get to the article and inundating you with pop-up ads in the form of cars, planes and other forms of creative advertisement running over the text when you finally get to the article you've got to wonder.

You'd think at least they earn good money when the ad takeup is so good as on the site featured below, but rumours have it that, at least in the Norwegian market, the competition for the advertiser's gold is so stiff that rebates are massive. My sources tell me one of the country's big media companies offer as much as 80 per cent rebate on listed advertisement prices. 80 per cent, that sounds like madness to my ears.

Now I don't follow the Dutch advertisement market closely, other than reading certain media company reports, but I had a hard time reading this article and would've given up if it wasn't for the topic:

With both these news sites the advertisement saturation is such that it's actually hard to avoid clicking on ads, Hans Kullin has looked at the all too similar situation in Sweden and Denmark.

"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."

Recent events has had me pondering if Twitter is not far superior to Facebook when it comes to mobilising people to actually take action and do something in the real world.

It was fascinating to hear Suw Charman-Anderson attribute much of the success of the Ada Lovelace campaign she ran earlier this year (I wrote about it here) to Twitter during this Media140 panel back in May. In contrast, many people joined the Facebook group she set up, but few seemed to do something actively after they joined. This sentiment was echoed by her husband Kevin, who found Twitter ever so much more useful than Facebook during his US roadtrip on behalf of The Guardian (I interviewed him about it here, in Norwegian).

Now, in both these cases we are talking about a fairly tech-savy audience, but clearly Facebook's where the major mainstream audience is - surely, that's a lot more useful from a marketing point-of-view, right? The experiences using social media to promote Wandsworth Common Beer Festival, presented in this interesting slide show found via Knut Albert, had me think perhaps not:

I must admit that I personally much prefer Twitter to Facebook, and I have a much more passive relationship to the groups I join or fan pages I sign up to on Facebook than information shared on Twitter. Often, the groups I join are just for fun or a symbolic show of support more than anything I think I'll ever do much with. My Twitter network is so much more relevant to my work and professional interests than Facebook, which is more of a mixed bag. Also, Facebook is more personal - a way to keep up with people not on Twitter, or people or projects I've "known" for quite some time" (mostly in real life). But I feel myself going over well known territory saying that, we all now Facebook and Twitter are different, that's not really my point, but I'm curious to learn/ see more of how effective the two sites are for moblising people to act - surely, that is a marketeers ultimate object, right?

Am I all wrong in thinking Twittter might be superior to Facebook here, and if so: in which cases are Facebook the better site to entice people to take action?

It must have been some of the most surreal 24 hours of my life: 6 July 2005 went by in an excited haze as I found myself handling extraordinarily good news, the day after I was dealing with the worst possible kind - while not knowing if near and dear ones were caught up in the events.

Back then I was a PR, in charge of the media side at Visit Britain's Norway office. 6 July that year it was announced London had won the 2012 Olympics, the next morning four bombs exploded on London's public transport network. Superficially put, the British tourism industry went from a day of celebration to one in shock and mourning - though all those questions about the terrorist attack's impact on tourism I fielded from media on 7/7 seemed to come from far, far away. I had moved my stuff back from London only a few months earlier, and still had half my life there: my ex, friends, former colleagues - all these people I didn't know if were safe. It was as if the floor fell out from under my feet and I had to keep on moving as if nothing had happened.

Luckily, I'm rather good at dealing with such scenarios - it always takes a bit of time for things to really sink in for me, by which time I will often have organised the funeral and written the obit - but I don't think I'd ever had to work harder to keep calm than on 7/7 and in the days that followed. As it turned out, I was very lucky in that none of "mine" where caught up in the events, but the city I had called my home up until very recently was, it hit so close to home, and I've found myself thinking about it quite a bit these last few days, after Jackie Danicki first raised the issue on Facebook.

To think, the evening before I was prepping my boss to go on a popular evening TV-show to talk about the Olympics, accompanying her there, then all hell broke loose the day after. Looking back, I wish we'd had a blog to get information up instantly, our CMS was hopeless, a Twitter account would also have been stellar for getting useful information out quickly- too bad Twitter wasn't invented yet. I only got to introduce blogs and wikis to the organisation the year after, but tools like these do make crisis communication so much easier. And I guess I wish PR didn't have to be "on message" in such scenarios, though, luckily, it didn't fall to us to speculate about the impact on tourism in figures and numbers: it was hardly what I found myself worrying about on 7/7...

If the situation wasn't so tragic, there would have been an excellent parody in it: both the journalist and the PR dealing in what felt like non-essentials. The former asking how it would impact London as a tourist destination before we even knew the number of casualties, the latter trying to put a terrorist attack in perspective, though I was also lucky to have a boss who agreed with me that our number one task was helping people find the right, most up to date information, not trying to make it less than what it actually was - and again, it would have been invaluable to be able to use social media to get that information out there...