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The Very Rich (Bankers and Industrialists) Come to the Aid of the Very Poor (French National Newspapers). But Is It In Time?

By Philip Stone 

Despite extremely generous state subsidies for the written press estimated at some €278 million for 2005 alone, running a national newspaper in France is synonymous with burning money. And who better situated to do that than the country’s richest industrialists and bankers. And they’re lining up to do exactly that.

The feeding frenzy so far this year:

Edouard de Rothschild has entered into exclusive negotiations with Liberation for a €20 million investment which would give him somewhere between 37 to 49% of Liberation between now and 2010, depending on its profitability.

Serge Dassault, head of Dassault Aviation and confidant to President Jacques Chirac, failed in efforts to buy L’Express in 1997, and France Soir and Le Figaro in 1999, finally got his wish in March, 2004, when he bought more than 80% of Socpresse, the company that owns Le Figaro and 70 other titles. The cost? Some €1.5 billion.

Rami Lakah, an Egyptian entrepreneur who also holds a French passport via his French wife, and who left Egypt in 2001 with debts allegedly of some $100 million, has paid €4.5 million for 70% of France Soir.

At Le Monde -- the most prestigious newspaper of all -- the editor-in-chief just resigned and the newspaper announced it has lost €100 million in the last three years. Losses for 2004 are estimated at €35 million and management is seeking a €50 million cash infusion. The three most often mentioned possible investors are Largardere, an arms maker (like Dassault) that is already a major media operator via its Hachette Filipacchi Medias; Bernard Arnault, head of LVMH, the world’s biggest luxury goods maker and who owns the financial newspaper La Tribune, bought in 1993; and Grupo Priso of Spain (publisher of El Pais).
ftm background

The common denominator running through all these national newspapers, plus others like Le Parisien and L’Humanite, is that they are all losing serious money. They compete in an environment where French readers have turned in ever increasing numbers to the regional press, to the free tabloids targeted at commuters and the young, and increased Internet usage – all of this in a country where some 85% of the population listen to the radio for more than three hours a day and who are the world’s most avid magazine readers, but when it comes to reading newspapers fall to 31st in the number of newspapers distributed per 1,000 inhabitants.

Add to that journalist contracts for a 35-hour work week with 11 weeks paid vacation a year, strong print unions not afraid to walk out if new rules are introduced, advertising down with unemployment high, and perhaps Europe’s most antiquated press distribution system and it was obvious that only very deep pockets could step in to start making things right. But even then, the first aim is to try and stem the losses. No one is really talking now about making profits.

For some newspapers the very thought of such money men taking over is close to an anathema. 

Liberation, for instance, is considered France’s leading newspaper of the left. Its roots go back to the 1968 student riots that rocked Paris. It was founded in 1973 by the philosopher Jean-Paul Satre (who must surely be turning in his grave at the thought of de Rothschild taking a major stake) and Serge July, who is still editor-in-chief.

De Rothschild told Le Figaro (the favorite of the right) that he hoped to start a media empire with Liberation as its base. He vowed that Liberation would maintain its editorial independence and that he wanted to fix its distribution system, create industrial alliances, and to optimize costs. But in a move he may regret later, he agreed that employees could maintain their veto on major management decisions. To fix what is wrong is going to take “major management decisions.” The battle lines are drawn.

The situation at France Soir borders on the tragic. Founded after the liberation of Paris in World War II it quickly became one of France’s most popular newspapers with daily circulation of 1.3 million – 800,00 in Paris and 500,000 in the regions – printing six editions a day. But by the time Rami Lakah bought a majority stake in October, circulation was down to just 67,500 daily.

There’s not much for Lakah to cut in way of expenses – staff is down to 99 employees including 60 journalists. He has said he will relaunch the paper and add an English language edition for expatriates and businessmen. The French usually don’t take kindly to the language of Anglo-Saxons trespassing on their own turf although Paris is home to the International Herald Tribune and an English language radio station recently went on air.

Serge Dassault took a no-holds-barred approach to his controlling interest in Socpresse, which includes Le Figaro, the weekly L’Express and around 50% of the country’s regional press among its 70 titles. In September he took direct control of Socpresse, firing the top two officials who were running the company, and he appointed a new CEO and a new editor-in-chief at Le Figaro. The newspaper’s circulation is down to around 330,000 but with the even steeper percentage decline in the circulation of Le Monde, the top selling national, Le Figaro is expected to become circulation leader within a few months

Although Dassault has promised that editorial independence will be maintained, Le Figaro journalists say there are already signs of interference, claiming that stories that could have embarrassed the Dassault conglomerate empire have already been spiked.

Although there have been no firm announcements, there are indications Le Figaro will undergo a considerable remake in 2005. The idea, apparently, is to become a quicker, simpler read to counter the Internet and the free newspapers.

Le Monde, left of center, has lost €100 million in the past three years, its circulation has dropped some five per cent in the past year to around 340,000, its editor-in-chief just resigned, it has announced 100 job cuts from among its 750 staff, and its management is desperately looking for a €50 million cash infusion.

For all that, it still maintained a reputation as being within the top five of the world’s most prestigious newspapers. But that reputation came under severe pressure at home when, in 2003, a book, The Hidden Face of Le Monde, written by Pierre Pean, considered France’s top quality investigative reporter, and Philippe Cohen became an overnight runaway best seller.

The book, in dissecting detail, basically damned the Le Monde top management, including editor-in-chief Edwy Pienel who resigned this month, for using Le Monde for political influence peddling and financial shenanigans over a number of years. Management sued, the case was settled out of court, but the allegations stuck, and circulation dropped precipitously after the book’s publication and still continues down.

So, with reputations in shatters, circulations just a small fraction of what they once were, and losses in the hundreds of millions of Euros, the French national newspaper business is in peril. Obviously the time has come to run the media as a proper business. That may mean some heartache along the way, but these investments could very well mean the survival of some of France’s best known logos.

© Philip M. Stone of  Stone & Associates, a partner in followthemedia.com


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