In an interview with *Werbewoche*, Publigroupe CEO Hans-Peter Rohner discusses the company’s new strategy and areas needing improvement, the situation in Basel, and the challenges facing movie theater marketing. Werbewoche: Mr. Rohner, you said that last year’s restructuring of Publigroupe was the largest in the company’s history. Where does Publigroupe stand now, and what are the next steps? Hans-Peter Rohner: The new overall structure is in place. 2008 will be a particularly intense year, especially for Media Sales—that is, the «new Publicitas.» In Zurich, more than 500 people from six different locations will soon be moving to the new headquarters in Baslerpark. That’s where the new Publicitas will come into its own: radio, TV, internet, and print media sales—all under one roof and in open-plan offices. A truly comprehensive fresh start. We’re implementing the same approach at each of our more than 150 locations worldwide. At Search & Find (S&F), the focus is on implementing the portal strategy—specifically, migrating the platforms Directories.ch, Gelbeseiten.ch, Weisseseiten.ch, and Local.ch to a single, high-traffic platform: Local.ch. This is a massive project that we’re undertaking together with Swisscom Directories. In the Custom Publishing division, the focus is on the integration of Denon and Emphasis and on preparing for expansion projects in Europe and Asia. And in the fourth business segment, Digital and Marketing Services, the focus is on synergies between Zanox and most of the Publicitas and S&F companies, as well as on the further development of Namics. We are also exploring several additional acquisitions in this area.
What conclusions do you draw from the 2007 pro forma financial statements based on the new structure? It is clear that rising online revenue is offsetting the slight decline in print revenue. What’s important to us is that we can maintain a high level of profitability at S&F. If we can achieve this, it will be a success given the massively intensified competition, while we will already see significant earnings growth at Media Sales this year. After all, if we were to generate just over 13 million in EBIT on revenue of more than 2 billion there, that would be completely unacceptable.
How do you plan to generate additional profit in Media Sales? First, internally, thanks to the new, more efficient structures; then, we also want to increase sales; and finally, the compensation system will become even more performance-based. In short: Good times for top performers, tough times for underperformers.
Will all employees worldwide receive new employment contracts under the new structure? No, but certainly all sales employees who have direct contact with customers will. New compensation models are being developed for each sector; while they won’t be implemented all at once, they are clearly a topic of discussion everywhere.
Where do you expect earnings growth—more in foreign markets or more in Switzerland? There are differences worldwide, including in Switzerland. Last year, we had to carry out a complete restructuring in the U.S. and are now re-entering the market with a fresh start. I don’t expect miracles there, but I do expect to return to profitability. In Switzerland, we’re in the black across the board except for Cinecom. There, we expect a significant jump in earnings thanks to more efficient back-office structures. And abroad, where we’ve made major investments in India and China, we’re essentially starting “Year 1” following the consolidation.
In 2007, Publigroupe generated about 20 percent of its revenue abroad. How large will this share be this year, and how large will it be in five years? In 2007, Switzerland accounted for 82 percent of total revenue, while international markets accounted for 18 percent. In 2008, we will reach nearly 30 percent abroad—which is a huge leap, because we are not scaling back in Switzerland. About half of the growth abroad is attributable solely to the fact that our Zanox stake can now be fully consolidated. In five years, I expect foreign revenue to reach around 40 percent, while at the same time we anticipate slight growth in the Swiss market.
Revenue in the Swiss advertising business (PubliPresse) rose by 1.1 percent in 2007, primarily thanks to job ads. How do you prepare for tougher economic times? With a Plan B (laughs). Well, our situation mirrors that of the entire Swiss daily press: The overall result has been encouraging, but primarily thanks to job ads. At the moment, the trend is still pointing upward, but it remains to be seen whether the current crisis in the financial market will remain confined to that sector. If not, it could spill over from the U.S. to Europe and also affect the labor market. The only possible strategic response to this is to make the company’s cost structure more flexible—that is, reducing fixed costs and increasing variable costs—so that we don’t have to take overly drastic measures at the first sign of a downturn. But one thing is clear: if there were to be a truly significant drop in job postings, cost reductions would be unavoidable.
What does that mean—laying off people? That certainly means a hiring freeze. Our company has many young employees, which results in an annual turnover rate of 12 to 15 percent. In that sense, a hiring freeze alone leads to cost reductions. But depending on the severity of the downturn, that might not be enough. And then we’d have to resort to Plan B after all.
Last year saw major upheavals in Switzerland: Tamedia acquired Espace Media, Axel Springer strengthened its position, SRG intervened heavily in private radio advertising, and Ringier, thanks to Media Swiss, became a major competitor to P. in the classifieds business. Where does Publigroupe see itself in this new landscape? In the same week that Tamedia announced its acquisition of Espace Media, we, together with Axel Springer, announced our investment in Zanox—the largest acquisition in our company’s history. While this timing was a coincidence, it certainly has a deeper symbolic meaning. Namely this: Whether in the directories sector or in marketing—while the print-oriented part of our business will continue to play an important role for a long time to come, we clearly see substantial growth outside of Switzerland and, to a significant extent, in the non-print sector.
What does it mean for Publigroupe that Ringier has also entered the third-party advertising business via Swiss Media? This is an interesting development that wasn’t necessarily expected. But I think it’s a good thing in principle. It will certainly make the market in this area more dynamic. And we certainly can’t overlook Google and others here. From that perspective, I think it’s a positive thing when other strong Swiss players enter this market.
Cinecom experienced a sharp decline in 2007. Why? Three factors played a role. First, we had a poor year for the movie industry in Switzerland, with no blockbusters and declining attendance. The outlook for 2008 is significantly different. Second, we experienced turmoil in Cinecom’s leadership, which led to Matthias Luchsinger and other senior executives leaving our company—right in the crucial fourth quarter, when in the past around 30 percent of total cinema revenue was generated. Last year, however, this was not the case, and it caused a large part of the shortfall in earnings. That is simply mismanagement. Period. The third point: Cinecom was not innovative enough in terms of the offerings it provided to advertising clients. The digitalization we introduced two years ago has so far been given far too little consideration. Yet it actually makes cinema a very flexible medium. With Beat Mühlemann—who, within Media Sales, is responsible, among other things, for designing innovative offerings—we should gain new momentum in this area. After all, he was the largest advertising client for years and was known for innovative advertising concepts. One of his new tasks is to incorporate the perspective of major clients when defining offers.
You said “mismanagement”—does that mean Mr. Luchsinger didn’t leave voluntarily? I don’t want that to be interpreted that way. Even when we took over Cinecom, it was clear that he wouldn’t stay on for 20 years. However, it’s also easy to see from the 2007 results that we didn’t achieve the goals we had set. The discussions about this then led to Mr. Luchsinger’s decision to leave.
Things didn’t go smoothly in radio marketing either: After Publisuisse entered this business, Publigroupe suddenly found itself at a disadvantage in this area. Last year, we indeed made a vigorous effort to market the Swiss Radio Pool, but ultimately lost out to Publisuisse. This caused some frustration both for us and for IP Multimedia. We were surprised that Switzerland’s private radio stations threw their support behind the SRG subsidiary. In the meantime, however, a certain disillusionment has set in. After all, it’s clear from what we hear and from the statistics that the market did not view Publisuisse’s first forays into the radio sector as particularly inspiring. And now it’s becoming clear that the awarding of licenses could create a new landscape. In any case, you can count on the new Publicitas to play an active role in the radio business—visibly and audibly—throughout Switzerland.
But at Radiotele of all places, half the crew and nearly all the expertise walked out. How are things supposed to move forward from here? Radiotele has indeed been severely shaken up. Not receiving the contract from Swiss Radio Pools was, understandably, a huge disappointment. On top of that, Radiotele founder Bruno Oetterli has always refused to make special deals. He always operated strictly according to the rate card—a principle we also uphold in print. But this stance has cost Radiotele market share. Today, we feel well-positioned and fully motivated to play an important role in the radio market as well.
Do you think you still have enough expertise to do that? Yes, definitely, although the biggest challenge for the new Publicitas as a whole is to transfer the extensive existing specialist expertise to all branches worldwide as quickly as possible. This is a task that will be a top priority this year.
Another source of unrest is Basel Zeitung Medien (BZM): Until half a year ago, you yourself were a member of the BZM board of directors. What’s going on there—it seems as though things are slipping out of your control. When the Basellandschaftliche Zeitung decided to merge with the MittellandZeitung, we at BZM found ourselves in a conflict of interest. We therefore offered to terminate the BZM management contract early and formalized our collaboration starting in 2008 in a new cooperation agreement. Now we’re still struggling to make these new arrangements—which are simple in theory—work in practice. I don’t want to add fuel to the fire here. But at the moment, tensions on a personal level are unfortunately still very high—not between Mr. Hagemann and me, but among the staff in the Basel market.
Is that really the case? Ultimately, a power struggle that’s damaging our reputation is underway. Is a solution really in sight? We’re working on it, and we’re the first ones interested in resolving the conflict in a professional manner. For example, in Bern, we’ve also been in very intense competition with Espace Media for decades over every ad, but there it’s always been conducted with a high degree of mutual respect, without personal or unwarranted attacks. We need to try to achieve the same in Basel as quickly as possible.
What will happen to the 37 percent stake in BZM? That’s not up for discussion right now, but what will happen in the medium term is, of course, still open. However, we have no reason to rush into any hasty action on this matter.
Publishers repeatedly cite the example of Basel to illustrate that the P has lost its footing, at least in Switzerland. Is that really the case? Is the problem in Basel really just a drop in the bucket from an international perspective? No, certainly not—Basel is, after all, Switzerland’s second-largest advertising and communications market. But the issue with the BZM is quite clearly an isolated incident. Last year, we were able to sign new contracts with various newspapers. Therefore, Basel isn’t the start of a new trend; rather, it’s a conflict of interest that could arise again anywhere. One of the consequences of both market developments and our strategy is that, in the future, we will no longer be able to please everyone. This applies not only to the print sector but in general: the battle for advertising revenue is intensifying. If we were to continue trying to maintain relationships with as many parties as possible, we would be overwhelmed or lose credibility. That’s why we’ll raise our profile if, in individual cases, we simply end one agency relationship and focus entirely on another.
Interview: Markus Knöpfli
