Back

Interview with Andreas Schaffner, Head of the Publishing Services Division at Tamedia AG

Switzerland

11.07.2019

What is the recipe for success at Tamedia AG?

Andreas Schaffner: Whether through acquisitions or organic growth, we were able to secure a large share of the newspaper printing market. Thus we could develop a further pillar in our publishing business that now contributes substantially to our bottom line. Meanwhile, Tamedia realised very early on that the business would have to rethink cost structures in view of anticipated erosion in revenues. This has been achieved through a consistent process over the last few years. Publishing is our core business, and keeping our newspapers profitable is paramount. To succeed in this endeavour, we need to invest in the future while staying efficient at creating value. This is where we have two approaches: cost management through concentration and consolidation on the one hand, growth on the other – either through investments or organically from online activities. We plan to further develop ourselves as the leading privately-held media group in Switzerland, and we are well positioned to actively shape the digital transformation process. Our three core objectives are: continued growth in publishing, expansion in the digital sphere, and opening up new fields of business.

Publishing has become a multichannel activity. What is the role of traditional print media today?

Tamedia operates a broad and attractive publishing portfolio of regional, weekly and Sunday newspapers, commuter media, and magazines. Although we are progressively building up a digital subscription portfolio for paid newspapers, traditional print subscription business continues to be our revenue mainstay and thus a very important pillar of earnings. But we must also think about the future – and this lies clearly in the digital realm. We need to gain experience on how digital products should be editorially equipped for the future, as well as how to market them. With this in mind, at Tamedia we have set up a variety of new departments that focus on the digital future of paid media. This is because we are convinced that demand for independent quality journalism is long-term – only the channels will change.

Does the contraction process in Swiss regional subscription newspapers more or less resemble what is going on in, say, Germany?

Yes, it’s comparable. I believe there is a similar general trend in countries where journalism tends to be subscription-based. But in countries where a high proportion of copies are retail sales, the year-on-year decline is steepening fast.

One difference about Switzerland is that in parallel with classic paid regional media, the country has commuter free sheets where Tamedia is also active. Has this combined strategy paid off, in your view?

Absolutely. Switzerland is a nation of commuters where hundreds of thousands take the train, bus or tram to work every morning. Tamedia had the courage to invest here as early as 2003, when we acquired the 20 minutes free sheet. Today we have a successful and wide-reaching network of free sheets across Europe – and 20 minutes is by far the most successful news medium in Switzerland. We do not believe that an exit from commuter media can alter market shifts in paid newspapers, by which I mean subscription titles. As the situation of paid media in Germany and Switzerland shows, the fact that German publishers chose not to go into commuter media made no impact on the general situation.

Andreas_Schaffner_2
Andreas_Schaffner_3
Andreas_Schaffner_4
At Tamedia you are responsible for the concerted energies of three printing centres in Zurich, Bern and Lausanne, so your publishing services division needs to be particularly well prepared for developments in print media. What is your prognosis for the immediate future?

Alongside our own newspapers, we also print third-party titles. We have contracts with virtually all the major media houses in Switzerland and our printing plants produce regional editions of their publications. In this regard we are not alone in facing a general erosion of print runs and page counts, so our predicament differs not so much from that of the publishing houses themselves. We have a problem in common, and we need to deal with it

So this means that you are projecting more or less of a decline, but with no expectation of disruptive changes?

We cannot predict today what will happen ten years from now, or whether there will be disruptive changes such as skipping publication on certain days or dispensing with weekday publication altogether. Within the bounds of our planning horizon, we assume that the newspapers we print will continue to exist in their current journalistic form and with the erosion in circulation that everyone knows about.

The consolidation of printing sites in Switzerland happened very fast. So considering today’s scene, do Tamedia sites count among those that are picking up rather than shedding business?

Newspaper production in Switzerland used to have a very extensive technical base. If you look at the geography and consider that 22 newspaper printing plants were still operating in 2012, then consolidation was foreseeable. We analysed the market in 2012 and gained two insights. One was that printing newspapers is no longer a strategic asset, but rather a product that can be split with any partner – it can’t be used to differentiate yourself, neither with readers nor anyone else in the market. The other thing we found was the underutilisation of newspaper printing capacity at almost all the plants. With print runs on the decline, the only way to keep unit costs steady is by consolidating. Which is why we decided in 2013 that Tamedia should play an active role in this consolidation, and make its highly productive capacity available to other publishing houses.

What kind of challenges does this bring?

We have been integrating a minimum of one newspaper a year since 2013. For the Tamedia sites and of course for the personnel, this has meant continuous development of know-how on the products concerned, together with adaptation of the company’s own production processes. In 2012 for example, our Zurich printing presses were producing the Tages-Anzeiger along with two smaller regional newspapers. Now, on one and the same night we run five national and four regional newspapers. Our flagship newspaper alone used to keep three presses busy, now it occupies only one.

Did that go hand in hand with declines in volume?

The capacity we can offer to our partners results from the Zurich printing plant having been set up for very large volumes when it came on stream in 2004. Those volumes are no longer in demand, which means that with parallel production we can now achieve the output necessary for producing larger, higher-volume products.

Did this result in your doing more with preprints, for example?

Take Zurich, where we have machines capable of handling 4×72 and 1×96 pages. With these running in parallel, we can set things up for the volumes demanded of us and produce significantly more copies using the same number of presses.

Concerning flexibility: that has to be the most important thing for your team when they face new workflows yet again.

Yes, you have to adapt to the customer’s processes. In the past, focus used to be on integrating and securing know-how on the customer side – as well as having a clean interface. In the next phase, we will also be thinking about process harmonisation.

By interface, you mean the handover from the editorial system …

This is already standardised throughout the market, using PDFs. So it’s actually much more about the day-to-day information you need for production: print run, volume and insert reports, transfers of subscriber data, and production reporting. When integrating a new title you can’t say, 'Guys, we’re doing it a different way now, and only our way.' Try that, and you would soon be out of the market. You must respond to individual customer needs and basically replicate each customer’s process. For us at the Tamedia printing plants, this has brought a great deal of variability and demand for flexibility.

The fact that consolidation of newspaper printing sites in Switzerland happened so fast is probably also due to the country having so many valleys. Yet discounting the Grisons, Valais and Ticino, everywhere is very close and, of course, the country has excellent transport links.

That’s true. There is a major east-west motorway running along the Jura ridge in the north of the country, and from there you can easily swing south into the central regions. So in this sense, Switzerland is indeed pretty well set up.

Which makes logistics easier.

For sure. Along with extra printing for third parties, Tamedia indeed offers the logistics as well. Our in-house logistics operation ships all of the newspapers we produce today. We run a nationwide transport network that distributes virtually every one of the major Swiss dailies. Dealing with that network’s constant growth and the increased volume was a challenge. We have built up a lot of know-how here, as well as investing in technology.

Earlier, you stated cost reduction as one of your goals. What does ‘cost-effective’ production mean in real terms?

One question constantly raised over the past few years on the market side has been how to align costs with returns. At the printing plants, however, costs are not the issue per se, since newspaper printing is mainly about fixed costs. Rather, the focus here is on capacity utilisation. That was the finding of our analysis in 2013: the variable cost component in a newspaper printing plant is so small that volume will be the pivotal element in the future. While publishers have scaled back their in-house structures, we have kept these relatively steady and increased the volume.

The largest chunks of fixed costs are skilled personnel and the installed technology. At many large printing plants in Switzerland as well as Germany, the latter dates back to the turn of our century. How would you describe the investment picture at Tamedia?
DZZ_Zürich
DZZ_Zürich_2

DZZ Druckzentrum Zürich AG is part of Tamedia AG and Switzerland’s largest production site for daily newspapers.

When we decided in 2013 to actively push ahead with consolidation, that raised the question of when would be the right time to invest. It was a difficult decision to make back then, due to unknowable future developments and corresponding uncertainty in estimating a replacement investment’s useful life. So we decided on retrofit programmes that would allow us to use existing machinery beyond 2028. This activity is currently under way at our three sites. It means, for example, replacing the control electronics in the printing presses as required. Or, in our mailing operations, updating conveyors and replacing the controllers likewise. Then again, we use the option of totally substituting certain plant components, provided suitable replacements are available at the time.

Now that we are talking about investments in technology, you have come rather quickly to the topic of retrofits. Isn’t new technology also an opportunity to open up new sources of revenue?

Of course, you are always looking for production possibilities that in some way represent added value for the customer: memosticks and other complementary products, for example. But these are also cyclical and trend-sensitive. Last year, for example, we produced three or four newspaper-style art catalogues because customers or agencies fancied the look and feel of newsprint. Moreover, we have built up particular competence in manufacturing these products either ourselves, or in association with partners. Also in this segment, we have a completely different and very special product: train timetables. Despite all the smartphone apps, evident need still exists for printed timetables. There are innovations that have arisen opportunistically, or in some cases as the result of technically available solutions. But when all is said and done, we are still a newspaper printer and as such, our bread and butter comes from their overnight printing. The niche product market cannot even come close to generating the value created during this prime time

Do you believe that products themselves will morph further and require different technology? Newspapers in Belgium, for example, are adding themed sections that make them ever more magazine-like.

Quality journalism will not change to the point where newspapers suddenly turn themselves into magazines. There will be novel journalistic products, but in daily newspapers we don’t foresee radical change. In general, though, the long-term future is trending to online and this is the focus of Tamedia and our printing customers.

The newspaper printing plant business you operate must have the right partners for development and service, since high availability is a requirement of the technology involved. What is your view of the development and consolidation among printing press and mailroom suppliers, and how is that cooperation going these days?

We stay constantly on the ball with regard to our strategic suppliers and partners, keeping an eye on their development activity as well as the scale of their technician crews. Our contracts with them secure the necessary services and agreed performance.

There is a continued trend towards outsourcing, for example in maintenance and repair services.

We examined this and concluded that outsourcing does not bring any significant advantages for us. What we need above all is a presence in day-to-day operations. This is hardly to be accomplished using external service providers and would not benefit us on the cost side. When it comes to periodic, cyclical interventions, it makes sense in some cases to coordinate who provides which resources.

Integrating print jobs is sometimes tied to integration of existing technology. For example, mailroom equipment was recently relocated from Adligenswil to Zurich. What has been your experience here with technical partners – in this case Ferag?

It is crucially relevant that Ferag mailroom technology also accommodates the mixing of generations and operating them together as a whole. In this way, components that have seen longer service and no longer match the current state-of-the-art can also be substituted without having to replace the entire system. That is very, very important to us: just take a look at our Zurich printing plant, where we have maybe five generations of Ferag mailroom systems installed. It all works well and is definitely an efficient and compelling way of modernising and staying up to date.

So for you, this means that Ferag’s development activities are sustainable or are designed to meet your expectations?

The machinery’s modular design is plainly a major advantage for us in terms of investment protection. After all, there’s no way of telling the future. When you are able to shape and deal with the future so flexibly, modular technology of course means significant risk reduction when it comes to investment.

How does the cooperation work, and how has it changed over the past ten years?

It has always been a dialogue where Ferag comes up with suggestions on technology development, while we set expectations on development and product design possibilities – not a one-way street, a two-way process.

Andreas_Schaffner_1