When a secretive German company took over Australiaʼs oldest and most iconic magazines — including the Australian Womenʼs Weekly — there was plenty of Shock! and Horror! Venerable titles have been closed, hundreds of people sacked… and now the business itself is struggling to stay afloat.

It was the sunny Monday morning after Derby Day last November and quite a few of the young women gathered in the meeting-room at Bauer Mediaʼs historic headquarters, across the road from Sydneyʼs Hyde Park, were nursing hangovers from a big weekend in the hospitality pavilions at the races. Things were about to take a distinct turn for the worse as a stocky man with a cropped ginger beard and a thick Eastern European accent stood up to give them the bad news. They listened in a daze as Sebastian Kadas, the newly-appointed publisher of two of Australiaʼs most popular womenʼs magazines, Cleo and Dolly, outlined his plans for a brutal “restructure.” Jobs were to be axed, redundancies would be offered, staff who wanted to stay on would work for both titles, one of the two editors would have to go.

“You mean itʼs going to be like The Hunger Games?” joked Phoebe Hooke, one of the magazinesʼ feature-writers.

Kadas seemed to enjoy the analogy to the sci-fi movie where children are forced to fight to the death in a dystopian TV version of Roman gladiatorial games. “Yes,” he said. “Like The Hunger Games.”

“It was just awful the way they broke the news,” says one of the more senior journalists who was present at the meeting. “So cold and unsympathetic. Just reading from the HR (human resources) script. A lot of the girls there were just kids in their early 20s and this was their first job. Afterwards, people were bawling, they were devastated, some of them were practically begging for a job.”

It was a little over a year since Australia had been stunned when the countryʼs largest and oldest magazine group, Australian Consolidated Press (ACP), had been taken over by ʻthe Germans,ʼ Bauer Verlagsgruppe, a fifth-generation family-run company. When the Bauers bought the ACP stable of 70 magazines in October 2012 for $525 million the acquisition brought its empire to 600 magazine titles, plus a slew of radio stations and online services in 37 countries on every inhabited continent on earth bar Africa. Its annual revenues last year — just about all the secretive business reveals to the outside world — had swollen to $3.7 billion. So while the Bauers may not be the Murdochs nor the German publishing goliath Bertelsmann, their earnings are getting on for double those of a major public company such as Fairfax Media, publisher of this magazine.

In the past decade the company has expanded from its headquarters near the docklands of the North Sea port city of Hamburg where it churns out a crop of TV guides and other mass-circulation magazines to become one of the worldʼs biggest media players. The reinsof the company were handed over by the reclusive, 74-year-old Heinz Bauer, to his four daughters a few years ago, principally Yvonne Bauer, the 37-year-old chief executive, who is ranked (with her family) by Forbes magazine as the worldʼs 613rd-wealthiest person, with a fortune of $2.6 billion. According to Colin Morrison, a former executive of both ACP and what is now the Bauersʼ United Kingdom publishing business: “They are very hands-on. They sit down to lunch in Hamburg every Sunday to discuss the business and then on Monday morning the emails go flying out to their managers around the world.”

The deal delivered the Bauers about half the 150 million magazines still sold in Australia every year, plus a distribution business, a classified advertising group in Melbourne and some magazines across the Tasman in New Zealand where they are now also the largest magazine publisher, after taking over a dozen titles from the struggling APN. But what caused the greatest consternation was not the scale of the deal, but the fact that it included some of Australiaʼs most iconic brands. Among them were the venerable Australian Womenʼs Weekly; Womanʼs Day which last year overtook its sister publication to become Australiaʼs biggest-selling magazine, with a total monthly readership of almost four million; foodie favourite Australian Gourmet Traveller, Australian Geographic and TV week.

It also gave them occupancy of the companyʼs rambling 12-storey head office at 54 Park Street, for three generations the home of another family publishing dynasty, the Packers. It was here in 1933 that Frank Packer, the big, brawling patriarch of the family founded the Weekly in the depths of the Great Depression. It was here, as portrayed in the TV drama Paper Giants, that some of Australiaʼs most celebrated magazine queens made their names and the Packers a fortune — Ita Buttrose, the 2013 Australian of the Year who edited the Weekly and in 1972 launched the daring Cleo, with its frank advice to the Pill generation and its coy nude male centrefolds; Nene King, who in the 1980s drove Womanʼs Day to the top, the countryʼs best-selling and most profitable weekly; and the formidable Pat Ingram who reigned over the womenʼs titles for nearly 20 years from the 1990s. It was at ʻnumber 54ʼ that Packerʼs son Kerry started work in his school holidays, bundling up copies of the Weekly in the loading bay. And here that his young son and heir James learned his most indelible business lesson from Al “Chainsaw” Dunlap, an American corporate executioner brought in to slash the staff: “You need to make up your mind whether you want to be called Jamie or James,” the ruthless Dunlap lectured him.

“Do you want to be liked or do you want to be respected?”

He chose the latter. In 2007, without a hint of sentimentality, James sold the Channel Nine group which included the magazines, for $5 billion, to CVC, an American venture capital business, to concentrate on building his global casino empire. CVC had bought at the top of the market, just before the Global Financial Crisis struck. For the next five years, as Channel Nine lost its perch at the top of the TV ratings and the magazines bled revenue and circulation, it struggled to repay its bankers until, almost on the death-knock of default, there was a phone-call from Hamburg.

The man who brought the Bauers to Australia is now the companyʼs chief executive here, Matthew Stanton, known to all as Matt, a 44-year-old accountant by training, with an engaging smile that does not crinkle the corners of shrewd eyes behind practical plastic-framed glasses, and an Estuary English accent delivered in a straight-from-the-shoulder style. Stanton, who learned his trade working for 10 years for the big British beer company Whitbread, had been the chief financial officer of an English radio-and-magazines group called emap which was targeted by Bauer in 2008 for its biggest international takeover.

Stanton packed his bags for Australia a few months later — not because of some falling-out with the new owners but to take up a job as chief executive of the struggling ACP magazine group. Four years later, with CVC striving desperately to stay afloat, Stanton rang an executive at Bauer to tell him that the magazines were for sale:

— I said ʻThereʼs a great magazine group you might be interested in.ʼ

— The gossip is that the purchase was Yvonneʼs idea, and sheʼs the one that was driving it and wants it to work, to demonstrate to her father that sheʼs capable of filling his shoes. Is there any truth to that?

— I donʼt know, but sheʼs really clever, really smart, she really gets the business from the top to the bottom. Sheʼs worked in the business all her life.

Initially the takeover was welcomed by such eminences grises as Ita Buttrose. “Bauer is a professional publishing company with a great reputation. I am sure they want to grow (ACP) and they have some good plans for it,” she said. “From a heritage point of view Iʼm excited for ACP being bought by someone who loves magazines, one of the biggest publishing companies in the world,” said Nine Entertainment chief David Gyngell, who negotiated the sale. Yvonne Bauer, the solidly-built, unmarried scion of the family, flew out to Australia to sign the deal. “We believe in print,” she reassured the nervous staff, who had been told that she liked to be addressed as ʻMadam.ʼ

Walk into the foyer of No 54 today and there is little outward sign that things have changed. Around the walls screens display the covers of the latest issues of the magazines, a window onto a parallel universe of celebrity, fashion, sensation and gossip. Selena Gomez, a bit-part TV actor and singer, confesses ʻIʼm a Big Romanticʼ on the cover of Dolly. Shanina Shaik, an Australian actress apparently, graces Cleo, and the elegant Drew Barrymore the more upmarket Elle. Womanʼs Day is hoping to attract the supermarket checkout crowd with a headline: “How I Lost 15 Kilos” by a woman with the improbable name of Fifi Box. “My Buttʼs Out of Control,” confides Kim Kardashian in NW.

Itʼs only if you look carefully that you notice that some of the titles are missing. Soon after the takeover it became apparent that the numbers were not adding up to the satisfaction of the Hamburgers, as male residents of that great city are called. At the time the deal was hailed as a steal — CVC had effectively paid $2.8 billion for the magazines, which they were forced to sell five years later for one fifth of that. But even at that bargain-basement price Bauer would struggle to make a decent return. Stanton, just back from a trip to frosty Hamburg, denies point-blank that the Bauers overpaid. “They are not buying for the short-term, they are buying for the long term. The Australian market is a good strong market,” he insists. But according to Steve Allen, the chief executive of Fusion Strategy which analyses advertising revenues: “They bought a Holden dressed up as a Rolls Royce. Most people donʼt think too highly of the advertising industry, but these masters of the universe, these merchant bankers would sell their own grandmothers.”

Says a former ACP publisher who knows the business backwards: “At the time of the purchase Australia was seen as a safe haven, our currency was one of the strongest in the world at a time when the Euro was struggling,” she says. “But now itʼs a perfect storm. Advertising is falling, circulation is falling, the Aussie is falling — they had no alternative than to rip the guts out of it.”

The now-privatised company will not declare its Australian results until the end of April, but no-one in the industry thinks that last yearʼs profits will come close to the $75 million it is believed ACP made the year before. What is known is that the Australian dollar has fallen about 20 per cent against the Euro since late 2012, which means that the Bauers paid $100 million more for the business than if they could have waited 18 months. What is also known is that the company has written down the value of its Australian titles by $46 million.

Curiously, this came to light when the accounts of its United Kingdom subsidiary were released last year — for some reason the Australian magazine mastheads are now owned by Bauerʼs UK company. Stanton declined to explain why, although this would have obvious tax advantages.

Within weeks of the takeover the cuts began. First to walk the plank were the staffs of a few obscure publications such as UFC (its stands for Ultimate Fighting Championship) a mixed martial arts magazine, Australian Good Food, a co-venture with the BBC, and two computer magazines for which Bauer found a buyer. But then the magazine-reading public began to sit up as some better-known publications were closed: Burkeʼs Backyard, the magazine spinoff of the TV gardening show which had entertained Australia since the 1980s, and the womenʼs titles Madison and Grazia, went to their graves. Rolling Stone, the Australian edition of the rock generation Bible, was sold. Altogether in the past 18 months Bauer has closed or sold nine of its magazines. Stanton declines to put a figure on it, but industry observers think that something like 200 editors, journalists, circulation and advertising people — or “heads” as Stanton calls them — have left or been laid off.

Stanton is keen to point out that the company has also been hiring staff for some new titles it has launched. However, only two have made much of an impact at the newsagents — the upmarket fashion magazine Elle, and Yours, a clone of the UK magazine of the same name which is aimed at “the forgotten generation” of over-50 women. Neither has yet produced audited sales figures, and newsagents have complained that they are sending back thousands of them, some still in their original plastic-wrapped bundles, because they have been over-supplied. The other start-ups are very much niche publications such as Turu, a camping website, and the rural thriller New Farm Machinery.

Visiting Australia over Christmas, Colin Morrison told me: “The Bauers always say they are committed to print and rarely close anything, which is what makes this unusual. They have closed more magazines in Australia in the past 18 months than they have ever closed around the world.” And there is no sign of the pressure letting up. Inevitably there will be further cuts and closures — Zoo magazine, a “ladsʼ mag” which features preposterously-proportioned breasts, is rumoured to be the next to be chopped. Bauerʼs predictions of a pick-up in advertising revenue later this year are regarded as whistling in the dark.

As well, there has been a growing chorus of criticism of the company, eagerly amplified by rivals such as News Corporation, whose own magazine group, NewsLifeMedia, is dwarfed by Bauer, with less than 10 per cent of the market. Departing staff have been angry about the way they were treated, culminating with one sacked editor taking Bauer to the Federal Court. Social media has been alive with complaints that some of the magazines, such as the relaunched Shop Til You Drop (sic), have been taken downmarket, with a greater reliance on articles recycled from the companyʼs overseas publications. And not just recycled. In an opinion piece in The Australian headlined ʻBauer Should be Ashamed of Itselfʼ the media pundit Mark Day took Bauerʼs Take 5 magazine to task for taking a story about a ʻcheating copperʼ in the Cornish village of Redruth from the British tabloids, and changing the location to Redfern in Sydney. Newsagents complain that Bauer is unloading huge volumes of magazines which they cannot sell on them — “like force-feeding geese for fois gras,” says one — which they have to pay to return for recycling. Its ungrammatical new slogan, ʻWe Think Popular,ʼ has been mocked in the social media. And on top of everything else there has been an official complaint that one of Bauerʼs German magazines wrote sympathetically about the Nazis.

One man who takes a long-term view of the world is Phil Ruthven. On the wall of his office, at the posh end of Melbourneʼs Collins Street, is a decorative genealogy showing his family tree going back to one Thor, Lord of Tibbermore, who terrified the Scottish highlanders back in the 12th century. For more than 40 years, Ruthvenʼs consultancy, IBISWorld, has been producing market research reports to guide some of the worldʼs largest corporations on strategy. His latest news, on the media industry in Australia which is worth around $30 billion a year, makes chilling reading for anyone in the print industry.

Since 1900, when newspapers and magazines owned the entire advertising market, their share of the market has been steadily gnawed away — first by TV, which now owns about a third of the market, and then over the past decade by the internet. Never, says Ruthven, has a new technology moved so fast and so aggressively to capture an industry. “I donʼt see any great future for print, and we may well see it disappear,” he says. “I donʼt say that with any joy, but I can see it going the same way as the horse and cart, although whether it will take 20 or 30 years I donʼt know.”

As for magazines, on top of their steadily-declining share of the pie, the pie itself has been stagnant or shrinking in recent years. The global consultancy firm PriceWaterhouseCoopers says that their total revenues (the cover price makes up about two thirds of magazine revenue, advertising the other third) have fallen by $300 million in the past five years, and predicts that it will continue to fall by another $100 million or so until it hits $1.2 billion in 2017. By then the internet will be making more money than magazines, newspapers, TV and radio put together.

As well, there is relentlessly bad news on the circulation front, as Bauer — along with other magazine groups — fails to come to terms with the internet generation. Millions of people have simply stopped buying magazines — “Young people think a magazine is an iPad thatʼs broken,” says one former magazine company executive. For decades, great titles like the Womenʼs Weekly commanded astronomical audiences. Today their sales have been decimated, slashed to a third or less of their former glory, read by an ever-older audience of loyal, but dying readers. These are the gloomy figures for Bauerʼs best-selling titles, according to the Audited Media Association of Australia:

So why would anyone, let alone the famously frugal Bauers, risk their money on a declining — if not dying — industry? Because, says one respected former publishing executive, they believe there are still profits to be made out of magazines by slashing staff, closing down unprofitable titles, filling the space by recycling articles from overseas publications, and adopting “the Bauer way.” Kadas, in particular — a Transylvanian-born high-flyer in the organisation who was publisher of Bauerʼs Russian magazines before his transfer to Australia — has ruffled feathers by going through the magazines page by page and insisting on micro-managing editorial content, cutting out slang, deleting pictures of staff writers and so on.

Tony Sarno, who resigned as editor of Bauerʼs two technology titles before the magazines were sold last year, believes the writing was already on the wall before the takeover was consummated. “When Yvonne came out we were told to have our offices all scrubbed up and clean and tidy,” he says. “We were told she was in the building… and then nothing happened. She never arrived (to visit us). It was all very disappointing, but I now think that they couldnʼt give a shit about the menʼs titles and technology. They are not interested in fostering an Australian magazine culture, just in rehashing all the stuff they have from overseas.” He says that on one occasion, when an editor asked how they were supposed to translate an article from German she was told to try Google.

And it was not just the redundancies, it was the way in which they were done. The “merger” of Cleo and Dolly, for instance, turned out to be no Hunger Games — neither editor survived; both left. Belinda Wallis, a 10-year veteran of ACP and the editor of Take 5, a $3 tabloid-style melange of “real life” stories, quiz games and puzzles, was told that her position was to be abolished. Wallis, who was on a package of about $200,000 a year (including a bonus), was so incensed that she took the company to the Federal Court claiming that she had been offered a far smaller redundancy payment than the departing male editors of Bauerʼs motoring magazines, and the company had short-changed her about $100,000. The case was settled out of court in February.

Matthew OʼMalley worked for ACP for seven years and was in charge of advertising for their seven motoring titles, including Top Gear and Wheels. He resigned in January last year, a few months before the 35 staff were told one morning that the magazines were to move to Oakleigh, in Melbourneʼs suburbs, where Bauer has its Trader group of classified advertising publications, and that they could apply for their own jobs if they wanted to make the move. OʼMalley, who is now running the local version of Evo, an upmarket British motoring magazine which he says carries more advertising than all Bauerʼs motoring titles put together, says his phone is running hot with calls from his former colleagues who declined to relocate because “without being rude to Oakleigh, itʼs not exactly a lifestyle move.” He says of Bauer : “Itʼs a very different place from what it was — you wouldnʼt recognise it. Content is not king any more. Thereʼs no passion there any more. But donʼt get me wrong, I have enormous respect for Bauer. They know exactly what they are doing.”

— Dumbing down, cutting costs, increasing profits?

— You said that, not me.

Mark Day was particularly critical of Bauerʼs cost-cutting device known by the euphemism of “repurposing” — taking a story from overseas and changing the location to make it more relevant in Australia. Some magazineworld executives and editors are relaxed about this longstanding practice. Sandra Hook, the former chief executive of NewsLifeMedia concedes : “Some products (magazines) are not high on editorial integrity — but this is not journalism, it is light entertainment.” But when I tackled Matt Stanton about it, he seemed to think it was just a production error:

— Obviously youʼre entitled to bring in stories from overseas. But youʼre not entitled to tell lies about where they happened. Is that going to happen again?

— Not on my watch. We made one error… there might have been a second one. That brought it to our attention and at that point we put some controls in place to make sure it doesnʼt happen again.

Stanton is equally dismissive of a well-publicised complaint by the Simon Wiesenthal centre in the US, that last year Bauerʼs Der Landser magazine published an article glorifying the Waffen-SS, the armed wing of the Nazi Party condemned at the Nuremberg Trials for its involvement in war crimes. “Itʼs nothing to do with us and Iʼm not going to comment on it,” he said. Bauer commissioned an inquiry into the complaint, which found that the article “complies fully with the stringent legislation applicable in Germany, and neither glorifies nor trivialises National Socialism.” However shortly afterwards the company decided to cease publishing the 43-year-old magazine.

Probably the greatest challenge Bauer faces — along with every other publishing organisation in the world — is coming to terms with the internet. The problem is not attracting readers online — Stanton says that both the Weekly and Womanʼs Day have over a million visitors a month to their sites. It is revenue. He concedes that, compared with the loss of print advertising the revenue gained from online advertising (which Bauer shares with Nine Entertainmentʼs Mi9 which hosts the sites) is “dimes in the dollar.” And there he might be regretting the loss of yet another of Bauerʼs most experienced magazine publishers, Robyn Foyster.

Foyster, a former TV presenter and 2007 Magazine Publisher of the Year, left Number 54 last year after her publishing responsibilities were reduced from seven titles to two, but insisted that “it was my decision and absolutely amicable and time for a change.” Recruiting some of Bauerʼs most talented editors and journalists, last month she launched Australiaʼs first online-only womenʼs magazine from an office in Neutral Bay. Called The Carousel, it presents a video-rich mix of fashion, health, beauty and food which she hopes will attract some of those women who have been abandoning print magazines such as Bauerʼs. “Peopleʼs consuming habits have completely changed. We have all the content you could dream of here in the palm of your hand,” she says, brandishing her smartphone.

Perhaps Sebastian Kadas was right, after all. Maybe magazines are like the Hunger Games. Except the fight to the death is not between staff, it is between print and online.

And everyone knows who is going to win that one.

Publishing Info

Pub: Good Weekend
Pub date: Saturday 28 March 2014
Word count: 4076