SanomaWSOY Corporation

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SanomaWSOY Corporation

Ludviginkatu 6-8
POB 1229
FIN-00101 Helsinki
Finland
Telephone: (+358) 105 1999
Fax (+358) 105 19 5068
Web site: http://www.sanomawsoy.fi

Public Company
Incorporated: 1999
Employees: 18,000
Sales: EUR 1.73 billion ($1.7 billion) (2001)
Stock Exchanges: Helsinki
Ticker Symbol: SWSA
NAIC: 323111 Commercial Gravure Printing; 451211 Book Stores; 511110 Newspaper Publishers; 511120 Periodical Publishers; 511130 Book Publishers; 511140 Database and Directory Publishers; 722110 Full-Service Restaurants

Finland’s SanomaWSOY Corporation leapt onto the broader European media scene with the 2001 acquisition of VNU’s Consumer Information Group (CIG) and its 250-strong portfolio of magazine titles. Prior to that acquisition, SanomaWSOY had been Scandinavia’s second-largest media group, behind Sweden’s Bonnier, as well as the Nordic region’s largest publicly listed media company. With the addition of the CIG unit, SanomaWSOY’s revenues will climb to EUR 2.4 million in 2002, from EUR 1.73 million in 2001. The acquisition gives the company leading shares in the magazine sector in Finland, the Netherlands, Belgium, Hungary, and the Czech Republic, as well as prominent spots in Croatia, Romania, Slovakia, and Sweden. Prior to the CIG acquisition, more than 92 percent of the company’s sales had been restricted to the Scandinavian market; following the acquisition, international sales represented more than 42 percent of SanomaWSOY’s total sales. The company’s media interests include Newspaper Publishing, including Finland’s largest newspaper, Helsingin Sanomat, and a range of regional papers; Book Publishing under the imprint of WSOY, Finland’s largest book publisher with more than 600 new titles each year; Retailing and Restaurants, through Rautakirja and its chain of newsstands, bookshops, and betting shops; Television, including Channel Four Finland, cable TV operator Helsinki Television, and commercial broadcaster Nelonen; Film, based primarily around Rautakirja’s 15 multiplex movie theaters; and other activities that include printing—the company operates 13 printing plants across Finland—and distribution. SanomaWSOY is listed on the Helsinki Stock Exchange and is led by Hannu Syrjänen, president and chief operating officer. The company remains held at 49 percent by Sanoma’s founding Erkko family.

19th-Century Finnish Media Dynasties

The SanomaWSOY entering the twenty-first century was formed through the merger of two of Finland’s leading media concerns, Sanoma and WSOY, in 1999. Both companies traced their histories to the late nineteenth century and had become leaders in their respective areas of newspaper publishing (Sanoma) and book publishing (WSOY); the companies had also long been partners in the Rautakirja retail and restaurant group, which had built the largest chain of newsstands in Finland.

WSOY stemmed from 1878, when Werner Söderström published his first book, J.O. Aberg’s Pohjanmaan helmi (The Pearl ofOstrobothnia). The Söderström family had first entered printing when Söderström’s father Gustav founded a printing shop in 1860 in the town of Porvoo. The younger Söderström, just 18 at the time he published his first book, soon developed the business into a respected publishing house, extending its title list to including literature, non-fiction, and textbooks by the end of its first decade. In 1904, Söderström incorporated the company as Werner Söderström OY (SOY). Two years later, the company began to publish the first-ever Finnish-language encyclopedia in partnership with another leading Finnish publisher, Otava.

In 1910, WSOY joined with newspaper publisher Sanoma and other Finnish publishers to form Rautakirja, an operator of newsstand kiosks which patterned itself after WH Smith shops in the United Kingdom. By 1911, Rautakirja had opened some 30 shops, at first targeting Finland’s train stations; that company added wholesale book and newspaper distribution in 1913, and by 1920 had expanded its retail network to more than 100 shops across Finland.

WSOY entered the magazine publishing sector in 1922 with the women’s title Kotilesi. The company quickly added additional titles. In 1934, WSOY and Otava formed the jointventure Yhtyneet Kuvalehdet, which took over the company’s magazine operations. By then, Rautakirja shops had begun appearing on Finland’s city streets and had extended their range to a broader convenience offering, including sales of tobacco, film, and candy.

WSOY’s partner in Rautakirja, Sanoma, had by then established itself as another major figure in the Finnish publishing market. Sanoma had been founded in 1889 when journalist Eero Erkko launched the daily Päivälehti. Erkko was named editor-in-chief of the newspaper, which grew quickly. By the end of the century, however, Päivälehti had caught the attention of Finland’s governor general, a representative of the Tsar of Russia, which still controlled Finland. Päivälehti began running afoul of the official censor, and by 1899 had faced its first threemonth suspension. Erkoo was dismissed as editor-in-chief in 1900 but remained on as a journalist until he was deported in 1903. In 1904, Päivälehti was banned altogether.

Yet the newspaper was quickly reborn, now as Helsingin Sanomat, published by the newly formed Sanoma Corporation. The newspaper began publishing in 1904; the following year, Eero Erkko, who had gone to the United States, came back to Finland, and in 1906 became Sanoma’s chairman of the board. Erkko once again took up the editor-in-chief position in 1909.

The growth of the Rautakirja retail network helped stimulate Helsingin Sanomafs sales, and by 1914 the paper, initially published six days a week, added a Sunday edition as well. The Finnish Civil War of 1918 caused a temporary break in the newspaper’s publishing schedule, as Helsingin Sanomat became a firm backer of Finland’s push to break free from Russia, which by then was in the throws of the Russian Revolution. That position helped the newspaper gain stature following the country’s independence.

After Eero Erkko died in 1927, Sanoma remained owned by the Erkko family, and son Eljas Erkko took over as the newspaper’s editor-in-chief. In that year, the newspaper added a new weekly supplement, Viikkoliite, which featured illustrations and, from 1929, comic strips. The popularity of the comics soon led the paper to add a dedicated comics supplement. Sanoma launched an afternoon edition of the Helsingin Sanomat in 1932, and by the end of the decade the newspaper’s circulation had reached 80,000—and rose to 100,000 for the Sunday edition.

Finnish Media Heavyweights in the Postwar Era

At the end of World War II, Sanoma entered the magazine business with the acquisition of Viikkasanomat, a weekly news magazine, in 1945. That same year the company launched Valitut Palat, the Finnish version of Reader’s Digest magazine. The growing success of an afternoon edition of Helsingin Sanomat led the company to re-launch it as a separate newspaper, under the title Ilta-Sanomat, in 1949. Two years later, Sanoma extended its magazine operation into the comic book arena, when the company acquired the Finnish license for Disney’s Donald Duck magazine. Called Aku Ankka in Finnish, the magazine quickly became popular among Finland’s youth and became the company’s largest-selling magazine.

Sanoma’s operations expanded again in 1951 when the company established a photographic news service, Lehtikuva, in time for Helsinki Olympic Games held in 1952. By then, the company’s flagship newspaper had been experiencing strong growth, reaching a circulation of more than 230,000 by the mid-1950s—a figure that established the paper as one of the leading newspapers in the entire Scandinavian region. In 1957, Sanoma had a new success with the launch of a Finnish version of woman’s magazine Me Naiset. The death of Eljas Erkko in 1965 brought a new generation of the Erkko family, in the form of Aatos Erkko, into Sanoma’s leadership. Two years later, the company added a new magazine title, the family-oriented Kodin Kuvalehti.

WSOY was posting its own successes in the postwar era. By 1947, the company’s new title catalog had topped 400 books for the year. In 1949, the company expanded its printing facilities with the purchase of FG Lönnberg. By the mid-1950s, WSOY had an international success after publishing Tuntematon sotilas {The Unknown Soldier) by Vain”Linna in 1954.

In the following decade, Rautakirja—which had extended into the bookstore market with a purchase of a single store, Suomalainen Kirjakauppa, in 1924—began to build on its retail holdings and opened its second bookstore in 1965. The success of that branch led the company to roll out Suomalainen Kirjakauppa across Finland, building up a network of more than 60 stores. With a strong retail outlet for its books, WSOY began developing other sales channels, and in 1971 the company launched its own book club, in partnership with fellow publishers Otava and Tammi. WSOY went public in 1976, and in 1977 the company opened a new book production facility in Juva.

Company Perspectives:

Mission: SanomaWSOY’s mission is to be one of Europe’s leading media companies in terms of stakeholder value growth. Vision: Our aim is to be the number one media company in our chosen markets, offering the most wanted and valued products and services and the best level of sustainable profitability and growth. Values: Our values are creativity, reliability, and dynamism. Creative work is the essence of communications, and creativity and reliability form the basis of all our activities. Dynamism is essential to our success; our strength lies in our people and working together for common goals.

Sanoma added color to its newspapers in 1979 after converting the company’s printing operations to the new offset printing technology. The company proved eager to expand into other technologies as well, and in 1981 acquired cable television operator Helsinki Television, which had been launched in 1973. That same year, Sanoma made an attempt to expand internationally, acquiring the printing operations of American Crafton Graphic Company; Sanoma sold off those operations again in 1988. Meanwhile, the company had created a new division for its book and magazine operations, Sonamaprint. That unit was expanded with the purchase of the over-50 magazine ET-lehti in 1983; Gloria, a women’s magazine, in 1987; and the computer and information technology magazine group Tecnopress in 1984.

WSOY had also begun to diversify in the 1980s, buying up Avest, producer of audiovisual programming in 1984, and launching a calendar publishing division in 1986, which was to go on to become one of Scandinavia’s largest calendar publishers. In 1988, WSOY and Sanoma placed Rautakirja on the Helsinki Stock Exchange. The public offering enabled Rautakirja to begin its own diversification drive, starting with the acquisition of a small stake in theater owner Finnkino in 1989 (with full control completed in 1994). In 1990, Rautakirja extended its retail business with the acquisition of the 98-store chain of Tiimari stationery and gift stores, which included a small operation in Sweden as well.

Sanoma had been expanding its printing capacity, opening two new plants into the new decade. The company had also restructured its operations again, creating a new subsidiary, Helsinki Media Company, to combine its Sanomaprint and other media holdings, in 1993. That year, the company began expanding beyond Finland with the acquisition of Sweden’s Milvus. The acquisition brought Sanoma Milvus’s outdoor sports magazine title and a platform for the launch of a new title, Sy & Sticka.

International Media Group for the New Century

In 1995, WSOY acquired Weilin & Göös, a publisher that had been founded in 1872. The two companies had already formed a relationship through a joint venture company, Ajasto, which combined the two company’s calendar publishing activities. That company then took the Scandinavian leadership in the calender market when it acquired Esselte Chrono and Emil Mostue in 1997. WSOY continued pursuing other partnerships, such as the formation of Werner Söderström Lakitieto with the Finnish Association of Lawyers in 1996.

Meanwhile, Sanoma had continued pursuing its international expansion, launching a Swedish version of ET-lehti, and acquiring ski and outdoor magazine Aka Skidor. The company also proved an early entrant to the Internet, launching Web sites for Ilta-Sanomat and Helsingin Sanomat in 1996. The company then extended its television holdings with the launch of a new television station, Nelonen, also known as Channel Four Finland. Sanoma’s publishing wing had also grown with the purchase of Startel and the launch of a daily business-oriented newspaper, Taloussanomat.

The year 1998 marked a turning point for the Finnish media market. In that year, Sanoma and WSOY agreed to merge, forming SanomaWSOY in a transaction completed in 1999. The new company, which listed on the Helsinki Exchange in 1999, spanned nearly every media category and took the clear lead in the Finnish market, trailing only privately held Bonnier, of Sweden, in the overall Scandinavian market. The new company, which included control of Rautakirja, began trimming some of its assets, selling off the Tiimari retail chain and the company’s book club.

As SanomaWSOY entered the turn of the twenty-first century, it remained almost entirely focused on the Scandinavian market, with some 92 percent of its sales, which had topped EUR 1.3 billion, coming from that region. In 2001, however, the company found what one analyst described as a “once in a lifetime opportunity.” The Netherlands’VNU group, which had just acquired the ACNeilson Company, announced that it was selling its Consumer Information Group business unit, with more than 250 magazine titles, a 50 percent share of the Dutch magazine market, a 39 percent share of the Belgian market, and an extensive portfolio of magazine titles across Central Europe. SanomaWSOY leapt at the chance, spending more than EUR 1.25 billion.

Key Dates:

1878:: Werner Söderström starts a publishing business.
1889:: Eero Erkko begins publishing daily newspaper Paivalehti.
1890:: Werner Söderström incorporates as WSOY.
1904:: Sanoma Corporation is created.
1922:: WSOY enters the magazine publishing sector with the women’s title Kotilesi.
1945:: Sanoma begins magazine publishing with the acquisition of Viikkasanomat.
1976:: WSOY goes public on the Helsinki Stock Exchange.
1981:: Sanoma acquires Helsinki Television.
1984:: WSOY acquires audiovisual production company Aveset.
1993:: Sanoma forms Helsinki Media Company, combining its book and magazine publishing and new media operations.
1995:: WSOY acquires Weilin & Göös publishing group.
1998:: WSOY and Sanoma agree to merge, forming SanomaWSOY.
2001:: SanomaWSOY acquires Consumer Information Group business from VNU, adding 250 magazine titles to become the fifth-largest magazine publisher in Europe.
2002:: SanomaWSOY acquires full control of retail and distribution group Rautakirja.

The acquisition transformed the group into an internationally operating media company with projected sales of EUR 2.4 billion by the end of 2002, giving it the number five position in the European market. While still small compared to European heavyweights such as Bertelsmann and Pearson, SanomaWSOY had achieved one of its main strategic objectives in a single deal. The company then began putting into place a new long-term strategy, announcing its intention to leverage its magazine division’s international presence in order to extend its other areas of operation into the larger European arena as well. As part of that plan, the company moved to take full control of Rautakirja, which by then had extended its own businesses into Estonia and elsewhere, in June 2002.

Principal Subsidiaries

2ndhead Oy; Accres Uitgevers B.V. (Netherlands); Alma-nacksförlaget AB; Baltic Media Oy (89%); Compad Oy; Emil Moestue as; Esmerk Group; Docendo Finland Oy; Docendo Sverige AB; Etelä-Karjalan Jakelu Oy; Etelä-Saimaan Sanomalehti Oy; Foodstop Oy (99%); Free Ad Production Oy; Geomatic International B.V. (Netherlands); Helsinki Television Ltd; HPR Holding B.V. (75%); use Media Group (58.7%); Infosto Oy; Janton Oyj (21.37%); Kymen Lehtimedia Oy; Kymen Sanomalehti Oy; Kymen Viestintä Oy; Lehtikanta Oy; Lehtikuva Oy; Leijonajakelu Oy; Mândag Oy; Nummi-Plast Oy; Oy Ruutunelonen Ab (90.55%); Oy Suomen Medianeionen Ab; RCV Entertainment B.V. (Netherlands); Saimaan Lehtipaino Oy; Sanoma Uitgevers B.V. (Netherlands); Sanoma Magazines Finland Oy; Sanoma Magazines International B.V.; Startel Oy (90%); Tuotantotalo Werne Oy; Uutisvuoksi Oy.

Principal Divisions

Newspaper Publishing; Book Publishing; Electronic Publishing; Television Broadcasting; Retail and Distribution.

Principal Competitors

Bertelsmann AG; Pearson plc; Reed Elsevier plc; United News & Media plc; Wolters Kluwer NV; Grüner Jahr AG & Co. Druck- und Verlagshaus; Reed International plc; Daily Mail & General Trust plc; Axel Springer Verlag AG; EMAP plc; WH Smith PLC; LOGISTA S.A.; FNAC S.A.; LOGISTA SA; FNAC SA; Reitan Handel ASA; Ingram Industries Inc.; Reitan Narvesen ASA; John Menzies PLC; Ingram Book Group Inc.; Follett Corp.; Timon S.A.; Union INVIVO; Anderson News Co.; Maruzen Company Ltd.; Relais FNAC; Dawson Holdings PLC; Ruch S.A.; Timon SA; Surridge Dawson Ltd.; Ringier AG; Conde Nast and National Magazine Distributors Ltd.; Libro AG.