Verlagsgruppe Georg von Holtzbrinck GmbH
Verlagsgruppe Georg von Holtzbrinck GmbH
Incorporated: 1948 as Stuttgarter Hausbücherei
Sales: DM 4.14 billion ($2.11 billion) (1999)
NAIC: 51113 Book Publishers; 51112 Periodical Publishers; 51111 Newspaper Publishers; 323119 Other Commercial Printing; 323121 Tradebinding and Related Work; 551112 Offices of Other Holding Companies
Verlagsgruppe Georg von Holtzbrinck GmbH is the holding company for Germany’s fourth largest publishing and media conglomerate. More than 80 companies active in the fields of book publishing, magazine and newspaper publishing, book printing, and new media belong to the group. The British Macmillan Ltd., the German publishing houses S. Fischer and Rowohlt, and the U.S. St. Martin’s Press are some of the most prominent members of the Holtzbrinck family of publishers. Periodicals published by the Holtzbrinck group include the German business and investment magazines Wirtschaftswoche and DM, Germany’s only daily business and finance newspaper Handelsblatt, the German weekly newspaper DIEZEIT, and the German daily newspaper Der TagesspiegeL In Scientific American and nature, Holtzbrinck owns two of the world’s leading science magazines, while through the Verlagsgruppe Handelsblatt, Holtzbrinck has a 49 percent stake in The Wall Street Journal Europe. The group also owns business databases, online services, TV production companies, and 27.4 percent of Germany’s business TV channel n-tv. Holtzbrinck’s Internet holdings are organized under the umbrella of the holtzbrinck networXs AG. The Verlagsgruppe Georg von Holtzbrinck is owned by the three heirs of the founder.
1948-71: Book Club Grows into Publishing Group
Georg von Holtzbrinck, the founder of the publishing group, was born in 1909. After graduating from law school, he became involved in the book trade. In 1937 he took over the Bibliothek der Unterhaltung und des Wissens (Library of Entertainment and Knowledge), a German book club founded in 1876 and based in Stuttgart. In 1948 Holtzbrinck transformed the firm into the Stuttgarter Hausbücherei, which became the breeding ground for his empire. The book club’s name was changed again in 1959 to Deutscher B¨cherbund.
Holtzbrinck next ventured into book publishing, acquiring the renowned S. Fischer Verlag in 1963. Fischer was founded in Berlin in 1886 and after World War II had been re-established in Frankfurt am Main. Such famous European authors of contemporary literature as Theodor Fontane, Henrik Ibsen, Thomas Mann, Virginia Woolf, Sigmund Freud, Thornton Wilder, Boris Pasternak, Arthur Miller, Nadine Gordimer, and more were published by S. Fischer. Moreover, its paperback publishing arm, the Fischer B¨cherei, included an extensive range of works in literature, entertainment, and science, as well as encyclopedias and the collected works of respected authors.
Between 1968 and 1971 Holtzbrinck bought stakes in more book publishing houses and ventured into the realm of periodicals. On the book side, he bought a 49 percent stake in Munich-based Kindler Verlag, publisher of large encyclopedias, biographies, art books, and books on politics and current events; a 26 percent share in the Ernst Rowohlt Verlag based near Hamburg, the publisher of such well-known authors as Hemingway, Updike, and Sartre, and which owned a majority share in the printing firm Clausen & Bosse; and 46 percent in Droemer Knaur, another Munich-based book publisher with a reputation for high quality fiction, contemporary nonfiction and political subjects, popular science, and lavishly illustrated titles.
In 1968 Holtzbrinck bought into the periodicals market with a 50 percent stake in the Verlagsgruppe Handelsblatt, which was founded in 1946, based on a license the British military government issued to publish in Dusseldorf a daily newspaper on business and finance. Holtzbrinck also invested in the Saarbr¨cker Zeitung, the only daily newspaper in the German State Saarland, when the paper was reprivatized in 1970. To organize all of Holtzbrinck’s holdings under one umbrella, the management holding company Verlagsgruppe Georg von Holtzbrinck was founded in 1971.
1972-83: The Book and Newspaper Conglomerate Grows
By 1980 the Holtzbrinck group owned 100 percent of the publishers Droemer and Kindler and 80 percent of the Verlagsgruppe Handelsblatt. The latter was on its way to becoming the leading publisher of business periodicals and information in Germany. After it merged with its main competitor Industriekurier in 1970, the Handelsblatt became Germany’s number one daily business and finance newspaper.
Ongoing efforts to improve editorial content also helped push up circulation. In the late 1960s the Handelsblatt had a circulation of about 30,000 on trading days. By the mid-1980s it circulated more than 100,000 copies. Verlagsgruppe Handelsblatt also published Germany’s only weekly business magazine, Wirtschaftswoche, which grew out of a predecessor, Der Deutsche Volkswirt (German Economist), founded in 1926. In 1977 Verlagsgruppe Handelsblatt bought the monthly magazine DM which was redesigned as a business magazine targeting private investors and consumers. Two years later Holtzbrinck acquired 25 percent of the daily paper Sudkurier, which covered the southern German areas around Lake Constance, the Black Forest, and the Upper Rhine, and a 40 percent stake in the Ulmbased printing operation Franz Spiegel Buch GmbH.
Until he died in 1983 Georg von Holtzbrinck managed his conglomerate from a hilltop headquarters in Stuttgart. Before his death, the founder gave equal shares in his enterprise to each of his three children: Monika Schoeller, who had been CEO of the S. Fischer Verlag since 1974, Dieter von Holtzbrinck, who was responsible for the Verlagsgruppe Handelsblatt, and Stefan von Holtzbrinck, a son from an extramarital relationship whom father Georg later adopted in 1975. The only exception to the equal shares was the Verlagsgruppe Handelsblatt, in which Dieter von Holtzbrinck received a majority stake of 55 percent. To protect the company’s independence as a family business, three family trusts were set up. Each trust was headed by two directors, one of them from outside the Holtzbrinck family. The six directors then formed a supervisory board and elected a seventh director who was also required to be from outside the family.
Holtzbrinck Goes English in 1986
After his father died, Dieter von Holtzbrinck was elected the new CEO by the supervisory board. After having graduated with a university degree in economics, Dieter von Holtzbrinck left the small world he grew up in and went to New York City for a few years. There, working for McGraw Hill, he got his first experience in book publishing. In 1970 he joined the management team of the Handelsblatt Verlagsgruppe in Dusseldorf; ten years later he was the group CEO. When Dieter von Holtzbrinck took over the company he decided to make some major changes. He did not believe the book club business had a future and thus sold the Deutsche B¨chergemeinschaft for DM 250 million to Leo Kirch, another German media giant, in 1989. He then extended the range of the company’s business publications by offering information services. In 1986 he took over the business information database GENIOS and integrated it into the Verlagsgruppe Handelsblatt. Holtzbrinck also bought a majority share of the Swiss economic research institute Prognos AG in 1990.
At the same time, Dieter von Holtzbrinck was the driving force behind the Holtzbrinck group’s expansion into the English language marketplace. Like his father, he favored high quality publishing over pulp and tabloids publishing, long-term profitability over short-term gains, and the independence of his publishers from strict management at Stuttgart headquarters. This business policy made the Holtzbrinck company attractive to publishers who were looking for a strong financial partner but were not willing to give up their independence as entrepreneurs completely. In 1986 Holtzbrinck acquired Scientific American, the oldest magazine in the United States, for $52.6 million. The scholarly magazine had experienced a significant decrease in ad sales and circulation, and several big publishers bid for the reputable publication, among them Time Inc., The Economist Newspapers Ltd., and British Printing and Communications Corp. (BPC). Although BPC offered $61 million, Scientific American’s board of directors went for Holtzbrinck’s offer, which included an agreement not to make any changes in management. Other acquisitions in the scientific field followed: W.H. Freeman, a college and science book publisher, Hanley & Belfus, a publisher of medical titles, and undergraduate college textbook publisher Worth. Another Holtzbrinck acquisition in the United States was Henry Holt & Co., one of the oldest American publishers.
In October 1994, 77-year old New York publisher Roger W. Straus sold his business Farrar, Straus & Giroux to Holtzbrinck. Farrar, Straus & Giroux had built an impressive author portfolio, including international bestselling authors such as Susan Sontag, Tom Wolfe, and Scott Turow, and 19 Nobel price laureates such as Nadine Gordimer and Derek Walcott. In addition to literary fiction, the company also published nonfiction and books for children. All told, Holtzbrinck invested some DM 550 million in American acquisitions between 1985 and 1999.
Since its founding 1971 the publishing group has followed and further developed company principles that are the guidelines for all its strategic and operative activities. Among these guidelines are an absolute orientation on quality and the extensive concentration on upper-level target groups; a profit orientation that must nonetheless not compromise quality and long-term stability; solid financing that ensures the independence of the family business; and disciplined self-restriction on the part of the family members in regards to money and influence. The publishing group is organized in a decentralized manner with minimal hierarchy. The different companies, which are managed close to the actual markets by local managers, are thereby able to profit from the advantages of a flexible mid-sized company as well as the financial resources and expertise of a big player.
Another major deal was sealed in 1995 when for DM 600 million Holtzbrinck acquired a 71.1 percent stake in Macmillan & Co. Ltd., the renowned British publishing group with $385 million annual sales. The deal included the U.S. publisher St. Martin’s Press based in New York, one of the ten largest general publishers in the United States and the division that generated over 40 percent of Macmillan’s revenues. Macmillan was a 150-year-old family business and the largest independent publishing group in Great Britain with over 2,000 employees and subsidiaries in about 20 countries including Australia, South Africa, Mexico, Japan, and India. The Macmillan shares had been put for sale when the family’s trustees were required to spread out ownership of the family estate. Macmillan published general fiction and nonfiction, academic and professional reference books, and the international science magazine Nature.
Because Macmillan’s management put a high value on high quality publishing, a decentralized organization and independence of its subsidiaries, Holtzbrinck and Macmillan were a perfect match. Holtzbrinck’s majority in Macmillan pushed the group’s foreign sales up from 12 to 30 percent of the total DM 2.2 billion. After the acquisition, Holtzbrinck’s management structure was changed to reflect the importance of the deal. Beginning in January 1996 the supervisory board of the Holtzbrinck group was enlarged to include two Macmillan managers. One of Macmillan’s most prestigious projects to date was completed in the same year. After beginning work on the project in 1982, the Dictionary of Art, a 34-volume reference in art history to which no fewer than 6,800 scholars had contributed, was published in 1996.
In the midst of such global expansion, Holtzbrinck faced some serious challenges on the homefront, when the German media group Axel Springer called for an investigation into Holtzbrinck and the German Kirch Group. German law at that time did not allow a private television station to be owned or dominated by a single party. Holtzbrinck had invested in the first private German TV channel, called Sat.1, and later sold its shares to Kirch. In short, Axel Springer accused Dieter von Holtzbrinck of acting as a front for media mogul Leo Kirch. Springer accused Kirch and Holtzbrinck of having a secret agreement that gave Holtzbrinck’s voting rights to Kirch; of planning that Sat. 1 productions should be almost exclusively produced by Kirch subsidiary PKS and Holtzbrinck subsidiary AVE; and of agreeing that Kirch would reimburse Holtzbrinck for possible losses from Sat.1 activities. The LPR, a state agency overseeing the private media, conducted an investigation, but the whole situation eased in 1997 when a new German law went into effect allowing media groups to own a majority share in private TV stations. By then, Holtzbrinck’s shares in Sat.1 were sold to Leo Kirch and its 14.5 percent share of the infotainment TV channel VOX were sold to the Bertelsmann Group.
The Late 1990s: New Media, New Management
The second half of the 1990s brought more major acquisitions in the field of print media. In February 1995 Dietrich Herbst, CEO of Frankfurt-based schoolbook publisher Verlag Moritz Diesterweg, with a nine percent market share in Germany, announced that he would join the Holtzbrinck group. In December 1995 the owner of one of the largest trade book publishers in Switzerland, Rudolf Streit-Scherz, announced that he too would sell his Scherz Verlag to the Holtzbrinck group by July 1996. Also in 1996 Holtzbrinck bought the highly respected German weekly newspaper DIE ZEIT for DM 140 million. In early 1999 Holtzbrinck merged some of its publishing arms with the Augsburg-based publisher Weltbild, originally a magazine publisher owned by the Catholic Church whose annual sales skyrocketed in the late 1990s and passed the DM 1 billion mark in 1998 for the first time. The new holding company was called Verlagsgruppe Droemer Weltbild in which both partners held 50 percent. While Holtzbrinck was interested in getting access to Weltbild’s distribution channels (over 100 Weltbild book store outlets and a 3.5 million customer mail-order database), Weltbild was interested in getting access to Holtzbrinck’s list of high quality titles. In November 1998 German publisher of American author Don DeLillo and owner of German publishing house Kiepenheuer & Witsch, Reinhold Neven, announced that Holtzbrinck would become a minority shareholder of his firm.
- Georg von Holtzbrinck founds the Stuttgarter Hausbücherei.
- Stuttgarter Hausbücherei becomes Deutscher Bücherbund.
- Georg von Holtzbrinck takes over S. Fischer Verlag.
- Holtzbrinck buys a 50 percent share of Verlagsgruppe Handelsblatt.
- Dieter von Holtzbrinck takes over company leadership after his father’s death.
- Holtzbrinck acquires Scientific American.
- German newspaper Tagesspiegel acquired by Holtzbrinck.
- Roger W. Straus sells Farrar, Straus & Giroux to Holtzbrinck.
- Holtzbrinck acquires a 71.1 percent stake in British publishing group Macmillan.
- Holtzbrinck buys German weekly newspaper DIE ZEIT.
- Holtzbrinck and Weltbild found Verlagsgruppe Droemer Weltbild; Holtzbrinck and Dow Jones swap shares of the Wall Street Journal Europe and Handelsblatt.
By the end of 1998 Holtzbrinck’s sales were twice as high as those of a decade earlier: DM 3.64 billion with gross profits of about DM 300 million. Germany’s Managermagazin noted that no other German media group had grown so fast. The acquisition of DIE ZEIT had pushed up the Holtzbrinck group from number seven to number four in total sales among German publishers. Holtzbrinck dominated the German book market and the market for business information. However, new acquisitions and the cost of integrating them into the group had cost Holtzbrinck DM 1.39 billion between 1991 and 1997. The Berlin newspaper Tagesspiegel, a Holtzbrinck acquisition from 1993, kept struggling in the red, and Dieter von Holtzbrinck did not expect the newspaper to break even much before 2005. Since it had been taken over by Holtzbrinck, DIE ZEIT lost five percent of its almost 500,000 readers. The book business was sluggish, and intensified competition put pressure on profit margins. Even in business-publishing, Holtzbrinck’s cash cow, competitors were challenging the group’s leading position. German publisher Gruner + Jahr, together with Brisith publisher Pearson, was planning to publish a German version of the Financial Times.
In addition, Holtzbrinck headquarters found itself understaffed to deal with its new holdings; for years it had been run by around 50 people (four executive managers, a dozen controllers, and administrative assistants), and suddenly that staff was overseeing about 50 subsidiaries with more than 10,000 employees. Thus, in January 1999 four vice-executive manager positions were filled in Stuttgart, more support staff was hired, and tasks were reallocated. In the United States Holtzbrinck invested $57 million in information technology and distribution, including a $30 million automated distribution center in Gordonsville, Virginia, which cut shipping and return processing time down to less than a week.
To defend its leading position in the profitable market for business information Holtzbrinck partnered with long-term American affiliate Dow Jones & Company to plan a new weekly business title. In 1994 Verlagsgruppe Handelsblatt and Dow Jones had taken over German business news agency Vereinigte Wirtschaftsdienste (VWD) and Czech publisher Economia. Since November 1995 the two companies had coordinated their strategies and cooperated in marketing of advertising and their electronic databases Genios and Dow Jones News Retrieval. In June 1999 Holtzbrinck and Dow Jones announced a strategic alliance and swapped shares of their business newspapers. Holtzbrinck assumed 49 percent of the Wall Street Journal Europe, while Dow Jones received 22 percent of Handelsblatt. While Holtzbrinck’s goal was to open up new European markets to the Handelsblatt, Dow Jones aimed at broadening the German readership for the Wall Street Journal Europe. While both periodicals were expected to stay independent, an intensification of the exchange of content, and cooperation in ad sales and distribution was planned.
Holtzbrinck’s New Media department, founded in 1995, included computer book, software, and CD-ROM publisher Systhema Verlag; the American Voyager Company; and various radio and TV shareholdings. In April 2000 all of Holtzbrinck’s Internet shareholdings were organized into a new holding company, the holtzbrinck networXs AG, with headquarters in Munich. The new company included shares of 25 percent or more in Infoseek Germany, Booxtra, Xipolis, e-fellows, Jobline, Newtron, The Motley Fool Germany, and Immowelt. Holtzbrinck planned to go public by 2001 and extend its Internet holdings to about 30.
After some changes in Holtzbrinck’s management Dieter von Holtzbrinck remained responsible for group strategy. He told German managermagazin that he had never been a fond of the shareholder value principle, believing that striving for profits must remain second to quality and long-term stability. To ensure the necessary stream of new talent for his expanding group that would uphold his standards of quality, Holtzbrinck educated 15 would-be business journalists a year at his own school, the Georg-von-Holtzbrinck-Schule für Wirtschafts-journalisten in Dusseldorf, as well as about 100 young multimedia specialists annually in another special training firm, Munich-based Activ-Consult. In the meantime, Holtzbrinck’s potential successor, stepbrother Stefan von Holtzbrinck, was preparing to join Stuttgart headquarters, as CEO of Holtzbrinck subsidiary Macmillan Magazines.
Verlagsgruppe Handelsblatt GmbH; S.Fischer Verlag GmbH; Fischer Taschenbuch Verlag GmbH; Rohwolt Verlag GmbH; Rohwolt Tachenbuch Verlag GmbH; Zeitverlag Gerd Bucerius GmbH & Co.; Verlag Der Tagesspiegel GmbH; AVE Gesellschaft für Fernsehproduktion mbH; AVE Gesellschaft fiir Horfunkbeteiligungen mbH; Clausen & Bosse GmbH; holtzbrinck networXs AG; Franz Spiegel Buch GmbH (66.5%); Verlagsgruppe Droemer Weltbild Verwaltungsgesellschaft mbH (50%); Verlag Kiepenheuer & Witsch GmbH & Co. KG (45%); n-tv Nachrichtenfernsehen (27.8%); Henry Holt & Company, Inc. (United States); Farrar, Straus & Giroux, Inc. (United States); Scientific American, Inc. (United States); Macmillan Limited (United Kingdom); St. Martin’s Press, Inc. (United States); The Wall Street Journal Europe (Belgium; 49%); Prognos AG (Switzerland).
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