Spanish media group struggles to survive
For 34 years the giant media group has reaped the benefits of Spain's transition to democracy. But now it faces a radical overhaul.
For 34 years it has reaped the benefits of Spain’s intrepid transition to democracy. But now the country’s most powerful media group, which owns the left-leaning El País newspaper, is to undergo a radical overhaul as it battles huge debts, a falling circulation and the death of its co-founder.
Early next month Prisa, which owns a raft of radio, television and publishing companies around the Latino world, will conclude a deal with a US cash shell set up by the globetrotting financier Nicolas Berggruen, known as the “homeless billionaire”, and the ultra-marathon-running Briton Martin Franklin, which should help the Madrid-based empire recover from a perfect storm of debt.
Overnight, a Spanish family company will be turned into a multinational firm, Liberty Acquisition Holdings, traded on Wall Street. The global financial crisis caught the Spanish media group at the worst possible moment: with a huge pile of debt and shaken by the death of its co-founder, Jesús Polanco. That debt now stands at nearly R40-billion, or nearly 12 times the company’s market value.
The Polanco family will lose majority control, with 70% going to the new investors, who will inject R56-billion. “Better 30% of something than 70% of nothing, to put it brutally,” said the other founder and now chief executive, Juan Luis Cebrián.
The change marks the end of an era in which Cebrián and Polanco built a huge media group based on El País in the wake of the end of Franco’s dictatorship, providing an intellectual home to the country’s flowering young left-wingers.
The energetic 65-year-old who uses long-haul flights to write essays and novels, will stay three more years.
“We need major management change. I can carry out much of that. The end of the change is to change me. That is the pact,” he said. The man who led Prisa into a debt mess, in other words, wants to lead it back out. “The group needs very deep transformation. In some ways I may be the worst-prepared person to do that, but in others I am probably the best.”
Cebrián insists the Spanish outlets will not switch political colours. “El País has been orientated to the centre-left from its birth. But the editorial line of our newspapers is set by the editors. That is not in danger.”
Franklin, speaking from New York, confirmed that politics was not a concern to the new investors. “I can count on less than one hand those who have asked me about the political aspects,” he said. “Our interest is in fixing the balance sheet, not in fixing the editorial content. We are not Rupert Murdochs and we have no agenda. What we want is a well-governed public company.”
One reason for not quibbling with El País’s editorial line is that it remains a relative rarity amongst Europe’s quality nationals: a money-maker. In the first nine months of the year it turned €8m profit, despite the advertising slump and a 4% yearly fall in sales to 375 000. It remains Spain’s highest selling non-sports daily and the Spanish-speaking world’s biggest newspaper, ahead of El Mundo.
Although evidence from elsewhere suggests otherwise, Cebrián claims the paper can reverse the fall in sales. “It ought to start climbing back up, though probably not spectacularly. El País will continue to be the market leader not just in Spain, but in the Spanish language for the next five years.”
Most exciting years
Making a profit runs in the newspaper’s blood, he said. When he became founding editor in May 1976 - with Polanco leading the business side - it took just six months to start making money. He edited the paper through the most exciting years in recent Spanish history before becoming chief executive. Polanco’s illness and death in 2007, he admits, provoked internal tensions that helped land the group in trouble. As a result, Cebrián has devoted 80% of his time since the markets collapsed to sorting out the debt problems with 40 banks.
In fact, although El País is part of what Franklin calls Prisa’s “trophy assets”, newspapers are a relatively small part of a group that Cebrián likens to an Ibero-American version of the Murdoch empire. “Politically, we have nothing to do with them, but we can be the News Corporation of the Hispanic world. Linguistic markets count with globalisation and we are fortunate to operate in two sister languages: Spanish and Portuguese.”
The biggest earners are the group’s pay-TV platforms and, like the FT’s owner Pearson, its educational publishing arm, which operates mainly in Latin America. Radio, including the No 1 stations in Chile and Colombia, is almost as important as the print titles.
Cebrián points to a market of 800 million people, mostly in booming Latin American countries with expanding middle classes. Whereas rivals such as Brazil’s Globo, the US-based Televisa and Mexico’s Univision have mainly concentrated on their home markets, Prisa targets the whole region.
“One of those markets is in the United States,” said Cebrián. “There are more Spanish-speakers in the US than in Spain. The GDP of American Hispanics is also higher, and the advertising spend is bigger. There is another Spain in there, with growing demand and nothing like the supply.”
Apart from using the group’s refound financial muscle, the key to Prisa’s future lies in the digital integration being plotted by the team imported from New York and led by a new chief digital officer, the Indian-born Kamal Bherwani. This includes both a massive database and a planned state-of-the-art integrated group platform. “We sell text books to 20 million children, many of whose parents read El País and whose brothers or sisters listen to music on our 40 Principales radio station,” he said.
“We want a consumer database that allows us to attend to their needs. And we are also creating a multimedia platform that allows us to match consumers with content. That’s easy to say but hard to do. We want to come up with technological solutions.”
The group has plenty of content to put on the platform - from video-on-demand to music, football rights and television news clips. The digital success of El País and the other online brands will, he predicts, depend on this ability to offer a huge variety of content.
Now that the debt worries have gone, digital convergence is the name of the game. The first results, Cebrián said, should be seen next year.
Men behind the deal, Martin Franklin, is a British-born serial entrepreneur, aged 46, whose US-based Jarden empire owns everything from K2 winter sports gear to Campingaz. He and Berggruen previously used Spacs (special purpose acquisition companies, also known as “blank cheque companies” or cash shells) to invest in the UK hedge fund group GLG and the insurer Pearl Group. Franklin is an endurance sports enthusiast, taking part in Ironman competitions and 100 mile-plus ultra-marathons.
Nicolas Berggruen, 49, has been dubbed “the homeless billionaire” because he does not own a house, preferring to live in hotels, and has few possessions. Rated 163rd on the Forbes rich list, he is worth $2.2bn (£1.4bn). The German-American son of art collectors says his investments are “often socially and culturally driven”. Recent acquisitions include Germany’s bankrupt Karstadt department stores. He sold his share in the Portuguese group Media Capital to Prisa in 2007.—