Mecom to charge for news online in new strategy

Reuters News
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Posted: Jan 24, 2012 5:33 AM
Mecom to charge for news online in new strategy

By Kate Holton

LONDON (Reuters) - Loss-making European publisher Mecom is to slash costs, review assets and charge customers to access content online as it fights to revive a business hit by falling advertising sales and changing readership trends.

The group, which sold its Norwegian arm in December to cut debt, set out a new strategy Tuesday in response to what it called significant challenges to the industry.

It plans to make 70 million euros of cost savings, including an unspecified number of job cuts.

By introducing so-called pay walls on the internet Mecom will follow in the footsteps of such publications as the New York Times and Wall Street Journal in the United States and the Times and Financial Times newspapers in London.

Britain's Guardian newspaper, one of the most vocal proponents of providing free news on the internet, has also started introducing paid-for applications of late.

Mecom said it had decided to charge for online access to newspapers such as De Gelderlander as it increases its reliance on its solid subscriber base, which has maintained circulation revenues despite the economic challenges, at a time when advertising revenues continue to fall.

"We are going to face continual declines in advertising over the next three years," chief executive Tom Toumazis told reporters. "But having said that the other key revenue stream of circulation, we believe, is going to prove to be steady.

"So that plays to our strategic message which is our push in to the paid model and subscription model."

The group will introduce charges for its online content, bringing in a fee for Mecom applications on the Apple iPad and smartphones, to expand its existing 1.2 million subscriber base that already pay for print editions.

It will test different pay models on its general websites.

The group, which publishes newspapers and websites in Denmark, Poland and has its core business in the Netherlands, said its cost-cutting drive would include outsourcing support work and greater integration across the group.

Mecom, which issued a profit warning in October due to plunging consumer confidence, said it would further review its business by considering options for its Polish operations and free sheet titles, either through further investment, collaboration or divestment.

"There is a clear need for Mecom to adapt quickly to meet the challenges our industry faces," Toumazis said.

"The strategy we are announcing today will ensure greater commercial focus through a commitment to paid platforms and closer integration to capture better the strengths of the group."

Shares in the group initially opened up over 2 percent before sliding to be down 8 percent Tuesday, following a rise ahead of the statement.

Analysts generally welcomed the review and said Mecom was well placed to grow its online revenues as it already has strong relationships with readers.

"We have long identified Mecom's high level of subscription revenue as a considerable asset and are supportive of the management focusing on this as a key driver of future growth," Numis analyst Lorna Tilbian said.

"We believe the direct relationship that Mecom has with its customers means the group is in a better position than UK peers to both monetize online and generate ancillary enterprise revenues."

($1 = 0.7665 euros)

(Editing by Mark Potter)