Germany is currently living through its “Borders incident," as Verlagsgruppe Weltbild, one of its largest book companies, filed for insolvency January 10. In an emergency meeting, Weltbild’s owners, a complex consortium of over a dozen dioceses of the Catholic Church, had decided to stop financing a forthcoming company restructuring. In a short notice, the management said that declining sales in the previous half year, and higher than anticipated financial commitments needed for the planned company turnaround had made the filing unavoidable.
With a turnover of € 1.6 billion ($ 2.19 billion), and a workforce of 6,800, Weltbild is one of the largest media and book trading houses in Europe, with operations primarily in Germany, Austria and Switzerland (with those latter holdings thus far not affected by the insolvency). For the moment, operations continue, while an insolvency administrator has been appointed who is expected to come up with an insolvency plan by March of this year. In first industry reactions to the filing, an asset stripping was expected to be the most likely outcome from the pending bankruptcy, with Weltbild’s online business considered to form the most valuable part of the company.
The announcement sent immediate shockwaves across the book industry, despite the fact that the company has been struggling for at least two years. As of November 2011, the assembly of bishops and other clerical organizations who controlled it, had decided to put Weltbild on the block, in response to a growing alienation between the owners and a management that had developed an initially local mail order and chain book store into a platform that was positioned to compete with Amazon in both print and e-book selling over the Internet. The selloff was canceled though, when no immediate buyer emerged, and some in the church and in the strong trade union frowned at the idea of bringing in investment capital.
In the long term, the showdown seemed hardly avoidable, as the owner’s low key commitment had to clash with the plan of the management, to radically renew Weltbild over a period of three years, until 2016, by closing many of its 300 bricks-and-mortar outlets, and instead transform it into Germany’s leading domestic Internet platform for books and media.
Led by CEO Carel Halff, Weltbild had become the number two online book retailer in Germany, behind Amazon, while multiplying its various digital initiatives. Focusing on a strategy defined by digital and Internet sales, Halff was betting early on e-books, introducing devices and promoting an expanding catalogue of titles – which included loads of self-published as well as erotic titles, which again drew harsh criticism from the Church. In 2013, Weltbild became a driving force in the Tolino alliance, a consortium formed around a line of e-readers and tablets, which included not only Deutsche Telekom as a technology partner, but also Thalia as the largest chain book store and a direct competitor. In November, Weltbild also announced plans to extend its share in buecher.de, an online bookselling platform co-owned by the Holtzbrinck group (which seemed to be ready to divest its stake) and Axel Springer.
All these simultaneous initiatives may have overburdened the complex ownership structure, as it required a significant financial commitment in a long term plan. When holiday sales stayed much below expectations, and the required investment skyrocketed from € 60 million ($ 82 million) to an estimated € 160 million ($ 220 million), the owners decided to pull the plug.
The drastic move not only takes out one heavyweight player from the German book market, but will confront publishers with a hefty load of returns, and a closed pipeline to consumers for their 2014 titles. It will – if lessons from the Borders bankruptcy have any relevance for Germany, too –grow the clout that Amazon has in the world’s third largest publishing market, both as the dominant online platform, and as the market leader for the now quickly growing e-book segment, as it is estimated at owning some three quarters of all online sales in books in Germany.
Coinciding with similarly drastic developments at other major book chains - Chapitre in France, Selexyz in the Netherlands, and Indeks Retail in Denmark – it must be expected that the fallout from Weltbild, and the overall crisis in book and media retail across Europe, are a somber start to 2014