How a German media company brought Australia’s greatest magazine empire to its knees

In 2003, The Australian Women’s Weekly, one of Australia’s most popular, not to mention profitable, magazines, turned 70. To mark the occasion, Kerry Packer, whose family business had published the magazine since its inception, hosted a lavish black-tie dinner for some 500 people at the headquarters of his Channel Nine network, in Willoughby, on Sydney’s lower north shore. Guests arrived by limousine and were ushered along a red carpet into the network’s main studio, which had been converted into a ballroom where the walls were hung with large screens showing famous Women’s Weekly covers.

There was French champagne and Dame Edna Everage. There was Ita Buttrose and Dawn Fraser; Margaret Whitlam and Kathy Lette. A big band played. Ros Packer wore a scarlet cashmere jacket edged in matching scarlet mink. A film crew shot the event, which was turned into a one-hour This is Your Life special with the magazine as the subject.

When the program aired, it featured a pre-recorded congratulatory message from Luciano Pavarotti, the opera tenor and paparazzi magnet whose mass-market appeal had made him a regular in the magazine’s pages.

“That party would easily have cost a million dollars,” says Deborah Thomas, the magazine’s then editor. “But it didn’t matter for Kerry, because he loved the Women’s Weekly.”

Kerry Packer and guests who attended the 70th birthday party of his beloved Australian Women’s Weekly, from left: Dame Edna Everage, Deborah Thomas, Ros Packer, Ita Buttrose and Dawn Fraser.Credit: Illustration by Sam Bennett. Photography by Steve Lunam, Kym Smith, Shaney Balcombe.

And no wonder. In the mid-2000s, the Women’s Weekly was regularly selling in excess of 600,000 copies a month. The magazine could top out at more than 300 pages and bring in close to $2 million in advertising revenue per issue. It could be mumsy, with its recipes and knitting tips, but it also had remarkable pulling power, and featured exclusives with princesses and prime ministers, actors and supermodels.

Buoyed largely by the Women’s Weekly, Packer’s publishing group, Australian Consolidated Press, became the biggest magazine publisher in Australia, and a nursery for some of the best editors, writers and photographers in the country. Packer amply resourced his mastheads, many of which, including Woman’s Day, Gourmet Traveller and Cleo, developed loyal readerships and high profiles.

By the late 2000s, however, the industry was ailing: sales were sliding, with advertisers and readers heading online. Kerry Packer died in 2005. Sniffing the wind, his son James sold his father’s media empire, including Channel Nine and ACP, for $5.6 billion to private equity group CVC Capital, which took full control in 2008.

According to Colin Morrison, a former CEO of ACP, the magazines made up $1.75 billion of that sale. Four years later, CVC sold ACP to Germany’s Bauer Media Group for $525 million.

Bauer is the largest private publishing company in Europe: when it took over ACP, it had annual revenues of 2.1 billion euros and offices around the world. And yet Bauer’s ownership of ACP has been a disaster. Dozens of magazines, including Cleo, Grazia and FHM, have been closed or suspended, and hundreds of staff retrenched.

“The saddest part about this whole debacle is that [Bauer] single-handedly decimated the magazine industry here.”

Through a combination of ineptitude, hubris and poor timing, Bauer has crippled the business, losing what Morrison estimates to be $800 million in eight years. The final act came in mid-June, when Bauer sold the magazine group to the Australian private equity group, Mercury Capital, reportedly for between $35 million and $50 million. (One source claims it was more like $10 million.)

“It’s been one long nightmare for Bauer,” Morrison says via phone from London, where he now lives.

Bauer might have put Australia in the rear-vision mirror, but the local industry has been left with the wreckage. “The saddest part about this whole debacle is that [Bauer] single-handedly decimated the magazine industry here,” says one former Bauer Australia CEO. “It’s hard to see anyone being able to resurrect it.”

Publishing has long been a world of egoists and eccentrics. Rupert Murdoch, Robert Maxwell, Randolph Hearst. Kerry Packer was no different. He kept a pistol in his office and gold bars in his office safe. He loved cigarettes, food and gambling. He could drop $10 million in a single sitting in Las Vegas or London. After winning big, he sometimes tipped croupiers tens of thousands of dollars, or offered to pay their mortgages.

According to legend, he was playing baccarat in Las Vegas in the mid-1990s when he was interrupted by a loud-mouthed Texan at a neighbouring table irked at being refused entry to the game, boasting that he was worth $100 million. Packer turned to him and said: “I’ll flip you for it.” The Texan declined. Such risk-taking would be anathema at Bauer, whose owners are known for their reclusiveness and frugality.

Bauer was founded in Hamburg, in 1875, by a 23-year-old lithographer named Ludolph Bauer. The company began by printing business cards, before launching a free local newspaper, Rothenburgersorter Zeitung. After World War II, it printed income tax tables, then radio guides and TV listings. It expanded overseas in the 1980s, buying and launching women’s magazines and supermarket glossies in the US (Woman’s World, In Touch Weekly) and UK (Bella, Take a Break, That’s Life!).

Creativity was not a priority. As Siegfried Moenig, who managed the company alongside owner Heinz Bauer in the 1960s and 1970s, once put it: “I am an industrial manager who accidentally produces printed matter.”

Bauer is a private company. Until he retired in 2010, Heinz Bauer, the fourth-generation owner, was said to hold 96 per cent of the stock. “Heinz is a devout Protestant, and very private,” says a former Bauer manager who has worked with the family in Germany. “He is an old-fashioned businessman who takes pride in the fact that he never takes out a loan to finance the business. It’s all equity.”

Major decisions were sometimes made by Heinz while sitting around the kitchen table, having dinner with his wife and four adult daughters. As an executive model, it worked well: Bauer is now a publishing behemoth, with more than 600 magazines, 400 digital media outlets, and over 100 radio and TV stations worldwide.

In 2010, Heinz handed 85 per cent of his stock to his third daughter, Yvonne. (The other daughters received 5 per cent each.) Yvonne was then 36. Two years later, in her first major foray, she bought ACP. Set against the estimated $1.75 billion that CVC had paid just four years before, Bauer seemed to have scored a bargain. But the Germans had misjudged the state of the business, which had been neglected during CVC’s ownership.

“CVC hadn’t invested in digital and had cut back on promotions,” says Colin Morrison. In order to turn a dollar, Bauer was forced to close titles and shed staff. Yvonne Bauer visited Australia infrequently, and then only briefly.

Staff were initially thrilled to have been bought by a media company. But Bauer’s publishing model could not have been more different to ACP’s.

“Staff were expressly told to address her as Ms Bauer, not Yvonne,” says Deborah Thomas, who was then editing the Women’s Weekly. Ms Bauer was polite but aloof, and studiously unflashy. Some people respected her unpretentiousness: others thought it sent the wrong message. As less charitable staff put it: “The Devil Wears Witchery”.

After years of being owned by private equity, staff were initially thrilled to have been bought by a media company. But as soon became apparent, Bauer’s publishing model could not have been more different to ACP’s. In Europe, Bauer churned out a raft of cut-price, mass-market weeklies, celebrity gossip sheets and puzzle books. It was a distribution-based model with the bulk of revenue coming from newsstand sales.

The formula worked well in Europe and the US, where magazines regularly sell hundreds of thousands of copies. But Australia’s small population means that many magazines, especially ACP’s high-end fashion titles such as Harper’s Bazaar and Elle, rely mainly on advertising revenue. But attracting premium brands to advertise requires investing in your magazines – paying for top photographers and writers, having the best paper stock – which Bauer was loath to do.

“We had our budgets cut relentlessly,” a former fashion editor tells me. On one occasion, a group of senior editors attended a conference organised by Bauer Australia in Sydney.

“We thought we would brainstorm, and come up with innovative new solutions to the problems we were facing,” she says. “Instead, an editor from Germany gave a slideshow on ‘repurposing’ content. He said, ‘In Germany if we have a story in one magazine, we can repeat that story in 17 other magazines in different countries, without changing a word.’ ”

This would backfire in 2013, when one of Bauer’s tabloid weeklies, Take 5, ran a story about a “crooked copper” from the village of Redruth, England, and changed the location to Redfern, Sydney. (Bauer blamed a typographical error.)

Cutting costs is hardly unique in publishing. But Bauer took it to another level. On one occasion, food editors were told to stop taking so many photos of dishes. According to one editor, “We were shown a shot of a green soup. We were told not to worry if the recipe we were featuring was for avocado soup or pea soup, ‘Just use the same image every time you have a green soup.’ ”

Another editor was told by her boss that “in Germany we have a magazine where normal people just send in their Facebook photos of food they make. That’s the whole magazine. People don’t want to see fancy recipes and pictures.”

Leadership also became a problem. (Bauer Australia had six CEOs in eight years.) Matt Stanton, who was CEO when Bauer took over in 2012, was well liked and respected. But when Stanton left, in 2014, he was replaced by a 44-year-old Englishman, David Goodchild. At the time, Goodchild also headed H Bauer, in the UK, and was flying regularly between Sydney and London.

According to past and present Bauer employees, Goodchild had little interest in or knowledge of the Australian market. (Goodchild, who resigned from Bauer in 2016, could not be reached for comment.)

He told editors that he had discovered an interesting Australian woman who they should feature in their magazines, named Ita Buttrose. On another occasion, he was asked by a group of senior editors about his strategy for the business: he apparently pointed to himself and said, “I am the strategy.” (Goodchild came to be known as “David Brent”, a reference to the Ricky Gervais character in The Office.)

In mid-2015, he downgraded the paper stock on Harper’s Bazaar, without telling anyone.

“The first I knew about it was when I got a call from our biggest advertiser screaming down the phone at me, saying how dare we change the stock without telling him,” says Marina Go, then general manager of the Bauer-Hearst joint venture, under which the magazine was published. “I went into [Goodchild’s] office and said, ‘I want you to know that we are going to lose hundreds of thousands of dollars in revenue because of this decision.’ ”

Goodchild lasted about a year. He was replaced by interim CEO Andreas Schoo, who was followed by Nick Chan in July 2016. By this time, it was apparent to Go that the business was in poor shape.

“The Australian operation couldn’t fund itself even then,” she says. “There were rumours that Bauer in Germany was sending out $50 million, just so the Australian business could make payroll.”

Chan had previously worked at ACP and its rival, Pacific Magazines, then owned by Kerry Stokes’ Seven West Media. One of his first priorities was to reduce the company’s overheads, which as a proportion of revenue were more than 15 per cent – an unsustainable figure. (Pacific’s overheads, by comparison, were roughly 5 per cent.)

Chan streamlined the business, selling or closing unprofitable titles, including Shop Til You Drop, Rugby League Week and the print edition of teen staple, Dolly.

He also attempted to grow the digital side of the business but, as soon became apparent, German HQ was reluctant to take risks. Indeed, Good Weekend has spoken to a former Bauer executive who, upon visiting the company’s headquarters in Hamburg, was told not to even mention the word “digital”.

“They paid half a billion dollars for these amazing brands, and then they roll them up into [one website] Now to Love.”

Today Bauer boasts of having “400 digital media outlets” worldwide. But this is misleading. “Most of these ‘digital media outlets’ are just websites in the image of a magazine,” says Colin Morrison. “They’re not, mostly, digital businesses at all.”

Bauer Australia had some wins online, most notably with Beautyheaven, a local beauty website that the company bought in 2015 for a rumoured $20 million. Beautyheaven has 30,600 followers on Instagram, and now vies with the independently owned Adore Beauty for market leadership.

But Bauer’s broader digital strategy, embodied by the Now to Love portal, has proved less impressive. Now to Love, which Bauer launched in late 2017, brought the company’s best-known women’s magazines, including The Australian Women’s Weekly and Woman’s Day, on one platform.

“The plan was to aggregate all of that content on one site, to develop a mass audience that could compete with Google and Facebook,” says current Bauer Australia CEO Brendon Hill.

To many observers, the plan made little sense. “They paid half a billion dollars for these amazing brands, and then they roll them up into Now to Love,” says Edwina McCann, editor-in-chief of Vogue Australia, which is owned by Rupert Murdoch’s News Corp.

“Bauer made the magazines play second fiddle to the platform.” Bauer had neither the imagination nor the appetite to reinvent its titles online, says McCann. “Cleo owned sex; Dolly owned teenagers – Dolly should be a superpower on TikTok!”

Bauer revamped Now to Love in 2019, but the results have been just a tick above dismal. Nielsen figures for March 2020 show the site’s unique audience to be 1,603,417. New Idea, then owned by Bauer’s rival Pacific Magazines and a direct competitor to Bauer’s Woman’s Day, had 2,597,344 alone – almost a million more than all of Bauer’s marquee women’s brands combined.

It would be unfair to pin this on Hill, who only became CEO in July 2019. Last month, I talked to him in a timed 15-minute phone call. He sounded depleted, which is hardly surprising: after a year in the job, he has already reached the average life expectancy of a Bauer Australia CEO.

The company’s decision to exit Australia wasn’t due to any particular failings, he said. Rather, “they wanted to concentrate on Europe and the US, where they have been going through a diversifying strategy.”

I pressed him on the approach to digital. “At the time, our strategy was to aggregate our brands,” he said. “We had to choose a strategy, and we stand by that.”

I asked how it is that a business that Bauer bought for $525 million in 2012 was sold for under $50 million. “The past eight years have been tough for everyone in this industry,” he said. “The Bauers are very good business people.”

Past and present titles. Print magazines worldwide have been in decline for 15 years as readers move online for similar content, which is often available for free.Credit:

Magazines in Australia have traditionally been a female-focused medium. “Magazines were like a window of discovery for women,” says McCann. In a male-dominated post-war Australia, magazines were “a place where women learnt about the world. They took us over the horizon and introduced us to the stylish and the clever and the new.

When Vogue Australia launched in 1959, it delivered Parisian fashion and culture. Cosmopolitan and Cleo taught Australian women about sex, and Women’s Weekly taught Australian women to cook. That’s why these brands mean so much to people.”

Bauer insists that its corporate purpose was to champion Australian women. As part of this, the company launched the Female Futures campaign in 2018. The campaign involved the so-called 10 Million Word commitment, a promise, as the company put it, to create content “that aims to improve women’s financial literacy, profile women in STEM-related industries [and] close the super and the gender pay gap”.

Part of the initiative was the “No Gender Selective Tax” campaign, an effort to abolish the 10 per cent GST on tampons. In late 2018, the tax was lifted. But one former senior journalist at Bauer describes the company’s efforts as “bandwagonism”, pointing out that politicians and women’s groups had been campaigning to have the tax axed since 2000.

He is said to have questioned why the word “runway” was used on the cover, insisting readers might confuse it for an aviation reference.

According to Bauer Australia, women made up 60 per cent of the company’s senior leadership team. But years of dismissive male-led management have damaged morale. “For years the attitude was, ‘Don’t worry your pretty little heads’,” one ex-staffer tells me. “If you made a stand you’d get told, ‘Oh, I like it when you get fired up, rah rah …’ ”

Ironically, perhaps the most malign influence on the Australian business was the most senior woman of all: Yvonne Bauer.

“Yvonne didn’t like to be told what to do,” a former CEO tells me. “She’s a petulant child. She spat the dummy all the time. If she didn’t get her way, she sulked.” Yvonne surrounded herself with “yes men”: “You say no, you lose your job.” She didn’t trust the Australians, which led to constant meddling and micromanaging from Germany, right down to magazine cover approvals and each title’s profit and loss statements.

Bauer Media Group's Yvonne Bauer and her father Heinz in 2010, the year he signed 85 per cent of his shares over to his daughter.Credit: Malte Christians

Bauer was intent on importing talent, usually from Germany, including one senior executive, Eckart Bollmann, who paid regular visits to Bauer’s Park Street offices in the Sydney CBD, during which he pored over each magazine’s accounts, and made staff fill in time sheets accounting for every hour of their day. Bollmann was notoriously rude – “He wouldn’t even look up when you came into the room,” I am told – and had little insight into the local market.

He is said to have questioned why the word “runway” was used on the cover of one of Bauer’s fashion titles, insisting that readers might confuse it for an aviation reference. (Bollmann left Bauer in 2015.)

Bollmann’s visits overlapped with that of Sebastian Kadas, a 33-year-old Bauer publisher who was appointed in 2013 to manage six mastheads including Dolly, Cleo and the hugely popular Woman’s Day. Kadas was a polarising figure.

“Sebastian had brilliant ideas and enormous energy,” says Deborah Thomas. “He was very creative.”

Lucy Cousins, former editor of Dolly and Cleo, says Kadas supported her. “He was in the battle lines with me. He had a lot of out-of-the-box ideas, but he didn’t have the resources to make it happen.”

For most of the staff, Kadas was a mystery; a large, ebullient, openly gay man who perfectly embodied Bauer’s state of internal chaos. It was unclear what nationality he was – Hungarian, German, Russian – or why he had got the job. He apparently spoke seven languages, and boasted of being good friends with fashion designer Karl Lagerfeld. He gave people to understand that he had won a talent contest in Russia as a child, and claimed that he could get Lady Gaga to hand out magazines in Pitt Street Mall, in Sydney’s CBD.

A former editor tells me that when she took a mock-up of a cover to him for approval, he said it was “shit”, then got a pen and drew a penis coming out of the cover girl’s mouth. He was also said to have been a little “touchy-feely”, and had to do HR counselling.

Kadas left Bauer in 2016 and is now the chief product officer at Funke Mediengruppe, a newspaper and magazine publisher based in Essen, Germany. He describes the allegations against him as “bullshit, with no basis in reality. They are stories taken out of context and fabrications of someone with a lot of time on their hands.”

He says he was given a portfolio of titles “that were a financial disaster and we had no choice but to hit the ground running. We had a lot of redundancies and a lot of egos were hurt in the process, so I became the poster child for that.” He adds: “Most of my colleagues were incredibly hard-working, but some never understood that publishing was changing and they had to adapt.”

At one point, Kadas put together a flip book for Dolly, a blueprint for how to remake the magazine. The content was cribbed from Bauer’s German teen magazines and translated into English. One of the story suggestions was for a map of a park, with captions outlining how and where to meet different types of guys. (“Hooray! Prince Charming is in sight.”) On the cover of the flip book, in large capital letters, was a quote from Disney’s The Little Mermaid: “LISTEN TO ME: THE HUMAN WORLD IS A MESS.”

In 2008, total advertising spend for print magazines was $483.5 million. In 2019, it was $88 million.

“They had no idea,” says a former staffer. She tells me that “Listen to me: the human world is a mess” became a favourite catchphrase around the office.

Bauer is hardly alone in its troubles. Print magazines worldwide have been in decline for a good 15 years, mainly because of the internet, which offers similar content, usually for free. Women’s titles are particularly vulnerable, according to veteran magazine editor Julia Zaetta, who has edited Women’s Weekly among other titles. “There are celebrity spaces out there where you can find out what the Kardashians are doing. There’s YouTube, Instagram, make-up bloggers, online shopping for fashion.”

There are other factors at play, including the demise of newsagents and the rise of self-service checkouts at supermarkets (no standing in a queue, flicking through New Idea). Then there are the custom or “in-house” magazines.

“The Coles magazine has 196 pages of recipes, and it’s free,” says Zaetta. “Bunnings has a mag that will tell you what lights you can get and what planters there are in the nursery. And they’re not bad mags!”

Not surprisingly, magazine advertising revenue has plummeted. In 2008, total advertising spend for print magazines was $483.5 million, according to analysts at Standard Media Index. In 2019, it was $88 million. Much of the money has gone to tech giants like Google and Facebook, which not only reach huge audiences but can target readers more effectively than most magazines.

In order to maintain scale, many traditional media companies have merged with one another. Fairfax Media, for example, merged with Nine Entertainment Company, which publishes this magazine, last year. Bauer pursued a similar strategy when it moved to buy its nearest competitor, Pacific Magazines, in late 2019. Pacific had a range of well-known and profitable titles, including Better Homes and Gardens, Marie Claire and New Idea.

“Buying Pacific would have given Bauer 85 to 90 per cent of the Australian magazine market and a stable of powerhouse titles,” says media analyst Steve Allen. “Better Homes and Gardens alone is the best multi-platform brand in the country. It’s got a TV presence, it’s got an online presence, and it’s had a radio presence.”

But here again, the Germans ran into trouble. Bauer announced its plans to buy Pacific for $40 million last October. Then, in December, the Australian Competition and Consumer Commission (ACCC) raised concerns that the merger would be anti-competitive, noting that the two publishers had many magazines that were in direct competition.

Should Bauer own them all, it might delete some or fail to invest in others, reducing consumer choice. The ACCC finally approved the deal in late March. But by that time, COVID-19 had hit. No one was spending money and advertising had tanked.

“Suddenly Pacific, which Bauer had agreed to pay $40 million for, was worth maybe $10 million,” says Allen. “The Germans were thinking: ‘How can we get out of this? Who the f… made this deal?’ ” Bauer tried to renegotiate, but failed. It’s thought those overseeing the purchase in Germany were fired. (Bauer denies this.)

Desperate to cut its losses, Bauer even offered to sell its entire Australian operation to Pacific for $1, according to someone close to the deal.

As it happened, the Germans had already made up their mind to leave Australia. Late last year, the publisher had entered into talks with the private equity group, Mercury Capital, to sell the business for a reported $150 million. But the deal was contingent on Bauer owning Pacific: Mercury wanted the whole box and dice.

When the ACCC got involved, however, Mercury pulled away. Believing Mercury had lost interest, Bauer panicked. In April, Bauer ditched its New Zealand business, closing 11 titles and leaving 237 staff unemployed. (The New Zealand government offered to assist Bauer with subsidies, but Bauer declined.) Desperate to cut its losses, Bauer even offered to sell its entire Australian operation to Pacific for $1, according to someone close to the deal.

Mercury circled back in early May, by which time Bauer was a basket case. One source suggests that the Germans sold to Mercury for $10 million – throwing the New Zealand business into the bargain.

As a former Bauer Australia CEO put it: “It’s a complete humiliation for them.”

It remains an open question as to why anyone would buy a publishing company right now. Mercury, which was founded by former Goldman Sachs banker Clark Perkins, has little experience in media. The firm has raised $1.2 billion that it has invested in areas as disparate as software, healthcare and messaging services. It also has a stake in Blue Star Group, New Zealand’s largest commercial printing company.

Mercury describes itself as a firm which seeks to “invest in businesses that demonstrate leadership in their industry [and] clear growth strategies”. This doesn’t sound like Bauer.

I was keen to discuss this with Perkins, who lives with his wife Marguerite in a $30 million waterfront mansion in Vaucluse, in Sydney’s eastern suburbs. But via text, he told me he couldn’t talk about it quite yet.

No matter what Mercury has planned, it’s unlikely the Australian magazine industry will ever be the same. Scores of titles have closed across the country, and hundreds of the most talented people have moved on. Magazines have lost the cachet and cultural clout they once had. But all is not lost. Colin Morrison, for one, believes Mercury can make a go of Kerry Packer’s baby.

“The market is still pretty big and this one company has almost all the best magazines. [The group owns 43 titles.] Mercury could make more money from just 10 or 15 titles, so I’d expect they would start to merge or close more mags.”

Brand licensing could broaden the revenue base. “A good example of this is Meredith, the US publishing company that produces Better Homes and Gardens,” says Morrison. “They do 3000 branded homeware and garden products that are sold through Walmart, and also have similar arrangements with sunglasses companies and grocery lines. If the Women’s Weekly did something like that in Australia, they stand a good chance of success.”

Julia Zaetta is similarly upbeat. “Magazines are still compelling to a great extent,” she says. “I love that they are called the ‘lean-back’ medium. When you’re at your computer, you’re leaning forward, but magazines give you the chance to lean back. Bauer has been through a lot but there are still a lot of good people there,” she says. “It still has electricity that will survive.”

With additional reporting by Zoe Samios.

To read more from Good Weekend magazine, visit our page at The Sydney Morning Herald, The Age and Brisbane Times.