HANNOVER: In 1980, the aspiring global media baron Rupert Murdoch turned to the president of his U.S. newspaper operations, Donald Kummerfeld, and, as he was wont to do, made a bold prediction.
"Someday, Don," Murdoch said, according to Kummerfeld, "all news — and advertising — will be delivered digitally. There will really be no need for paper and ink."
More than a quarter of a century later, the world's largest publishing companies are struggling with the implications of Murdoch's future, as Internet-based news and information services steal their readers and advertising sales.
"We are on the cusp of a new era in media," said Kummerfeld, the former head of News America Publishing and now president and chief executive of the International Federation of the Periodical Press, based in London. "It is time for the industry to seize the possibilities."
While upbeat testimonials and anecdotes of digital diversification dominated the two-day Magazine Media 2.0 conference in Hannover last week, the industry executives gathered here from more than 25 countries could not overlook one unsettling trend.
After spending millions of dollars to buy digital media companies, online advertising firms and search engines, only a few of the 350 magazine and newspaper companies represented at the conference said, in a show of hands, that they were making more than 3 percent of their sales online.
And only one company, Meredith Corporation, the U.S. publisher of 26 magazines including Better Homes and Gardens, Family Circle and Ladies' Home Journal, said it was making a profit.
Even then, the "significant" profit Meredith is making from its 32 Web sites, according to its chairman, William Kerr, is coming mainly from Web advertising and subscription referrals, not from the digital sale of what is typically a publishing company's biggest product — text.
"I would also emphasize that the profit from our online operations at Meredith is also driven in no small part by the 80 years of established branding of some of our titles," Kerr said. "This is not something we did overnight."
For most publishers at the conference, the Internet remains a greedy one-way vacuum, siphoning readers and advertising into an uncertain future.
After years of denying that online rivals posed a threat, some publishers said they were now following strategies to transform or defend their traditional print businesses.
The French publisher Hachette, a unit of Lagardère, began selling online subscriptions to 200 of its magazines in August. Philippe Hautrive, the executive vice president for business operations at Hachette Distribution Services, said about 20,000 consumers had taken up the offer.
But Hachette is making sales, not profit. The economics of online publishing, though lower-cost because no paper or printing is used, are still daunting for companies like Hachette and Axel Springer of Germany, because most Internet-savvy readers expect online text to be free.
Hachette sells access to digital facsimiles of four magazines for just €9.90, or about $13, a month. Consumers download the magazines, which are enhanced with embedded audio and video, and read them off line. They can switch the four titles each month and there is no yearly commitment.
"There is no question that online sales are part of the future," Hautrive said, adding that Hachette planned to expand its online sales to 500 titles in France and, later this year, in Britain. "The only question is how big a part they will be."
Online consumption of magazines should pick up, Hautrive said, once the electronics industry develops a hand- held reader that is capable of downloading and displaying newspapers and magazines and that is embraced by consumers. But that development is still a few years away, he believes.
Most large publishers at the conference said they had no choice but to build, expand or acquire online operations. The reason: Their largest advertisers are starting to abandon them for online forums, Web sites and even Web games.
That is the case at the German carmaker Mercedes-Benz, which this year will spend more than €100 million to advertise and market the new version of its C-Class sedan. Olaf Göttgens, vice president for brand communications at Mercedes, said that the automaker was increasing its spending on Internet advertising, though he declined to give specific figures.
To market the C-Class, Mercedes has invested millions of euros in online and mobile phone advertising, and has even placed a digital version of the car in Second Life, the online role-playing game, Göttgens said. Like its competitor BMW, Mercedes is setting up its own digital TV channel to sell cars.
"I think the old ways of buying media are old-fashioned and won't be followed in the future," Göttgens told the publishing executives.
Some publishers are investing to retain key advertisers. Axel Springer Verlag, the largest newspaper publisher in Germany, bought four online advertising and Web services companies in the past six months, and has built an online division of 200 employees.
"We are making a lot of sales online, but over all we are still making a loss," said Andreas Wiele, the president of the publisher's magazines and international businesses, which are based in Berlin. "But we basically had no choice. Our advertisers are demanding an Internet strategy and we have to have one."
Some publishers are trying to hedge their bets, looking beyond their traditional print businesses.
Dogan Media, the largest Turkish newspaper publisher, made an unsuccessful offer in January for the German television broadcaster ProSiebenSat.1; it was outbid by two private equity firms. Hanzade Dogan, the chief executive of the company, described the bid as an "opportunistic" chance to get into Germany's TV market.
While TV was a lure, Dogan, publisher of the Hurriyet newspaper, said she had no interest in bidding for the Süddeutsche Zeitung, one of the largest-circulation daily newspapers in Germany. The privately owned publication, based in Munich, recently sold one of its regional newspapers in Braunschweig, stoking speculation that a sale of the entire group could follow.
"The German newspaper market is saturated," Dogan said. "There is simply no growth in the newspaper business there."
