Springer's major profit generators are print properties like Hor Zu. SAD CHAPTER IN AXEL SPRINGER STORY HEIRS LASH TROUBLED GERMAN COMPANY

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The "revolving door" executive suite at Axel Springer is raising concerns about the future of Europe's fourth largest media company. So much so, in fact, that the late German publishing giant's heirs are publicly objecting to the way the company is being run.

Springer is still financially healthy: profits are expected to register a 25% gain to $44.4 million when calculated for 1993. But the publishing company, in effect run by Bernhard Servatius, the late Axel Springer's former friend and executor of his will, has relinquished its lead in various segments, such as TV magazine listings publishing.

Still Europe's largest newspaper publisher, Springer is nevertheless losing money on some of its prominent publications, including daily Die Welt, in chronic red ink. And SAT.1, the private TV station in which Springer owns a 20% stake, is unprofitable after paying too high a price, $430 million, for football rights in 1992.

Furthermore, the company's independence is in question as Munich film dealer Leo Kirch, a 35% shareholder, is believed to be seeking more clout while senior Springer executives are being shown the door.

Lavish payouts to executive board members and huge severance packages for ousted top executives are so legendary that Springer execs joke they work for these severance packages.

Typical is Willi Schalk, 54, who resigned as a board member last January after less than three months with Springer. Mr. Schalk, a former BBDO International declined comment for this story. His stay was too short to meet his goal of pumping up profits at the publishing house. He resigned after Axel Springer's executor, Mr. Servatius declined to offer him another position.

"The way Willi Schalk has been treated [by Servatius] is absolutely against everything Springer once stood for-fairness and good behavior. There is a feeling of uneasiness with Springer employees. Many are afraid to go on vacation because they may lose their jobs and many spend 70% of working time defending their [jobs]," said a publishing insider.

"The ongoing struggle at the top of Axel Springer publishing house is the saddest chapter in German publishing history," said Roman Koester, spokesman at rival Heinrich Bauer publishing, Hamburg, and a former Springer employee.

About 70% of Springer's $2.2 billion in profits comes from its stable of seven national and eight regional newspapers which include Die Welt and Bild. The remainder of its properties include 32 magazines, including Hor Zu and electronic media. Along with SAT.1, Springer owns 24% of sports channel Deutsches Sportfernsehen and a minor stake in five private regional radio stations.

But it's mismanagement more than slower profits that concern three of Mr. Springer's heirs. On March 4, they ran an open letter in weekly Die Zeit denouncing the way the company is being run. "We, the children and grandchildren of the late Axel Springer, see with growing horror the direction in which the life's work of our father and grandfather is going," said the letter, signed by granddaughter Ariane, son Nicolaus and grandson Axel-Sven.

"His forebodings, his fears and visions are being seriously misinterpreted, and, contrary to his last will, alliances are being formed ... which are contrary to his vision."

Under the terms of Mr. Springer's will, the heirs cannot sell their shares or acquire voting rights until the year 2015. They own 50% plus one share of the company.

The battle lines are drawn with the son and grandchildren on one side vs. the power base behind Mr. Servatius that includes the late Mr. Springer's fifth wife. The Springer contingent has three members on the executive board, and therefore a block of three votes controlled by Mr. Servatius and Mrs. Springer. Mr. Kirch's camp has two votes; the remaining four are held by board members uncommitted to either side.

Springer was known as a benevolent family company until the owner-founder's death in 1985 at age 73. Mr. Springer was regarded as an innovative thinker who built the company into a publishing giant. A charismatic leader, and a visionary, he was involved in German politics, seeking to reconcile Germans and Jews with frequent goodwill visits to Israel and fighting for the reunification of the former East and West Germany.

Mr. Springer's original intention was to cast his lot with Hubert Burda, founder of the Burda Publishing House. Before his death, he sold 24.9% of Springer to Mr. Burda with the apparent plan of somehow linking up with Burda. But after the founder's death, the Burda company was divided up and Burda brothers Franz and Frieder sold the Springer stake back, at huge profit, to Mr. Springer's heirs.

By this January, the Springer company's paternalism had faded away entirely. It was then that Mr. Servatius, an attorney in private practice with no publishing experience, appointed three new presidents and CEOs to replace President-CEO Gunter Wille, who died in November. In a stunning move believed unprecedented in Germany, he appointed more than one successor. Gunter Prinz, 64, was named to lead the company until July 20 when he retires. After that date, Horst Keiser, 57, and a member of the management board, will become CEO and president. Jurgen Richter, 52, currently CEO of publishing house Medien Union, was named Mr. Keiser's deputy president to succeed him at an unspecified date believed to be in 1996.

The heirs' letter alludes to problems with Mr. Servatius without mentioning him by name. "We had to watch how the executor elected himself to the executive board," the letter said, adding, "Our hands are tied, with legal possibilities slim."

Legally, their only option is to eject the executor, a lengthy and costly legal procedure with no guarantee of success.

Asked to comment, the board issued a statement: "It is not in the spirit of Axel Springer to settle internal difficulties among the heirs in public."

The heirs aren't looking favorably on another interested party, Kirch Group International Owner Mr. Kirch, 67, who has slowly upped his stake from 10% to his current 35%. He is thought to be eyeing the almost 15% of shares on the open market in order to extend voting rights control beyond that of any faction now involved in the power struggle.

"He needs the Springer publications for his various TV activities," to promote and publicize his film and TV empire, said a media manager familiar with Mr. Kirch. His properties include a majority of SAT.1 and 25% of pay TV station Premiere, and his son holds the majority of the TV station Pro 7.

"[That] makes it very profitable for him to sell his huge stock of old film rights to the TV channels he owns," the media manager said.

Mr. Kirch didn't return calls.

Regardless of which side wins, some of Springer's generous practices are likely to end.

But all this squabbling has distracted managers from the business. Springer watched as rival Burda carved a new niche with the highly successful newsmagazine Focus (AAI, Feb. 21). And Springer left the non-German market to Gruner & Jahr after Springer's joint venture with Spanish publisher Trensa Espa¤ola, Claro, flopped in 1991.

Springer is losing its once magic touch with existing properties. In TV listing magazine publishing, Springer has relinquished its lead to Heinrich Bauer Publishing, publisher of five TV directories, with a 48.8% market share in the fourth quarter of 1993 to Springer's 27.2%. A decade ago, Springer's share was 46.2%.

Meanwhile, circulation at Springer's Hor Zu TV magazine declined from 4 million in the 1980s to 2.7 million in 1993, according to the print tracking service IVW.

Even with Springer's introduction of a new, lower priced TV Neu, costing 60 cents to most titles' $1.45, the publication still isn't in the black. "It is unforgiveable that Springer gave up their once dominant position in the money-making TV listing magazine market and made no efforts to challenge newcomers," said a rival publishing executive.

Another property perpetually in red ink is Die Welt, with annual losses estimated at $30 million or more. While highly respected editorially and Mr. Springer's pride and flagship, the newspaper has periodically tried to cut staff to jumpstart profits, all to no avail.

The picture isn't completely grim at Springer, however. A bright spot is Auto-Bild, a weekly started in 1986 that now boasts a circulation of 973,000.

Auto-Bild appears in France, the U.K., Switzerland, the Netherlands, Italy, Greece, the Czech Republic, Turkey, Romania and Spain through licensing and joint venture agreements.

Springer's other big moneymaker is Bild, its daily tabloid, but that too is losing circulation, from 5 million a decade ago to 4 million last year.

The company is now looking to magazines to build business. Hoping to duplicate the success of Focus, Springer is considering bringing its Austrian title News to Germany this fall.

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