Well, good morning. Good Morning. Thank you for joining, Matthias.
I guess this is our first physical interview
since the lockdown.
It is something nobody predicted that could happen.
But here we are, in this beautiful place. So, in a time of a pandemic, clearly some of the things we are doing
is through distance, which makes it harder to enjoy some of the
relationship and you know some of the technologies we have been discussing
for some time like VR, AR, for virtual experience where you may
not be able to go physically to this beautiful gallery, but you could
experience it through distance. I think this kind of
new experience could be accelerating in time like this
I would love to hear your view about how Axel Springer
is using digital technologies to enhance and address what I call physical
distance gap by virtually being able to get closer to where we were not being able
to go in physical sense that we can do today.
Well, crises like a pandemic have always the potential to accelerate negative developments but also
accelerate positive developments. In the case of the Covid-19 crisis, my biggest
worry is that we may limit, reduce or even lose certain elements of freedom,
of individual rights, of data protection and in a way the beauty of the open society,
that we tend to go to more an authoritarian model. This is my biggest worry.
My biggest hope is that our whole form of social interaction and
professional interaction, the organization of workflow and with that also
the productivity is going to benefit big times and here virtual
reality and artificial intelligence will play an instrumental role. I have been a strong believer
in these developments for many years. I had conversations with Mark Zuckerberg
three years ago on how and when direct and physical communication will be to a very
large extent be replaced by virtual conversations. And we then
already said that most of the meetings that are happening in the world are not
necessary as physical meetings where you need airplanes. If you have a
conversation with virtual reality, where you have a three-dimensional image of
your counterpart, and the only thing you are missing is a sent
or a personal feeling, then not everything can be replaced by that but a lot can be
replaced in a much more efficient, less costly and healthier way, and in that
sense, I think the corona virus and the new habits, we stopped, I mean, in
Europe people hug and kiss each other when they meet. This is probably not
going to come back again. I guess you are going to do this now. Yes, that was my suggestion, I suggested to do this, which is for me the nicest way to say hello
anyway, independent from the virus. But again, I think all these habits and
behaviors will change. With the help of VR, we will be able to optimize our
workflows and our conversations and, in a way, the experiences that we are making
now are accelerating that process. Well, actually, I think this is
the case for all technologies. Imagining Zoom, I was lucky to
meet the founder of Zoom in 2011. Eric Yuan. He was not able to raise money,
because they said, we got Skype, we got WebEx. Why do we need another
video conferencing application and tools? What I liked about Eric, and he is a
phenomenal engineer, was he said you know it is still not good enough for
the user experience. It is about experience. And then he really hit me and said Young
I want to have that experience on things like your mobile phones.
So that I can be able to zoom it from the phone directly.
At the time, 2011, smart phones were still becoming
smarter and that was a direction or a thing I really liked about him. I think
that it was the direction of this what I call making it easy for the consumer to connect,
using cloud and mobility to get your job done. So what could be Samsung’s
contribution or where's the opportunity for Samsung, as a learning, as an
opportunity that derives from the crisis? Well, I think that the areas that we
are learning is actually we also have to change drastically.
We must go even more, accelerating in the direction of remote, because Samsung
is also a physical company. Like BMW, or Daimler, we go to the plane, we have an
office and we work there. But, fortunately, Samsung does also have a business that
does infrastructure. 5G. I think 5G deployment is going to be even more
critical going forward, because all of the things will be connected, and
having that access will be even more important no matter where you are at. So,
you can have the real time and access that you need. I believe also we
are investing in what we call the backbone of infrastructure, which is
semiconductors. We are one of the largest
semiconductor companies and this is my background. We are involved in investing in
semiconductor components and technologies that can enable this whole
cloud scalability, mobility and edge devices that can be able to access
information no matter where you are. So, infrastructure, critical technologies are
what we are focusing on, and I think we have announced that we would
invest 160 billion dollars, and we are half way in already on that
investment route. For one company investing that is not a small
scale. But that shows where we have to go. I believe where we need to go more is
the fact that our business is not a cloud business ready as much. So we
need to do more of that. In terms of our our applications, we need to move more
into helping our workers to working remotely.
So I know, in times like this, I noticed that
digital platform companies, like Google, like Facebook, have done much better,
although the advertising business has come down. But clearly, always-on
channels are doing much better than traditional media companies. And it is
tough when you are physically dependent on. Everybody is going through this
transition. Clearly, Axel Springer has been going ahead of others, even very
aggressive going that direction. What is your perspective on this side?
Well, to cut it short, I think the last 15 years
were the decade of the platforms and the
success that they have achieved is remarkable with entrepreneurial success
that is unparalleled if we are talking about companies like Amazon, like Google,
like Facebook. And for the content creators it was very difficult, because
It almost seemed that suddenly the pipes were smart, they had the smarter
business model and the content producers were relatively dumb and had a very
stupid business model. I think that is now turning around. The platforms were able simply because of market power and reach,
Google has in most of the European countries a market share of 95 up to 99 percent. So it's
de facto a monopoly, we were speaking about monopolies and competition, and so
they could simply say: we take content from content producers, being it music or
film or texts from publishers or videos, we take it and we monetize it through
smart advertising. Zero content creation costs, between ninety and hundred percent
of advertising revenues. And that created a tremendous market power and weakened
the content producers. I think the next 15 years will go to the exact
opposite direction and it will be the decade of the content producers. For two
very simple reasons: one, because if there is enough competition of pipes
and platforms that need the content, then the likelihood that a model is
developing where there is a fair ecosystem, and platforms that are using creators' content will
have to pay for that will have to make sure that there is a fair share of
monetization. And the second is simply that the customer wants it. And that is
perhaps even more important and fake news, certain developments of data
manipulation, political scandals, populism, the rise of autocratic systems based
on false information and propaganda, that all shows how important it is to have
trustful sources, trustful quality content. And I think this new kind of
importance that it got, also during the current Corona crisis where truthful
facts are of existential importance and the source really matters, I think that
is going to happen. And then there is a third reason, if these two factors alone
do not do it, then the regulator will do it, because the regulator, politicians,
political systems, societies will not allow it in the long run that there is a
totally monopolistic or quasi monopolistic situation where a company
that has two and a half, three billion customers decides which information is
consumed by whom, what is true, what is not true, what is good, what is bad, that
cannot maintain, that cannot exist like that forever. So I think there are much
more reasons to be optimistic, and clearly, we at Axel Springer want to be
the major beneficiary and we want to become the globally leading digital
publisher. We are the European market leader in digital publishing already today,
and we have a lot of ideas to grow beyond Europe, the US is becoming more and
more important, the democratic part of Asia is very very promising for us. So we
see a lot of opportunities. That's great, you know, I'm really happy that you
talked about and actually you helped us to be together in our joint project in
this whole enabling curated digitalization content through Upday.
And i know it's something that you thought about it, and I think having
one of the largest platform combinations with the curated content
makes it a much more obvious partnership and I do appreciate that partnership and
I think that partnership really helped us to expand in Europe. Hopefully, we can
expand globally and show an alternative option to other
media channels that are out there and digital platforms through mobile phone
reach today. And it's something that I very personally thank you for supporting.
It was is really your idea when you said: okay, you know what? This partnership
makes sense and this is about four years ago? Absolutely, yes.
By the way, you gave me a piece of the Berlin Wall and it is on my desk.
It reminds me, because my father came from North Korea originally. We still have a divided country
where business still needs to be done. I can imagine that. But I'm glad
that you are glad about Upday. I truly think that it has incredible potential.
Perhaps we have reached today only five percent of the total potential, although we are
already the biggest European news app with more than 26 million users and
successful in so many countries with very very positive developments recently.
The company, although it is very young, is already profitable since 2018
and growing so incredibly fast. That's all nice, but I truly think it's only the
beginning. The real vision for Upday is that it is
the destination if you want to be reliably informed through text, audio and
video on all possible devices in all situations of your life. At the moment, it
is pre-installed on Samsung mobile phones, but one day it can be in every
car, it can be in every kitchen, it can be in every living room, it can be
everywhere where we are, and it can be as an offering that you can read text,
where you can watch videos, but where you can also while driving a car, or sitting
in a car, or while sitting in a subway, you can listen to things, because you
have it all available. We have already today more than 5000 sources of
journalistic excellence. It can be much bigger, it can be in all countries, not
only in Europe. It should be a global product. So I think the vision and the
potential for Upday is really big. Absolutely, I think having this curated
content, content we can trust, content we can work with, content that can stand
behind your brand is really important. This is why I think the partnership works.
Upday is the anti fake news product, that's what it is. It protects you against fake
news. Absolutely right, so, I'm really excited about this journey, I think that
is something that I believe you're right. We are experimenting here. By
the way, I think this Upday kind of partnership, what I am learning from Berlin is that there
are few other examples that we can actually do with Samsung. There are
similar in different areas we can partner. We might not be able to
innovate within the company or we may not be able to reach certain audiences by our own, but I
believe together we can be able to expand. One more thing about Upday is that
I want to just say Samsung does not want to monopolize great content. if it is
good content it should reach all consumers, because at the end of the day,
we do have the largest consumer products out there anyhow, so we will benefit, but we
should not exclude people that are using LG or Huawei phones, it's fine, I
think they should also get the benefit of your content. One last question for
you, and this is more personal. Because my company got
bought out by KKR and Silver Lake in 2005, I did mentioned that to you.
It actually turned out to be very good experience for me, because they bought it, when I was
running it, at 2.6 billion, it turned out to be a hundred billion dollars company
today, so that turned out to be good for everybody
that was involved. How was your experience?
Some people have certain perceptions about private equity:
is it good, bad or ugly? But obviously it’s all
about individual experience as well. So far the experience is great. I mean,
the logic of it is very simple. A company that used to be a German analog
newspaper and magazine publisher and is today now an international digital
publisher has shifted completely our focus from being a kind of restructuring
case that could only deliver growing EBITDA and higher dividends to its shareholders,
but not too much growth. And we have now shifted into much more of a growth company
that creates tremendous accelerated growth and value increase with that, but
also needs investment for that. And under the current regime of a publicly
listed company with shareholders who were used to this kind of EBITDA dividend
maximization case we could not do that. And we thought we have to change
that we have to take the company private, at least for a couple of years in order
to really aggressively invest in growth and accelerate the growth speed and the
potential with regard to valuation. We did a process, we invited seven private
equity companies. From the very beginning, KKR was the most determined one, the
most kind of "we want to do this deal, we believe in your story and we really
believe in growth potential." We then discussed an accelerated growth plan, we
precisely allocated certain investments that we thought are necessary and, from
the beginning, there was a lot of buy-in from KKR into that strategy, and that's
why we decided, ok, KKR is the partner that we choose.
Now, shortly after that has happened and the deal was signed, the unexpected happened:
the corona crisis and with that a big financial crisis
appeared. I cannot tell you how happy I am that we did that move and that we are
now in this very privileged situation to have somebody where the famous word of
Henry Kravis, who said in our first shareholder meeting "never waste a good
crisis". So what you do in a crisis you invest, contrarian investments, you buy
assets, you invest organically into your businesses that have this potential in
order to accelerate growth. And to be able to do that with such a partner and
not being a publicly listed company with short term shareholders who need the
next quarter's EBITDA to grow, that's a privilege. So we are very happy, and also culturally, it goes very well, but you should ask
me that question in five or seven years again. Yes, right, the long-term
perspective. But you know that any transformation, disruption, change, we
say easily, but it's really hard to do for public companies, because I was CEO
of three public companies and you know you are bound by those quarterly
earnings. And in times like this, when you want to invest in massive digitalization,
even though it may incur losses, how do you do that? It is a
brave decision that you made and it's a hard decision to make and sometimes it
only you only see the outcomes several years later, but that's what is required in
times of change. Well, thank you for your time. Thank you, it was a pleasure. As always, I really enjoyed our
conversation. Thank you very much.