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Abstract. Background and problem According to Atkinson, Banker, Kaplan and Young (1995) manage- ment accounting and control practices have an important role ...
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JÖNKÖPING UNIVERSITY
Master thesis within Business Administration
Author: Einarsson Ulf
Persson Anna
Tutor: Florin Samuelsson Emilia
Jönköping June 2007
i
Master Thesis within Business Administration
Title: What gets measured gets done? –a study within the newspaper industry
Authors: Einarsson, Ulf
Persson, Anna
Tutor: Florin Samuelsson, Emilia
Date: June 2007
Subject terms: Management accounting, performance measurement, incentives, newspaper industry.
Background and problem According to Atkinson, Banker, Kaplan and Young (1995) manage- ment accounting and control practices have an important role within today’s organizations. In order for the organization to be successful, information on the finances and performance are crucial. But in the media industry there are indications that management accounting and control practices are not as accepted as in many other industries (Tjernström, 2002). Since there have not been much research about management accounting in the media industry, compared to what have been done in other industries, like manufacturing and new econ- omy firms, there are less knowledge from this industry.
Purpose The purpose of our thesis is to investigate, explain and analyze the management accounting practices, with focus on performance meas- urement and what the attitude to performance measurement is within four newspapers in Sweden. This will be done from a management perspective.
Frame of reference Previous research about agency theory, stewardship theory, budget, responsibility centres, operating- income and margin, reward and in- centive plans, balanced scorecard and intellectual capital statement and theories about the newspaper industry are described and used.
Method A qualitative research with four interviews was conducted. Three were newspaper managers and one editor in chief.
Conclusion From our four researched newspapers we have found that managers described management accounting and performance measurements to be important but still not communicated. Therefore, it is interesting that none of the newspapers measure performances in the editorial department. Journalists have been and are sceptical to management accounting practices and performance measurements but this attitude has changed and is not so strong and not a problem nowadays. Focus on profit has increased but is not considered as a threat to newspaper quality as long as it is not too extreme. Operating margin is the key ra- tio that all four newspapers use.
Tables
profit focus is a threat to the quality of the newspaper and editorial independence (Tjern- ström, 2002).
The Newspaper industry
Sweden has a reading population. Together with the Nordic countries and Japan, Sweden has most daily newspaper per citizen in the world. Eight of ten people read at least one daily newspaper a day and spends in average 20 minutes to it each day (Månsson, 2005). During the former years changes have occurred in many levels within the media industry. These changes involve mainly technology, revenue generation, ownership patterns, mana- gerial efficiencies and management philosophy (Shaver, 2000). Everyone does not like the- se changes since there are indications that some journalists believe that modern manage- ment lead to less quality and different stakeholders are guided by different ideologies and have varied expectations about what a public service firm should do (Tjernström, 2002). The reason to why they are so concerned with the quality is that newspapers are said to be important for the democracy in the society and reading a newspaper is therefore a way to take an active part in the society life by being informed and updated with what is happen- ing in the society. Newspapers make it in this way possible for people to take an active part in the society debates and the democracy processes (Bergström, Wadbring & Weibull, 2005). The scepticism to profit focus became once again a hot topic in Sweden around Au- gust 2006 when the largest newspaper in Sweden, Dagens Nyheter (DN), recruited a new editor in chief, which came from a tabloid and is known for turning red figures to black. It was argued that the journalists were nervous that the newspaper would turn out to be more like a tabloid in its quality (Byström, 2006). The editor in chief replied to this fear by stat- ing that his objective was that DN should be journalistic strong in the future and that is only possible by being profitable, which was not the case before changing management (Hagen, 2006).
Newspapers have traditionally been limited in their ability to measure their organizations effectiveness because of the lack of recognized performance measurements. Establishing benchmarks would allow newspapers to evaluate their performance and compare them- selves with other newspapers (Hernandez, 2002). Or as it is expressed by representatives from Newspaper Association of America "Creating industry benchmarks for newspaper operations will give papers the essential tools to chart their progress and know where they stand in relation to their peers" (Croteau, cited in Hernandez 2002).
As mentioned in the background there are researchers arguing that the role of management accounting and control practices is important in order to keep the organization in track and to follow up and evaluate the situation in a company. They also say that the control prac- tices will facilitate the work of measuring performance and the financial results and in turn work as a tool to improve the operation and performance within an organization (Simons 2000, Atkinson et al. 1995, and, Ax et al., 2002). We can see indications that management control practices are not as accepted in the media industry as it is in other industries (Tjern- ström, 2002). This is due to, that a threat to the product quality could be devastating for firms in most industries but if a daily newspaper loose quality is it not only dangerous for the single firm but also for the society. Because newspaper fulfil important functions in democratic societies when they improve knowledge about politics, help citizens integrate into their community and participate in democracy and by making plenty of information accessible to their readers (Schoenbach, 2004). This attitude among journalists does not
mirror the attitude in the rest of the society. According to Catasús, Ersson, Gröjer & Wallentin, (forthcoming) measurements have a strong position in the rest of today’s society and they even suggest that we are entering an age of organizational measurability. One rea- son to this is that according to Otley (2003) what gets measured generally gets done and what is not measured may suffer in comparison (cited in Catasús et al., forthcoming). It is not only the profit focus that is said to be a threat to product quality; it is also the consoli- dation in the media market. The reason to this is that a consolidation can lead to a decline in diversity of expressions and result in products with homogeny content (Bagdikian 1993, cited in Albarran & Dimmick 1996). This consolidation leads logically to larger news or- ganizations and there is a belief that large news organizations place more emphasis on profit as a goal than smaller news organizations does and are therefore more dangerous for the democracy (Bagdikian, 1987 cited in Demers, 1996). Everyone does not share this opinion, according to Demers & Merskin (2000) large news organization are more profit- able but put less emphasis on profit and more on product quality.
In this study we want to find out if four organizations in the Swedish daily newspaper in- dustry are measuring performance and if they do, how performance measurements are done in an industry where there is little knowledge from. We will also try to find out if there is scepticism to management control practices and performance measurements.
The purpose of this explorative study is to investigate, explain and analyze the management accounting practices, with focus on performance measurement, and find what the attitude to performance measurement is within four newspapers in Sweden. This will be done from a management perspective.
People act in different ways depending on their motives. This might affect outcomes in the short- and long run. In this section we present two contrasting theories regarding human behaviour, and how researchers view different kinds of human behaviour.
The agency theory deals with a contract between principal (e.g. owner) and agent (e.g. employee) where both persons behave in a self interest way (Macintosh, 1994). In other words, the agent or principal will chose to act in a way that increases his or her individual utility (Davies, Schoorman and Donaldson, 1997). The owner, also called principal, is seen as the decision making authority and the employee, called agent, is the person who perform services on behalf of the owner, i.e. the principal control the agent. The agent is a utility maximizer but will not always take actions that are in the principal’s best interest. The prin- cipal can take actions that limit such behaviour by auditing, accounting, or establish an in- centive scheme (Jensen and Meckling, 1976 cited in Macintosh, 1994). Agency theory is said to be built around seven key ideas which are; self interest, adverse selection, moral hazard, signalling, incentives, information asymmetry, and the contract (Macintosh, 1994).
Self interest implies that an individual’s happiness comes from getting what one desires. This means that the individual acts in a way that he or she will gain from. Adverse selec- tion, or hidden information, deals with the problem when the principal puts out a contract to the market of managers. In this case managers have private information about their own abilities to perform according to the contract while the owners have never observed the managers in action. In such case, the principal have no awareness about the agent’s quality and a situation of asymmetric information arises in the market for managers. In this situa- tion the less able employees will gain since their lack of quality is not observed by the prin- cipal. Moral Hazard, or hidden action, also deals with the situation of asymmetric infor- mation in a way where owners have hired employees but they can not observe the actions and efforts of the employees. In this case the managers are given a certain amount of input and effort but the principal can not observe the input and effort used. The principal can then only rely on some output measure, such as profit or sales, as a base for administrating the contract. This situation can result in a decrease of the employees’ incentive to maximize input and effort. Since asymmetric information in the adverse selection arises managers want to take actions by signalling their abilities, such as their level of education and their work experience. Incentive systems are important since it will, hopefully, motivate the agents or employees to work and act in the principal’s, or owner’s, behalf. One way to mo- tivate the employee could be to link the manager’s payment to the produced output. As could be understood from the problems mentioned above asymmetric information is a fundamental concept in the agency theory. Many problems arise from the lack of perfect information for the owner. The owner has to guess the effort from the output and do not have the ability to observe the employees’ actions. The last key idea which agency theory is built on is the contract. It refers to an agreement where a principal engage an agent to per- form the service to make decisions on the principal’s behalf (Macintosh, 1994).
However, the agency theory is criticized by some researchers. They argue that this theory is an “unrealistic description of human behaviour” and that “labelling all motivation as self- interests do not explain the complexity of human action” (Jensen & Meckling, 1994, and
the parties’ interests can be brought more into alignment by using appropriate monitoring and a well-organized compensation system. Additional theories are needed in order to un-
derstand the different types of human behaviour (Davis et al., 1997) One theory that can be used is the stewardship theory, which will be described below.
The stewardship theory defines the relationship the other way around, so to say, since the manager not is motivated by his or her individual goals only. Instead they are stewards with objectives that are more associated with their principals’ objectives. Davis et al. (1997) ar- gues that the behaviour of a steward has a higher utility due to its pro-organizational and collectivistic behaviour in relation to the individualistic and self-serving behaviours such as agency theory. According to the stewardship theory the steward seeks to achieve the organ- izational objectives and protects and maximizes shareholders’ wealth through organiza- tional performance. By doing so the steward’s utility function is improved. As stewards seek to improve the performance of the organization it generally satisfies most stakeholders groups i.e. stakeholders interests are well served since the organizational wealth is in- creased. Therefore it can be said that the behaviour of a steward is more organizational centred (Davis et al., 1997).
However, stewards have of course also a kind of self interest since he or she must have in- come to survive. The difference between the self-interest in agency theory compared to stewardship theory is that a steward realizes the trade-off between personal needs and or- ganizational objectives. By working towards organizational objectives and attain these the personal needs are attained as well (Davis et al., 1997).
These two contrasting views regarding what motivates people in an organization might be interesting to analyze within newspaper organizations since there is some indications that the objectives might differ between management and journalists.
Some researchers argue that “what gets measured gets done” but is this really the case or is it just an assumption? According to Heath (1998) measurement affects behaviour and ex- amples of these are reward systems and incentive plans that are based on measurements (cited in Catasús et al., forthcoming). Otley (2003) states that what gets measured gets gen- erally done and what is not measured may suffer in comparison (cited in Catasús et al., forthcoming).Wallace (1997) tested if this was true by selecting a sample of firms that be- gan using a residual income performance measure as a base for their compensation plans and compared their performance to a control sample (cited in Catasús et al., forthcoming). His result generally supported the phrase “you get what you measure and reward”. Using measurements as a base for reward and incentive plans is not the only reason to the in- creased use of measurements. The idea of coupling measurement to management is an- other main reason (Catasús et al., forthcoming). Of other opinion than these do we find re- searchers saying that what managers measure does not correspond well to what they want done (Emiliani, 2000, cited in Catasús et al., forthcoming). Williams (1998) is of the same opinion and argue that numbers simplify a complex setting and can hardly represent the organizations reality (cited in Catasús et al., forthcoming).
From the perspectives presented above, some researchers describe how the human behav- iour and actions within an organization influences the organizational work and the per- formance in different ways. The work will be influenced by internal factors but also by ex- ternal factors, financial- and non-financial, tangible and intangible factors. The relation be- tween such factors can, for example, be put together in a balanced scorecard, which is the most well-known tool regarding non-financial measurement. It is important to find a bal-
Some researchers are sceptical to budgeting though. One of them is Wallander (1994) who argues that it is hard to predict the future and one example is the interest rate which fluctu- ate all the time and is impossible, or at least very hard, to predict. Wallander (1994) further argues that since the budget often is made by the employees and might be related to an in- centive plan the employees might make a budget which they will achieve and therefore the budget is faked. Wallander (1994) therefore suggests an alternative to the budget and this method he calls “the budget loose system” (in Swedish “det budgetlösa systemet”, authors’ translation). This system requires a fast, detailed and functional accounting system which provide a base for the organization’s direction and not only provides a result.
2.3.2 Performance measurements
The balanced scorecard (BSC) was introduced by Kaplan and Norton in 1992 and the purpose of this “tool” is to set a vision and work out a strategy to obtain the vision (Olve, Roy & Wetter, 1999). The company states a vision for the organization and uses the bal- anced scorecard as a strategy tool to attain the vision (Samuelsson, 2004). The aim of the scorecard is to find a relation between the short-term operational control and the long-term vision and strategy (Olve et al., 1999). This should be done by using different measures and the original measures that Kaplan and Norton suggests are financial perspectives, customer perspective, internal business perspective, and learning and growth perspective. According to Kaplan and Norton, these perspective are the most efficient to use when measure an or- ganization’s performance. The financial perspective should highlight the result of action al- ready taken and then be complemented by the other operational perspectives in order to improve the future outcome (Broadbent, 1999)
The balanced scorecard can be used to communicate the company’s different objectives and Kaplan and Norton argue that the balanced scorecard should be based on the business idea and take some question into consideration:
The balanced scorecard consists of, usually, 15-20 measures. It should describe the goals set for the organization and how these goals are attained. These measures should be di- vided between the perspectives and used to evaluate a situation, plan for future outcome and make decisions. Examples of these measures could be for the financial perspective: result per employee and Return on investment (ROI), for the customer perspective; number of customers and Customer-satisfaction-index, for the Internal business per- spective; share of administration cost in relation to administrated capital and total return compared to index, and for the Innovation and learning perspective; satisfied staff in- dex and marketing cost in relation to administrated capital (Samuelsson, 2004).
Different time perspective should also be taken into account: past, present and future. The financial measures are often used as a description of what has happened in the past, the customer and the internal business measures are used to describe the present situation and the innovation and learning measures indicates that what is done today will contribute to future improvements (Samuelsson, 2004).
Some studies have been made whether the balanced scorecard might replace budgets or not. However, according to Ax et al. (2002) the studies have not succeeded to prove that it is possible to replace the budget with a balanced scorecard. This is since the balanced scorecard is more a complement to the budget rather than an alternative. The balanced scorecard can also be seen as a non-financial budget which explains the financial values, ac- cording to Ax et al. (2002).
In a study made by Otley (1999), in which he compares the use of budgets and balanced scorecard, he concludes that an organization can not survive using only a balanced score- card and suggests that the balanced scorecard should be used as a complement to the budget.
According to Ax et al. (2002) the balanced scorecard is complex to use and requires a lot of time and effort to use as a management tool if it should be used properly. In addition, some researchers have criticised the balanced scorecard since they argue that balanced scorecard is hard to use in a centralized company, if the firm wants to have complete con- trol over all units. It is much easier to use measurements as profit, cash-flow and the achievement of budgets. However, these measurements are all financial and do not take any non-financial measurements into consideration (Broadbent, 1999). One alternative to the balanced scorecard could be the Intellectual Capital (IC) which deals with intangible recourses in terms of human capital, customer capital and organizational capital. The intel- lectual capital is difficult to measure since it is intangible. However, Mouritsen (1998) fol- lows the efforts made to measure the intellectual capital in a table with the columns “that what is” (resources), “that what is done” (actions) and “that what happens” (result). The two first columns can be measured in particular departments and functions within the or- ganization and the latter column is more difficult to measure but might be helpful for im- provements in the company (Broadbent, 1999). An example of Mouritsen’s table is visual- ised below.
Mouritsen and Larsen (2005) write about the intellectual capital information and tries to analyze what role knowledge has for management control. They split the knowledge re- sources into two different approaches; first wave of knowledge and second wave of knowl- edge. The first wave of knowledge is referred to knowledge embedded in individuals and value is created through individuals’ knowledge. It is therefore important to stimulate, cre- ate and share individual knowledge within an organization. The second wave of knowledge, on the other hand, is referred to be knowledge resources which are used in the production and creating of value, i.e. the knowledge is not embedded in individuals. Mouritsen and Larsen further states that knowledge resources are important for the organizations and ar- gue that in order to combine individual knowledge in an appropriate way the company could be managed successfully.
means that the financial measures are based on the operational and physical measures the balanced scorecard, intellectual capital as well as performance pyramid (Broadbent, 1999 and Olve et al., 1999).
2.3.3 Responsibility centers
“Centralization or decentralization refers to the organization of a company and specifically to how low in the organizational structure decisions are made” (Hirsch, 1994, p 589).
Centralization
Centralized organizations place most of the decision making power to senior executives. It is hard for highly centralized organizations to respond effectively or quickly to their envi- ronments and therefore centralization is best for organizations that are well adapted to sta- ble environments. In these organizations there are no major information differences be- tween the corporate head quarters and the employee who were responsible for dealing with customers or running the operations that make the organizations products or services (At- kinson et al., 1995).
Decentralization
The more independent and free to make own decisions a manager in a company is, the more decentralized the structure is. The best way to measure the depth of decentralization is to investigate how low in the organization where important decisions are made. There are two factors that are important when deciding the extent of decentralization: how to de- centralize, with this means what segments and bases for these segments. The second thing to consider is why to decentralize. Traditionally have these segments been divided by how they will be evaluated using financial measures. Decentralization involves dividing a com- pany into segments, divisions and strategic business units or any other name where the fo- cus is to create autonomy for each division and by that evaluate the segments as a separate entity. The level of decentralization can vary between the different entities in the company and therefore it is important to have in mind the authority each entity and manager has when evaluating them (Hirsch, 1994).
In order to achieve a company’s strategy it is important to decide how to organize people and resources. People within an organization might be divided into teams and work units. This is done in order to facilitate work flows and to focus attention on their specific task. Accountability characterizes the outputs that a work unit is supposed to produce and the performance standards that managers and employees of that unit are expected to meet. Different managers will be responsible, or accountable, for different parts or centres in the company (Simons, 2000).
The financial control is evaluation of some financial aspect of an organizational or respon- sibility centre and is used to achieve financial results within the company. Responsibility centre is a unit within the organization which a manager is accountable for. The most common responsibility centres could be divided into cost centre, revenue centre, profit centre and investment centre. The responsibility centre’s prepared accounting report re- flects whether the responsibility centre manager controls revenues, costs, or investments (Atkinson et al., 1995).
When outputs can be defined and measured and when the required input used to produce the output can be specified cost centres can be established (Kaplan & Atkinson, 1998). In cost centres the responsible manager must control the costs and do not control revenues
and interest (Atkinson et al., 1995). Managers of cost centres are given cost budgets and they have to distribute the desired level of goods or services within those spending limita- tion (Simons, 2000). In order to organize marketing activities, such as selling and distribut- ing finished goods, revenue centres are used (Kaplan & Atkinson, 1998). The manager of a revenue centre is responsible for the revenues but not for the manufacturing cost of product or service they sell, or the level of investment in this centre. The revenues meas- ures the value added activities (Atkinson et al., 1995). Profit centres can be seen as a combination of cost centre and revenue centre since the manager of this centre control revenues and costs of the product or service they deliver. Managers can make decisions about which products to produce, how to produce them, quality level, price, and the selling and distributing system since they have responsibility for both production and sales. This implies that managers have the position to optimize the performance of their centres by making tradeoffs among volume, quality, price and costs (Kaplan & Atkinson, 1998). This centre works as an independent business except that the senior manager, not the responsi- bility centre manager, controls the level of investment in the centre. In the investment centre the manager of the centre control revenue, cost and the level of investment (Atkin- son et al., 1995). This means that apart from the above stated responsibilities, for profit centre, the manager also has responsibility for working capital and physical assets (Kaplan & Atkinson, 1998). This centre works as an independent business (Atkinson et al., 1995). Table 4.1 summarizes the different types of responsibility centers.
Factors Cost center Revenue cen- ter
Profit center Investment center
Controlled by center mana- gement
Costs Revenues Costs and reve- nues
Cost, revenues and investment.
Not controlled by centre man- agement
Revenues, in- vestment in in- ventory and fixed assets.
Costs, invest- ment in inven- tory and fixed assets.
Investment in inventory and fixed assets.
Measured by the accounting system.
Cost relative to some standard (usually a budget)
Revenue rela- tive to some standard (usu- ally a budget)
Profit relative to some standard (usually a budget)
Return in in- vestment rela- tive to some target level.
Table 2-2 Summary of responsibility centres. (Atkinson et al., 1995 p 499).
After dividing into responsibility centres, the second question involves how to decentralize. Companies can be segmented on several different bases like; geographical area, products, types of customers and technology. There are many advantages with choosing a decentral- ized structure form, first it facilitate the response to environmental complexity which is done by decisions that are made by experts at lower levels of management. Cost of infor- mation is reduced because if all the information has to go forward to top management so they can make all decisions would be costly. Timeliness, in some uncertain environments there are not time to wait for decisions at top management level. Motivation and training will lead to that managers feel like they are more part of the process and perform better. Another reason for decentralize is the ability to evaluate segments and find out how differ- ent parts of the company are doing (Hirsch, 1994).
Atkinson et al. (1995) describe two types of rewards; intrinsic and extrinsic. Intrinsic re- wards deals with the design of the job and the nature of the company that people experi- ence. These rewards reflect the satisfaction that an individual experience from doing his/her job and is a kind of feeling. In this sense the management’s role is to develop an environment and culture within the company where the employees value intrinsic rewards. Extrinsic rewards, on the other hand, is a more physical reward that one person give to an- other person for a well performed job and therefore it is based on performance to a higher extent compared to the intrinsic reward. Examples of extrinsic rewards are meals, trips, cash- and stock bonuses (Atkinson et al., 1995).
Kaplan and Atkinson (1998) argue that there is no single bonus incentive plan that domi- nates and is the right one for all companies. Many things need to be considered when choosing incentive plan like the degree of decentralization, the time horizon for critical de- cisions of the firm, the environment and its uncertainty and the structure of the industry. How it is paid out is another part of the incentive plan and there are different ways of do- ing this. Reduction of taxes is one of the greatest benefits with a bonus plan, so pay the bonus in cash immediately is not the best way in this aspect. The tax is one reason why stock options have become the most popular incentive form. Other forms of monetary compensation than cash and stock options are; deferred compensation, performance shares or units, stock appreciation rights and participating units (Kaplan and Atkinson, 1998).
Above we have seen the researchers’ view of management accounting in general and per- formance measurement in particular. To sum up it can be said that, according to research- ers, management accounting and performance measurement would be useful in many or- ganizations in order to evaluate the previous and present situations, plan for future and make decisions for future process. However, the question is if it always is optimal to use performance measurement in all organizations. Performance measurements are used in manufacturing industry (Ask & Ax, 1992) but are the performance measurements useful in the newspaper industry as well? As discussed in the introduction, there is criticism to the use of performance measurement among some journalists in the media industry. We have, therefore, chosen to investigate the newspaper organizations since the objectives might dif- fer in this kind of organization compared to other organizations.
Some newspapers aim to increase profit and sell advertising spaces in their newspapers, and in that way receives “safe” incomes, since they know how much revenues they receives per newspaper (Hadenius & Weibull, 2005). With no advertising spaces the newspaper does not have “safe” revenue in the same sense. In such case, the only “safe” revenue is from subscribers which pay an amount of money when they start their subscription and it should cover many expenses. For these newspapers the financial aspects might be seen as more important than the quality of the outcome, i.e. they focus on profitability. Other newspa- pers have the aim to critical review a society matter (Schoenbach, 2004) and in that way get a leading role in a non-financial way. For such newspapers the focus is put on the quality of the editorial text rather than profitability and advertising sales. The differ in objectives can be related to Dagens Nyheter (DN), mentioned in the introduction, where the new editor in chief was well-known for financial focus and the journalists were afraid that the editorial quality would suffer due to the eventual increase in profitability.
2.3.5 Examples of financial indicators
Here we will present some performance indicators which can be used to measure the fi- nancial performance.
Operating income
The adjusted operating income is an interesting and a relevant income concept. Operating income is an income concept which, as a result of FAR’s guidance, can be found in a ma- jority of companies income statement (Hanson, Arvidsson & Lindquist, 2006).
Operating income=net turnover (adjusted) - operating costs (adjusted)
As seen, operating income is the surplus from the activity the companies has which shall cover interest rates and give a reasonable profit. If we want to compare the operating in- come between different years and different companies it could be done by put it in relation to the net turnover (Hanson et al., 2006).
Operating margin
Operating margin= operating income (adjusted) / net turnover (adjusted) (Hanson et al., 2006). The difference between gross margin and operating margin is that the depreciations over plan are included in operating margin. For a capital intense company where a large part of the assets are building assets could it therefore be a large difference between gross margin and operating margin. For a service company or a another labour intense company is the difference on the other hand small since there is few building assets to write off. Op- erating margin could be a good measure when making comparison of companies with dif- ferent debt structure because in this case does not the financial influence have an affect on the result (Sandberg, 1993).
During the 1970’s and 1980’s many people expected the death of daily newspapers due to the competition from media like TV, local radio and satellite TV. Despite this new compe- tition these decades were, according to Hadenius and Weibull, 2005, the best ever for the Swedish newspaper industry with a positive development both in terms of numbers of publications and large advertising revenues. The expected hard times would eventually come after all but not until the 1990’s. This led to the bankruptcy of the Social Democrat owned A-presskoncernen. The problems were decreased advertising revenues because the public reading behaviour was the same as before. During this time the industry of daily newspaper changed character. The political parties’ connection to the newspaper dimin- ished and the newspapers became more of an industry than an instrument for political opinions (Hadenius & Weibull, 2005). The political parties that owned newspapers, tradi- tionally, focused on maximizing number of copies, i.e. increase the edition, instead of mak- ing profit. The reason to this is historical, the newspapers was started of publishing or po- litical reasons and not economical. But this attitude with not having economical goal as their primary target is about to change (Sigfridsson, 1993). Looking at the global scene has the activities of companies engaged in different segments of the communication industry have been dominated by mergers, acquisitions, joint partnerships and other strategic alli- ances (West 1995, cited in Albarran 1996). According to Ozanich and Wirth (1993) there are four factors driving media mergers and acquisitions and these are; the growth of the media, significant barriers to entry in many media markets which increases interest in exist-
