World Association of Newspapers and News Publishers

World Publishing Expo 2013 opening panel discussion – transcript

World Publishing Expo 2013 opening panel discussion – transcript

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The following is a transcript of the discussion at the official opening of the World Publishing Expo in Berlin, with Axel Springer CEO Mathias Döpfner and Guardian News and Media CEO Andrew Miller participating. Moderator was noted analyst Ken Doctor. An edited version of this transcript appears on page 12 of the November/December issue of World News Publishing Focus.

Ken Doctor: As you look at the social numbers and other analytics now flowing into the Guardian, what ways are you finding to turn increasing intelligence about your readers – where they're coming from, when they're coming – into money? Are you at the beginning of that process, or does this kind of data help you monetize, and how does it help you monetize?

Andrew Miller: First of all, we're in the early stages of this. The important thing is it empowers a newsroom to see this stuff. It's not telling a newsroom about this – it's giving them the information to be able to work with it. This is where our readers are, so there's no point in pretending they're not there, and therefore my job is to embrace in the right way, but also challenge, people like Google and Twitter and try and find the monetization models around it rather than try and be in denial. That's where our readers are already. If I look at models like Buzzfeed and other ones which are algorithmic, they still need strong editing in there and the 200 years of heritage we have at the Guardian allows that strong heritage to come through in editing, so ultimately it's about the journalism, about editing, and then my job is to really work the business models around it and that's what we're doing. We've got, say, five consecutive courses of revenue going through this kind of work. The big worry is privacy in data, as we've seen in the NSA-type stories. The real problem, I think, will be an increasing position coming from people to start complaining, rightly, about the use of their data, and maybe over time there will become a trade-off, that if pay you don't give away your data, but if you don't pay maybe you implicitly say, "I'll give away my data." But that's still, I think, years away yet. That's a nice idea but it's still a long way from practice.

Doctor: How about for Springer, in terms of analytics and use of them: Where are you at in that process at this point?

Mathias Döpfner: Not doing analytics and not looking at them would be just stupid. On the other hand, I think there is a danger of over-valuing them. It's not going to tell you where to go, and it's not going to replace healthy gut feelings and emotional elements in your decision-making. I strongly believe that these emotional factors, these intuitive factors, are much more important and more successful than the analytical ones only. I dare to say that since we are now generating seven years in a row record profits. Probably if we would not do so I would not dare to say that publicly, but I'm in a position to say simply out of my own experience, take into account what analytics provide you, but base your decisions on other factors and don't neglect intuition.

Doctor: So what are your advertisers asking you for at this point differently in 2013 than they were, say, five years ago? Are they asking for different kinds of data? What is the relationship – how is it different?

Döpfner: Well, there is a pretty substantial change going on. I mean, our former business model was pretty much based on the reach figure that we were providing and a price for a certain reach figure, and the format that you are booking your ad in – and I think that's over. Customers are much more sophisticated, looking for more sophisticated multimedia solutions and packages on the one hand, and of course they are interested to get more information on the people they are reaching with a certain bundle or multimedia mix, and they ask for more transparency. There is a wonderful model in the digital world that we love and that we are very active in, and that is the performance-based model, affiliate marketing like Zanox, Digital Window, and those are companies that we control, and this model basically says that the advertising client only pays for an ad if it led to a result, if it led to a transaction. And it's almost a no-risk proposal for the advertising client. So I'm a bit ambivalent because on the one hand we are strongly benefiting from that wonderful model. At the same time this is creating new demands on the advertising side.

Doctor: That's right. So you have it on the new side of the business, so you don't want it too strongly on the old side of the business.

Döpfner: We need to do both.

Doctor: For you in advertising, you have been among the leaders as well in advertising growth. What kinds of demands are you finding that you have to now meet from advertisers?

Miller: The biggest challenge in the U.K. for advertisers is the fact that the clients absolutely want to innovate and try things, while the ad agencies seem to still struggle with where that's going. We deliberately moved away from selling numbers. I totally agree, we're selling an audience, so we're defining our audience as persons, and showing the value of being in the audience, so that's winning clients for us. We did a thing, the GuardianWitness app, which has strong sponsorship from everything everywhere, a mobile company. It was about readers sending their content in and then us editing it and changing it around. So it's about being very innovative in the advertising platforms but really engaging as much with the clients as it is with the advertising agencies. And so far that's winning. But it's content advertising and creative on our part that seems to be flavor of the month. It'll be flavor for how many years? But still fundamentals have to work through and got to prove the value of what we're offering clients.

Doctor: Are there any difficult kinds of demands that you're getting now that are harder to meet? Are you getting more content marketing kinds of approaches?

Miller: Well we're not getting – we're actively trying to find them. That's really important, but what we don't do is, the Guardian journalists still remain independent. The danger is for many companies to grab this stuff and compromise the journalism. We'll never do that. To work, there's got to be a fence to keep the journalism real. We've re-geared the whole of our sales team to be chasing down these things, not waiting for them to land. I've criticized many media companies as waiting for things to land rather than chasing things down.

Doctor: In your talk, Mathias, you said if you're expecting the print world to come back and save us, that's not going to happen. We need to do a set of things and you said, "Will that work?" And I think you said "perhaps." Which is searingly honest and I think accurate and I think where we are today. I'm wondering for both of you, on a 10-point scale where 1 is having done a little and 10 is almost being there, in terms of a transition to a truly hybrid digital-print business, where do you think your businesses and the industry is today? How much of a transition have you made? You both made a huge amount of transition, but I'm wondering what you see ahead. What number would you pick as to where you're at?

Döpfner: I would stick to the percentage of our profits, which is between 40 and 50 percent, and I think that's where we are as a company with regard to the transition, so clearly below 50 percent. We have more to do than we have done.

Doctor: Now 40 to 50 percent is what percentage of the profit is digital?

Döpfner: We have 47 percent are deriving from digital businesses.

Doctor: So not quite halfway?

Döpfner: No. Still more to do.

Doctor: More to do.

Miller: What I was saying earlier, if you look at our readers, they are 9 out of 10 and we are probably 3 out of 10. In terms of where I would like us to be, we've got a long way to go still. The industry maybe is a 2 out of 10, I don't know, but we're 3 out of 10. And it's about continuing to innovate and continuing to find new ways of doing that.

Doctor: Those are really interesting answers. One thing I have seen this year, I noted, the billionaires – private money moving into the U.S. industry. In Europe newspapers have often been much more private and stayed private, coming out of families. In the U.S., there are largely public newspaper companies but it's now gong the other way and I think that's part and parcel of what you're saying if you had a 3 or a 4 that this is now long-term. I heard as paywalls started going up the last couple of years, maybe – this was the question the press would ask – are paywalls the savior of the industry? And I got tired of giving the answer: There is no single savior as you're all doing many many things and the answer is still "perhaps." So this is a long-term perspective and I think now we're now in this point of 2014, probably the middle of this decade, which is still a major transition. And the biggest worry is when I look at these numbers, and I look at them in Europe and in the U.S., is the continuing high rate of decline in print advertising. And I'm wondering whether you see as you look at especially 2014 – 2015 is almost too distant – but do you think that the decline, the rate of decline in print advertising, is going to soften, or essentially the acceleration that we see is just going to wipe out another half of print advertising in the next five years? Do you have a sense of the trajectory of print advertising?

Miller: My reference point would be the classifieds sector, where we always thought it would bottom out at some point, and we were waiting for that bottom to happen. But it didn't happen, and we flipped Auto Trader to being a pure digital model now. So my reference point from classified is you cannot plan on the basis it will plateau, but it will be a pleasant upside if it did. In a more content-focused media organisation such as the Guardian it may be different. I think it's about the print format as one format of consumption of our journalism, out of many formats of consumption of our journalism. The Monday-to-Friday format is very different from the Saturday-Sunday format, and I think therefore it's up to me to innovate as much around a newspaper as around digital and find the right format for what people want these days. So I know that I prefer a quick read when I'm traveling to work in the morning rather than a heavy read any more. But I know I love a lifestyle paper – the Guardian, the Observer – at the weekend. So it's about designing a format. Will there be an inexorable decline? I've given up trying to answer that one. I'll just go with the flow and there will be a pleasant upside if there isn't.

Döpfner: The only consistent trend that you can see is that the advertising business is getting more and more volatile. That's why it is absolutely impossible to make any prediction here or have any kind of plan for the next two years or for the speed of decline. To be on the safe side, I would always expect that it is ongoing. I don't see any reason why there should be suddenly a stop of that, so you have to prepare yourself. For us, for example, it's a very good position to be in because we have almost no classified ad revenues in the print business. It was traditionally only around five to six percent of our total revenues. That's why we were very aggressive and active in entering the digital classified portals and they are now contributing a large deal to our business, and so you have to find ways to live with a situation where there could be an ongoing trend. But I think more important than that is that we have to redefine what we are offering to the customers. It's not a print circulation – it's a brand. And it's a brand that is coming to their customers on a traditional broadsheet newspaper, in a tabloid version, on a web site, on a mobile app, on a tablet app, perhaps on a web TV format. So it's a brand on different distribution channels, and with that I think you can create a growth story where your reach in the number and quality of your clients is growing and with that you can grow your top and your bottom line.

Doctor: So you've talked about exactly your all-access model, and the all-access model is so new. It turned out, I think, to be a historical accident – the tablet came out about the same time that paywalls started going up, but clearly the consumer psychology is exactly as you said: "I can get it here, here, here, here, and here," and what you've done is you've said, with the regional papers, with Die Welt and Bild, "You pay us a price – you can pay one of three prices – and you can get all of these things." What have you learned so far about – you have the early experiments in Hamburg and Berlin – I know Bild with the Bundesliga highlights now – what have you learned very early about consumer psychology and where does that tell you you're going to go with paid content?

Döpfner: First of all, it's very early to say something about it because we have only a couple of months of experience. We were very worried before we started, because we were the only ones and nobody else did it, so if you are the only brand on the web that asks for a subscription price, I mean, it's pretty tough. So we were very worried. I have to tell you from today's perspective the situation is much better than I ever expected. To be concrete: I can talk about the Die Welt figures. With Die Welt we have 47,000 paying digital-only subscribers plus 27,000 multimedia subscribers who subscribe to print and online, plus a couple of thousand who are sponsored by a car manufacturer, so we don't count them. And even if we don't count the 27,000, if we only take the roughly 50,000 digital-only subscribers, we have generated them in six months with a limited marketing budget. It's roughly 20 percent of the total circulation of the paper, where we needed 50 years or more to generate that amount. So it is pretty exciting, more than we expected, and the most surprising thing is that the reach figure of the web sites – the uniques, the eyes – did not go down, which we expected, which we absolutely expected. So why is that? My only explanation for that is that it seems to be an emotional perception that something that has a price has a higher value and you want to be part of it. Otherwise I could not explain, to be very honest, with all confidence in the great quality of our journalism, why so many people are willing to pay although they have so many alternatives for free around us, and why the reach figures are not going down. So there seem to be enough people who think, "Okay, this is worth paying that price," and I think it's very encouraging. It's a long-term project, and even if it would not go well we would continue to learn from our failures and so on, because I really think it is decisive that we have the two revenue sources, in order to make journalism a solid business model in itself and not as a recipient of subsidies.

Doctor: Andrew, I know you have a number of individual paid products, where iPad is paid in some places, and you're managing this great global audience growth and using social media, as you displayed up there, to do something which is unusual in the trade. You're growing greatly. And yet I know the U.K., and London specifically, is maybe the toughest paid-content market in the world as I look at everything. What do you see, both for the Guardian and as you look at what's happening with paywalls generally over the last two to three years?

Miller: I think it's very specific to each company's position at start point, so you've got to remember that the Guardian was the second-smallest national newspaper in the U.K. and through the opportunity that digital has given us, has propelled us to being the third-largest website internationally in English-speaking terms. And that's an opportunity that we'd be crazy not to have taken, be crazy not to keep going and taking. We are not anti-paywall. We watch all the time and logically over time we're going to have to be asking for more direct revenue from our readers. But I prefer at this stage to be going after reach and increasing engagement internationally, because I see that as a bigger opportunity than closing down our offer through paywalls at this stage. But we monitor and follow it all the time.

Doctor: Is it going to take you to a path, you think, by, say, 2015 where you are finding ways to get more reader revenue? Is that a important strategy – to take advantage of that reach?

Miller: Well, I would argue that we are getting strong reader revenues. Digital advertising is only there because we've got readers. It may be indirect, but it's still reader revenue, and the classified business we have is part of the Guardian's reader revenue. So I would argue that it's there. It's about how one monetizes the readers and that's really the challenge – whether it's direct or not direct.

Doctor: Let's talk about weekend, and you made the point about weekend, and I know one of the subscription choices is digital plus Sunday. And we've seen this change in all of our readership; we're more digital during the week, as you said about the feature section, so it's not just the Guardian but of all good newspapers Saturday or Sunday editions, depending on the context, can be really good. Do you think that there's a longer lifespan for a Sunday or weekend paper – and does that deserve more investment consequently to hold onto that print base?

Döpfner: The short answer to your question is yes, I do. On the other hand, I want to share one experience with you that surprised me. When we offered for Die Welt - for Bild just two months ago, so it's too early to say – so let's stick to Die Welt – when we offered the three bundles there was a minimum digital package; there was an extended digital package, all digital offerings – website, all apps, PDFs and all that; and there was this combination, all digital plus the Sunday edition. We thought among the three offerings the third one is the most compelling, is the most attractive, and it had by far the most significant price advantage. Now guess which offer of the three is the least successful? The most attractive one. So that is something that surprised us. But it can be explained by the fact that probably a digital subscriber is only intererested in the digital product. I don't know, but this is something that we have to learn more about and that we have to understand better. In general I think weekends are getting more important. Because during the week you prefer the fast digital consumption of things whereas on the weekend it's the big movie theatre, the big format where you have the visual attractiveness of the print product that is hard to replace with a little screen.

Doctor: What do you think? Are Sundays more important in terms of the editorial focus and the investment than it was, even three to four years ago?

Miller: Again, it's about innovating across all the different ways our readers consume. Also what we see very clearly is Saturday is lifestyle, and that's big advertising for us, and Sunday is more reflection and thought. But it's interesting: We're seeing people shifting from Sunday to Saturday so they want is more of a weekend-type and then during the week it's slipping into mobile so mobile is more of a live experience, people looking for live breaking news. I think it's just reflecting the different devices and products for all the different needs of our readers.

Doctor: Talking about mobile, the stat I had up there – 33 percent generally I hear from news companies coming from smartphones and tablets. BBC, I think, had its first majority mobile weekend about six weeks ago and clearly we're going to be mobile majority in 2015-2016, maybe earlier for news sites. It could well go, too, where Facebook and Pandora and all these companies are, up to 75-80 percent. Do you view, as you're looking strategically now – you didn't need new problems, new issues to deal with – but if we get to 55-60-75 percent mobile use, is this more of an opportunity or more of a new problem to deal with in terms of transitioning the business?

Döpfner: Well, I think definitely more of an opportunity. I always believed in the mobile devices as the real opportunity for the publishing sector. Desktop is not an attractive way to read newspaper or magazine content. Newspapers and magazines live from their mobility. You can read it in the morning in your bath, you can read it at the breakfast table, you can read it in the subway, you can read it in the car, you can read it at your workplace – wherever you want to read it. You're totally flexible, you are mobile. That's why in principle a mobile device is closer to the role of newspaper journalism and consumption of newspaper journalism. On top of it, the devices and how they are developing now – the tablets – the tablet is the first device where magazine or newspaper content can be read in a really attractive and convincing way. I think we are at a very early stage of that development. I would not exclude that in a couple of years from now – let's say in seven or 10 years from now – these tablets are looking like traditional paper as we know it. It's something that you can fold or roll, that is very easy to put into your pocket and it's just a commodity. Everybody has it. And that's why I think this whole question – how much is paper in the sense that as we know it, the analog paper, and how much is digital paper – is not that important. What's more important: Do we have the right number of readers and the quality of readers? I think here the mobile devices are a great help for publishers.

Doctor: I ask Andrew to comment on that and if anybody has questions.

Miller: I'd agree totally on the view of mobile. We see it exactly the same. To me mobile is a great opportunity – it's not a problem. There are challenges, as the economic model is even worse than desktop, but the opportunity is there and that's how people are reading and consuming it, so we have to be there. The challenge, I think, is interesting in two ways. Responsive design helps – a technology that starts making the technology more neutral as to whether it's desktop or whether it's mobile, and cheaper, and the second one is that just by actually following the consumer, that's one way around it.

Doctor: One of the biggest concerns, of course, is advertising. That it's still another advertising format. The tablet is more print-like. Tablets are very different advertising platforms than are smartphones, and are you able at this point to cater to advertisers well enough on each of those devices? We have some of these in-between devices, but mainly the small screen and the tablet print-like replacement. Is that working for you in terms of working with advertisers on these different kinds of devices, or is it still at a very early stage?

Döpfner: It's at an early stage. We are not good enough in doing that. On the other hand we see that advertisers are pretty reluctant with the small format of most of the mobile devices. I think that's an issue that we have to take very seriously.

Miller: But again an iPad is very different from my mobile phone, and the way it's consumed is very different as well.

Döpfner: It could be that mid-term, the mobile devices are more attractive for the readers and more financed through subscription models whereas the bigger screens are more attractive for advertisers and more financed through advertising revenues.

Doctor: We're going to see, I think, over the next couple of years, a tremendous investment by Google, and Google is now really getting a larger share of the mobile advertising that's out there, even though mobile is smaller. Let me go into another Internet huge success story: Amazon. I'm wondering, when you heard that Jeff Bezos had done a deal with the Graham family, what was your first thought and what's your thought now: Is he going to be a major change agent or is it going to be an overblown story?

Döpfner: Well, my first thought was that when I was at the Sun Valley conference this year I always saw Don Graham and Jeff Bezos talking together and I thought, "What are these guys talking about?" Now I understand why. So that was my first thought. My second thought was I don't believe that this is a kind of private toy that he just bought because he wants to have some political influence or something like that. I think it can be – I mean, I don't know – but it can be part of a very smart strategy. He simply bought it privately because he didn't want to have the debate with his shareholders: "Why buy a print asset?" But he believes in the brand, as you said in your presentation. I fully agree. He believed in the power of the brand. He believed in the power of the content. And of course he wants to develop Amazon and particularly his devices into content players. not only content distributors but also content players. In book publishing it's very easy. Every author can access publishing tools directly and he often wants to avoid the traditional publisher. In the magazine or newspaper model it's a bit more complicated, and he takes a first step with one of the most prestigious and powerful news brands in the world. I think it was a very smart move, and at that price, we would have bought the Washington Post immediately – without due diligence.

Doctor: They didn't call you? Let me just ask Andrew to answer that one and then we'll go to the question.

Miller: I think it's a really exciting opportunity for the industry. I think it's exciting on two fronts. One is you've got the master of data analytics and consumer insight marrying up with a content company. And the clash of cultures between a tech company and a newsroom, to see how that works as well, so I think it's going to be interesting to watch.

Doctor: It's going to be fascinating. we have a question over here.

Questioner (Karl Malik, Publisher, Pre-Media Newsletter): Two questions to Mr. Döpfner: Can you give us a rough idea, entering so successfully this 47 percent profit in the digital business, as to your total investment in this business? Second question: You sold recently, a few weeks ago, one of the most successful, biggest regional newspapers, Hamburg Abendblatt, and a lot of magazine titles to Funke Mediengruppe, transferring about 900 employees to another big competitor. Does that mean the final showdown for print in Axel Springer's portfolio?

Döpfner: Well, first question: Just to give you a rough dimension of it, we are generating now a quarter of a billion of EBDA with digital businesses, through partly organic, partly inorganic acquisitions. And for the acquisitions we spent north of a billion in the last 10 years in order to acquire that portfolio. The deal that you refer to we are still waiting for the approval of cartel authorities. That's why it is still a plan, not a done thing. But there are no reasons to think that they will not approve it. We definitely don't see it as a kind of showdown and I think it is not a print or no-print decision. It's not that the Funke group believes print will grow forever and we think print is dead. That's not the point. I think both companies see the challenges, the structural changes in our industries, and we came to the conclusion you have to focus on your core competencies, on your strongest brands. and in the regional newspaper business, we had no chance to grow, simply because of the role that the Bild-Zeitung plays in Germany. The cartel authorities think Bild has a market-dominating position, which we think is completely ridiculous, particularly if you take into account players like Google and others, but nevertheless, it is as it is. We have to live with that and we were not able in the last decades to buy even a minority of any other regional newspaper. And I think regional newspapers can prosper if you do it like Warren Buffett or if you do it like potentially the WAZ group (the Funke group) is doing it, that you build large chains of regional newspapers with high cost synergies on the overhead side, where you really can focus on decentral regional journalistic qualities and investments. That's what the WAZ group can do that we could not do. The same is true for the TV listings business and you simply have to come to a conclusion either you grow and generate synergies on that front or you have to divest and take the money in order to transform the company further into a truly digital media company and to strengthen the journalistic quality of the remaining key brands of the company. That was the idea behind it.

Questioner (Dipankar Das Purkayastha, Managing Director & CEO, ABP Pvt Ltd, India): My question is to Mathias. I'd like to know about the 47 percent return on EBITDA, what percentage is coming to your organic growth and how much to inorganic?

Döpfner: Well, this figure I cannot give you because it's hard to say. You know, if you bought a portal company five years ago, is it now organic growth or is it inorganic growth? Even in the existing organic projects we have some inorganic elements, so that is definitely impossible to break out. I can tell you that we have three pillars this digital strategy is based on, and these three pillars are basically representing the traditional revenue streams of a publishing company, a newspaper company. It is on the one hand content and the consumer who is paying for the content. It is the second, advertising and in the digital space particularly performance-based advertising models, and thirdly it's classified ads. That was the business model of a newspaper, so you create the best possible journalism and make your readers pay for it. You use the reach that you have achieved and monetize it towards advertising clients, and you take advantage of that position and build classified ad platforms in real estate, cars, and jobs. And those are exactly the three things that we are doing in the digital world, and in all three areas with organic and inorganic elements.

Questioner (Katja Riefler, Director EMEA, AIM Group): I have a question regarding classifieds, so it's very good that you just mentioned them. I wondered, because the big classified players we have in digital right now, they have grown without any editorial help. So I wanted to know if you see synergies – you have been talking a lot about journalism – if there are any in the digital world, or whether the classfieds will just keep on growing as a separate business that perhaps can even live better without the help of publishers.

Miller: To me the learning we have in Auto Trader, which went from an 80-million-pound-profit print business to now a 140-million-pound-profit digital-only business, is that it is best run on its own. The learning process is that the number one or first to market generally is the one who wins. And there are other players around it, so my strong preference is, whilst ancillary classified revenues can build onto a newspaper – what we do with Guardian Jobs in the U.K. – the best way to run an online classified business is to keep it separate.

Döpfner: I would first of all agree with her observation that it is true that the classified players can do their business independent from journalism, and that's a big difference to the analog world. We have to take that into account and not fool ourselves. On the other hand, I don't give up the idea that there can be certain positive effects and synergies if you closely cooperate with print and offer multimedia bundles, which we are doing and if you also use your print reach in order to drive the online traffic. And you could say okay, that's naive, it's not going to work. I would not dare to say that we have found the golden recipe here and that we know that it is going forever like that, but I can give you one example. We bought Stepstone in two steps. Stepstone is a market-leading job portal. We bought first a minority stake of 49 percent in the German business of Stepstone. The german business was not making money, nothing, it was a catastrophe. After our investment the German business of Stepstone became the most profitable and fastest growing element of Stepstone. Then we bought 100 percent of Stepstone international and the whole company grew in the first year after our acquisition by 80 percent. Now you can say that was the genius of the management. Maybe, but I think on top of that there was a certain synergetic element that helped to achieve that.

Doctor: Let me just ask lastly one more question: You both made different kinds of investments in my home country, in the USA. The Guardian has made another significant move into the USA over the last year and Australia as well. Being an English-language paper is good. That was good planning on your part. How is the effort in the USA and Australia going at this point, and is this a long-term reach effort or what do you see in it at this point?

Miller: The investments both in America and Australia are going extremely well, both in terms of reach and audience engagement, thanks to, again, the journalism, the story. Mark Snowden has really taken off, particularly in America. We're now building a commercial model. The other interesting aspect of it, it's a pure play digital newsroom. It's a very different way. And part of the learning of it is how do you run a digital newsroom to learn as well. We only have 50 people in America, 15 of which are commercial, yet we have an audience of 15 to 20 million unique users and a story like the NSA. And that shows you you can do really powerful tough journalism in a very different way in a very different business model as well.


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Anton Jolkovski


2013-11-29 13:34

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