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New Year. New Media. New Deals. Industry Professionals Weigh-In on What 2007 May Bring



By
12/28/2006

It's a new year and with it comes an expectation of new mergers and acquisitions and an even greater emphasis on digital media. And polling industry executives on their predictions for the new year has become a Folio: Alert tradition. So, from media bankers to CEOs and custom publishers to bloggers, we hit them all to get their take on what 2007 might bring. Some responses are humorous. Others are serious. Some are short and some are long.

From the hopeful to the pessimistic, here's what they had to say:

I suspect that 2007 will be tipping point for traditional (ink on paper) publishers regarding their legacy business. The market is already punishing traditional publishing companies with lower valuations than multi-platform media companies command. In 2007, I suspect that traditional publishing companies will be more focused than ever on adding online, television, events, etc. in order to preserve and build enterprise value.

Clay B. Hall
CEO, Aspire Media

We will continue to witness the ongoing evolution of our industry towards electronic media, where electronic and integrated product strategies will have increasing importance to our readers and advertisers alike. E-media strategies and electronic product introductions will play a vital role in reshaping the competitive landscape of every b-to-b market. Partnerships between traditional and new media providers will be explored and forged in the new year in pursuit of these new market demands, and we will continue to experience ongoing investment from the private equity sector. P/E firms will seek to invest in companies with a clear e-media strategy and those that are poised for market advancement. The change is inevitable, it will improve our business model and create opportunities for many organizations.

Douglas J. Manoni
CEO, Wicks Business Information

  1. Magazines will expand their footprint into digital platforms, building audiences, creating bold new forms of content, and increasing ad revenues.
  2. At the same time, more web-originating entities will find launching print magazines as the next logical step to creating deeper communities and a new revenue stream. (WebMD and TheKnot are sterling examples of successful web-to-print launches.) Check out the growing list of Internet brands that launched print magazines here: http://www.magazine.org/digital/15103.cfm.
  3. Print magazines will maintain their hold on media advertising spending share, and will still be considered the premiere medium of engagement.

Nina Link
President & CEO, Magazine Publishers of America

  1. The b-to-b media M&A market will remain strong as long as debt financing remains robust, interest rates remain stable, and recent transactions perform. Look for at least one blockbuster b-to-b media deal in 2007.
  2. Traditional strategic b-to-b media buyers will continue to sit on the sidelines for magazine transactions, although they will be active in acquiring vertical on-line businesses. United Business Media will continue as the most active strategic buyer. The new strategic buyers are the financial sponsor-owned integrated media companies such as Penton/Prism, Apprise Media, VNU, 1105 Media, and Summit Media.
  3. In 2007, magazine publishers will start walking the walk and not just talking the talk about eMedia. If nothing else, 2006 has demonstrated the importance of transitioning print brands to the web as the key to the very survival of many magazines. Most consumer and b-to-b magazine publishers understand the importance of this secular change in the industry, but fewer will be successful in making the transition.
  4. In spite of all the dire predictions, well positioned and well managed magazine brands will demonstrate surprising growth and profits in 2007. Savvy financial investors will see value opportunities that strategic players overlook. We will not experience a media recession in 2007.

Thomas Kemp
Managing Director, Verona Suhler Stevens

  1. In the magazine world, David Carey will be a name we hear a lot in 2007. The launch of Portfolio will be the most talked-about launch in a long time (unless, that is, you combine all of the talk about the multiple launches of Radar).
  2. Speaking of Radar, it will launch and close again in 2007, setting up another relaunch in 2008.
  3. Chris Anderson will have a big column in Wired magazine about "Radical Transparency" and it will become a book to be published in 2008.
  4. Wikis will be the "must-have" feature on magazine websites, however, they will frustrate publishers and editors when no "users" add content.
  5. Time Inc. will lay off employees and sell off properties and reorganize. They will issue lots of statements about synergy. (Oops, that's my boilerplate prediction from the past five years.)

Rex Hammock
Owner, Hammock Publishing
Author, Rexblog

  1. Magazines will remain a healthy slice of the media landscape, and will grow more robust as print companies wake up to the fact that they own BRANDS and begin to manage them in the way that their advertisers have long managed their brands.
  2. The M&A market will be hot thanks to the jumpstart provided by the sale of Time4 Media.
  3. In the magazine publishing industry, the "big four" will become the "big six" with two private equity-backed newcomers.

    4. As the recent acquisition of Readers Digest suggests, public media companies will continue to sell properties to private funds so that necessary investments can be made before they are once again sold or taken public.

Tom Beusse
President, Time4Media

  1. The migration of dollars to online from print will pale in comparison to a far more detrimental effect for many publishers: the emergence of lead gen as the negotiating tool. Readership quality will be determined more by its ability to produce a lead than anything else. Not all readerships were built with that in mind.
  2. A decline in the use of the word "Agnostic" as in "Channel Agnostic"-this will happen as a result of someone looking up the word and realizing that it means "you are not really sure about something". Hopefully new terminology will also emerge to take the place of "Cross Platform" & "Integrated Marketing Program".
  3. Although the terminology is over-used & unfortunate (see #2), Integrated Marketing Programs will be the best way to get the attention of clients. Sellers who are not strategic will be commoditized and driven to the bottom on price. Yet another unfortunate reality of the online emergence for those who don't have the right stuff.
  4. Increased interest & use of controlled circ to deliver "where & when" impact. Conversely, continued decline in newsstand. Death to the idea of paid circ as having the ability to provide more engagement than non-paid circ.
  5. Audience fragmentation & the ďľ‘Net will continue to put pressure on broadcast & general interest titles that worked in effect like broadcast. The spoils from these two areas will be shared by both online & vertical print properties.
  6. Hope: Publishing industry develops a new distribution model in effort to go "green" -finds it unacceptable that over 50 percent of its products on the newsstand get thrown awayďľ…and that recycled paper makes enough improvements in quality & efficiency to gain widespread use.

Traver Hutchins
CEO, MediZine

Magazines will continue to be challenged by advertising partners to deliver full marketing services and capabilities that surround traditional print buys with various multi-media and experiential elements. Most magazines have been too slow to adapt to that mentality and are still resisting this notion. Magazines that continue to meet these challenges in a creative way, that is also mutually beneficial to all parties, will be the success stories of 2007.

Andy Cohn
Publisher, The Fader

For 2007 I predict more of exactly the same as in 2006, except it will be completely different. There will be more new analog printed titles than ever before, but with smaller and smaller circulations. There will be increased focus on Web social networking platforms for publishers and their readers (Duh! magazine readers are a ready-made social network, there for the plucking).

I predict that two major circulation titles will fold along with several celebrity wannabe's, and that there will be unexpected shake-ups in the upper management of several top shelf publishing houses.

Paper, postage and ink prices will rise and the price of broadband access will fall.

I also predict that, as amazing and strange, as it may seem, on the same day, that the MPA creates an effective marketing plan for magazines, Derek Jeter, the shortstop for the Yankees, will throw the winning touchdown pass in the Super bowl.

And lastly I predict that publishers will finally realize that content is their true franchise, anti-disregardless of the platform that content is distributed upon, and that we are entering the new golden age of profitable Information Distribution, formally known as publishing.

Bob Sacks
The Precision Media Group

As more and more custom publishing contains a web, digital or other component, the "p" in custom publishing will be challenged. Is it custom content, custom communications or customized marketing? Whatever we call it, custom publishing continues its growth spurt in the industry. Marketers are putting more dollars against custom publishing and as a result, the products are more attractive, compelling and appealing to the recipients. Stay tuned. You'll see more high profile custom launches n 2007.

Lori Rosen
Executive Director, Custom Publishing Council

We will feel the affects of a down housing market in 2007...this will be offset by our growth in e-media and aggressive expansion into commercial construction...our trade shows and magazine events remain very strong....focusing on our launches and acquisitions will position the company for a solid 2007.

Peter Goldstone
President, Hanley Wood Business Media

  1. A few months ago we saw VNU turn its back on ethics and begin inserting ads in editorial copy. After folks complained, VNU pulled back. But I expect more of this foolishness this year. The pressure to increase revenue is enormous. Much of that pressure is coming from the new of owners of b-to-b magazines - private equity groups, hedge funds and assorted gamblers that don't share a commitment to journalistic ethics. And a myth has arisen that the old rules don't apply in new media.

    I predict at least one major publisher will do something unethical this year and then try to hide behind a claim that "things are different online."

  2. I expect 2007 will be the year of outsourcing. A number of magazines are already experimenting with having their art and design work done overseas. And Reuters opened the door in 2006 to outsourcing some editorial operations to India. But this movement will grow tremendously in 2007. I predict that at least one major b-to-b publisher will outsource some or all editorial operations to overseas staff. The most likely scenario is that one of the dozens of magazines that have launched overseas editions in Vietnam, China, India and elsewhere will ask their overseas staff to take over U.S.-focused beats.

    Once a publisher comes to understand that the editorial work being done overseas is as good as what's done in the home office, it's inevitable that he'll move more work offshore.

Paul Conley
Paul Conley Consulting

  1. Buyers will finally realize that the cash flow from free distribution titles (non-requested) is just as good as the cash flow from requested or paid titles and hence these titles will see a bump in multiple from 6x to 7x. Their excuse has always been that the barrier to entry is lower with non-requested titles but the good one can be extremely strong franchises with loads of advertiser loyalty.
  2. Lots of single title publishers who have postponed cashing out due to the ad recession of 02/03 will find their P&L's healthy enough to proceed with putting their title on the market. This will lure the strategic players back into the market who have been sidelined by lack of acquisition inventory. It will also excite the private equity fund buyers who are eager to make "add on" buys to their platforms. The result? Solid multiples for single title publishers whose titles have at least 400K in EBIDTA. I think we will see 7x and 8x multiples for healthy single titles in 2007 that have solid top line growth.
  3. Hot Sectors? Follow the ad pages. Recent reports indicate the housing sector is over the hump and there are several good sized acquisitions waiting in the wings.

Drew Lawler
Managing Director, AJ LAWLER Partners

  • Audience targeting will provide opportunities to take verified circulation into account. Heightened interest in providing advertisers with targeted audiences as well as a renewed interest in audience data by the magazine industry may increase the use of the verified circulation category. To support this, research will grow to provide qualitative information about the circulation such as the demographics and engagement of verified circulation recipients.
  • Consumer marketing will continue to focus on strategic partnerships as well as online marketing. Consumer marketers will continue to find ways to contact prospective online and print readers. Recognizing the relationships between magazines and their complement products, services and events,consumer marketers will continue to develop partnership and sponsorship sales programs.
  • Media buyers will continue their interest and demand for publisher participation in ABC's Rapid Report program.
  • Circulation transparency and media buyer interest in ROI will continue to change the role of consumer marketers. Given the multidimensional approach to consumer marketing by magazines and the increasing push by advertisers and agencies to maximize advertising ROI, consumer marketers will be increasingly called upon to work with their ad
    sales departments in presenting the details behind their circulation strategies.
  • As publishers extend their brands into other media platforms,there will be a greater demand for developing new reporting and metrics reflective of the changing media consumption habits of traditional and new readers. Although they may not be directly comparable, Web and circulation metrics together can demonstrate a publication's brand and the reach of its content. As media silos are reduced or eliminated by advertisers,their demand for consolidated accountability across all media platforms will find publishers and ABC providing new tools to address their needs.

Michael J. Lavery
President and Managing Director, Audit Bureau of Circulations

We expect M&A to continue at a brisk pace in 2007. Especially strong will be the private equity buyer group. A lower expectation, but not a bad one, is that there will be an increase in strategic buyers. Both buyers and sellers are urged to take advantage of the circumstances. Don't screw around with the market. Price levels probably won't change much.

Robert Garrett
Managing Director, AdMedia Partners

  1. I think the M&A market will continue to be bipolar - some companies will sell at frothy multiples, while other trade at more modest valuations, if they sell at all.
  2. There will always be more power in serving a marketplace with multiple, complementary media.
  3. The rise of digital media will continue but, as the market matures, there will be more pressure on performance measurement.
  4. Live events and custom media will remain hot areas.
  5. Figuring out how to make B2B readers pay for information is still an enormous, untapped opportunity for most publishers.
  6. Fundamentally, the industry remains a people business, with good talent being the scarcest resource.

Neal Vitale
CEO, 1105 Communications

I hope that Time's recent announcement to base ad rates on paid circ or audience is the start of a major change in the industry. Paid circ rate bases have led to most of the industry's bad decision making---may it rest in peace!

Dan Capell
Principal, Capell & Associates

In 2007, associations will dramatically increase their sponsor-supported publishing. Sponsorship gives associations the resources to do the kind of -depth research and analysis their members crave, and it allows an association to launch a new product line with virtually no financial risk. With new fee-for-service revenue harder than ever to get, with ad pages falling in some areas, and with association members wanting ever more detail to meet professional challenges, sponsor-supported publishing makes sense, as long as appropriate controls are in place to ensure the content retains the objectivity that is core to an association's value. Perhaps someday (although surely not in 2007) traditional advertising-supported association magazines will look more like newsletters, with the substantive information provided not in magazines but in series of sponsor-supported reports.

Robert Fromberg
Editor-in-Chief, Healthcare Financial Management Association
President, Society of National Association Publications

I see 2007 as being an even better year for magazine M&A than this past year which was great by itself. I think that magazines have learned a lot about how to work with the Internet and take advantage of gaining such alternative sources of revenue. Generally, also, I believe the solid economy will help nudge ad pages higher and this will in turn lead to good operating results which means in turn good prices for publishers that want to sell.

As to major developments, I guess we will see 1105 Media continuing to build in the technology sector and I would look for them to try to make a quick exit before this sector falters again. I think the private equity backed groups like Apprise and others will continue to be active as well.

Baran Rosen
President, Whitestone Communications, Inc.

By
12/28/2006







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