By Tony Silber

In August, CMP Media acquired the telecom Web site Light Reading for $27 million. When the deal was announced, it was CMP’s COO, Steve Weitzner, not CEO Gary Marshall, who was quoted in the press statement. “We’re looking forward to Light Reading’s very talented group of executives and professionals joining us as colleagues,” Weitzner stated. “These guys have been blazing a new trail in the B2B market, and we are excited about the opportunities this acquisition offers for both organizations.”

Two months later, Marshall was out and Weitzner was promoted to CEO. And left unsaid in all the official public comment was the fact that CMP and Light Reading have a history;a compelling history that symbolizes the challenges of the 2006 magazine-media CEO.

The founders of Light Reading, Stephen Saunders and Peter Heywood, started their site in 2000, two years after CMP acquired a group of IT magazines;including theirs, Data Communications;from McGraw-Hill, for $28.6 million. But then CMP shut down Data Communications in 1999, and laid off the staff.

Small Investment

Within weeks, Saunders and Heywood were out with their new site. Saunders describes it: “We didn’t have anything to lose so we decided to do the most outrageous, risk-taking thing, which was to start an online publication on optical networking,” Saunders says. “The dot-com bubble had just burst, and then the telecom bubble burst. Everybody thought we were crazy. But it turned out to be a stunning success.”

Light Reading got up and running for about $200,000, Saunders said. “It was nothing;my checking account. I had been working at McGraw-Hill and I had six months of severance. If we had wanted to do Light Reading as a print magazine it would have cost $1 million.” The site generated about $2.5 million the first year and produced about $10 million in 2005.

So CMP bought a group of magazines from McGraw-Hill for $28.6 million and essentially closed them, and then seven years later spent $27 million on a Web site on the same topic created by the people laid off when the magazines were shut down.

In the last five years, Light Reading grew from nothing to become a $10 million business. At the same time, CMP declined from about $500 million in revenue to an estimated $350 million in 2004.

It’s not just CMP. Across the magazine industry but especially in b-to-b publishing and particularly in technology, print media is facing decline. American Business Media’s BIN reports indicate that the computer, software and telecomm categories produced $2.3 billion in 2000, $1.8 billion in 2001 and about $1.0 billion in 2005.

An Inherent Disadvantage

All of this adds up to an extraordinary dilemma for print-media CEOs: Managing “legacy” print media and emerging online media simultaneously. Print media is declining, but makes up the vast majority of magazine-company revenue. E-media is on the rise, and many publishers are aggressively involved, but they’re at a disadvantage because of their imperative to protect what is still their largest revenue-producer.

The continuing shift in media has taken its toll. Since the end of June there has been a steady stream of CEO changes at prominent magazine companies.

ユ In June, Russell Denson lost his job as CEO of Gruner + Jahr when that company was acquired by Meredith.

ユ In August, Stephen Kent left F+W Publications when it was sold to ABRY partners.

ユ In September, Marshall left CMP and was replaced by Weitzner.

ユ In October, Kelly Conlin left Primedia amid a rare display of public finger pointing.

ユ In November, Jim Casella moved out of the top operating role at one of the country’s top two or three b-to-b media companies, taking on a new role as vice chairman for expansion into international markets.

ユ Also that month, Patrick Kenealy announced he was leaving as CEO of IDG to go back to that company’s venture-capital business. Indeed, the only CEO of a major technology publishing company with significant tenure is Robert Callahan at Ziff Davis.

The truth, many observers say, is sobering. “It’s not a pretty thing to have to face as a publisher that your cash cow is slowly dying and there is probably no way to make up your lost revenue online,” says Alan Meckler, CEO of Jupitermedia, a Darien, Connecticut-based online-only company for the IT and Internet markets. “It’s a losing battle. The only course of action is to ultimately bite the bullet. If you have a print magazine in technology these days, there is no way that your advertising will keep up with the rise in distribution costs. It is a question of how long you are willing to go.”

Light Reading’s Saunders offers a similar take. “You can’t just keep sitting there losing 15 percent of your revenue every year and think that one day everything is going to be okay,” he says. “Because it is not. My prediction for 2006 and 2007 is that people are going to stop doing print. Or they are going to reverse the polarity of their companies. And they are going to take a hit.”

Greg Strakosch, CEO of Needham, Massachusetts-based TechTarget, an online media company covering the IT space that has branched into print, notes that many print-media companies, especially those covering technology, are struggling with revenue. “In the legacy print companies, overall revenue is flat,” he says. “And if you look at where they are growing, it’s online. So they are really only moving money from the left pocket to the right pocket, not growing marketshare.”

More ominous, Strakosch says, successful online companies usually are those with an online heritage. “Yahoo and Google started as online companies,” he says. “And if you look at the ones that have been successful in a particular market, you have TechTarget and c|net in IT and WebMD in medical. In each specific vertical, the most successful companies have started online.”

Changing Markets, Changing Managers

The magazine industry, says Tom Kemp, a managing director at Veronis Suhler Stevenson and former CEO at Penton Media who left that company in 2004, has not been able to benefit from the overall economy as much as people expected. “It’s still a very challenging environment for most traditional magazine-publishing companies,” he says. “And there are no easy answers.”

Adds William Pecover, CEO of Haymarket Media, “Changing markets need different managers. Everyone talks up magazines, but pages are flat across all markets in the fourth year of a recovery. The media market has changed dramatically, and many traditional companies can’t cope.”

Naturally, some traditional-company CEOs don’t see it that way. They don’t even like being called print. “I don’t like the categorization as a legacy business,” says David Nussbaum, CEO of Penton Media. “We are not a print company. We are a multichannel media company.”

Nussbaum acknowledges the validity of some of what Saunders and Strakosch say. “If you are protecting your print, then yes, you are going to fail. Companies like ours are going to succeed if they go to market not with any particular prejudice in terms of the media, but rather with an understanding of the community and the right information products for that community. That’s what Penton is doing.

“I would put my Web-development staff up against any of those companies,” Nussbaum adds. “Take a look at the revenue and profit that Penton is generating online and it’s bigger than a lot of these pure-plays. And many of the assets represented by the print product translate magnificently to to the online world: Brands, databases, content validity, and community.”

IDG, meanwhile, says that online now represents 20 percent of its total revenue. “Traditional publishers have a starting point for building online businesses with assets such as brands, unique content and relationships with advertisers but if they rely solely on that heritage, they surely won’t succeed in the ムWeb 2.0′ world,” says IDG president Bob Carrigan. “The challenge for traditional publishers is to think of magazine assets as just a kernel in a much larger Web world where to be successful, publishers need areas such as blogging, new ad models, including pay-for-performance, new audience development techniques, and new technologies for delivering content in the way that users want to receive it.”

Still, there’s no question that the pure-plays are achieving scale. Strakosch says that TechTarget will grow by 50 percent in 2005, from about $50 million to $75 million. Jupitermedia will generate $125 million this year with no print magazines, although it has shifted dramatically away from media and become an online image library.

The challenge for print media is to become conversant;and to generate revenue from;such devices as research, blogs, white papers, case studies, chat, keyword search, Webinars and more. It’s one thing to experiment in these areas, but another to rely on it without the safety net of print. “These are difficult questions that these companies have to wrestle with and so far no one has been able to figure it out,” Strakosch says. “I don’t know of any businesses that have print legacies that have been able to adapt online.”

It starts, arguably, with the CEO. Says Nussbaum: “Of course there are CEOs suited to run a publishing business, and there are others suited to run a multi-platform, delivery neutral, community oriented business. There is no doubt that finding senior execs who are Internet savvy, and Web passionate, as well as those who understand the content and events business;is not easy, but that is likely the profile that many companies are searching for.”

Some, including Penton’s Nussbaum and many others, say print and online are all part of the same continuum of content. It’s not about print even if;like Penton;only 10 percent of your revenue comes from online. It’s about presenting great content in a neutral manner. It’s about incenting your sales staff to sell to a topline, whatever the medium. So if you miss your print budget and exceed your online budget, that’s fine. The challenge is that online revenue never matches print revenue dollar for dollar. “Penton will do 300 Webinars next year,” Nussbaum says. “We are a cutting-edge online company.”

Obsessed With Technology

Andre Shashaty, president of San Francisco-based Alexander & Edwards, publisher of two real estate-finance magazines, says his $4 million company offers blogs and plans to launch several Webinars this year. However, most of the information online for the real estate world is poor, he says.

“Maybe we and others need to take more time with the development of the electronic channel but that is not important if your product is not cutting edge and unique,” Shashaty says. “The discussion is so e-centric I feel that we become a little obsessed with the technology.”

Alexander & Edwards has a revenue split of about 90-percent print and live events and about 10 percent e-media. Readers and advertisers have not been demanding e-media, Shashaty says. E-newsletters produce no significant revenue. “Small entrepreneurial publishers like me don’t go in lockstep with the big companies,” he says. “We have to be much more selective about the opportunities we invest in.”

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