As a magazine industry pioneer for over three decades, John Suhler has an unmatched perspective on the long-term macro trends in media. And his perspective is bolstered by the Veronis Suhler Stevenson Communications Industry Forecast, which tells a surprising story about how traditional media stacks up against digital-media companies. [Full disclosure: VSS is an investor in Red 7 Media, the parent company of this magazine.]
In 2007, according to the forecast, traditional media companies (including b-to-b and consumer magazines) produced about $32 billion in online and mobile ad spending, while their pure-play counterparts, including the giants like Google, generated $37 billion. “The fact that they’re even in the same spitting distance is a shock to most people,” Suhler says. “And the fact is that they are even growing faster.” Also in 2007, according to the CIF, spending in traditional media companies had a five-year growth rate of 45 percent, while pure-plays grew by only 13 percent in the same five-year period.
So for Suhler, the big idea is this: Traditional media companies should recognize the success of the new model and drive their businesses into “multiple-channel clustering around brand communities.” And the financial community will see that there is long-term sustainability around those companies.
“This is helping traditional publishers see there really is a bright light at the end of the tunnel,” Suhler says. “If they really dedicate themselves, they have a good chance of translating their brand effectiveness in print and events into a successfully rounded media enterprise.”
The companies that think it is business as usual, Suhler adds, may still be making 20 percent to 30 percent EBITDA margins in the short term but their growth rate is going to drive them down, and their value accretion is also going to be under pressure in the coming years.
“The data suggests that print media is industriously trying to embrace Web and mobile content,” Suhler says. “As these brands develop online, it will reach 10 or 15 percent of their total business. And if you can get 15 percent of your business growing at double digits, that’s very positive.”
STRENGTHS: “Print strengths are the brand. Print strengths are helping to define communities.”
WEAKNESSES: “The weakness of print is that it is not interactive. And the spend is not measurable.”
OPPORTUNITIES: “The opportunity is for someone to assess their portfolio and ask which of those properties can be bolstered or pruned so that the residual properties can become the core of a cluster of multi-channel exploitation.”
THREATS: “The threat is inaction. The world is moving toward measurable media expenditures and online is well suited to that.
Wenda Harris Millard
Co-CEO, Martha Stewart Living Omnimedia
President and CEO, CXO Media
Founder, Publisher and CEO, New West Publishing
Founder and Editor, Technologizer.com
General Manager, Digital Media, New York Media
CEO, American Media