MIAMIâDuring his morning keynote, Meredith Publishing Group president Jack Griffin explained the company's approach to selling via its M360Âș group. "It's a group set up to be media neutral. We're not selling a particular asset, but creating solutions for our advertising customers."
It's an approach that focuses entirely on selling integrated packages, no longer simply selling customers on a single mediaâprint display advertising, for example. It's also one that other publishers are adopting. CMP has realigned its marketing services team to be customer-facing by region, creating customized packages that rarely come straight off a menu. "We have teams focused in the customer client regions, in the sales regions if you will, working with different customers to do that integration across different platformsâprint, online, events, or deeper into a specific platform," says Scott Vaughan, vice president of marketing and research.
"Customers don't necessarily say to you âI want to advertise,'" added Elliot Kass, managing director, client content services. "They just say, âThis is what I'm faced with and if you can help me figure out a way to solve this problem then I'm very interested.'"
Earlier this week, Eric Lundberg, Penton's CFO of a year, announced that he was returning to ALM. On Tuesday, Penton head John French passed along this note:
-----Original Message-----From: French, JohnSent: Tuesday, February 12, 2008 9:07 AMTo: DL-Penton Global; DL-Prism GlobalSubject: Eric Lundberg's DepartureImportance: HighHello Everyone,Today, I am announcing that Eric Lundberg, Chief Financial Officer, has decided to leave the company. Eric will be returning to ALM as Chief Financial Officer and senior vice president.Eric joined Penton a little more than a year ago and his contributions have been significant. He led the company through a very challenging integration effort and much of our present and future success is due primarily to his leadership. Bringing two large organizations together was a complex undertaking and very few people would have been able to accomplish this with such tremendous success.On a personal note, I have enjoyed working with Eric throughout this past year and greatly appreciate his hard work and dedication. We are working together during a brief transition period. We have already begun the search for a new Chief Financial Officer and will inform you when we have completed that process.Please join me in wishing Eric well in all his future endeavors.John
This post by FOLIO: editor Dylan Stableford on Glam Media and its CEO Samir Arora makes two insights into e-media M&A: "If traditional publishers continue to miss the site network strategy, as Arora says, I'd expect that line of âapproachers' to start looking like the runway at JFK, probably sooner than later. And when it does, it'll be a fun exercise in valuation."
Arora says he's already getting a significant amount of interest from tire-kickers and the supposition that the crowd of curious buyers will soon resemble a packed runway is dead on. Media bankers DeSilva + Phillips have already labeled 2007 as the "year of the digital niche acquisition," and this year is shaping up to be more of the same.
What's more, Arora is actually generating revenues. "Our internal goal has been to drive the revenue growth rate faster than any other media company on the Internet--traditional or nontraditional," Arora told me in our original interview.
Whether or not Glam's revenues are developing at a scale or speed buyers are looking for, that model is something both potential strategic and financial buyers will no doubt appreciate, given the smokey back room approach to early-stage e-media valuations.
With the credit markets as tight as they are these days, buyers may not be as willing to pay whatever it takes to win a bid. And in a deal for a property that has proven financials, a bidder pool would likely expand to include even the more conservative buyers who normally shy away from early-stage Internet companies that have no measurables to pin a valuation on beyond site traffic, demographics, an executive team still in their 20s, and a great idea.
Smart Money picked up a Dow Jones story reporting that Michael Copps, a Democrat and member of the Federal Communications Commission, is voicing a growing concern over the big private equity dealsâparticularly in media. Seems he's a bit skittish over the volume and size of these deals over the last year, especially in light of the subprime fallout and a grim economic outlook for the coming year.
"There's been a whole raft (of acquisitions) involving private equity in recent years and I think we need to ask questions about them," said Copps, who also believes that ownership structures are becoming unclear, which apparently makes it tougher for the FCC to crack down on companies when something goes wrong.
FCC chairman and Republican Kevin Martin so far is downplaying Copps' concerns.
Nevertheless, Copps is exposing what might be a tricky year for over-leveraged deals, and a situation that might work its way into all sorts of corners in the private equity deal landscape.
Hachette Filipacchi Media's announcement this morning of its appointment of Todd Anderman as SVP, digital media seems to have elicited a number of queries into where the company's previous head of digital, Marta Wohrle, ended up. Wohrle joined the company a couple years ago to build out the digital media group, first as a consultant, then fulltime. She made our FOLIO: 40 last year for essentially creating Hachette's e-media business from scratch.Turns out Wohrle has been busy developing her own sites, and plans to do some investing herself. Here, via Hachette spokeswoman Anne Janas, is what Worhle passed along:"I am starting my own web content business: www.truthinaging.com. It is in Beta and next week I am launching truthinhaircare.com. I am also looking at investing in early stage digital content businesses with private equity backing."Interestingly (strangely?) Wohrle describes herself as a "digital media amateur" in the About section of Truthinaging.com.
I interviewed Kristy Kaus, Active Interest Media's research director, for a story I wrote in the January issue of FOLIO:. Kaus has been doing cover research for a number of AIM's enthusiast titles, and her program has provided a measurable boost in newsstand sales. The research is done via online surveys-a method that puts cover testing well in the realm of small to mid-sized enthusiast publishers that otherwise wouldn't spring for a full-on, focus-group or direct mail approach.
The testing is performed through a proprietary Web-based survey platform developed by Kaus, and can be executed with a 36-hour turnaround. If you're feeling skittish about using an online-based testing group, don't be. Kaus notes that readers are typically online anyway, and backtested her groups just to be sure their opinions matched performance. "We tested a past poor performer versus a past top performer. With every control on the online survey the top performer won. So that was enough to validate the program for us, that it's effective. And it gave us enough assurance that moving forward was a smart idea," Kaus told me.
I suppose it's a more guerrilla approach to cover testing, and perhaps not as hermetically sealed as a formal, live version, but Kaus' numbers speak for themselves: "For every test that I have done, the sellthrough has either stabilized with the same issue month the year prior or it has increased, and in some cases increased pretty substantially," says Kaus. Southwest Art jumped 12 percent in singlecopy sales, and Vegetarian Times increased 21 percent, for example.
Not too shabby.
If you haven't stopped by our massive (and growing) list of magazine predictions for 2008, do so. In the meantime, for those of you who are more financially inclined, I've pulled out the banker predictions and compiled them here.
Interestinglyâpredictably?âthere's a mix of optimism and wariness for the year ahead. On the one hand, we're coming off an amazing run of M&A action fueled by the deep pockets of private equity. On the other, we're still smarting a bit form last summer's credit crunch and staring at a possible recession in 2008, which may stop the overly-leveraged dead in their tracks.Here are the banker predictions. And click here to see the full, industry-wide list. NAME: Reed PhillipsTITLE: Managing partner, desilva + phillips2008 PREDICTION: Last year, I said I'd be watching with great interest the possible sale or break-up of the Tribune Company. Now, I think it is safe to predict that the company will be sold any day now. [EDITOR'S NOTE: Less than an hour after Reed sent this over, prediction #1 came true.] My prediction for 2008 is that by year-end valuations for newspapers, specifically, and print media, in general, will start to rebound.NAME: Chris ShannonTITLE: Managing director, Berkery Noyes2008 PREDICTION: On the consumer side, M&A will be as busy as it was last year, as far as what's in the funnel. Strategic buyers will make a comeback and play larger role in 2008. Everyone out there that's either buying or selling it has to have a digital component. Next on the priority list for buyers is a mobile component. If you have a magazine to sell, the ones that have a Web site and even just the beginnings of a mobile product definitely have an advantage.NAME: Larry GrimesTITLE: President, W.B. Grimes & Company2008 PREDICTION: More private equity firms will look to exit magazine publishing in 2008 but may find buyers slim to come by. Many will find their assets have depreciated substantially over the past 18 months, in large part due to mismanagement. The groups will recognize that the tuck-in acquisitions they have been avoiding for a couple years really do make sense and will start pursuing those smaller strategic deals as a way to boost both top and bottom line growth. Many of the publishers who have an eye on digital acquisitions will find the pickings are very slim and will realize growing digitally from within is their best approach. Video will become an increasingly important element of publishers' online strategy and especially for their advertisers. Online directories will continue their metamorphosis from simple listings to interactive and will include product offerings. Deal flow will be slow until the banks start lending again.NAME: Scott PetersTITLE: Managing Director, The Jordan, Edmiston Group, Inc.2008 PREDICTION: Media M&A in the middle market will remain active and will equal the transaction volume of 2007. However, overall transaction value will decline as the debt-heavy, mega deals get sidelined as the credit markets continue to work through challenging issues.NAME: Thomas KempTITLE: Managing director, Veronis Suhler Stevenson2008 PREDICTIONS:1. The conversion from print advertising in magazines to online will accelerate in a softening economy in most, but not all markets.2. We will see some highly leveraged transactions of the past couple of years experience extremely challenging times, what the bankers called distressed credits. Think Ziff Davis type experiences.3. Financially backed media businesses that become distressed will replace their CEO's. Some big name CEO's will get fired in 2008.4. Several b-to-b media companies that have adopted successful on-line strategies and cultures will thrive as eMedia achieves scale of revenue and profit.5. Focused, high quality, leading magazines will continue to grow and buck the trend of the digital revolution.6. M&A market will continue to be strong for quality assets, particularly for the middle market properties, $50 - 100 million, although transaction multiples will come back to earth as a result of tighter credit markets.7. The media world will not come to an end as we know it. That is, Google will is not the evil empire of the media industry.
The New York Times reports that Jeffrey Bewkes [right], who takes over as Time Warner CEO in January, has "quietly" hired Douglas Shapiro to head up investor relations. Shapiro was formerly an MD and research analyst for Banc of America Securities and joined Time Warner a month ago. Coincidentally or not, a February report by Shapiro on Time Warner had a buy recommendation on the stock at $25 a share because "we think there is a chance it pursues a restructuring eventually, including possibly divesting publishing or AOL, or even a full breakup of the company into its four logical components." That would include Time Inc., presumably.If Bewkes eventually does take Shapiro's advice, here's what a spun-off Time Inc. might look like.
An e-mail from an "industry observer" on yesterday's purchase of Publishing Group of America by Bain Capital Partners and Shamrock Capital Growth Fund: "I think this is potentially a fabulous buy for these two investor groups. PGA is a group that has successfully launched two huge winners. Controlled circ so the inserts are force fed. Originally designed as the "Parade Magazine" for the weekly and small daily newspaper industry. Good editorial products. And with their circ base, a strong buy for national advertisers-especially those who want to penetrate the rural and semi-suburban markets. This is not an Internet play and probably never will be. Makes me wonder why folks like Meredith have not tried to duplicate this by teaming up with the major newspaper companies, like Gannett, MediaNews, Gatehouse, etc. to produce special interest magazine inserts. These vehicles do not lend themselves to selling local ads but they do enhance the editorial quality of the local newspaper and do provide a higher level content than most local papers can afford to produce. I have not read what they paid. I would guess a pretty penny."
Felix Dennis has a little more work to do yet on his weekly news compilation The Week. He tells David Carr that he'll be expanding the magazine into more markets and has fended off some significant offers. "Cross my heart and hope to die, I have already been offered hundreds of millions of dollars for it."Even after selling off Maxim, Stuff and music magazine Blender to Quadrangle-backed Kent Brownridge in mid-2007, Dennis declined to sell his one remaining U.S. title, noting that he expects it to become a sizable franchise. "I will throw The Week onto no pile until it becomes a half a billion or billion-dollar franchise. The Week is my baby," he says. The North American version of the magazine has a circulation of about 500,000; the British version is the original; and Carr writes that an eastern version of the magazine will soon be released, supported by a five-person edit team in Australia and one-man bureaus in Hong Kong, Singapore and New Zealand. Just as The Week is Dennis' across-the-bow shot at the sagging newsweekly market, the magazine's lean staff structure is his answer to bulging mastheads. "The American magazine industry has been massively overstaffed for years and years. It is one of the most inefficient businesses in the history of the world. And you know what? The chickens are coming home to roost."
Gordon Hughes and company at ABM fashioned their Top Management Meeting held this week out in Chicago around a concept Hughes coined as âBrandscapeâ: Leveraging a publisherâs brand (i.e., the magazine) across an ever expanding product platform.
Hughes noted that member companies are reporting relatively flat growth for their print brands in 2007, around 2 percent to 4 percent, while other products are growing at a much faster clip: digital at a 14 percent average, custom at 18 percent and events at about 6 percent. Events are expected to pull even next year with print, achieving revenue parity. So it goes without saying that there should be some consideration of how publishers are both leveraging their brand identity and consistently representing it across the platform.
But another theme emerged from the TMM program that also has to do with the repercussions of rapid diversification. And thatâs how companies are handling day-to-day changes in their workforce to accommodate it â whether through hiring, retention, training or compensation. Itâs an important topic, and one that will likely see much more coverage.
-Observations From ABM Top Management
You can't say Rolling Stone founder Jann Wenner is a big fan of digital media. The CEO of Wenner Media, which also publishes US Weekly and Men's Journal, recently told BusinessWeek's Jon Fine "we never lost tons of money chasing down ridiculous online ideas." Nevertheless, Wenner has finally chased down what many publishers have been tinkering with for the last few years: digital editions. The last in a three-edition 40th anniversary series is available in its 213-page entirety as a digital edition, developed by Olive Software and sponsored by LG.
The free digital edition is accessed via a prominent "current issue" link on Rollingstone.com. There is no login step and users can access the content directly. The full text is available and some bands and songs within the copy are linked to Rhapsody, a two-year-old membership-based music service started by RealNetworks, which also powers Rolling Stone's Web site via a licensing agreement.
The digital edition follows closely behind the recent release of the firstÂ 40 years ofÂ Rolling Stone as a digital archive available in a DVD boxed set produced by Bondi Digital.