Business Media Thinks It Understands.
According to all the b2b publishers interviewed by Press Gazette this week, all is well and innovation is thriving in the move to digital platforms. A detailed analysis of what they said would be, "blah blah blah blah". Press gazette can do better than this. Ask a question guys - don't just swallow the corporate puff.
When Incisive Media brag that they are content agnostic, what does that mean? Does it mean they can't decide which platform to focus on (lack of strategic clarity) or that they don't care (lack of customer understanding). If the web2 devlopment is so important to them how come it didn't get a mention (outside of the reference to Clickz) in their annual report. When one of the many MDs at RBI, Robert Brighouse (wasn't he once a classified rep on Computing Magazine?) says that his advertisers have been slow in coming to terms with what he is doing, doesn't that really mean that he hasn't understood what his customers want? Free advice Robert - all your customers are spending big wonga online - but obviously not with you.
I don't want to go on about this, but it does seem as thought the traditional media companies are treating what is happening as business as usual. "Ah yes we spotted this trend years ago..." Bollocks. Trust me, imho, they are all doomed.
Centaur in Further Cutting Edge Web Analysis
Centaur Chairman says,
"These changes are key markers of the way that the provision of business information in the UK is changing." What he wants us to think is that the changes he is making show that his company is right on top of the digital revolution.
So what are these changes? MetalWorking Production, a monthly magazine for engineering sub contractors is to reduce its frequency. So is another engineering title, Process Engineering. So Graham is right. He has also "sold" Televisual" to its manager. This does show how the provision of business information in the UK is changing. Magazines are dying.
Of course the announcement comes with a load of guff about online newsletters and how publishing the mag less often is better for readers. Yawn.
The Guardian reports that yesterdays announcement of the MBO of Incisive Media backed byApax may flush out other bids. Tim Weller, CEO complains that his company has been underrated by City investors. Apparently at least one shareholder thinks that the premium offered by Apax is "low ball".
Part of the problem is envy that the management got rich (er). Good luck to them. They built the business. Private equity deals are structured differently for management than public deals. Right now the senior management of Incisive own around 5% of the company. Once the deal is consummated they will pocket around £15m of cash and reinvest the rest in return for around 10% of the equity. Some might think that the management are doing very well at insitutional shareholders expense - doubling their stake but getting 2/3 of their money.
There is no getting away from it, this is good deal for the management, but their 10% is of a different kind than their 5%. In the first place it won't be easy to liquidate. Secondly the deal will be funded with debt making the balance sheet very heavily leveraged. Wiithout further investment, and presumably therefore a future dilution for the management, the growth that Weller aspires to will be hard to come by. Most of his free cash will be servicing the debt put in to do this deal. Their won't be much left over to fund a b2b aggregation play.
Apax have promised to "buy and build". That means acquisitions not organic growth. It will be interesting to see if Apax are good as their word.
Weller Rings Till and Banks Apax Money
Incisive Media are going private with the backing of Apax. The offer is a significant premium on yesterdays share price vlauing the business at close to £200m. A no brainer for Incisive shareholders. Incisive have struggled to maintian momentum with more growth predciated on deals rather than organic growth. It is hard to see where the growth will come from unless they buy and become the business media aggregator that CEO Tim Weller has always wanted to be. Incisive alos published their interim results today which we will have a look at. Management are I am told leaving some of their gains in the business but noentheless this looks like a smart move from Weller who privately may be thinking that future growth may be hard to come by. With this deal Apax take the risk. Weller has come long way since being a grubby rep on defunct VNU mag Datalink and his job on the Matrix (see pic)
Take a look at the masthead for the new look The Business. As we have reported before, Andrew Neil is relaunching his paper as a magazine. We expect it to fail. Neil forecasts a sale of 50000. My view is that copy sales at full price will never make a tenth of that.
Look out for the first issue on October 12th
B2B Agencies Need Accreditation
A blue chip advertiser in a leading weekly magazine booked all their advertising through a one man band advertising agency. The client was the only substantial account on the agency’s client list. You can guess what happened. Payment of invoices got later and later until the point was reached when there was no alternative but to refuse to accept any more bookings. Neither the client not the agency was much amused. The agency argued that we could not be paid as he had not been paid by his client. Not only did this turn out not to be true, but when we pointed out that the once the agency accepted the 10% agency commission we offered, he was the principal, he became apoplectic with rage and threatened never to do business with us again. Our view was that it was a matter for him and his bank to fund his working capital, not a matter for us and ours.
In the end the client exerted some pressure on the agency and we eventually got paid. Amazingly the agency kept the account and it must surely be only a matter of time before the same scenario rears its head again.
Although it was a happy ending some uncomfortable issues are raised by this all too familiar tale. The first is that no workable accreditation system exists for business media agencies. Media owners have little choice but to trust agencies to continue to pay their bills. Many, if not most, business to business agencies are too small to pass any of the blue riband accreditation tests. With so many business to business accounts traded through tiny boutiques it is just not possible refuse business from any but the most reliable agencies.
Twenty years ago unaccredited agencies would have had to find a third party to bill for them if they could not muster an accreditation. The febrile competition in almost all business markets has extinguished this. It’s time that the industry got together to agree a common approach to managing the problem. In the first place media owners should write into their terms and conditions that credit information will be shared with other publishers. Publishers should agree to act in unison in refusing to do business with any agency that materially defaults on payment terms.
UBM Sells Music
This may be the first of many disposals from business media companies who, in the absence of clear growth strategy and with pressure on margins from deteriorating ad markets, need to look busy.
United selling their music titles in the US is no surprise. Tony Keefe, the CEO is a Brit with a background in trade shows. Although he has been running these titles for UBM for about three years, this will be his first independent gig.
Can Subscriptions replace Trade Sales
A very senior and seasoned business to business media executive, lets call him Dick, told me recently that he wasn’t worried about the decline in his news trade sales. “I’ll replace them with subscriptions,” Dick boasted.
What Dick hasn’t realised is that in the last twelve months business magazines have seen their copy sales through newsagents drop a massive 10%. With rates of decline at half that level, National newspapers think the sky is falling in. Business publishers don’t even appear to have noticed.
I checked the latest ABC returns for the first eighteen business magazines I could think of. I discovered that every title I reviewed but one had posted a year on year trade sales decline. That should make every business advertiser and business publisher (except Dick), need to have a lie down and a think.
The price of the industry’s failure to tackle this issue is enormous.
I estimate that business to business magazines generate gross news trade revenues of around £30m a year from around a quarter of a million magazine sales a week. If this revenue can’t be replaced some £15m of profit gets wiped from business media companies results. If advertising is sold at an average of £100 per thousand circulation and there are ten advertising pages in every magazine, add a further revenue loss of £10 million as advertisers demand lower rates for less circulation. If circulations are propped up with controlled circulation add around £10 million to the cost base of business magazines.
Any way you look at it, an educated guess says that the total loss of business magazine news trade sales will wipe at least £25m from business media company profits. That’s the equivalent of wiping a company the size of Centaur off the face of the earth, twice. Perhaps a thousand people will lose their jobs.
So why not be a Dick and sell more subscriptions? Selling 250,000 new subscriptions may not be possible at all. If it was wouldn’t we be doing it right now? The average acquisition cost of a new subscriber is around £75 and if we are all Dicks, a replacement subs strategy will cost the industry nearly £20 million in the first year and £5 million a year for every year after that!
This is the most pressing crisis to face every business publisher except Dick. The rate of news trade sales decline is accelerating. Dick tells me he isn’t that interested in the issue. Let’s hope he keeps his job.
Nursing Times Fights Back in Recruitment
Saving job advertising is on the "to do" list of every business publisher. The growth of general job boards and the migration of readership and therefore response to the web has really hurt.
Nursing Times has been hurt more than most. It's answer is to allow recruitment advertisers to place ads along side editoiral on their web pages. They argue that many suitable candidates will not be active job seekers and therfore have to be tempted into replying to an ad. In professional markets that is a spot on analysis. Many of the best candidates will never sign up to a job board. It is not clear from the story, but I hope Nursing Times is charging a big premium for this service to advertisers. It is the equivalent of allowing job ads in the run of paper in a magazine.
If we can give advertisers a way of exercising creativity in their advertising too this could be the nascent beginning of vertical publishers fighting back in the recruitment world. Having said that I can't see any evidence of this new service by looking at the site. I'll keep an eye on it.
EMAP Gets Carter to Board
The Guardian reports that Emap are sorting out their strategy. Following their sale of the french operation and their recent profit warning Derek Carter has been appointed to the plc Board. Derek is a man and boy Emap man and is responsible for the most profitable part of the entereprise.
The Guardian tries to argue that this appointment which completes the simplification of the group in to two (consumer and business) is a confirmation of their declared intent to be brand driven but media neutral.
I don't think it's anything of the kind. Most observers of the business media world probably thought that Carter was already a member of the PLC Board. He certainly should have been. His appontment now is nothing more than just reward for his diligent supervision of Emaps most successful but most ignored division. Ironic really, as Emap CEO Tom Moloney began his career in business publishing. He left Reed back in the eighties, it is said, because they told him he was too young to be a publisher. He would have to wait until he was 40. He left and by 40 was CEO of Emap.
In any event, brand led, media neutral is just so twentieth century. Only old media companies worry about brands. Users - readers as we used to call them - only care about the media experience and are decreasingly loyal to any media brand - business or consumer.
How to Save The Business Magazine Industry. A message for Advertisers and Publishers
Yesterday I claimed that 98% of business to business magazines weren’t very good. I argued that too few were pursuing the cause of excellence in their product, or writing compelling content. Most magazines can’t afford to produce great content. The average turnover amongst the 5000 or so business to business magazines that are produced in the UK is not more than £400,000 a year.
So whose fault is it that standards are so low amongst so many of our magazines. I have spent most of my life as a business magazine publisher and I am arrogant enough to believe that I am not bad at it. So you will forgive me if I say it’s not my fault. I’ll go further and say that isn’t any publishers fault. Publishers produce crap magazine because advertisers let them. Most business magazine readers don’t pay for their magazine, and if they do, it’s usually with someone elses money. Publishers will continue to send dead trees to readers for as long as advertisers will pay them to do it. They will do this even if nobody is reading their magazine.
It’s time for advertisers to take a stand and starve crap magazines of revenue. Here is my advertisers five point plan to campaign for higher standards in business publishing.
1) Phone every magazine you deal with. Offer a meaty schedule but say that you will only book if your client gets some favourable editorial mention in the magazine. Any magazine that agrees, strike from your media list for ever.
2) Read every magazine you advertise in and red line every article that isn’t interesting, well written and well presented and send it to the publisher and the editor with your comments. Do this for eight weeks.
3) After eight weeks suspend your advertising until editorial standards improve.
4) Reward improving magazines with higher rates and more of your clients business.
5) Don’t advertise in crap magazines. Put them out of business by not advertising in them.
My conclusion is that the sign of an improving and vibrant business magazine industry will be fewer better magazines not more magazines.
I might wonder tomorrow how we are doing with digital solutions to the business media content problem
Business Magazines Are Dying and It's our Fault!
The PPA make an excellent job of producing research that shows how important business to business media is to its recipients. We all know that this is true even without reading the research because our own experience tells us so. But business publishers are much cleverer than you think because over the last ten years they have been seducing readers with more media than just magazines. We have created trade shows and conferences, awards and databases, newsletters and directories. Business publishers have been powerhouses of innovation. The media buyer must be very happy.
To be fair, some are. But in aggregate Advertising Association figures show that in real terms, expenditure on business to business advertising at least, has hardly grown at all in fifteen years.
Many years ago, senior Reed executives used to talk about the information pyramid. They argued that if you deliver “must have” information your customers will pay you more and your company will make better margins. The more “must have” the information is, the higher up the information pyramid you climb and the more money you make. This simple and elegant view of the world has informed their strategic progress for years and has served them rather well. They sold their consumer businesses in book publishing and magazines (which are not “must have”) and acquired information rich companies like Lexis Nexis. The City rather liked what they did so they did some more of it.
When I was thinking about this I started to wonder whether the “must have” idea infected magazine publishing at all. Could it be that the content of business magazines is not good enough to inspire real growth in business to business advertising? If this hypothesis is true it’s pretty alarming. After all the heart of all business media companies is magazines and without them most of the other media diversifications that have been pursued would be pipe dreams.
Before outraged business publishers begin explaining how their publisher sponsored research proves that their magazine is read for hours at a stretch by the most important decision makers in the land, let me admit that there are some fantastic business magazines around.
The problem is that of the 5000 or so titles that are published in the UK, not more than a hundred of them would pass a test of editorial excellence. Too many business publishers have sacrificed their editorial integrity. Too much of the content is “advertorial”, that cunning blend of advertisement and advertisement, as Ian Hislop once so memorably put it. Too often the news desk is under resourced and left to cut and paste dreary press releases and then keep them separate with small, poorly reproduced photographs. My heresy is this; that 98% of the business magazine published in the UK are really not very good.
VNU Win PPA Campaign of the Year
Well not yet. Call me a cynic but VNU's announcement of a cross magazine campaign to promote green issues in computing is plainly an overt attempt to win the PPA Award. I simply do not believe that this represents a meaningful change in editorial thinking.
Somebody at VNU sat down and thought, "how come we don't win awards? Why does Tony Collins on Computer Weekly always pick up an award for writing about helicopter crashes? What can we do about it? " This is their answer.