The Independent reports that Informa is considering seelling some assets to reduce its debt burden. There have been rumours that Informa is concerned about the possibility of breaching its banking covenants. Certainly the City has been marking down its stock because of the high level of gearing.
Covenrants get tighter as time goes on. They are agreed on the basis that the business grows and in interest cover improves (thats profit/interest due). As trading weakens a breach becomes ever more likely. Informa is not admitting to any possible future breach and they remain confident, but not so confident that disposing of assets to raise some cash is not being seriously considered.
It is not a good time to sell anything - just ask the Board of Reed Elsevier.
Next year I am expecting at least one "oh my god!" moment when something really ugly happens to one of the big players. Informa is already putting down a marker that they don't want it to be them.
Apple has decided it will be backing away from its support of the Macworld show organised by IDG. Other exhibitors are also reported to be reducing their committment to the event.
If one of th worlds leading companies thinks it is no longer valuable to soend its marketing buck supporting a trade show that is all about selling its own stuff and stuff related to its own stuff, then we have to expect the world to get tougher for all trade show organisers in 2009.
Readers of this blog will have been expecting this news for some time, but American Business Media has announced that in the US trade shows have seen a decline in revenues in 2008 of 3.7% in the first nine months.
What a year it has been. We began with Emap being sold in what turned out to be the last major business media deal before the crunch. Reed announced in February the sale of RBI and then spent all year not getting it done. All the public business media companies saw their share prices collapse. No business media enterprise was exempt from redundancies. Magazine titles closed or merged. The tech sector led the way with Computing merging with IT Week. In the US PC Magazine and Techworld switched off their print editions all together to concentrate on online only.
What are we to expect in 2009. Is this the beginning of the end, or just the end of the beginning of the end? Can we expect a renaissance in the business media zeitgeist? It was just five years ago that city analysts were spouting the mantra that the future of media WAS business media. It was on the back of this optimism that Centaur floated at a valuation of £140m. Today the same analysts and city brokers value the same business at less than £50m.
This industry demise was not a bubble that burst, rather one that deflated rather quickly making farting and popping noises as it chaotically whizzed around the room look for somewhere to land in a flacid heap.
The tragedy is that although the crisis has been made worse by the credit crunch, so much of what has happened was avoidable. The impending crisis has been visible for a long time. I started this blog back in 2006, way before the credit crunch, and it was clear then that our model was doing its dying.
But we are where we are and it is time to turn our attention first, to what we think might happen in 2009 and then to consider what we must all do to rebuild our industry.
There will be some who say that this is all an exaggeration, that the fundamentals are good. Experienced management teams are in place, the business media has led the way in developing events and data business and looking at work flow solutions and migrating to the web. Let me remind you of the view of the CEO at Hanley Wood when he accused us back in February of "underperformance, cowardice, technophobia, inferiority, complacency, coziness, stinginess, cluelessness, disorganization and dullness."
The management teams have too often been in the same place for too long. They are mostly magazine publishers trying to adapt to the new world. Their staff are frustrated and frightened. Lemmings led by donkeys as one rather harsh observer of our industry put it to me the other day. Yet we have some hugely able leaders at the top of b2b, Jones at RBI, Heseltine at Haymarket, Gilbertson at EMAP, Levin at UBM, Weller at Incisive, Brady at Wilmington to name but a few. There is hope. There really is.
It is too easy to blame all this on the crunch or on a change in City sentiment but its more fundamental than that. Reed Elsevier worked out there was no future in the old business publishing model and tried to ditch it. EMAP lost its way and broke itself up into bits, UBM effectively fired all its global CEOs (except in Asia I think), Stirling Media Group got saved by Progressive Media unable to sustain an independent existence any longer, Centaur got rid of some its longest serving and most loyal senior executives. Haymarket said goodbye to Nick Stimpson and others. Incisive Media, perhaps the success story of the last five years, announced layoffs and ousted Rory Brown amongst others.
The tales of reflex culling are too numerous to list. But what next? When the culling is over, when the redundancies are done, when the budgets have been slashed, the overheads expunged, what if the revenue keeps falling?
A parenting guru of my acquaintance told me that it was always wrong to smack an errant child. His reason? If it doesn't work, which it often doesn't, you are left with only two choices. Smack the child harder or think of another strategy. He argued, why not deploy the other strategy, the one you will have to get to when you realise that beating your child senseless will not change his behaviour (unless you want him cowered and snivelling), before starting on the smacking.
We have been smacking the arse of business media and our businesses all year. Many of us haven't finished yet. There will be more pain to come in 2009. But let us take the advice of my parenting guru and start to deploy the strategy that will save us from nurturing a cowering, frightened and clueless industry.
As you can probably tell - I am not having a good day.
Image via Wikipedia United Business Media has issued an update ahead of its year end results. The announcement claims that UBM has had its best year for six years but leads with the explanation that much of this is due to the strengthening of the dollar against the pound. This is not quantified in the statement so we cannot judge what is really happening in the underlying business.
I am always amused that public companies will argue that unfavourable exchange rate movements should be ignored when reviewing their results, but favourable movements are always cloaked in a perverse self congratulatory smugness. Spinning, is not confined to the world of politics.
The statement notes that some print products and events are struggling. Exhange rate or not, this is a rare almost good news story, only slightly blushed by the acknowledgement that 350 jobs are to go.
UBM is doing some interesting things. Their internal Wiki (see article below) is proving a useful tool for sharing knowledge around their organisation, they have taken the lead in "delayering" of management, expansion in to developing markets and have been succesfully weaning themselves off print dependency. However their share price, like everyone elses has tumbled this year and an exposure to exhibitions is by no means an insurance against a rough period to come.
So that's it then. Reed Elsevier has "postponed" the sale of RBI for the "medium term". Since the disposal was announced last February the credit market has collapsed and so has the b2b media trading environment.
There has been no meaningful trade interest in RBI for months and now private equity buyers have proven to be very thin on the ground. The only deal on the table involved a deferred consideration and a low price. This would have left Reed exposed to a risk of not achieving even the depressed price the media has speculated. They wanted the cash from the sale to protect their credit rating and to pay down debt incurred following the acquisition of Choicepoint.
Reed will be kicking themselves that they did not get on with this disposal two years ago.
As the City digests the implications of this (even good international business media businesses are unsellable at almost any price) expect the pure play b2b public companies to endure a further beating on their share price.
What next for RBI? Clearly there is room for some substantial cost cutting. They should also be closing titles, downsizing the scale of the business and its overheads, re thinking how their magazine model works and run the place as if it were owned by private equity.
This will be very counter culture RBI management. They should plan that they have to exit their current shareholder in three years - just like a private equity manager would think. Exposing palpable shareholder value in such a short time period is not the same strategic approach as running a business as part of a long term position in a large corporate group.
The changes in thinking required are so fundamental that it would be wise to makes some management changes and to make them fast.
If I were Keith Jones (and for the record I am not), I would want to get such a plan written and in place before Ian Smith, the new Reed Elsevier CEO turns up. If I hadn't, I might expect a short career as global RBI CEO.
"1. The B2B publishing industry -- which is now dominated by giant print companies and smaller Web-only companies -- is about to collapse.2. When the dust settles, B2B journalism will still be here -- but many of the companies that make up the industry will be gone.3. The dominant business models of both the past and present will fail."
The market has already decided this is so for many of the public companies. Centaur Media's share price hit a new all time low of 36p this morning, valuing it at around £50m - a third of its float price. They are not alone - just a bit ahead of the curve.
We have argued on this blog for some radical thinking to solve the problem but there is precious little evidence of anything other than cost cutting. When Steve Austin lost most his body parts in an accident the surgeons did not build the bionic man with an axe. The leaders of B2B companies cannot build a new model industry from the crash damaged cadavre of the old model with a cost axe either.
American Business Media, the US equivalent of the PPA is claiming that only a third of b2b marketeers are planning to cut their ad budget in 2009, 40% will hold steady and 30% will increase their spend.
Like the PPA, ABM has a vested interest in talking the market up so we treat this with scepticism I suppose.
The mathematical implication is that we should sign up to 09 budgets that are the same ad revenue as 2008 - and that just feels hopelessly optimistic.
Its a Bit of a Bain, but there is only one bidder left for RBI
The Telegraph reports that only Bain Capital remains in the bid process for RBI at a bid of around £680m - around half the original price. The article also speculates that the proposed deal involves an earn out (ie deferred consideration) and a lock in for key executives.
As gifted as they are, the radical surgery and rethink needed in RBI is not best solved by managers who have been there 25 years. Earn outs are always messy and Reed Elsevier will be reluctant to tie themselves into future consideration over which they have no control.
Bain will consider that either they will have got RBI on the cheap, or by the time the earn out kicks in, the financial markets will be looser and raising funds will less of an issue.
I have no idea whether he is involved in the deal, but a Bain Consulting senior guy is one Graham Elton who was briefly CEO of Miller Freeman UK (now CMPi/United Business Media).
The odds of the deal closing are getting longer. There is every possibility of a withdraw before Christmas.
Deal or no deal, vicious cost cutting will follow rapidly in the new year.
A US review of research by Technorati, the blog search engine, claims that most Blogs carry advertising and that average revenue/year is $6000 with some of the uber blogs making $75000 a year.
The numbers are small, but growing fast. This blog, which has a mostly UK audience is much smaller and makes next to nothing from advertising. In part this is because the Google ads are often not very relevant to this very specialist audience.
As regional newspapers wrestle with the concept of ultra local advertising, is there an opportunity in b2b to learn something from this approach and to create a network of business to business specialist blogs and micro sites where the ads are sold on a "classified" model? Advertisers can match their advertising to the audience and select which blogs they wish to appear on. This opens up access to highly relevant audiences not normally available. How would you reach the audience of this blog otherwise? I don't sell ads and the Google system is not sufficently targeted for this specialist group. Only a handful of sites and blogs write about the UK B2B sector and certainly none mainstream media portals bother much with it. And yet, small though it is, there are many suppliers to our industry who would happily pay to reach you. (In case you didn't know most of you are pretty grown up execs in the b2b industry.)
Let's call this B2B idea "Ultra Niche".
The advertising is highly targeted, inexpensive and very effective. It encourages the growth of specialist writing and offers great ROI for advertisers at a low cost. It's a credit crunching idea!
In a larger way Federated Media has built a substantial business in the US using a variation of this thought.
Rory Brown has started an interesting debate on his blog about the usefulness or otherwise of digital editions. Some have said it's the worst blend of a magazine format on the web, and a the worst blend of the web in a magzine format. Rory says people don't read them.
He argues that they don't offer what readers want, which is bookmarking, interactivity, forums, networking and so on.
There is the inevitable defense from the providers that they have research that shows how great readers think these things are. Maybe. As ever with this kind of thing the truth is more complicated.
Digital formats for content can be shrinkwrapped in a virtual magazine and can be a compelling experience provided that the navigation works (many of them are hopeless - especially on a lap top, they integrate rich media and interactivity and the content has been bespoked for the format. What doesn't work is taking the print mag and sticking it in a digital reader (imho) just to save distribution costs. (which I think everyone contributing to Rory's discussion agrees)
There are one or two publishers who have done some interesting things with digital formats. Dennis publishing have had a brave go in the b2c world with Monkey. Its not a digital edition of the magazine and its not their technology, but it is cute (and I mean the technology not the content).
Press Gazette reports on the same story from the FT we comment on below. Cuts digging deep we fear at PG towers, They begin their piece, "The sale of Computing Week publisher Reed Business Information by parent company Reed Elsevier ...."
There is a mag called Computing and there is a mag called Computer Weekly - but there aint no such thing as a Computing Week.
Thats what you get with no subs and no regular coverage (knowledge) of what goes on in B2B. The first is a generic problem with online journalism and the second a weary jibe at the mainstream media media.
If Lorna Tilbian, the media analysts analyst doesn't know....
"Lorna Tilbian, analyst at Numis, said: “It is Darwinian. The environment is so volatile, people are waiting for weaker players to fall into receivership. The landscape is changing so quickly, how do you value something?”
...then what hope is there for the rest of us trying to make sense of this.
The FT reports old news that the RBI deal is falling in value. It says Reed is "desperate to get the deal done". It shouldn't be. There is a future for RBI - it involves substantive delayering of management, a radical approach to business magazine publishing and inventive solutions to the conundrums that b2b publishing faces. RBI as the biggest player in this place, and as a relatively small part of its parent company can afford to be brave. Will it care to embrace "boundarylessness" as it strategy declaration says it should?
Job Losses, Curated Content and a Rough Year for B2B Ahead
A report by analysts Outsell penned by Chuck Richards should scare the hell out of you. Every 1% of print revenue lost, they claim, will lead to 435 job losses. They forecast a drop in print revenue of 4.5% in 2009, leading to further job losses. The migration to online combined with the downturn is an ugly cocktail.
The article points out that print sales people convert poorly to online sales and quotes one source saying that the success rate is just 25%.
"B2B trade publishers need to be positioned to compete with companies like Demand Media that will compete on a much more profitable cost basis. Step 1 is to rationalize staffing to match sources of revenue. Step 2 is to use this time of economic stress to restructure all key processes to not just stay afloat, but to be ready to jet forward when market growth resumes."
Not only do I agree with the sentiment, but the company they mention has an interesting model. It uses a mix of UGC freelance and industry source data to compile web sites. The result, according to Outsell is revenue/employee double that of traditional b2b media companies.
Forrester call the Demand Media model Curated Content and explain how it works here
I am not sure its really b2b, and I am not sure it would work here. It depends on much content being supplied by experts and paid a modest fee. You need a lot of experts to make enough content. And as any journo will tell you, turning an experts copy into something readable is time consuming and expensive. However Demand Media has been around for three years and by all reports is doing well in the States. What it has discovered is that curating third party content is a way of reducing content creation costs perhaps enough to allow an online model to produce sufficient revenue to make a profit.
I have written before that the problem with online is that the ad revenue opportunity is modest. The answer is to solve two problems. The first is is to create a better ad model with more proveable ROI for B2B advertisers. The second is to reduce the cost of content creation. Demand Media are addressing one part of one half of those issues.