Profitable Publishing In the Internet Age
After four years of virtually unimpeded
growth, media industry mergers and acquisitions
activity peaked in 2007, with transaction volume
(the number of completed deals) leveling in
the second half of the year. Surprising to
some, however, is that despite tighter credit
and turmoil in the financial markets, enterprise
valuations remain strong.
Now, with the economy slowing and
traditional advertising spend poised for a dip,
pressure is mounting for magazine publishers
to diversify their revenue streams. From the
standpoint of maximizing media company asset
values, the solution appears to be the familiar
model of the three-legged stool: (1) a stable,
revenue-generating traditional print product;
(2) an online presence that monetizes data; and
(3) an event or tradeshow that provides both
revenue and one-to-one contact with the core
audience.
Doubling Value in Two Years
For at least the past ten years publishers
have been wringing their hands over how to
protect their franchise in an increasingly
fragmented marketplace. Most have poured
rivers of cash into creating and sustaining an
online presence, yet few have truly prospered
from their investment in digital media. It’s not
enough to be a print magazine with a web site.
Rather, success appears to accrue to publishers
who can convert a title into a brand, and a
brand into a diversified media platform that
supports print, an internet destination and a
tradeshow or consumer exhibition. If they can
capture user data, repackage it and sell it to
advertisers, so much the better.
One media company that is doing exactly
that reportedly doubled its value in two years.
Explaining why Randall-Reilly Publishing is sharpening its focus on data, online and event
development, CEO Mike Reilly quipped, "for
the same reason Jesse James robbed banks:
because that’s where the money is." Berkery
Noyes managed the January 2008 acquisition
of Randall-Reilly on behalf of the buyer,
Investcorp, which has a record of backing strong
management teams bent on rapid growth.
Not every publisher can capture and resell
valuable proprietary data the way Randall-Reilly
does. Web site operators who can take a piece
of every transaction they generate or facilitate
profit handsomely by leveraging existing print
content and offering it as a free web-based
service. Publishers of travel guides, for example,
offer content normally sold in bookstores to
their web audience as a free service, then claim
a commission on every reservation booked
through their site.
Brave New World
Of course, the future—at least the one
unfolding in the next five years or so—belongs
to those who can deliver useful information not
to a desktop or laptop but to a mobile platform
(most likely one bearing an Apple logo).
Handheld devices that access the internet, play
music, store information and make phone calls
are the newest elephant in the room, a certainty
that muddies the waters for publishers even as
it opens expansive new vistas of opportunity.
A few traditional publishers and even a
handful of diversified media companies will
figure out how to enter boldly into this strange
new landscape. Most will need help, probably
in the form of a strategic alliance or an outright
merger with a technology partner who can
navigate this uncharted, unbounded and, you
can bet, wondrously profitable territory.