Nick Logan on Arena: “Glossy paper for my people”

Posted by Peter Kirwan on 6 March 2009 at 21:42
Tags: emap

When news of Bauer’s decision to close Arena broke last week, I read a couple of news stories that failed to mention the magazine’s founder, Nick Logan. 

Because Logan has lived in self-imposed exile from the magazine industry for the past decade, this isn’t so surprising. After selling The Face and Arena to EMAP in 1999, Logan seems to have spent his time playing tennis and reading books in his native Essex.

You need to be of a certain age to remember Logan’s titles in their pomp. Happily, Matt Wells of the Guardian is of that age. This week, he got Logan into his studio for a 15-minute interview.

It’s a shame the session wasn’t longer. Although the founder of The Face and Arena hasn’t edited a magazine for a long time, he’s still passionate about them.

To appreciate Logan’s impact, it’s probably necessary to have experienced the sheer dreariness of Britain during the late 1970s and early 1980s.

In 1980, both Tyler Brule and Jefferson Hack were still in primary school. James Brown of Loaded fame was 14. The mass market was monochrome and tabloid. During the interview with Matt Wells, Logan talks about paper stock and repro in this respect:

“I didn’t see why Tatler, the upper classes, should have glossy paper. I wanted glossy paper for my people. I wanted good colour, I wanted good reproduction. So I wanted all those values and I wanted to get it out next to Vogue or Tatler.”

It’s an interesting quote. Alongside the punkish urge to rebel, there’s also an anticipation of the levelling-up culture of the 1990s.

In this respect, what Logan did for magazines is not dissimilar from what Tony Blair did for the Labour Party. He expanded the middle market, unlocking a new aspirational sensibility.

Logan told aspirational types where to focus their attention. He sought out trends and themes that had yet to hit the mainstream, and he packaged and popularised them.

If this sounds poncy in a Wallpaper-ish way, well, it wasn’t. In dreary 1980s Britain, it felt like liberation.

And it was classless: “I always wanted Arena to be read by postmen, mailboys and bankers. It was for anyone. Well, not anybody. But Arena was a sensibility, and that sensibility can be anywhere.”

Today, the mainstream consumer magazine industry is mostly enslaved by PR. Logan describes those bits that aren’t enslaved as little more than “vanity publishing”.

By contrast, the man who launched The Face and Arena was always interested in the mass market: “in being there on the shelves of WH Smith”.

Interestingly, Logan sounds slightly ambivalent about his self-imposed exile. In turn, this makes me wonder whether he could work his magic in today’s mass market.

It would be harder. As Logan himself suggests, the kind of coverage Arena produced is now “everywhere”. Getting ahead of the curve ain’t what it used to be. The latter-day dominance of the PR industry would probably hinder the effort, too.

And then there’s social media. Who needs to be given a list of aspirations when Twitter and Facebook offer more trend-spotting potential than any one human being can handle? Just like Arena-style journalism, the taste for niches is everywhere. The web has brought us The Long Tail, and in doing so, it has given everyone the tools to become a trend-spotter.

You can read the demise of The Face and Arena as evidence of the usual commercial pressures in new markets that become old over time.

But you can also read the demise of these magazines as evidence that the market for a certain kind of didactic journalism has narrowed.

But I reckon there’s still a market for really good curators. If Logan ever did come out of retirement, I’ll be the first in line at WH Smith to buy his new venture.

It would be a pleasure to see him do his stuff again.

The discreet charm of non-executive directors: Sharp hires at The Guardian and The Telegraph

Posted by Peter Kirwan on 15 October 2008 at 00:59
Tags: Associated Newspapers, Daily Mail & General Trust, Google, Guardian Media Group, Independent News & Media, News Corp, News International, Trinity Mirror, United Business Media, emap

What do non-executives get paid for?

Actually, the money isn’t great (at least not by the standards of Masters Of Universe).

The official version is that non-executives act as neutral voices, mediating between management teams and shareholders. Occasionally, they are called upon to mediate between chairman and chief executives, too.

If that sounds a bit like working as a counselor at Relate, the marriage guidance service, think again. Non-executives also have some serious (fiduciary, in the jargon) responsibilities. In extremis, neglecting these responsibilties can get them prosecuted.

As I say, that’s the official version. In many ways, the unofficial version is much more interesting — particularly at non-quoted companies, where there’s less pressure to appoint directors who are deeply acceptable as guardians of the City’s interests.

Away from the public markets, copper-bottomed presentability in the City doesn’t matter so much as a gilt-edged contact book.

Nothing wrong with that at all. It’s the stuff from which deals are made. In particular, today brought two stunning examples of the genre.

First up, Telegraph Media Group appointed Lauren Twohill, Google’s European marketing boss, as non-executive director.

Twohill has worked at Google for the past six years — long enough to assimilate the DNA of a company that lies at the heart of the web economy.

Meanwhile, over at the Guardian Media Group, in the wake of Paul Myners’ departure, the company has appointed venture capitalist Judy Gibbons as a non-executive director.

Like Twohill, Gibbons is unusual — in the sense that she’s a female Brit with extensive high-level experience of Silicon Valley.

But Gibbons’ track record in the tech industry — all 25 years of it — is deeper and wider. After stints at Hewlett-Packard and Apple, she switched allegiance to Microsoft, playing a big role in the development of MSN.

Next, Gibbons ascended to tech exec heaven — that’s to say, she became a partner at one of Silicon Valley’s largest and most respected venture capital firms, Accel Partners. (Its portfolio of investments include Facebook and a bunch of established and well-respected deep-tech companies.)

No doubt Gibbons will play a big role in advising Carolyn McCall on how to invest the tens of millions that GMG has banked from the part-sale of Auto Trader. (There’s a rather large “investment fund” waiting to be spent — although some of it may already have been blown on the £30m acquisition of Paid Content).

We know less about Telegraph Media Group’s investment plans. Have the Barclays ponied up cash for a 2.0 spending spree? Given the desperation of so many start-ups, they could do a lot worse. No doubt Ms Twohill will help the Barclays to spend what’s available.

If anything, the corollary these appointments is even more intriguing.

At Wapping, can we expect James Murdoch to tear down the walls that traditionally separate News Corp’s operating units — and bring in some digital expertise from his dad’s empire? You’d hope so. But there’s little sign of it.

If anything, the recent promotion of two insiders to take over Anne Spackman’s role as editor of Times Online points to a continuing preference for autarky.

What about Daily Mail & General Trust? This is a company that has excelled in snapping up high-margin B2B and database publishers. But its top table visibly lacks a digital star. (Charles Dunstone of Carphone Warehouse is a retailer at heart, and a superb one. But he doesn’t quite make the cut in tech terms IMHO.)

Endearingly, five of DMGT’s non-execs appear to be over 70 years of age.

At Independent News & Media, there’s no News Corp-style pool of talent to call upon. Here, the roster of non-execs resembles a procession of stuffed shirts, old mates with Irish surnames and the odd bloke who has some expertise in international relations. Plus Baroness Jay.

As at DMGT, this is a boardroom policy minted in the 1980s. The appointment of Twohill and Gibbons elsewhere will steadily increase the pressure on the O’Reillys — and the Rothermeres — to confront the recent arrival of the 21^st century.

And what of Trinity Mirror? Sly Bailey has made some interesting-looking digital acquisitions. But have you looked at Trinity’s line-up non-execs lately? To say the least, it lacks digital oomph.

There’s Gary Hoffman (a vice-chairman at Barclays, who seems well-versed in the credit card business); Laura Wade-Gery (an ex-management consultant and investment banker who runs Tesco.com); Kathleen O’Donovan (former beancounter-in-chief at industrial widget company Invensys); and Jane Lighting (former CEO of Five).

DMGT, IN&M and Trinity Mirror need to get their backsides in gear. Their non-quoted competitors have just raised the ante. Significantly.

Yahoo’s APT (Part 1): A media-friendly future for digital ad trading?

Posted by Peter Kirwan on 26 September 2008 at 12:27
Tags: Independent News & Media, Media, emap

Jerry Yang, the co-founder of Yahoo, calls APT the “next generation of advertising”. Slightly awkwardly, he adds on his blog that APT would be to 2009 “what radio was to 1924, TV to 1947, color TV to 1965, and the Internet to 1993″.

You get the idea.

Actually, APT is intended as a market, an exchange — in the same way that you could describe the London Stock Exchange as a market for share trading. As Yang puts it:

The advertising strategy at Yahoo is about building platforms for publishers and advertisers and our second strategy is about opening things up for multiple sales forces and multiple pieces of inventory.

In other words: APT is what happens when a pure-play giant like Yahoo opens up its highly advanced infrastructure as a trading platform for rival publishers. Yahoo now wants to become a supplier to Big Media, the industry it once threatened to destroy.

Business Week offers a flavour of what’s involved:

The core of the system is an open online marketplace where publishers—Yahoo and its network of partners, including 784 newspapers—use a simple dashboard to post ad slots available on their Web pages.

Advertisers, using anonymous data on visitors to the pages, can target ads to the most likely prospective buyers in particular geographic areas—say, ads for minivans to married women aged 31 to 40 in the Chicago metro area. In one transaction, they can reach potential buyers on Yahoo and on partner sites.

So what’s in it for media owners? At APT’s launch, Yahoo wheeled out Dean Singleton, chief executive of MediaNews Group, which publishes the San Jose Mercury News.

Singleton — whose company has collaborated with Yahoo on the development of APT — believes that the system will dramatically improve newspapers’ ability to generate digital ad revenues.

Singleton believes that media owners will benefit from Yahoo’s behavioural targeting prowess. APT’s ability to combine the offerings of different publishers into a streamlined buying process should also help.

“As part of APT, we can bundle our inventory nationally and in a more targeted way. Today, newspapers are focused on selling sites and sections generally. . .

“We can charge higher rates if we can target better. If we could charge normal rates for our advertising, you wouldn’t be hearing about the woes of the newspaper industry. The reason that online newspaper revenues don’t make up the losses on the print side is because we’re selling cheaper remnant ad space.”

In an interview with the FT, Singleton went even further, suggesting that if APT had been launched earlier, “you wouldn’t be hearing people talk about the woes of the newspaper industry”.

Although he didn’t say it, Singleton probably also hopes that platforms like APT will reduce the role of ad networks, or even disintermediate them entirely. Media owners won’t shed too many tears on this score. Ad networks have always been an imperfect solution to the challenge of selling low-value inventory.

APT should also allow publishers to cut the cost of selling digital ads, perhaps radically. This seems likely because Yahoo’s platform promises to address the supreme paradox of digital advertising — namely: organisational processes that are “crummy” at best. (On Thursday, this adjective was used by Yahoo’s Susan Decker, who knows what she is talking about.)

From Yahoo’s point of view, the ambition is similarly heady. And here’s a significant bit of parsing from Reuters’ Paul Thomasch:

What Yahoo wants is a system as efficient for online display advertising as the one run by Google in search advertising.

Well, yes and no. Yahoo, it seems, envisages APT becoming a unified trading system for all kinds of digital advertising including (yes) online display, but also mobile and search. Video advertising sits on Yahoo’s list of ambitions, too.

So why hasn’t anyone else thought of this before?

As it happens, they have. But in recent years, progress toward automated trading of digital display has been frustratingly slow.

Arguably, the faster-growing market for paid search has been occupying all of the best talent at places like Google, Yahoo and Microsoft. Meanwhile, EBay’s efforts to set up a trading exhange for the US TV industry appear to have foundered in the face of opposition from media owners.

Now, however, Google, Microsoft and AOL are all working on platforms to rival APT.

Of this trio, AOL seems to be closest to realizing something concrete. This week, the Time Warner subsidiary claimed that it will launch an ad exchange called Bid Place in early 2009.

This burst of development couldn’t have come at a better time. In an online display market that shows signs of tanking alongside everything else, it’s precisely what’s required.

By the time we haul ourselves out of recession, digital advertising — and therefore digital media — could look very different indeed.

Johnston Press 1H08 Results: The Conference Call

Posted by Peter Kirwan on 27 August 2008 at 10:40
Tags: Johnston Press, emap

Results presentations usually contain hatfuls of interesting data — but oddly no-one covers them live in the UK. So we thought we’d redress the balance a bit. Here’s my near-live take on JP’s 1H08 results , which Tim Bowdler & Co. delivered at 9am this morning. If you like it, let me know, and we’ll do more of the same in the future. . .

8.40: Ahead of this morning’s conference call with analysts, Johnston has published its topline results for the six months ending 30 June 2008. I’ll be blogging the conference call live, looking for clues about the depth of the downturn.

8.45: Those topline results include overall revenues down by 6.3%. Within this, ad revenues (which comprise three-quarters of all revenues) are down by 9.5%. If this strikes you as a moderate decline, remember that it has been progressive. By late June, ad revenues were falling by much, much more than 9.5%.

Tucked away at the base of Johnston’s press release is the real stinker: “advertising revenues for the first 7 weeks of the second half are down by 21% year-on-year”.

In this month’s edition of Press Gazette, I write about The 20/20 Scenario. This is the idea of a 20% decline in ad revenues during 2008, followed by the same next year. This would submerge most of the UK’s news-generating organizations beneath a tide of red ink. Johnston Press seems to be leading the way.

8.51: Some slightly positive news. Courtesy of its rights issue, JP has paid off a wholesome chunk of its net debt, which stood at £692m six months ago. Now it’s down to £483.9m. If this was your mortgage, you’d probably be delighted (although your other half might resent selling off the living room to a Malaysian investor along the way).

08.53: Is JP competing with Trinity Mirror to hack the most cost out of its business? Looks like it. They’ve cut £7.6m during 1H. TM’s target for the full year is £20m — in the context of turnover 50% higher than JP’s. Do the maths yourself.

9.06: Tim Bowdler, chief executive, kicks off proceedings: Plays up the op margin “which still looks relatively good” at 27%+. However, JP is in a “severe cyclical downturn” — “owed entirely” to the downturn.

9.08: Stuart Paterson, finance director: Turnover down by 6%, operating profit before non-recurring items down 16%.

9.10: Into margins. “Every publishing divison has seen a reduction in margin”. Most significant in the Republic of Ireland.

Slight reduction in advertising yields — only 1%.

Circulation sales down 1%.

Digital revenues: £11.1m, up by 52%.

[Ed note: Great -- the slides have gone down. I've got sound but no vision. Are the non-existent slides a feature or a bug?]

Costs would be worth focusing upon, if only I could see the slide Mr. Paterson is talking about. Big cuts in newsprint costs, but these are presumably a one-time saving.

Editorial costs actually up, from £38.09m to £39.9m (wonder how the NUJ feels about that?). Advertising and marketing costs flat. Costs of digital = £4.5m up from £4.1m a year ago. Most of JP’s cost cuts (£7m+) occurred in Q2.

Where will JP cut costs in 2H? Perhaps editorial will need to take its turn as we approach Christmas. Nice.

9.15: Ads: Q1 down 9%, Q2 down 13%.

Property down — 24.5% in Q2

Display down — 10.8% Q2.

“A good number of estate agents withdrawing totally from advertising for August.”

9.18: Digital — Page impressions more than doubled and uniques up by 42% YOY.

9.20: Net cashflow down by 16% YOY. The rights issue is the “primary reason” for reduction in debt. Net debt to EBITDA — 2.6 times.

9.22: Danny Cammiade, chief operating officer, is winding himself up for a Big ‘Un. He starts out with a pleas for the “power of the regional press” based on research. (”One in three adults in our catchment areas read one of papers every week.”) In the background, I can hear analysts snoring.

He quotes some positive research from Google suggesting that newspaper advertising “works”, is “trusted” and “generates a response”. Better tell that to Eric Schmidt.

9.25: Now he’s talking about wine clubs. And self-service advertising opportunities — “following what you can get on Easyjet”. Allowing advertisers to book their own ads online sounds like an interesting project, but the detail is wafer-thin.

Cammiade promises that all JP presentations to advertisers now involve digital (if that’s just happening now, isn’t this a bit worrying?).

Reader databases: JP now has 2.6m personal records, with permission to contact over 1m of them.

[Whoa! The visuals are back. . . Only a dozen slides later. Thanks JP.]

9.28: Lots of non-specific (in financial terms) discussion of digital development. Danny has looked up the value of houses in his street on a JP site and found they’re down by 15%.

9.31: More discussion of “unleveraged ad opportunities”. This seems to mean revenues generated by selling digital-only solutions. Clearly, this is growing important as print advertising declines.

But JP’s mention of “unleveraged ad opportunities ” twice in this presentation makes me wonder how much turmoil is going on within sales teams. If they’ve been selling digital as an add-on to print, when print ads decline, they’re in trouble. The politics of this must be highly enjoyable.

9.32: Discussion of IT infrastructure. Non-specific talk of savings. Mention of a “new generation content management system”.

9.34: Cammiade is still going strong: “We re looking very hard at using technology to drive efficiencies in editorial and advertising. But we want to keep customer-facing staff close to their markets, which is something we take very seriously and won’t give up easily”.

At first glance, this sounds Churchillian. But note the bit that says local presence is “something we won’t give up easily”. Does JP have a regional retrenchment programme if things continue like this into 2009? You bet. But it’s not going to see the light of day for a while — if ever (we hope).

NB: All replacement recruitment at JP now has to be personally approved by Cammiade himself.

Oh, and unlike the rest of the JP Empire, The Isle of Man doesn’t have colour printing. But the islanders don’t need it, says Cammiade. (Mmm: JP’s three printed products on the island look colourful to me.)

09.37: Some useful figures on headcount:

Editorial — June 2008: 2542
Editorial — December 2007: 2563

In anyone’s language, that’s flat.

09.38: Back to Tim Bowdler. Another couple of high-level slides. . .

. . . and then, at 9.40, this, the equivalent of the monster from the JP lagoon. Bowdler is presenting ad revenues for the first even weeks of 2H. They look horrible:

In print (£):

– Employment: down 27.9%
– Property: down 40%
– Motors: down 22.8%
– Other classified: down 8.4%
– Display: down 9.9%

Total print ad revenue decline YOY for July and August: — 21.4%.

Happily, digital is up by 25% YOY, from £1.2m to £1.5m.

But it’s a drop in the ocean. Those digital numbers hardly move the needle for overall ad revenues, which are down by 21% YOY during July and August (thus far).

The 20/20 Scenario? Yeah, bring it on. . .

Murdoch’s Teflon margins: Even with Dow Jones aboard, News Corp’s newspapers still look good

Posted by Peter Kirwan on 8 August 2008 at 17:25
Tags: Media, News Corp, News International, emap

If you work at Wapping, what should you think of News Corporation’s full-year results? Here’s the stuff investor relations would like you to shout about:

• Revenue up by 9%
• Operating profit up by 18%
• Q4 net income per share up 27%

Yadda-yadda. So is everything really rosy in the garden? Given News Corp’s typically miserly approach to disclosure, it’s hard to say.

In particular, News Corp’s second-quarter earnings release is studiedly guarded about progress at Dow Jones, which became part of the P&L in Q1.

It tells us, for example, that Dow Jones generated $48m in operating profit before amortization and depreciation during News Corp’s Q4 (Q2 in calendar terms).

But it doesn’t tell us how much Dow Jones generated in revenues. As a result, there’s no way to assess the unit’s margin performance.

There’s probably a very good reason for this.

Last year, before the acquisition of Dow Jones, News Corp’s newspapers generated margins of 20.9%.

Any hint that these profits are being diluted by Rupert Murdoch’s high-priced acquisition would have enraged investors and analysts.

Happily, this week’s year-end results from News Corp don’t offer any real evidence of dilution.

Even with Dow Jones & Company on board for two quarters, News Corp’s newspaper division still managed to generate operating margins of 19.2% during the 12 months to 30 June.

It might not look like much, but this is really quite a feat.

The important point to remember is that pre-Murdoch Dow Jones was a dog (there’s no other word for it) in terms of profitability.

In Q307, for example, the company generated operating profits of $40.9m on revenues of $493.3m. That’s a paltry operating margin of 8.2%.

Historically, it was never much better.

• Q207: 12.5%
• Q107: 7.5%
• Q406: 13.1%
• Q306: 3.3%

The question is this: how has News Corp managed to shoehorn such a large and underperforming asset into its newspaper division without hammering its own margins?

Dow Jones was a biggish acquisition in revenue terms. Its $1.8bn annual revenue base compares with News Corp’s pre-acquisition newspaper-related revenues (for 2007) of $4.5bn.

And yet. . . despite absorbing the big revenues and poor profitability of Dow Jones, News Corp’s margins have barely registered the impact. Here’s what’s been happening on a quarterly basis:

News Corp newspaper margins Q208: (with DJ) — 19.2%

News Corp newspaper margins Q108: (with DJ) — 17.9%

News Corp newspaper margins Q407 (without DJ) — 21.3%

News Corp newspaper margins Q307 (without DJ) — 18.7%

News Corp newspaper margins Q207 (without DJ) — 23.4%

News Corp newspaper margins Q107 (without DJ) — 20.3%

(NB: These margins are calculated before depreciation and amortization)

Yes, there’s a small dent visible in the margin during Q108, the quarter in which Dow Jones was included within News Corp’s numbers for the first time. But apart from that, the margin performance looks unbroken.

How have Murdoch & Co. managed this feat? The answer to the question — I suspect — falls into two parts:

1) They’ve been pressing every possible button in a bid to increase margins at Dow Jones & Company (not terribly surprising).

2) They’ve been stripping costs out of every other News Corp-owned newspaper worldwide.

Is Rupert Murdoch’s obsession with the Wall Street Journal going to weaken The Sun, the News of the World, The Times and the Sunday Times? Does the competition have an opportunity to benefit from this in the short and medium term?

My guess is that the answer to both of these questions is yes — notwithstanding recent largesse in terms of new print plants, redesigns and a “permanent” 5p cut in the price of The Sun.

Dow Jones won’t get fixed overnight. Until it does, the rest of the Murdoch empire will almost certainly need to share the burden of rebuilding it.

Memo to private equity: Why not try a proper challenge?

Posted by Peter Kirwan on 2 July 2008 at 17:46
Tags: United Business Media, emap

So a consortium of private equity firms has got round to bidding for Informa.

This, however, feels like one of those deals that — like climbing Mt. Everest — lacks a rationale apart from the fact that it’s capable of being done.

Currently, Informa carries around £1.25bn of debt. At 4.4 times EBITDA (roughly equivalent to operating profits), that already looked high. Indeed, reducing debts was supposedly one of the attractions of talking with United Business Media.

So what will private equity bidders do? Yep: they’re going to increase, rather than reduce, Informa’s debts.

Specifically, according to the FT, they are proposing to ratchet up the company’s loans from £1.25bn to £1.85bn.

This will help to pay for the deal (in the same way it helped the Glazer family buy Manchester United). But it would also mean that Informa’s net debts would amount to more than six times EBITDA.

And take a look at the interest rates that a newly-private Informa would have to pay on its shiny new loans, as reported by the FT:

• £1.39bn at 3.75% over Libor: in other words, around . . . 9.7% *
• £463n in high-yield (a.k.a. junk) debt costing. . . 11.75%

Under these circumstances, after a successful private equity deal, Informa would find itself making interest payments of £188m a year.

In a recent conference call with analysts, Informa suggested that it expected to pay a “blended” interest rate of 6.25% on its debt during 2008.

Of course, this will have increased since then, but it’s worth noting that under such circumstances, Informa would find itself making interest payments of around £78m this year.

What’s £110m between friends?

Actually, quite a lot — even if Informa’s new owners don’t demand much in terms of dividends from their investment in the short term.

If this deal goes through, employees can expect the mother of all cost-cutting programme to swing into action from Day One.

Unless Informa’s board has been deceiving investors about the company’s prospects, this acquisition would take a moderately stressed, but fundamentally solid, company and put it through the wringer without much justification.

By contrast, if private equity were really doing its job, it would be tackling a proper challenge — like restructuring the regional press.

The only silver lining is the market’s suspicion that Informa’s private equity suitors won’t be able to raise the money required for a bid. This is evident in a share price that’s stolidly refusing to perk up to anything like the anticipated offer of 506p.

* I’m using three-month LIBOR (5.95%) here: it seems to be the benchmark.

Who will save Kelvin?

Posted by Peter Kirwan on 20 June 2008 at 11:00
Tags: GCAP PLC, Independent News & Media, Media, News International, United Business Media, emap

The happy-go-lucky saga of Kelvin MacKenzie’s potential candidacy in the by-election at Haltemprice and Howden cannot be allowed to hide the bleak reality.

Kelvin MacKenzie is a man who has lost an empire, but has yet to find a role.

Friends are worried that he is turning into the media world’s equivalent of Gazza.

The drink-sodden Geordie’s latter years were a steady downward spiral of broken dreams in dreary places: Gansu Tianma, Wolves, Boston United, Kettering Town and Burnley.

All the time, he was being helped through the darker moments by old mates from Spurs like Terry Vanables and Gary Mabbutt.

It’s a similar story with MacKenzie, who never properly recovered from the shock of leaving The Sun.

He was edged out of Sky after a few months in 1994. (The job had been arranged by his mate Rupert.) Then it was on to broken dreams in dreary places: LIVE TV, Talk Radio, Highbury House, Media Square.

Every one a winner? Not quite — despite the quiet behind-the-scenes help from his old mates Rupert and Les. At every port of call, MacKenzie’s self-destructive talent for destroying shareholder value resurfaced to devastating effect.

In the Sun column he used to announce that he wouldn’t be standing against Davis, McKenzie admitted that cashflow is, er, a little bit tight.

Will anyone help this once-proud man to conquer his demons? For his own good, MacKenzie needs to be prevented from ever running a business again. . .

Who will buy back Europe’s media industry when private equity has done its work?

Posted by Peter Kirwan on 10 June 2008 at 14:25
Tags: emap

Financial News has a handy assessment of private equity’s rampant thirst for media companies.

The Europe-wide boom in media buyouts started in mid-2006. During the past 12 months alone, 42 media buyouts deals worth Euros 6.5bn have been finalized in Europe.

These are enormous numbers. The spike on the graph that accompanies Financial News’s story would make Jimmy Choo proud.

It’s obvious why. Private equity funds are recycling experts. They take away difficult propositions, knock them into shape or convert them into something else — and then sell on the revamped article.

The size of the private equity boom tells you that stock market investors are seriously spooked about the future of media. Across Europe, they’ve been calling in the recycling experts willy-nilly for the past two years.

All well and good. But as David Gilbertson, the newly-appointed chief executive of EMAP, wrote in an email to staff in April:

At some point, private equity firms sell their stake in the business for more than they paid for it and retire to the wine bar.

Question is: two or three years hence, who will underwrite all of that champagne? Or as Crevan O’Grady, head of media at 3i, puts it in sober fashion: “The question is where the exits are going to come from.”

UBM & Informa: B2B consolidation just got interesting

Posted by Peter Kirwan on 10 June 2008 at 14:13
Tags: Reed Elsevier, United Business Media, emap

How many ways can you skin a cat?

Johnston Press solved its debt problems by asking investors for cash and accepting the advances of a Malaysian billionaire.

Now comes Informa. After experiencing debt-induced palpitations, the £1bn-turnover B2B publisher is wondering whether it might be best to fall into the embrace of United Business Media.

Actually, the merger-of-equals rhetoric isn’t too far wide of the mark. The markets value Informa at £1.8bn and United Business Media at £1.6bn.

Neither company looks particularly distressed in operating terms. Despite the current signs of a slowdown, both Informa and UBM grew at around 9% last year — not bad at all for companies of their size.

There’s symmetry at the level of motivation, too.

Informa has £1.25bn in debts and wants to reduce that number — fast. Combining with UBM, which has minimal debts, will improve matters. Besides, both companies will benefit from up to £50m of cost savings if they merge.

For its part, UBM will benefit from a deal by reducing its dependence on print and advertising revenues.

The result would be a post-print B2B behemoth turning over £1.7bn a year.

How problematic are Informa’s debts? This, after all, is a company that has grown rapidly on cheap credit. In 2001, Informa was a £300m-turnover company focused on subscription revenue and events.

Just seven years later, its revenues have quadrupled via apparently well-chosen acquisitions in academic publishing (Taylor & Francis), conferences (IIR) and research (Datamonitor).

Last year, however, Informa’s net debts reached a peak of 4.8 times the company’s operating profits.

By comparison, Johnston Press was forecasting 2008 net debts of 3.5 times operating profits before company announced its rights issue. (The multiples involved are similar to the ones used by building societies to assess the size of mortgage they’ll give you. If in doubt, think of your salary as operating profit. In the current climate, multiples higher than 3 aren’t popular among investors.)

How did Informa manage to rack up so much debt? During the naughties, it made big acquisitions. But the company’s fast-growing cashflows easily covered its interest bills.

For most of the decade, Informa looked like a good bet to bankers. It was a publisher with interests in virtually every media format you can imagine, apart from the dodgy no-go sectors of print and recruitment advertising. (In 2007, ads generated just 3% of Informa’s revenues).

Now, however, investors are much more worried by the speed with which B2B publishing profits might decline. Under these circumstances, interest repayments could become burdensome — very rapidly.

That’s why, as with Johnston Press, investors have been shunning Informa’s shares. (During the past year, Informa’s share price has dropped by one-third. The UK media sector as a whole has declined by 25%.)

It also looks as if Informa’s buoyant margins have started to slide in recent months. Helpfully, the combination of UBM with Informa should reduce the merged company’s debts to much more comfortable 2 times operating profits by 2009.

In recent years, United Business Media has avoided mega-deals. But that’s not to say that the company’s managers have been asleep at the wheel.

Far from it.

UBM has sold off Exchange & Mart, its 35% stake in Five and the NOP market research unit.

And since David Levin joined the company as CEO in 2005, UBM has spent almost £400m on 52 acquisitions negotiated by three separate in-house M&A teams in London, New York and Hong Kong.

UBM has been snapping up companies at the rate of one every three weeks. Few, if any, are what you’d call traditional B2B media outfits.

The aim has been to diversify away from the company’s declining roots in print.

But if Informa was self-consciously designed and built as a post-print B2B publisher, UBM still resembles a half-renovated Victorian semi with a skip in the drive and a concrete mixer in the garden.

In 2005, print accounted for 46% of UBM’s revenues. Two years later, the figure is 27.5%. Although UBM now draws four-fifths of its profits from events, databases and press release distribution, there’s still a way to go.

A merger with Informa would propel UBM squarely into the post-print future. The combined company would be largely focused on events, market research, databases and so-called workflow solutions.

In this respect, UBM-Informa could come to resemble Reed Elsevier, whose great leap forward involves selling off Reed Business Information, its magazine division.

If the UBM-Informa deal goes through, and if Reed Elsevier offloads RBI this summer, it will mark a decisive parting of the ways among B2B publishers.

Incisive Media, EMAP — plus whoever buys RBI — would remain as the major players in traditional B2B publishing. Two of this trio are already owned by private equity investors. RBI could go the same way, setting the scene for dramatic restructuring away from the limelight of the public markets.

That’s one scenario.

Plenty of others exist — including a potential counter-bid from private equity investors for Informa. Potential bidders understand investors’ fears that UBM will buy Informa on the cheap.

But by sucking hard-to-find debt financing out of the market, an intervention like this could derail Reed Elsevier’s plans to auction off RBI.

What we’re witnessing is top-of-the-cycle consolidation. By the end of this year, the B2B publishing market will have changed out of all recognition.

Whether investors have sufficient appetite for risk to make the pieces of this puzzle fall to earth in an orderly fashion remains to be seen.

Those EMAP bidders in full: �2.5bn and counting. . .

Posted by Peter Kirwan on 4 December 2007 at 23:07
Tags: Media, emap

Reuters offers a run-down of the vultures — sorry, runners and riders in the Great EMAP Auction, the first stage of which ends this week.

Consumer magazines: circa 50 titles

– H. Bauer
– Hearst Corp (bidding with private equity house Exponent, says the Telegraph)
– TPG (private equity)

B2B Publishing:

– Apax (private equity) and Guardian Media Group
– Permira and Providence (private equity)
– Candover and Cinven (private equity)
– Reed Elsevier (”unlikely to push too hard for the business,” say Reuters sources)
Radio:

– Veronis Suhler Stevenson and Vitruvian Partners (private equity, with Phil Riley, former CEO of Chrysalis Radio)
– Global Radio (private equity-funded consortium run by ex-ITV CEO Charles Allen)
– H. Bauer (possibly)
– Guardian Media Group (interested in individual assets, according to the FT)

UBS, the investment bank, expects EMAP to achieve a break-up price of 1,030p. That divides up as follows:

• Consumer magazines: �700m

• B2B Publishing: �1.25bn

• Radio: �400m

EMAP’s shares finished Tuesday at 840p. I don’t know about you, but the substantial gap between that price and the UBS break-up value suggests that investors are plenty nervous about the sale process.