McGraw-Hill puts Business Week up for sale

Posted by Peter Kirwan on 14 July 2009 at 14:51
Tags: Media, Pearson PLC

190 staff, 4.8m readers and 80 years-worth of back issues.

I give you Business Week, for sale by McGraw-Hill with a reserve price (according to some reports) of as little as $1.

The volume of ad pages carried by Business Week during Q1 fell by a remarkable 39.8%. During Q2, the decline was 30%.  (NB: These numbers come from McGraw Hill and differ from the YOY revenue numbers used by Silicon Alley insider in the chart above.) The bankruptcy of Detroit hasn’t helped.

At The Atlantic, Michael Hirschorn points to what ails the US news weeklies, which he describes as “mainframes in an iTouch world”:

In the digital age, with its overabundance of information, the modern newsweekly is in a particularly poignant position. . . The audience it was created to serve—middlebrow; curious, but not too curious; engaged, but only to a point—no longer exists. Newsweeklies were intended to be counterprogramming to newspapers, back when we. . . needed a digest to redact that vast inflow of dead-tree objectivity.

Now, in response to accelerating news cycles, the newspapers have effectively become newsweekly-style digests themselves, resorting to muddy “news analysis” now that the actual news has hit us on multiple platforms before we even open our front door in the morning.

True enough. For McGraw Hill, this is an exercise in bolstering profit margins.

Traditional media forms perhaps one-tenth of McGraw-Hill’s revenues. Increasingly, Business Week looked awkward alongside the data-driven business like Standard & Poor’s and JD Power. McGraw-Hill’s ability to spread the cost of owning Business Week across its other businesses was limited.

Business Week used to be a cash cow. Now it’s a loss-maker. The dynamic is similar to that which forced DMGT to sell the Evening Standard for £1. In the darkest hour of recession, the relief on the bottom line is all that matters.

Looking ahead a little further, the natural impulse is to look for other large companies that own small, and isolated, media operations.

One such is Pearson, owner of the Financial Times. It’s usually at this stage in the economic cycle that grumbling and speculation about Pearson’s ownership kicks off among investors and analysts.

Thus it was during the dot.com bust. And so it shall be again. . .

For how much longer can Rupert Murdoch spend “major amounts of money” on the Wall Street Journal?

Posted by Peter Kirwan on 23 June 2009 at 11:43
Tags: News Corp, Pearson PLC

At the weekend, the Sunday Times ran a throwaway 150 words on Lionel Barber’s request that senior staff at the Financial Times should consider taking an extra week’s holiday this summer, on 30% of their usual pay.

So what? Well, the report prompted some thoughts from an analyst at Cazenove (reproduced at FT Alphaville yesterday). This excerpt on the FT’s business model bears repeating:

As a reminder, the Financial Times newspaper accounts for only a small part of Pearson group (we estimate 5% of revenues and 3% of profits in 2008, moving to a small operating loss forecast for 2009E).

However, there is a high drop through to profits from cyclical fluctuations in levels of advertising which (despite the retail cover price increase to £2) still account for around 70% of total FT newspaper revenues.

Following a 13% decline in Q4 of last year we have already factored in a 25% fall in FT advertising revenues this year. Each further 10% drop in ad revenues (which we estimate at £180m for 2008) hits group profits by around £15m pa (-2.5% off EPS).

The last cyclical dip in profitability at the FT — caused by the dot.com crash — was nasty and severe. It took the pink ‘un what seemed like ages to emerge from the slump. As a business publisher, the FT tends to decline late in the cycle, and recover late, too.

This time will be no different. 2010 might bring a recovery of sorts for some consumer media. But in its recent survey of the prospects for media, PwC suggests that the market for financially-flavoured business information in Europe will only start to stage an anaemic recovery in 2012.

PwC’s numbers suggest that a similar dynamic will apply to the Wall Street Journal, which shares a proprietor with the Sunday Times. If anything, the US market will prove tougher. PwC expects the North American market for financial information to contract at an average rate of 5.5% between 2009 and 2013.

Not that you’d know it. In New York, Rupert Murdoch has been spending “major amounts of money” on the Journal and Dow Jones, according to the paper’s former managing editor Paul Steiger.

As a result of this largesse, Steiger adds, the Journal has been mostly “insulated” from “all of the trauma that’s been going on in the news business and particularly the newspaper business”. Not to mention the trauma that has now started to affect the market for financial business information in earnest.

News Corp’s investment plan has culminated in the Journal’s recent office relocation from downtown Manhattan to midtown, where rents are up to one-third more expensive. The New York Observer suggested recently that the cost of relocating was “well in the millions, and could touch eight figures”.

No doubt there have been accompanying economies. News Corp’s plans to drive Dow Jones into new information markets look intriguing. It’s also a fair bet that the Journal is less exposed to cyclical advertising declines than the FT.

But additional expenses will shortly be incurred in Europe, where Patience Wheatcroft, newly-installed as editor-in-chief of the Journal’s European edition, is transferring the paper’s regional HQ from Brussels to London.

With News Corp so willing to grease the palms of estate agents on both sides of the Atlantic, the Sunday Times presumably took some pleasure in reporting that FT executives have prepared an “Armageddon” plan that provides for deep cuts in local and international coverage.

Yet given what’s happening to financial information markets, the FT would be daft to ignore the darker possibilities.

The big questions don’t all loom over the FT’s HQ next to Southwark Bridge. As News Corp shareholders would probably agree, a fair few of them — mostly unanswered — have started to gather above the Wall Street Journal’s shiny new home on Avenue of the Americas in midtown Manhattan.

How FT Alphaville did the business on Meltdown Monday

Posted by Peter Kirwan on 16 September 2008 at 16:04
Tags: Pearson PLC

It was the kind of day that comes around once a decade — possibly less frequently — for City hacks. (Although there might be a few more of them to come by the look of it.)

The Daily Mail, ITN and the Telegraph called it Meltdown Monday.

Strange but true: reading the FT’s web site last night was an oddly static, unsatisfying, experience. Online, the Pink ‘Un struggled oddly to conveyed any sense of the significance, of events.

I’m not sure why. Design constraints might have something to do with it. Alternatively, perhaps the FT’s stable of high-end analysis writers are still geared to writing for print.

The lead story when I visited — Stocks sink amid Wall St crisis — was a little more than a basic recap of the day’s events.

This morning’s print edition was another matter: plenty of crisp and well-packaged stories, with the likes of Gillian Tett asking some sharp “what’s next” questions. Essential reading.

The one part of the FT’s site that really caught fire yesterday was Alphaville.

Alphaville ran three live blogging sessions yesterday — the last of them kicking off at 15:34 (Crisis Live — iii).

In the process, authors Paul Murphy and Neil Hume left a trail of gems behind them. Readers adding comments only enriched the haul. In terms of drama and cut-through, this mix of journalism and reader comment left the FT’s home page way behind.

Trying to get a look at Markets Live on Alphaville this afternoon wasn’t easy. Pages were loading slowly — quite possibly because of traffic volumes.

This feels like real citizen journalism to me — smart, engaging, hotter than hell, unfolding in front of your eyes and as interactive as you like.

Messrs Murphy and Hume (plus their backroom staff) have just proved a very big point. Lionel Barber, the FT’s editor, will have plenty to think about when things calm down.

For you, Mr Gowers, the war is over

Posted by Peter Kirwan on 12 September 2008 at 10:31
Tags: Pearson PLC

To say that Andrew Gowers was a popular editor of the Financial Times would be stretching it a bit.

Gowers left the FT abruptly in 2006 after a five-year stint. He cited “strategic differences” and made his way to the investment bank Lehman Brothers, where he became head of corporate communications.

If you’ve ever wondered what the highly-paid PRs employed by banks like Lehman actually do for a living, an answer is at hand.

Typically, once every decade, amid a nasty financial crisis, they fight like good ‘uns to convince the world that their employer isn’t going to go down in flames.

Gowers has been doing this for the past few month, grappling with a tide of rumours about Lehman Brothers that culminated in this week’s announcement of an apocalyptic $3.9bn quarterly loss.

Fat lot of good his time at the FT did him.

Lehman has always enjoyed a reputation for sailing close to the wind. Now everyone and his mum suspects that the bank’s taste for dodgy mortgages willconsign it to the great credit crunch in the sky.

Gowers must have been mildly chagrinned by the coverage he received in the FT’s Lex column, which described the bank’s post-results rescue plan as “incomplete” and full of “good intentions” and “token gestures”.

But there was worse to come at FT Alphaville, which has taken to calling the bank “Lehmon” (as in lemon). The Alphaville hacks described Lehman’s chief executive “broken and defeated” during this week’s emergency conference call.

But that was nothing compared with the vilification handed out by Alphaville’s readers in the comments. Or the outlook as envisaged by the Independent’s always-excellent Jeremy Warner.

For Mr Gowers, it would seem, the war is over. . . He hasn’t resigned yet. But according to the Daily Telegraph, a new career in Whitehall beckons.

Er, what was that about a broad-based recession?

Posted by Peter Kirwan on 29 July 2008 at 22:55
Tags: Daily Mail & General Trust, Media, Pearson PLC, United Business Media

This morning, United Business Media turned in revenues up by 10.4% YOY for the six months to the end of June. Cash conversion improved, and so did operating profit (up 11.4%).

Even CMPi managed growth of 6.2% (although margins dipped slightly below 20%).

For the journalists among you, it’s worth pointing out that all of this happened inside a company (UBM as a whole) where only 25% of revenues are now generated by print. That’s down from 56% four years ago.

It’s just as well, then, UBM’s events business is doing a fair impression of the Duracell bunny. In his presentation to analysts this morning, David Levin, UBM’s chief executive, kept the best news until his last slide, which contained these bullet points:

– Forward bookings across UBM’s major events scheduled for 2H08 are 10% ahead of the previous year.

– Bookings for 2009 major events demonstrating good growth — 10% ahead.

Pearson was also presenting half-year results this morning. There, the FT Group delivered revenues up by 11% for the half-year. Much of that was attributable to the group’s Interactive Data division. But FT Publishing itself managed a 2% increase in subscription, circulation and advertising revenues.

Not bad given what’s happening to City jobs and financial services advertising.

Dame Marjorie sounded over the moon. She told the FT: “In downturns, companies like ours, which have consistently invested and have very strong balance sheets, have huge opportunities. This [the next couple of years] is probably going to be the most fun time I have had yet in this job.”

How so? Scardino mentioned acquisitions, “bolt-ons, things which are hugely synergistic”.

Whether or not she’s thinking — in part? — about enriching the FT Group with acquisitions remains to be seen.

Three or four years ago, when the FT was languishing miserably at the bottom of its profit cycle, investors would have demanded Scardino’s head on a pikestaff at Traitor’s Gate if she’d so much as hinted at such a thing. Now, as the FT prepares to confront a rampaging Wall Street Journal, there’s just a chance that things might be different.

Stranger things have happened.