Apr
2
Portfolio Power Down
Filed Under B2B, Big Data, Blog, data analytics, Education, Financial services, healthcare, Industry Analysis, internet, mobile content, news media, Pearson, Publishing, Reed Elsevier, Search, Uncategorized | 2 Comments
In the days when everyone did everything, few people did everything well. But I loved it. Editors in magazine companies moved from the Meat Trade Journal to the Retail Jeweller in a moment. I myself was transmogrified in a 3 line memo from running educational publishing to leading the charge in building a law publishing empire. We were in Publishing, we were Men (sadly, mostly) for All Seasons. “These are just businesses” we used to say. “You don’t need to be a lawyer to run publishing for lawyers”. And part of me still believes that, except nothing can now forgive how arrogantly little we knew about the needs and behaviour of the good people buying our publications.
These thoughts came to mind two weeks ago while reading this press release: “The company plans to complete its portfolio rationalization by exploring strategic alternatives for McGraw-Hill Construction, a leading provider of essential data, news and insights to better inform construction professionals’ decisions in the United States. McGraw Hill Construction has approximately $170 million in annual revenue and stand-alone operating margins approaching 20%. The business has shifted away from legacy print products to new, innovative data and analytics offerings, which are generating double-digit growth. Evercore Partners is acting as a financial advisor to the Company in this matter” (www.biia.com). It reminded me why we built these curious portfolio companies in B2B in the first place, as well as confirming my view that most press releases mean the opposite of what they say (“complete” in the context of the above note must be taken in the context of a complete review having broken the corporation into two and divested Education!).
We reached this place through a long experience of periodic recessions – at least that has not changed. We got here because we argued that a balanced portfolio gave us assets which would not all go down at the same time, and a balance of early first-in, first-out victims, recession proof activity (that is how we saw law publishing in the 1980s!) and quick recovery vehicles would proof us against all eventualities. Add in a blend of other qualities – some selected for high growth, others for cash generation, a few for high margins and we convinced ourselves that we could really get “balance” in a portfolio. But all of those traditional craft became waterlogged in a recession which was like no other in information marketplaces. As we emerged it became clear to all but the recidivist publishers that publishing, as experienced in the previous 50 years, was just about over. When we could pry people’s compulsive attentions away from their smartphones in order to ask them what they wanted, people did not generally say “book” or “newspaper” or “magazine”. In other words we were left asking Format questions which did not satisfy answers expressed as “solutions”, or “excitement” or ” learning without teachers” or even, “answers”.
Last week I was at a European Union workshop in Luxembourg on what we are going to do about stimulating the Creative Industries in Horizon 2020, the Commission’s workplan for 2015-2020. Only the nice lady from FIPP used the word “publishing” on any of the sessions that I moderated or attended, and even then with a sort of apologetic bashfulness. So it does not surprize me that the great portfolio conglomerates built in the publishing space of yesteryear are crumbling away, but it is worth asking why, and what may replace them. Companies change mission over time – think only of Pearson, a late Victorian builder’s merchant from Yorkshire which exploded into growth as an oil explorer in Latin America before, in late cycle, using the accumulated capital to become a brand portfolio in the post – war years. Now it is a single market entity once again, with just one of its brand acquisitions, Longmans, the eighteenth century bookseller/publisher, becoming the path to a remarkable twenty-first century market leadership. This is an odd story but not an unusual one. Portfolio is part of a cycle.
So what did Pearson need when they went single market in education? Well, specialist educational expertise is part of the answer. The single market specialists do seem to have a layer of market expertise which is very different from the jack-of-all-trades tradition that I noted above. And managers can talk tech talk and know what they are saying, while technology investment has become the key marker for many. Can you put a portfolio on a single platform is the “how many angels can you get on a pinhead” question for the industry rationalist schoolmen. Truth is, I believe, that new platforms and greater data concentration and increasing semantic analysis and domain ontologies increase specialization. For the portfolio players this raises a problem of choice and investment. Sometimes the answer, and this may be the case at McGraw-Hill, is not to invest further but to dispose. You could call this the D&B Gambit, as it retreated from portfolio ownerships over the last decade onto a core specialization. Sadly the pieces it sold are now worth more than the bits it retained, which is another warning to portfolio dismantlers.
Pieces of stucco have broken off some of the best regarded frontages in the industry in recent years and gone crashing to the pavement. Think of Penton Media in the US, now mercifully under management with a new plan. The McGraw announcement along with the break-out of Axios, itself a mini-portfolio, from UBM tells me that this is speeding up. And the units going now are not unprofitable, just not investable in the holding group context. And they are going to market now because markets are receptive to this kind of M&A in a way that we have not seen since 2008. So put your head back into the portfolio dominated world of 17 April 2008, when the market leaders included UBM, Informa, McGraw-Hill, Reed Elsevier, Wolters Kluwer, and Thomson Reuters, which was created on that day. Now, tell me which players will specialize in what as the ice thaws and the Big Portfolio Break-Up begins. Answers on an email please to david@davidworlock.com.
Mar
6
The Media Regeneration Game
Filed Under B2B, Blog, eBook, Education, Industry Analysis, internet, mobile content, news media, online advertising, Publishing, Reed Elsevier, social media, Uncategorized | 1 Comment
The last two days at Digital Media Strategies (Kings Place, London, 4-5 March 2014) have been amongst the best that I have spent in a conference hall in a decade. And I have wide experience to call upon! But Neil Thackray and Rory Brown and their team at the Media Briefing company pulled out all the stops to advance the game on their inaugural effort last year, and in the process pulled over 340 delegates and some first class “big names” and an even better class of “previously unknowns” from this diverse industry. And they really set me thinking: where were all these newspaper bosses and magazine tycoons during the long years when “it will never happen here” was the rule. Some still looked a bit nervous – Simon Fox, CEO of Trinity Mirror, caught in the headlights of a tigerish interrogation from Thackray, looked as if he were about to confess to war crimes at HMV and indecent assault on “The People”, but most of his colleagues were self-assured to the point of near-arrogance.
That at least could be an explanation of Mike Darcey, the News Corp CEO and his decision to spend 8 minutes of his own allotted time taking apart what he fancied to be the strategy of the next speaker, Andrew Miller, CEO, The Guardian Media Group. At least this precluded further dwelling upon the comparative failure of paywalls and the comparative lack of impact of digital advertising. And it enabled everyone to say that they were faithfully following the user experience. Yet it had the odd effect of making News Corp into a sort of John the Baptist warm up act for the Guardian, to which one felt that Andrew Miller responded by indicating that he had a better plan, but not revealing fully what he had up his sleeve. To those in the audience inured to the media having no plan at all, this was a tonic. At the moment the Guardian seems to be a connectivity junkie, rightly glorying in its content re-use and the amount of referral traffic it gets, celebrating its brand positioning as a global voice of liberal values and trying to draw the advertising it can get on this pitch. But I get an underlying feeling that they know that advertising is not the answer, and the room sat up when the topic turned to Guardian Membership.
Clearly if the Guardian can monetize its community effectively then it may be possible to get millions of people to subscribe to its values and buy into aspects of its content feed. Andrew Miller showed a picture of C P Scott and laid tributes before the lares and penates of great journalism, as indeed he should (and neither he nor I care that Edward Snowden appears to be a right wing Republican with a wholly eighteenth century view of the rights of the individual). However, if you have large populations of like-minded people with a strong community ethic then you can create – Guardian (Eye)witness. I well remember, while chairing Fish4, the frustration of the regional press competing with Mr Miller as he distributed free AutoTrader software to every used car dealer, enabling them to organize their inventory and upload easily – to AutoTrader. As a Guardian Member will I get the equivalent, thus broadening the scope (and reducing the cost?) of Great Journalism. Too early to say it yet, perhaps ? The editors would be talking quality control and the journos would be talking to the National Union of Journalists, but…
But at least we are all talking now. As a digital participant from 1980 and an internet – watcher from 1993, I am interested by how much of the industry response was fear and loathing. Hearst, at this conference a great example of digital thinking, spent the early years of the internet buying medical databases and B2B applications. Brilliant purchases, but what did they say about management’s view of their existing media futures? In the same terms, DMGT has turned itself in these time periods from being a newspaper company into a B2B player. No harm in that, but could earlier action have preserved the original structures. Or maybe the media is best re-invented not by its current practitioners but buy complete outsiders – great examples in this conference from Buzzfeed and from Business Insider? And then, what do we make of what seems to be a very European trend at present – letting the staff who know the markets create and test the ideas for recreating media and beyond media services.
I had heard a little about Sanoma’s regenerative Accelerator programmes before, and so was full of anticipation when Lassi Kurkijarvi covered the stage with energy and enthusiasm. With both internal and external venture activity he had a lot to cover. It is now fairly common for media players to invest in start-ups and develop incubators (Reed Elsevier have been venture capital investors for a decade; Holtzbrinck have their seed corn funding and efforts like Macmillan Digital Science and Digital Education; Gruner und Jahr spoke of their activities here) but getting 150 employees into a boot camp and encouraging ideation? Only for the Finns? Not at all, said Lassi. Here was a a planned process of open innovation starting with a mass kick off meeting, a webinar-based process, staff making quick pitches to get support for ideas, an initial selection of 20, crowd sourced selection of 5 for a boot camp experience and the result is 3 ideas which the company is now developing. So look out for Spot-a-shop, Huge or ClipScool – they did not come from Silicon Valley or Tech City, Old Street, but they may be none the less valuable as they express the knowledge of customers built up within a diversified media conglomerate like Sanoma.
So what does this mean? That media corporations can be regenerated from within? What would we have given to know that in 1993!
« go back — keep looking »