Thursday, January 21, 2010

Is this the end of the B2B magazine industry, or only the end of the large debt, private equity model?

A strange sense of deja vu overwhelmed me as I read yesterday that Greg Farrar, CEO of Nielsen Business Media would be leaving the company. Folio: reported that Andy Bilbao, senior vice president of brand media, will be taking over while the company evaluates strategic alternatives.

"Strategic alternatives"?  Sounds a bit like Reed's announcement of the departure of CEO Tad Smith, doesn't it?  Like Reed's decision to get out of Dodge, Nielsen is looking to exit the market, fast. 

So is this the end of B2B magazine publishing in America? If the nation's two biggest trade publishers, Reed and Nielsen, want out, who will be left? Cygnus? Questex? (OK, bad joke.) McGraw-Hill, the company where I entered the B2B media industry, is slowly exiting the publications game -- having sold Business Week to Bloomberg, and having watched Hanley-Wood take from Arch Record the official designation from the AIA, what's left? Wither ENR?

And talk about piling on: Gordon T. Hughes II announced Wednesday that he will leaving his post as president-CEO of American Business Media in July. The announcement was not entirely unexpected as Hughes had been with the organization for 16 years. But when asked recently if magazines were going to be "obsolete" Hughes responded "This is where we are going."

It is simply not true that business people will no longer be in need of business intelligence, is it?. The trade press industry will go on surely.

The full quote by Gordon Hughes mentioned above includes his predictions for how B2B media companies revenues will continue to skew towards areas other than magazines. He states that print now only accounts for around 30 percent of a firm's total revenue. But "30 percent" is wildly misleading. Major media companies like Reed have large exposition divisions, as well as other divisions outside of B2B magazine publishing. The inference is that to succeed in B2B one must get out of magazines and into everything else. But this is an investor's strategy, not a publisher's strategy.

The PE and VCs that invested in B2B are the equivalent of the banks on Wall Street -- they have taken outrageous risks and created much damage. Worse, the revolving door of CEOs in and out of B2B companies often includes a short stop at the very same financial companies responsible for today's situation. The title "Investment Banker" is now pretty much interchangeable with "Publisher" to many of the investment firms.

That is why one can trace the decline in the trade press not to the economic meltdown of 2008, but rather to the rise of the aggregating media companies of the 90's.  The financial players will point to their successes. But they don't measure success the same way a publisher does, or a reader. Buying a group of magazines for xx dollars and selling it for xxx dollars may be a win for these firms, but does this measure the performance of individual magazines? 

The issue to be faced by the vast majority of trade magazine publishers is how do we grow our news products? Yes, trade shows are struggling, but many feel they will rebound with the economy. (I know some might argue with that.) And yes, we know the Internet is where the future lies -- but our sites are not making up for the losses we are suffering in print. The key question facing the trade press business is what must be done differently to succeed going forward?   (To be continued)