Wednesday, April 6, 2011

Sometimes you can learn more from the 'losers' than from the 'winners'; but no one likes to write about the 'losers'

As usual, John Gruber of Daring Fireball found a story online that I found interesting. He pointed to this story on Call Me Fishmeal, a blog written by Wil Shipley, about software companies. One of the points of the story is that no one likes to write about the companies than don't make it, stating that "there are no magazine articles written in Fortune about all the guys who invested in ePizzaOnline and lost all their money."

He's right, of course. But his story is really about the software business, not the media business, but I immediately saw the media implications of this fact.
First, it is true that Fortune, or any other business magazine, and especially B2B magazines, don't like to right about the companies that don't make it. There are lots of reasons about this, but they pretty much boil down to cowardice. Few publishers will reward their editors for writing a downer article about some failed business -- even if readers want to learn from the failure of other businesses. Looking at the website of many B2Bs one will find only press releases and feature articles, designed to attract advertising and offend no one.

OK, for anyone with any experience in B2B publishing that is well known. But, and this is the second point, the same holds true of those who look at the media business.

Now, I am not talking about bloggers -- we all live on negative commentary, right? But what about the trade press, how honestly do they look at their own industries and examine the reasons why a company or publication has failed?

Part of the reason for this is that so many media executives, especially in the magazine business, have an annoying habit of popping up again and again -- this is especially true of companies owned by PE firms who seem to have a very short bench of talent. Trade pubs are notoriously shy about talking about what is going on at media properties owned by the slash and burn crowd, knowing that these same executives will appear again at the head of the next company.

But a more important reason why failure is rarely examined is that it is mondane: a company that slashes its editorial and advertising sales teams and then finds itself struggling to survive is not the kind of story the makes it to the cover of the next issue.

When I was hired by Reed Business Information, at the time still known as Cahners, to run two trade magazines the first thing I did was try and understand the history of the two monthlies. One was actually performing fine in its niche, limited though it was. The other, however, had once been a cash cow: a $9 million a year trade magazine that could be counted on to produce a 35 percent return year after year -- that is until it was bought by RBI.

Once acquired the company started to fiddle with it to the point that the magazine fell apart. At first the company attempted to justify its acquisition by doubling its frequency, then when that only led to higher costs and smaller issues, staff started being let go -- slowly, on an annual basis. The sales team that once was nine strong went down to two; revenue went from $9 million to $2 million -- all over about seven years. Accounts that used to run hadn't been called on in years, yet when they were called on often said to the reps "where have you been?".

Unfortunately, the lesson here, that cuts that don't reflect the size and strength of the market, but only occur because of internal issues (in this case, the pressure from corporate to cut heads, anywhere and everywhere) is a losing strategy.

These are the stories I would like to read about in our mainstream trade media. Sure it is nice to read occasionally the diatribe about paywalls, aggregation and other issues du jour, but the in the trenches stories from publishers, editors and sales people will be far more valuable to those of us in the business.