Wednesday, July 20, 2011

Schofield Media shutters its Chicago operation; unique business model kept the media company 'under the radar'

Both B2BOnline and Folio: are reporting today that Schofield Media was shuttering its U.S. operation. According to the company, the Chicago office is being shuttered after Wells Fargo pulled its financial support.

If the company is not familiar to you it was intentional. Founded by UK publisher Andrew Scofield, the company used a somewhat controversial method of selling advertising. A phone operation was employed, made up of "researchers", whose job was to call companies to see if they would agree to be "profiled" in an upcoming issue. The articles would then be written by a small editorial staff who worked to produce a favorable article, often featuring an interview with the president of the company.
In exchange, the company would give the publisher a list of their suppliers. Another separate phone operation (within the same room) would then hammer these suppliers for advertising in support of the "profile" article using a script of assist the sales process. (If I remember, Schofield didn't use the term "profile" but instead used "feature".)

Each potential article was written onto a chalkboard that sat in front of the inside sales room and the number of ads sold would be listed next to the article name. The article would go live only when enough advertising was sold. Lots of ads, a longer profile. No or few ads meant the profile would be scrapped. Only when the feature went "live" would the information then be passed on to the editorial team.

"I would prefer that we continued to stay under the radar," Andrew Schofield told Folio: back in 2006.

But while the operation could sell several hundred thousand dollars per issue each month, built exclusively with profile advertising, the very next month the ad dollars started at zero again since there was no contract advertising to carry over.

In addition, because the readership of these magazines – and currently the website lists eight titles for Chicago – consisted to a large degree of the companies being profiled, few copies needed to be printed. So, while a magazine such as Construction Equipment magazine may claim over 75,000 subscribers, Schofield's Construction Today claimed only 8,541 readers in the last year that it publicly reported its circulation (of which only 2,705 was first year qualified). Most of the other magazines simply did not report its circulation to an auditing bureau.

Because circulation could be kept to a minimum, the largest cost was that of the sales force and the editorial teams, along with production.

Despite the lack of contract advertising on its books, Veronis Suhler Stevenson invested in the company and lists them as an investment on their site still today. Tom Kemp, then a managing director at VSS, and now CEO at publisher Northstar Travel, said of Andrew Schofield "(h)e is young and aggressive and he has plans," the Tony Silber article in Folio: said. "We like being a partner."

When Schofield Media first started up in Chicago in the early nineties I interviewed at the company. Looking at from Andrew Schofield's office one could see the enormous phone room that was used to drive both company profile subjects and then the ads that surrounded those articles.

When Schofield told me of his business model I laughed knowingly. It turned out that the publisher I followed at McGraw-Hill had employed a similar method of driving advertising. The twist was that at McGraw-Hill, the subjects were of actual interest to our readers, and that readership paid a high price to receive our publication. Also, the "profiles" produced accounted for only a small fraction of the total advertising being sold.

What Schofield Media wanted to do, I was told, was to use this model to launch more magazines, build an outside sales department that would sell contract advertising, and build their editorial team up.

I thought that was a great idea and was eventually offered job at the company. While at Schofield Media I brought in the editorial director, who is still there, and hired the first outside sales person. I also wrote a business plan that would enable to the company to launch two to three magazines a year. How was this possible? Easy. By launching each magazine using the profile model, the very first issue of each new launch would be profitable. While contract advertising was sold, and readership qualified, the magazine would be sustained by profile advertising. Eventually there would be a balance between contract ads and profile ads.

But building contract advertising is hard, and creating readership lists means a commitment to levels of circulation far higher than what the company was used to. Whether my business plan was used in anyway to entice VSS to invest I do not know. But whatever the case, the company continued to launch magazines for a number of years.

In 2006, Construction Today, for instance, was already in its fourth year and generating $4 million annually, according to the Folio: story. The magazine launch I led generated over $250,000 its very first issue, but had 30,000 circulation made up of executives at some of America's biggest companies thanks to a list bought from a database supplier.

Other magazines launched included Supply Chain Solutions, North American Design, Exploration + Processing, Venture, and Food & Drink. The original magazine that launched the Chicago division was U.S. Business Review. In the issue published just prior to my coming on board, the telephone sales staff sold just under $200K in advertising. Six months later issues exceeded $500K routinely – none of it contract advertising.

Today the parent company says it has five divisions: Schofield Publishing UK, RedCoat Publishing, which was acquired by Schofield in 2005, Ideal Media, Schofield Healthcare Media in the UK, in addition to the Chicago division. Much of the assets of Ideal Media were divested last year and are now part of CSP Information Group, Inc.

My guess would be that the Chicago operation can be closed down without effecting the operations elsewhere by the way the company has been structured. Additionally, the profile method of publishing was not, I believed, used at all the divisions – especially at the divisions acquired through funding.

Already the article about the closing has generated a couple snarky comments on the Folio: site. But the fact remains that while many B2B media executives knew of the methods employed at Schofield Media few wanted to talk about them.

But there have always been things that could be learned by understanding how this company did business. First, it was sales driven in a way that few media firms can understand. In some ways, I like to think that Groupon is run in a similar fashion: a strong reliance on inside sales, a belief that sales forces should be aggressive and as large as possible. While many B2Bs were reducing sales staffs throughout the nineties, Schofield Media was constantly hiring.

And while many editors would scoff at the editorial content of the magazines, the puff pieces produced for the profiles were no worse than the articles generated from press releases seen in many B2Bs today.

Further, the magazines were printed well and perfect bound, presenting an attractive picture for prospective advertisers. If a potential advertiser wanted to see a copy of the magazine before committing to advertise, the sales person could send out a copy knowing that it would present a good picture of the publication – as long as the potential advertisers did look too hard at the actual articles produced. Also, it should be noted, that each book tried to include some legitimate editorial in front of each book. With the limited news holes most B2Bs have today, it is safe to say that the news holes dedicated to good copy of these massive magazines probably was about the same as your average B2B.

When explaining the business model used at Schofield Media to other B2B executives I often got lots of questions about the wisdom of doing business this way. But when I explained that the very first issue of U.S. Business Review published by the new Chicago division in the fall of 2000 was 132 pages in size, with 40 pages of ads in it, they suddenly were interested. I then would tell them that this was by far the smallest issue I ever saw while at the company.

The latest issue Construction Today, according to the flipbook on the website, was a 172 page folio.