Sir Crispin Davis, chief executive of Reed Elsevier, couldn’t have made it clearer if he tried: the Ministry of Magazines has fallen out of love with… magazines.
On the same day (21 February) that Davies announced the forthcoming sale of Reed Business Information (RBI), he unveiled a new object of affection.
This was Choicepoint, a US software company coyly described as specialising in ‘risk management, data and analytics”. If RBI has been jilted, it’s easy to see why. Choicepoint has multiple attractions and a keen nose for what’s hot.
The company that Davis wants to buy for $4.1bn has grown by at least 10 per cent each year for the past decade. It also assists the US government to wage war on Osama Bin Laden by producing software for ‘analysts’who are keen on ‘cross-agency collaboration”.
In addition, Choicepoint sells ‘tools’that allow users to ‘screen’what it describes as ‘politically exposed persons”. And for good measure, the company’s databases also track down benefit cheats, identity thieves and absconding bank debtors.
Unsurprisingly, Davis’s decision to swap journalism for investment in a company which helps fight the war on terror was greeted positively by the markets, which marked the company’s shares up by six per cent.
In the short-term, until Reed Elsevier can find a bidder with the required £1bn, RBI will remain as one of Reed Elsevier’s three divisions, alongside Legal and Science & Medical.
Last year, the three divisions generated around £1.5bn each in revenues. But the similarities end there.
The Legal division houses LexisNexis, a paywalled database that used to allow solicitors to download court judgements.These days, LexisNexis peddles a vast quantity of must-have documentation to ‘professionals’working in tax, accounting, academia, insurance, financial services, government (and yes, the security services).
Nothing to do with journalism, but it’s a great business. Legal generated a 26 per cent operating margin last year, compared to RBI’s 17.5 per cent. The addition of Choicepoint should enhance its performance still further.
Once upon a time, the Science & Medical division churned out academic journals destined to spend their lives gathering dust on library shelves.
A few years ago, however, something odd happened. It was Science & Medical – rather than RBI – that became the consultants’ favourite case study to illustrate how Big Media should cope with the disruptive effects of the web.
Like Legal, Science & Medical has nothing to do with journalism. Partly as a result, it’s highly profitable. In 2007, Science & Medical generated margins of 32 per cent.
RBI’s performance might not cut much ice in Sir Crispin Davies’s preferred world of workflow solutions and subscription databases. But in traditional B2B publishing, RBI is well-regarded. The division boasts some powerful brands: New Scientist, Computer Weekly and Variety among them.
All are part of a B2B publishing empire that partly traces its origins back to the decision of the late 19th-century founder Albert E Reed to start manufacturing newsprint in Maidstone, Kent.
The old Methodist philanthropist would no doubt be horrified by Choicepoint (and not much impressed by Reed Elsevier’s soon-to-be-discontinued arms fair business, either). Something of his influence has lingered on at RBI’s Sutton HQ.
Traditionally, the company’s priorities differed from low-cost rivals which long ago turned trade journalism into churnalism. If you had a family and a mortgage, Sutton was a decent place to build a career.
More recently, things have started to change. There has been a hiring freeze and the closure of RBI’s Healthcare titles, with the loss of 32 jobs. Earlier this month, 16 jobs were cut on the company’s technology and construction titles.
By putting RBI up for sale, Reed Elsevier is signaling that it wants someone else to continue with making the transition to digital.
More than most, Reed Elsevier knows what happens when trade audiences migrate to the web. At the leading edge, Davis has seen the web’s impact on Computer Weekly. In the late Nineties, this venerable 100,000-circulation weekly for IT professionals probably generated £20m-plus in revenues annually.
Now, on a like-for-like basis, it’s less than half that amount. Large swathes of Computer Weekly’s lucrative recruitment advertising revenues have melted away to the web. Meanwhile, digital media continues to undermine the selling price of display ads in the print edition.
Reed Elsevier is at pains to point out that RBI makes 30 per cent of its revenues online. Perhaps. But some find it curious that RBI hasn’t invested more aggressively in digital publishing since Davis’s arrival.
As one editor put it last week: ‘We worry a lot that we’re in a weak position to shut down the print editions and go all-out against competitors who have made the web their only priority for a long time.”
Of course, what happened to Computer Weekly won’t be replicated right across RBI’s portfolio. Not every trade magazine has so far to fall in revenue terms. And for most, the worst of the damage to recruitment revenues is surely over.
But in B2B publishing, as everywhere else, content is expensive, advertising revenues are fickle and the future is unwritten.
Because he understands this, Sir Crispin Davis is heading for the exit. The new owners will need to be made of much sterner stuff.