Business to business media in the UK made £23bn last year and is set to grow despite the economic downturn, according to a recent Periodicals Publishers Association survey. But despite this the future for its journalists appears uncertain. Major player Reed Elsevier this year signalled its intention to get out of the advertising reliant magazines business altogether and is attempting to sell Reed Business Information, home to New Scientist and Farmers Weekly.
Last year, magazines giant Emap also decided to get out of the game when it was broken up and sold off. But Apax and Guardian Media Group‘s joint takeover of Emap Communications this year for £1bn suggests they believe the B2B side of the business has a considerable future yet.
A glance at the top-line figures from CMP Information’s annual report illustrates how the industry is evolving from primarily print publishers to face-to-face events organisers. The numbers speak for themselves. Over 60 per cent of CMPi’s revenue from last year came from face-to-face events while magazines brought home only 30 per cent and digital 10 per cent of the bacon.
CMPi chief executive Gary Hughes has dramatically upped the face-to face side of the business since his arrival in January 2006. The business he inherited had not produced any organic revenue growth in the previous five years.
In 2005, approximately 30 per cent of revenues were derived from face-to-face media. That percentage has now doubled. The company delivered seven per cent organic growth last year, or 16 per cent, taking into account mergers and acquisitions.
Even if the walls of Hughes’ London office, overlooking the Thames, are dotted with pictures celebrating recent editorial wins (the company took home four PPA awards for magazines from Building to Farmers Guardian), there’s no doubt the journalist’s role is in evolution.
First, there is the challenge of adapting to multiplatform strategies. Then there is the fact that the business is arguably turning away from having editorial at its centre and towards information services and face-to-face events.
The future of journalists
Hughes is happiest talking about his approach to management, something he prides himself on. He prefers to call his staff ‘colleagues’and spends the first 10 minutes of the interview talking about the investment in his colleagues and the positive culture he has sought to cultivate.
This is not just an empty boast, Hughes is known to meet with large groups of staff every couple of months and when he first arrived went out and met, he says, all 1,200 of them in pubs at CMPi’s global locations. Certainly, the list of initiatives the company undertakes and the cash spent on them suggest he’s putting his money where his mouth is.
There are £20,000 worth of prizes handed out to staff every month, and annual independently judged internal awards ceremonies, hosted by the likes of Davina McCall. ‘All that stuff might sound kitsch or staged but when aggregated these things are really important,’Hughes says.
But all the razzmatazz in the world can’t buy you gratitude from a bunch of journalists asked to dramatically change what they are about. Journalists who spoke to Press Gazette off the record said there were concerns that requests to improve their skill set were not being met by adequate training programmes. Hughes admits there was a degree of resistance from editorial to adapting a more multiplatform approach but says most are now ‘on message”.
He says he is aware and concerned with how stretched staff, and particularly editors, are by this. ‘I’m conscious there is only so far we can take that model. But it is a very American approach. If you look at an editor of a big US CondÃ© Nast title, they probably spend 80 per cent of their time on sales calls. A lot of b2b editors, especially in the technology space, are spending as much time doing webinars and blogging.”
He adds that he is aware that the demands on a editor have become ‘quite significant as they move from product editor to ‘brand ambassador’. That worries me; we have got to make sure we don’t push that too far.’His solution to training issues is similarly non-committal: ‘There is probably a role for training but it is as much peer-to-peer training as anything else,’he says.
Hughes says the company has invested in equipment and specifically focused on digital sales training, putting over 100 staff through a training programme by the end of May. This raises another issue that has got the backs up of some of the journalists Press Gazette spoke to: that sales teams were being unfairly rewarded and prioritised over journalists at the company.
An example is the Rainmaker scheme, giving sales personnel specific cash incentives to meet targets.
Similarly, recently introduced awards for sales teams are, Hughes says, to give the staff the same status the editorial teams already enjoy. ‘I would argue very, very strongly that the part of our organisational mix who were treated as second class were our sales people.”
Sales teams in the US are ‘the kings and queens of the castle,’he says. ‘I think there’s a real problem with business media and actually media in general that sales people don’t get the same level of attention as content creators be it in television, journalism or radio.”
He argues that most sale teams operate on a basic salary plus commission, leaving most of them below entry-level salary elsewhere in the company. ‘I’d argue very strongly that our average salary for our journalists is much higher than a salesperson. So trying to compare the two is very different and unfair.”
Nor does Hughes believe in incentivising journalism, a strategy which has been tried out elsewhere including at parent company United Business Media in the US and most recently mooted at RBI, where journalists are rewarded for the number of hits their online stories get. ‘It can be quite divisive,’says Hughes. ‘Do you come to work as a journalist to be measured on your productivity? On the amount of work you do rather than the quality?”
The future of magazines
One thing he isn’t about to offer is false comfort to his journalists stuck on the idea of magazines. He says the idea of publishing just a magazine is a thing of the past but that the company will be publishing print products for many years to come.
But there are caveats, he says: markets will consolidate so that only the strongest two to three survive. Smaller publishers will find it tough. And there must be a multiplatform strategy.
Hughes goes on to list the merits of face-to-face and how it has propelled the company into new markets globally. But he also adds that magazines from Farmers Guardian to The Publican have benefitted from significant investment. Putting the emphasis on face-to-face does not mean the end of magazines, says Hughes. ‘It doesn’t mean we don’t love our magazines,’he adds. ‘We continue to reinvest.”
But would he launch a brand new magazine? He lists Property Week Global and TTG Luxury as examples of recent launches, though both are extensions of established flagship brands. ‘We are not adverse to launching a product that is part of a multi-channel strategy.
‘Would we run out tomorrow and launch a title in a sector we are not represented in? I’d say no because we do not have a multi-channel strategy in place or the prospect of a multi-channel presence.”
He doesn’t see the recent decision at Reed Elsevier to ditch its magazines business as something that could conceivably happen at CMPi. Hughes says that the business is run as an integrated portfolio organised by market, whereas at Reed it is organised by media type making RBI an unappealing buy.
‘The way we look at markets we would find it inordinately hard to look at that as an acquisition opportunity. We like markets rather than media formats. We like to be in markets and then work out how to make money in that market rather than say here are magazines and websites, [now] make money even though you have no face-to-face assets.’He says he would be interested in some of the RBI assets but doesn’t expect Reed Elsevier to sell anything other than the entire business.
It looks unlikely that CMPi would want individual titles, bereft of their associated events, which Reed Elsevier want to hold onto. The company has no time for titles it feels do not fit within a larger market. In this way, CMPi disposed of the small loss-making title Cabinet Maker last month to Manning Publishing.
The company has invested heavily in interiors exhibitions, buying a massive interiors trade show called Decorex last year. Hughes says that in interiors CMPi is principally an exhibitions operator and that having looked at the long-term future of Cabinet Maker magazine the company decided to sell it on.
The fate of Music Week is also one that has caused concern among CMPi journalists. The weekly news magazine for the music industry has had a particularly tough year with 10 staff departures, culminating in the exit of the final two news reporters on the title last month. CMPi say the five editors on the title will continue to create the content.
The action has led to internal speculation that the title is being prepared for sale. CMPi has blamed the ongoing turmoil in the global music industry for the problems with the loss-making title. Of its future, all Hughes will say is that there is no sale process currently in action but that the company is working to turn the title around. ‘It has not delivered but in a market that has gone significantly against it.’
If the logic is that the business struggles when the industry it feeds into is in turmoil, the looming credit crunch would appear to present a sizeable problem for a publisher in the property, travel and leisure industries.
Hughes is pessimistic about the economic climate. ‘I’m more doom laden than most. The UK is more exposed than the US in my view. Maybe only Spain and western Europe are more exposed than we are. I look at what’s happening in the BRIC countries and their economic growth is slowing down, see what’s happening in the commodity prices and I’m genuinely a bit wary, a bit worried.”
He says in some of CMPi markets there are early signs corporate confidence has been affected. It will dent growth but the plan is to stay with the markets that have long-term prospects through the lean times. As Hughes says: ‘As long as you believe that the long-term dynamics of the market are worth investing behind, stay loyal to your portfolio. Don’t let short to medium-term economic gloom ruin your portfolio otherwise you would be exiting good products at the worst time.’
So, despite the pessimism, he predicts organic growth for the company, to a lesser degree than previously. And for the industry generally, he says: ‘Anyone sitting on a lot of debt, not leading in their markets or following a multi-channel approach is going to be exposed.”
The industry-wide trend towards private equity takeover will also struggle in looming economic turmoil, according to Hughes. He doesn’t foresee any more big buyouts like Incisive in 2006 and Emap Communications this year by private equity groups. Drumming up the money to make these kind of massive transactions will be harder to achieve.
And he warns that the private equity backed ventures are in for a tough ride. The public company can look to the long term, says Hughes. A private equity backed venture will have to come up with a return on its investment for its investors quickly, which leads to substantial pressures to sell. ‘What you have for these businesses is a degree of future uncertainty. They know who their owner is today but they don’t know who their owner is going to be in three years time.’