Why the Big B-to-B Model is Broken
FOLIO: article about the situation in b2b media. Here're some excerpts:
Beyond the problems of being overleveraged and in debt, many of the larger publishers are based on obsolete operating structures. As traditional print vehicles are replaced by multimedia and strategic services, the economies of the current structures no longer work.
“It seems to be that the economics of building a large b-to-b animal with multiple titles doesn’t necessarily click anymore,” says Garrett. “What do you get? A shared back office with human resources, finance, production and a centralized circulation department. But beyond a certain point, you begin to develop a bureaucracy. That impacts the performance of individual titles and even stifles growth—particularly with a public company—because they have earnings levels to meet, or if it’s a large private company with expectations or wishes to go public and they’re trying to build a P&L record.”
“An old magazine publishing company had various things that led you to a highly centralized structure. Those are the economics of large-scale mass production and distribution of magazines with classic departments like circulation and production. Five years ago, print accounted for two-thirds of the revenue of this company. Now, less than 5 percent of profits are attributable to the magazine businesses. The core requirement was to move the organizational structure and engage in a different way, and create a structure that allowed for scale without required centralization.”
Today, publishers are split on whether that multi-market approach still works. “I think it’s a difficult model,” says Bill Pollak, CEO of ALM, which focuses on the legal market (and which in 2009 was spun off as an independent company from U.K.-based owner and financial publisher Incisive Media, which went through its own reorganization and refinancing). “This idea that we can take a group of markets and put them under one umbrella and think we can create cross-market synergies sounds great on paper, but I don’t think it really happens. It’s very difficult to get people in different market segments to work together.”
Some executives think the shift away from traditional publishing services makes the multi-market approach even harder. “Being in several different unrelated markets is difficult in this economy,” says Ron Wall, senior vice president of publications at Canon Communications. “With lead generation, database, custom digital/print and immediacy of message being the focus of so many marketers the only way these can really be achieved is having several strong and focused assets that solve a customer’s entire needs.”
One poster at Foliomag.com wrote: “We’ll know when they emerge from this, if they are serious about their business: Get rid of the dead-weight management, bring actual talent back, re-establish the core values that have been lost some time ago, and do business based upon principles that leave room for integrity and ethics, as well as profits.” That poster summed up the fact that while it’s easy to talk about change, it’s much harder for publishing executives (and owners) to take the steps necessary to enact it.
The industry’s moved beyond competing narrowly around ad- or subscription-driven print models. I think five years from now b-to-b publishing will be further transformed with a much more diverse range of b-to-b service business models facilitating commerce by serving everything from mass market b-to-b audiences on a global scale to highly specialized information and very finite 1-to-1 buyer-seller interactions via very dynamic platforms.”
Others see a new round of investors emerging. “I’ve been in b-to-b for 30 years and have been owned by private companies, public companies, private equity and a single bank,” says Wall. “We are in a business that generates good revenue from multiple sources and has minimal capital assets and EBITDA margins that are, for the most part, above 18 percent—how many other industries can say that? It may be hard to say today, but a new group of investors will find b-to-b a nice asset.”
The full text here
Beyond the problems of being overleveraged and in debt, many of the larger publishers are based on obsolete operating structures. As traditional print vehicles are replaced by multimedia and strategic services, the economies of the current structures no longer work.
“It seems to be that the economics of building a large b-to-b animal with multiple titles doesn’t necessarily click anymore,” says Garrett. “What do you get? A shared back office with human resources, finance, production and a centralized circulation department. But beyond a certain point, you begin to develop a bureaucracy. That impacts the performance of individual titles and even stifles growth—particularly with a public company—because they have earnings levels to meet, or if it’s a large private company with expectations or wishes to go public and they’re trying to build a P&L record.”
“An old magazine publishing company had various things that led you to a highly centralized structure. Those are the economics of large-scale mass production and distribution of magazines with classic departments like circulation and production. Five years ago, print accounted for two-thirds of the revenue of this company. Now, less than 5 percent of profits are attributable to the magazine businesses. The core requirement was to move the organizational structure and engage in a different way, and create a structure that allowed for scale without required centralization.”
Today, publishers are split on whether that multi-market approach still works. “I think it’s a difficult model,” says Bill Pollak, CEO of ALM, which focuses on the legal market (and which in 2009 was spun off as an independent company from U.K.-based owner and financial publisher Incisive Media, which went through its own reorganization and refinancing). “This idea that we can take a group of markets and put them under one umbrella and think we can create cross-market synergies sounds great on paper, but I don’t think it really happens. It’s very difficult to get people in different market segments to work together.”
Some executives think the shift away from traditional publishing services makes the multi-market approach even harder. “Being in several different unrelated markets is difficult in this economy,” says Ron Wall, senior vice president of publications at Canon Communications. “With lead generation, database, custom digital/print and immediacy of message being the focus of so many marketers the only way these can really be achieved is having several strong and focused assets that solve a customer’s entire needs.”
One poster at Foliomag.com wrote: “We’ll know when they emerge from this, if they are serious about their business: Get rid of the dead-weight management, bring actual talent back, re-establish the core values that have been lost some time ago, and do business based upon principles that leave room for integrity and ethics, as well as profits.” That poster summed up the fact that while it’s easy to talk about change, it’s much harder for publishing executives (and owners) to take the steps necessary to enact it.
The industry’s moved beyond competing narrowly around ad- or subscription-driven print models. I think five years from now b-to-b publishing will be further transformed with a much more diverse range of b-to-b service business models facilitating commerce by serving everything from mass market b-to-b audiences on a global scale to highly specialized information and very finite 1-to-1 buyer-seller interactions via very dynamic platforms.”
Others see a new round of investors emerging. “I’ve been in b-to-b for 30 years and have been owned by private companies, public companies, private equity and a single bank,” says Wall. “We are in a business that generates good revenue from multiple sources and has minimal capital assets and EBITDA margins that are, for the most part, above 18 percent—how many other industries can say that? It may be hard to say today, but a new group of investors will find b-to-b a nice asset.”
The full text here
Labels: b2b, crisis, folio, publishing
posted by Alex Yefetov @ 5/04/2010 11:20:00 AM
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