A b-to-b publishing paradigm

Folio: The Magazine for Magazine Management, May, 1999 by Paul McDougall

Scoby also contends that smaller, privately held companies such as Crain have several advantages over the multinational, publicly traded conglomerates like VNU and Reed Elsevier, which are invading more and more U.S. markets. "A lot depends on the size of company you want to be," she says. "They have different pressures. We can be more patient with growing products, and we can invest on our own terms. We're a niche kind of publisher, and the ownership has a very good sense of the company they want to run. If and when bad times come, we answer only to ourselves. We've never had to kill a title we're in the process of growing just for the sake of our balance sheet."

The right mix

The fact is, however, that BPI under VNU has managed to diversify itself considerably, giving it breadth that is reflected in its most recent balance sheet. In 1998, 53 percent of the company's revenue was derived from advertising, 19 percent from circulation and 10 percent from book publishing. Contest entry fees, trade shows and conferences, licensing and television programming accounted for about 16 percent. And Babcock says most of BPI's products operate, like Bill, with margins in the 20 percent range. "There was a mandate from VNU to increase margins," he notes. "They were at 11 percent three years ago and the goal was to take that up to 15 percent. But we're a substantially higher margin company, so we help the mix."

Significantly, about 2 percent to 3 percent of the company's revenue last year was derived from electronic media. And while that's a small number, both Babcock and Hobbs believe it's a revenue stream poised for big growth. "About 85 percent of availability for our Adweek site has already been sold for this year," claims Babcock. Beyond advertising, BPI is generating revenue through the Web from subscription and content licensing to other Web sites. "All of our sites have three different revenue streams," Babcock notes.

And that, adds Hobbs, is a crucial point. "When talking about electronic publishing, I make a distinction between what publishers often do--which is static Web sites--and e-commerce. There are going to be very good opportunities for trade publishers in e-commerce."

Changing the rules

Analysts say the net effect of VNU USA's recent surge is a further consolidation of this country's business-to-business publishing industry. "They are part of an emerging set of aggregators, which also includes Primedia, Advanstar, Penton and Miller Freeman," says Phillips. Still, most observers are confident that small publishers are not about to get shut out of the market--at least not yet. "The barriers to entry in this industry are still not that great," maintains Veronis, Suhler's Novak. "If the consolidations continue to the point where you get insurmountable advantages for these big boys, then there is a real danger."

The fact is, VNU does have plans to get even bigger. Earlier this year the company confirmed its interest in buying CMP Media, the Manhasset, New York-based computer publishing company that has put itself on the auction block. And even before all the bids were in, VNU was considered by many to be among the frontrunners. Indeed, despite the Hayden disaster, VNU is one of Europe's biggest players m the IT market. "One would have to think about it in the context of VNU's overseas holdings," says Hobbs, adding that "CMP is trade magazines, and we have some expertise in that."