Small-Business Buyout

Folio: The Magazine for Magazine Management, June 15, 2001

Small business is fast becoming big business, now that major players like Time Inc. and Gruner Jahr USA are beefing up their business-book lineups. To keep pace, publishers are eyeing new economy titles as they go on the auction block and are fishing for niches that diversify business portfolios. The latest reported deal has Business Week's owner, The McGraw-Hill Companies, close to acquiring independently owned Entrepreneur Media. And while Entrepreneur CEO Peter Shea was tight lipped about the negotiations, he did discuss the thinking behind the trend and the trials of independent publishing.

Are you selling the company?

We've been contacted by the usual suspects interested in the small-business market. If they call us, we talk to them. If the right business proposition were to come along, we'd be open to discussing it.

Were you looking for a buyer?

No. We're still nicely profitable, although we're less profitable than we were last year. We'll get through this period of time, and I think we're poised to take some marketshare away from some people.

What's behind the small-business magazine buildup? Why are big publishers suddenly interested in this sector?

Being an independent is becoming more difficult because of the dynamics of the business--circulation and newsstand [declines], and postal increases. So it's a very opportunistic time for the bigger publishers to make strategic acquisitions. And the small-business market has taken on new importance. If you look at it statistically, 98.5 percent of all business conducted in the U.S. is conducted by small businesses. That works out to about 51 or 52 percent of the GDP. It's a huge market, but it's very difficult to get to. To try to start a magazine and try to get there would be very difficult and very expensive. It's less expensive to buy something that's perceived to be in that marketplace.

What's the future of independent publishers? Can they compete in this consolidated market?

It's becoming tougher for an independent, especially if you're playing in a marketplace such as we are. We're competing with the likes of a Time Inc. or Gruner Jahr, which has Bertlesmann behind it with God knows how much money. It's not impossible, but it's certainly challenging.

Do you think we'll see more independent publishers selling in this market?

I still think there is an ability for some of the smaller ones--some of the trade books, some of the hobbyist books--to remain independent. But as books become larger and they have to compete against the Time Inc.'s, that becomes more and more difficult.

If you do sell Entrepreneur, would you consider doing another start-up?

Probably not. If something happened, and I did [sell the company], I suspect that I'd probably be involved with the magazine for a period of time, I like the business, so maybe I'd be an investor in a magazine. But I don't really see a pure start-up in my future. I'm just not sure I want to go through that agony.