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Magazines – death rumours greatly exaggerated!

Recent ABC (Audit Bureau of Circulation) figures for consumer magazines might suggest that a slow and not-so-lingering-in-some-sectors death is on the cards for the medium. But that would be to misunderstand the nature of the medium. Magazines like other consumer products have life cycles dictated by demand, or the lack of it. While men’s magazines suffer, many sectors show remarkable resilience and to prove the point – there’s room for something new and different even in the crowded women’s magazine market.

For all doom mongers out there, Psychologies’ circulation growth to a highly respectable six figures plus shows no sign of abating. What’s more their readers don’t, by and large, read any other magazines. Yet another niche created by publishers with patience and commitment to a brand. Hachette may have been quietly confident after the performance of the sister title in its French home territory but, as ever, there were plenty ready to write Psychologies off when it launched upon an ever cynical media world in the autumn of 2005.

Expect 2008 to see plenty of circulation declines in magazines reaching the end of their life cycles but also expect more than one or two resounding successes with – whisper it – the odd runaway launch success thrown in. The medium has never been in better survival mode.

John Thater, February 2008

EMAP – it’s over

An even earlier Xmas present for investors than predicted below as Apax and the Guardian complete on EMAP’s business media division for a respectable figure north of a billion including debt. The January EGM looks a formality. Game set and match to chairman Cathcart.

John Thater, 24 December 2007

EMAP – it’s not over till it’s over!

The EMAP ‘auction’ is over, or so it would seem. The consumer bits scooped up by the canny Bauer (and equally canny Lazard for nurturing them ‘off-the-record’ so well for so long) looks a good deal for shareholders, if not so good for radio industry consolidators. But it gets EMAP’s consumer businesses away at precisely the right time – before more bad news and the (inevitable) closure of titles, including a rare weekly launch failure with the aptly named ‘First’.

The latter aside, intriguingly Bauer now has a talented bunch of consumer magazine professionals at its disposal – people who’ve launched more successful magazines in the last decade than any other UK publishing house. This in marked contrast to Bauer who’ve signally failed with every new launch they’ve tried in the last 10 years. Hopefully Mr Bauer will use the opportunity to let EMAP ‘reverse takeover’ his lacklustre UK operation.

And what of the ‘jewel in the crown’ business media empire, now set to go-it-alone under a new moniker (Bauer bought the name EMAP as well)? On the surface this represents a good opportunity for a talented team to grow a single-minded business operation from a pretty sound base. Inevitably they’ll be an instant takeover target and may not get much of a chance, or is there one last twist in this particular ‘auction’ process even before this stage is reached? Don’t bet against it.

John Thater, December 2007

BBC – On Another Planet

The BBC’s acquisition of the Lonely Planet travel information business got a fairly smooth ride from the usual critics of the BBC Worldwide division’s commercial initiatives. The Guardian to Sunday Times axis questioned how this squared with the commercial constraints exercised relatively recently by the divestment of non-BBC programme-related magazine interests. Did the BBC have a Lonely Planet programming strand? No, but attempts were made to suggest that Lonely Planet would bring content capable of enriching and enlarging the BBC’s vaunted travel output.

So the BBC got off lightly but not because this deal could be justified within its previously acknowledged commercial constraints, whatever the dubious ‘synergies’ with its travel output, but for two more immediate reasons:

1.‘Crowngate’- the far more newsworthy programme-making banana skin that did for the BBC 1 Controller and easily consigned a grubby commercial deal to a distant also ran on any BBC-centric news agenda.

2. The stark commercial reality that there wasn’t a lot of commercial appetite elsewhere for this deal. The BBC didn’t exactly have to fight off a number of serious commercial players to get its hands on these particular crown jewels.  So the news media weren’t being wound up by the likes of Time Warner and Hearst subsidiaries with their well-rehearsed anti-BBC commercialism arguments.

Whether the BBC’s travel output couldn’t have been developed just as easily without this acquisition, we’ll never know. Unless those ‘synergies’ fail to materialise and the to- be- left-alone guide books part of the business starts to haemorrhage cash. Perish the thought!

John Thater, October 2007

EMAP – breaking up not so hard to do!

EMAP’s lack of strategic direction accounted for the chief executive some months back. However the continuing lack of strategic direction, beyond an avowed intention to deliver £20m of cost savings, now appears to be a strategy in its own right. Just as talk of a sell-off was deemed unrealistic by executive chairman Alun Cathcart, a sizeable offer for the new flagship business division has caused a re-think. If the figure of £1.3bn is to be believed, then it is possible that offers for the other main parts – radio and consumer magazines – might lift the overall figure to a price shareholders will find more than acceptable. Even those long-standing ones whose loyalty has been eroded by the steady departure of their favourite sons.

What we now have is an ultra-pragmatic chairman acting in the best interests of shareholders. Care must be taken not lo leave EMAP with the worst bits but, despite the consumer division’s fall from grace, it seems unconscionable that at least one or two bidders of Mondadori or Hearst proportions won’t find Heat, Closer et al attractive enough and that a private equity bidder or two won’t fancy their chances with the less glamorous, specialist stuff. Coupled with a radio sell-off to finally consolidate that volatile medium and give advertisers genuine scale and you might have the dream ticket shareholders have long been waiting for.

One thing is looking fairly certain – the last ever chief executive of EMAP left some months ago.

John Thater, August 2007

EMAP – what next?

Recently the chief executive of EMAP was fired. He’d been with the company for 26 years. Immediately there was speculation that EMAP would be broken up and bits of it sold off to the highest bidders. EMAP’s radio interests were deemed top of the sales list. The new executive chairman denied that there would be any sell-offs, with the exception of very marginal (i.e. small) businesses like their French exhibition business and the magazine publishing operation in Australia. The chairman also said it could take up to six months to find a new chief executive and that meanwhile he would move things forward along strategic lines he declined to elaborate on.

What should we make of all this and how will it affect EMAP shareholders and employees in the short and medium term?

Shareholders of more than five years standing are a disgruntled lot because the share price refuses to climb above the £10 mark, a price they probably bought shares at in the first place. Recent events are unlikely to cheer them up. Analysts suggest ‘break-up value’ is likely to be no more than £9. However, the chairman’s remarks suggest he was unhappy with the pace of change and he at least threatens to accelerate EMAP’s development. If that brings enhanced value then shareholders will be marginally more cheerful.

The problem is nobody really knows what EMAP’s strategic intentions are, or were for that matter under the former chief executive. Most recent public pronouncements from EMAP have mostly followed on from trading difficulties within their once mighty ‘flagship’ consumer media division, home of their biggest and best magazine titles or ‘brands’ as EMAP prefers to call them. These announcements have been of the ‘re-structuring’ variety and involved the deletion of whole tiers of management over weeks in the full glare of the media press.

The rise of EMAP’s business division, rather vapidly called EMAP Communications, has gone largely unnoticed during this time. Despite haemorrhaging significant volumes of recruitment advertising in its profitable healthcare sector, the division has increased profits by exactly the same 11% the consumer division has declined by. Profits at £92m are £20m ahead of consumer with another acquisition – always a telling sign of EMAP’s future direction – set to boost profits still further.

All this activity suggests a company in transition and a company EMAP’s size is bound, under such circumstances, to invite speculation. Even more so when your company is made up of so many moving, and in some cases not exactly fast moving, parts.  Recent events may whet the appetite of competitors for acquisitions and media watchers for yet more speculation but a much more likely scenario is that EMAP will concentrate on maximising value where they do things best – well before giving any green lights to companies seriously considering all or parts of their assets.

We’ve already seen a willingness to invest and grow their business media interests. The same will also be the case with their so-called ‘troubled’ consumer media division. Even if the latter were ripe for sale, this does not represent a good time in the development cycle to sell. It shouldn’t be forgotten that EMAP’s consumer division has some of the best magazine assets in UK publishing and by far-and-away the best recent launch track record of any consumer publishing company in the UK – ask Bauer. These assets will not be traded lightly, if at all, in the short to medium term. Radio could be a different matter if only it weren’t such a bad time to sell radio assets at a decent price.

Hold onto your shares, don’t expect any immediate sell-offs or radical changes. Hopefully just more of what EMAP does well – integrating business acquisitions and successfully launching consumer media – and rather less of what it does badly – torturous and very public re-structuring.

Finally – don’t expect any eventual break-up to be presided over by an EMAP ‘old boy’ returning to the fold as chief executive. In this particular media saga, lightning doesn’t strike twice.

John Thater, June 2007

© 2008 Thater Media