B2B Media Business - July 13, 2008
Budgeting for a Challenging '09
By Marie Griffin
As leaders of business media companies approach the 2009 budgeting season, one adjective keeps coming up: challenging.
"The b-to-b media industry will continue to be challenged," said Neal Vitale, president-CEO of 1105 Media. The company originally budgeted for 4% to 5% aggregate growth this year over 2007. "We're going to be down in single digits from budget for full-year 2008," he said, "but up 1% to 2% from last year in total revenue."
To make its bottom-line budget, 1105 Media has already tightened spending, allowed vacant positions to remain unfilled and delayed deployment of some budgeted initiatives. "I don't like what we are having to do to make budget this year," Vitale said. "We are having to make cuts and to spend less in areas where we'd like to spend more."
Controlling costs
On the cost side of the equation, the 1105 Media team will be "looking at spending and staffing," Vitale said. "With more online content, we're looking at how we're organized editorially. We're looking at circulation. We're looking at production. I don't think there's any area of our business where we're not examining the spending. Obviously, we've been aggressively managing to deliver the bottom line."
Questex Media Group, by contrast, has been doing extremely well, President-CEO Kerry Gumas said. "As of the halfway point of 2008, we are slightly ahead of our budget on a revenue basis, which will put us ahead by about 11% year over year. We feel pretty confident we will hit our annual objectives for 2008, and from where we sit at the end of June in 2008, we will budget to be up somewhere in the 5% to 6% range in revenue in 2009."
Gumas said he's still keeping an eye on inflationary trends in the economy. "If the economy continues to move in this direction, our forecast may wind up changing," he said. "In any event, this is going to be one of the most challenging markets we've seen in a long time."
"We're taking a very conservative view, to be perfectly direct," said Jim Malkin, chairman-CEO of SourceMedia Inc., which serves the banking, credit, investment management and mortgage markets, as well as related technology businesses. "I am not expecting anything to get particularly better until the end of 2009. I would love to be proven wrong, but I don't see anything going on in the market, with our clients or in the economy that suggests any upturn in sight."
If it weren't for SourceMedia's mortgage group, "our business would be flat to last year for 2008," Malkin said. "With mortgages, we're about 3% below where we were at the end of the first half of last year." SourceMedia will budget flat to actual 2008 revenue for 2009, he said.
As an antidote to economic forces beyond its control, SourceMedia has "completely revamped" its custom media efforts with a newly created central group, Malkin said. "We've had to change how our company approaches the clients. Custom media requires a significantly different sales process and training, and we have brought new people into our organization with experience doing this."
Economic unknowns
In the four months prior to a presidential election, the U.S. economy will be filled with unknowns, with wars continuing in Afghanistan and Iraq, record high oil prices, financial institutions rocked by subprime mortgage losses and tumbling home values.
Yet the economy will always go through up-and-down cycles, said Gordon T. Hughes II, president-CEO of American Business Media. Business media companies face a much greater long-term challenge today in transforming themselves—in every function and level—for the new ways the Internet enables business audiences to consume information and marketers to reach them. "This transition is truly painful," Hughes said.
As business media executives begin planning for 2009, they're focusing heavily on digital initiatives.
Richard Reiff, CEO of Advantage Business Media, is typical, listing online growth along with the price of fuel and the change in the presidential administration among the trends that will have the greatest impact on his company's budgeting for 2009. Against actual performance in 2008, "we will be budgeting print to be flat and e-media growth at 40% for 2009," he said.
"We are investing in redesigns and content management systems for all of our Web sites," Reiff added. During the current fiscal year that began July 1, Advantage plans to add 20 to 25 people to support its budgeted online growth. Those are in addition to the 30-plus e-media positions created in the fiscal year just ended.
At Incisive Media's ALM unit, "we will miss our 2008 budget overall by year end; not by a huge amount, but we will definitely miss it," said ALM CEO William L. Pollak. While ALM may be best known for its legal newspapers and flagship magazine, The American Lawyer, it also has a Real Estate Media division.
A slumping sector
"The commercial real estate field has really felt the impact of the downturn," Pollak said. "We're assuming a bottoming out of the real estate market by the end of 2008. We think real estate will be relatively flat in the first half of the year at least, with some recovery in the second half of 2009. So we'll budget real estate flat to what the final numbers are for 2008."
ALM is budgeting higher for its legal and conference businesses, Pollak said. "I think banks will have to open up the credit spigot a little bit, which will mean more transactions, which, in turn, means busier lawyers," he said. “We will almost certainly budget our top line up in the low single digits for 2009. A few years ago we were budgeting for increases in the high single digits."
While ALM cut it staff by 4% in April and took other measures to offset revenue shortfalls, it has kept up its investment in technology to drive its Web initiatives, Pollak said. "We have a new content management system, and we're beginning to redo Web sites now," he said. "But the real revenue impact will be in 2009."
Questex has also focused on developing its integrated media model.
"We are building the company to be able to deliver integrated services and solutions to our user base across our multiple channels—digital, events, marketing services and research," Gumas said.
One part of the initiative, which began about three years ago, has been developing better Web sites and other multimedia assets. "But like other b-to-b media companies, we struggled with the issue of how we go to market with integrated solutions," Gumas said. "We spent a lot of time doing the really basic things, such as cross-training salespeople, editors and marketers in the digital arena. We also made sure event teams understood some of the dynamics of publishing in the digital media world and, to some extent, helped the publishing staff understand how to produce events."
Gumas added: "We've also focused on operating efficiencies and productivity, identifying areas where we could take costs out of the business either by leveraging our size—and negotiating prices—or by saving cost by improving processes. We've chosen to reinvest a lot of the savings we generated in the last couple of years in building our digital business into what is now approaching a $25 million income stream."
Expanding beyond media
While companies in the b-to-b media space expand their offerings beyond print into e-media and events, McGraw-Hill Cos.' Business Information Group is expanding beyond media altogether, said Harry Sachinis, president of the unit. He noted that venerable media products such as Architectural Record, Aviation Week and ENR are only part of the 3-year-old Business Information Group, which also includes Platt's, a leading international provider of energy information; the Sweets Network database of construction products; and Dodge Reports on construction projects.
“I am quite positive in my outlook, even in what may be a tough environment for media,” Sachinis said. “I'm looking at a healthy picture based on services that are imbedded in the work flows of the various industries. “It's going to be a good year for us in 2008, and we're going to do very well against our budget,” he added, declining to be more specific.
In addition to continuing the transformation of the Business Information Group beyond media, Sachinis said he is also looking to expand globally. “How do I see the budget for next year? I see growth both on the revenue side and the profit side, and I will have to leave it at that,” he said.