The transition from our legacy analog world of ink and paper is accelerating. Major changes in newspapers over the last several years with revenues significantly down to levels not seen in 10 years. Growth ceased, and status quo is hard to digest to those in the industry that used to grow by showing up. Population growth meant circulation growth. Those trends no longer exist, and print media outlets are starting to drop like flies. First it was newspapers, now the trend has extended to magazines and direct marketing publications.
In a recent Daily Beast article by Daniel Gross “Why Time Warner Felt It Had to Spin Off Magazine Unit Time Inc we see why this is happening. Its all about stock prices. This trend is now making its way felt through the entire communications field from newspapers, magazines and direct marketing publications.
Newspapers were the first to feel the pinch of declining revenue. The grind of producing, printing and delivering daily papers IS not easy, and its expensive to do it every day, especially on those days when the paper is not full of ads. Recent changes in newspaper ownership around the county brought some promise of hope when heavy hitters like Warren Buffett bought in and gave some hope to other owners that were still viable. But Warren likes to buy and hold, and he likes to buy things he knows a lot about – and HE still reads his paper daily. Not everyone agrees with Warren, nor do they all have his deeps pockets.
Even with his very deep pockets Rupert Murdoch owns bunches of papers in the US and in Australia and England, but Rupert also owns lots of digital media in those markets as well. He also sees the enduring value in the print, but he was one of the first to see that revenues were lagging in print, and those lagging revenues reflected poorly on the ability for the overall stock value of these publicly traded companies to grow. He has lead the move to split his holdings into discrete segments – digital on one side and print media on the other. Future dollars for investment and growth are attached to the digital side, and print you’re now on your own now.
Recently Time Warner felt the urge to ‘unmerge’ its holding and to spin off its magazine unit, including Time, Fortune, Money and Sports Illustrated and make them a new stand alone organization and take them public as their own group. The magazines are still profitable, but they cannot keep with the market and are thus a drag on corporate earnings.
Harte-Hanks, Inc. originally started off as group of small Texas newspapers, but chose a different way to grow outside of newspapers and moved into direct marketing, and over 20 years sold off all other holdings, including all of their newspapers and became a powerhouse in shoppers publications covering millions of households in California and Florida. A still thriving industry for small communities covering a market just below that of the newspaper they provided cost effective targeted advertising and in the process stole market share from larger local newspapers. Those golden days are now over. Having written down all of their goodwill equity in the declining value of The Pennysaver, they were able to unload them quickly.
In December the Florida operations were sold back to their founder Dick Mandt, a former boss of mine, and his team of highly effective industry managers. Were they losing money -no, but they had to go. Sources tell me that the same thing is likely in California where the original Pennysaver circulates. Staff cuts are being made, offices are closing, and they appear to be on the same trajectory as Florida. Can they still make money – yes. But they can’t grow in the manner that a public company needs them to.
Like Time, Inc., Harte-Hanks, is a publicly traded company and must show growth. The huge revenue base of the Pennysaver could not keep up the growth curve for Harte-Hanks and stock prices lagged. Decision time came, and decisions were made. Heads rolled, and the new management staff has a mandate for growth, and a tight timeline. This is the new story for print and direct marketing, especially for those mailed publications. If you are on the big march and you fail to keep up – we’ll leave you a canteen of water, and a couple of biscuits, but your on your own. Tough love, I think we call it! Time is not always on our side.