Even before last September's financial crisis, print was in decline.
Last spring, American Business Media President-CEO Gordon T. Hughes II said: “All of us must recognize the unprecedented changes we are facing. We must untether ourselves from our legacy business model to be competitive in today's environment.” By midyear, print advertising revenues, as reported by ABM's Business Information Network, were off 7%.
During the summer, ABM commissioned consultancy Booz & Co. to study the industry and make recommendations on how members could make the changes necessary to ensure future growth while their legacy businesses declined. Booz collected information from 76 of ABM's 120 media company members through personal interviews and an online survey for the study.
The report, “A Roadmap for Profitable Revenue Growth,” was considered so critical by ABM's board and staff that they built the entire ABM Top Management Meeting in November around it.
The report outlines two paths b-to-b media companies can pursue to ensure their future viability. The first is marketer-driven solutions that expand beyond the traditional advertiser-publisher relationship with agency-like services. The second path is user-driven solutions in data and business information that can be monetized through licenses, subscriptions and other fees.
Significantly, the Booz analysts advised ABM members to pick just one of the two paths, explaining the “significant complexity and organizational challenges” posed by each.
Matthew Egol and Harry Hawkes, both partners in Booz & Co.'s Global Media & Entertainment practice, were the lead analysts on the report. Egol focuses on strategy and organizational effectiveness issues in b-to-b and consumer media; Hawkes handles the consulting company's global operations work in media and entertainment.
“We wouldn't be surprised if print was 10% down in 2009,” said Egol. “In an environment where revenue is going to shrink by a wide margin, companies are racing to take costs down to offset that blow.”
Understanding that the knife is the tool b-to-b media companies will most likely use first, Egol and Hawkes provided recommendations and cautions on how to cut costs without sacrificing future opportunities.
“We think companies should be able to do some big things to cut costs and achieve 15% to 20% savings,” Hawkes said. “However, if you keep seeing revenue declines of 10%, you've just bought yourself a couple of years if you don't focus on the parts of the business that are going to be able to grow and be profitable in the future.”
B-to-b media companies “need to challenge the sacred cows in costs to remain profitable this year and into the future, because we don't expect print advertising to get back to its current levels—ever,” Egol said.
Hiring freezes and across-the-board cuts won't be enough. “They need to fundamentally attack the operating model,” he added. “There's significant room to take cost out of the organization in terms of head count when you look at rationalization efforts, when you look at shared services, when you look at things like outsourcing and offshoring.”
Even people at the top should not be off limits. “When you are streamlining the organization and reorganizing, you may not need high-priced management talent or as many of those managers,” Hawkes said. M