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E-business titles' war of attrition

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Let the shakeout begin.

Late last week, after months of rumors, the poster child of new economy magazines, Business 2.0, was bought by AOL Time-Warner Inc. subsidiary Time Inc. for $68 million in cash. Under the terms of the deal, eCompany Now, Time Inc.'s monthly, consumer-focused Web title, will suspend publication in August; Business 2.0, which changed its frequency to fortnightly last May, will re-emerge as a monthly title with a circulation of 550,000 in September.

Industry watchers have predicted for some time a thinning of the herd among new economy magazines, whose advertising base continues to go down.

Advertising spending on technology print publishing dropped 10% in the first quarter of 2001 compared with 2000, according to Adscope Inc. In a review of 366 titles tracked by Adscope, 39 titles shut down and 30 were launched so far this year. All titles took a cumulative drop of 10% in both ad pages and ad revenue.

Something’s gotta give

Indeed, something had to give. Earlier this month the U.K-based Haymarket Group suspended publication of its digital tech title, Revolution, and said the company is now working on details to relaunch the publication this fall.

"There are not enough ad dollars to go around" for all of the titles, said Reed Phillips III, a managing partner at the New York-based media investment banking firm DeSilva & Phillips Inc., adding that he anticipates further consolidation in the space.

Business 2.0, Phillips said the new magazine will position itself to compete against Fast Company and The Industry Standard. "I think the new [Business 2.0] is absolutely viable and those books are now probably going to be the three big players in the market owned by large media companies."

Business 2.0 had achieved a circulation of 350,000; Time's eCompany Nowhad circulation of 375,000.

The new publication is expected to straddle both the consumer and business markets when it re-emerges this fall. In a prepared statement, John Huey, editor of The Fortune Group, said: "There is a vibrant community of readers for a 'next generation of business magazine,' one with a different perspective and attitude than the more traditional business books. Drawing on the resources of Time Inc. and AOL Time Warner, we are wholly committed to making Business 2.0 the voice of this business market

M&A to increase

According to a recent study conducted by AdMedia Partners Inc., a New York-based media investment banking firm, a majority of respondents still expect an increase in merger and acquisition activity between traditional media companies and interactive firm, despite the growing number of dot-com failures (see "Press Box," Page 9).

"They have to broaden their advertising market because it’s very difficult to cut costs in the magazine business," said Gene DeWitt, chairman-CEO of Optimedia International Inc., a New York-based advertising agency whose clients include Hyperion Solutions Corp. and Hewlett-Packard Co.

Joe Malone, senior VP-group media director at FCB Worldwide, New York, whose clients include Compaq Computer Corp. and AT&T Business, said that if enough ad budgets are revived in 2000 "to tide these guys over, there’s a good chance that all of them can survive."

But Bill Slapin, vice chairman and founder of 101 Communications L.L.C., a Chatsworth Calif.-based integrated marketing company specializing in the IT sector, reaches an exactly opposite conclusion. Slapin doubts any of the titles will achieve longevity.

"As e-business becomes regular business, it’ll have a severe impact on all these titles because all the mainstream titles will be covering the same things," said Slapin, whose clients include IBM Corp., Microsoft Corp. and Dell Computer Corp. "The horse race is so small you can probably run it in a pony ring," he said.

DeWitt thinks the new economy magazines likely to survive are those with the following qualities: the highest paid circulation, the best renewal rates, a relatively stable ad base in light of the dot-com crash and deep-pocketed owners.

Ernst & Young L.L.P. is among those advertisers holding back spending on the new economy titles. In the months ahead, the company will have less of a presence in these magazines since selling its consulting services practice to Cap Gemini, said Jim Spero, chief marketing officer in the U.S. for Ernst & Young.

But even with a flat overall ad budget, Spero said Ernst & Young would continue to purchase ad space in what it considers the core brands, including Business 2.0 and Gruner + Jahr USA Publishing’s Fast Company. (Spero could not be reached last week for comment on Time’s purchase of Business 2.0 .)

Spending beyond the core titles will depend on the "vitality of circulation, any cutbacks the companies have had and whether the magazines have stayed true to the editorial mission," Spero said, adding: "Some of the titles will collapse. There are fewer eyeballs chasing too many pages."

Other top b-to-b advertisers asked to comment on how the current market is affecting their spending in new economy publications are keeping their plans very close to the vest. It’s premature to say which titles will see AT&T Wireless’ ad dollars, even as the company gears up for a new ad campaign launching sometime later in the year, said spokesman Rich Blasi.

Degrees of vulnerability

All of the titles in the new economy are hurting, but some are more vulnerable than others.

Red Herring, which rode the venture capital wave to popularity only to watch its ad pages dry up along with the VC markets, denies reports that it is being shopped around. Indeed, the company has a redesign planned for the July 15th issue, which coincides with the eighth anniversary of the magazine’s parent company, Red Herring Communications Inc.

The Industry Standard, which is owned by International Data Group, and Fast Company, which Gruner + Jahr bought in December for nearly $500 million to serve as a springboard for its new business media division, are considered the safest bets because of the strength of their parent companies.

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