In April 2001, the McGraw-Hill Cos. tapped Scott C. Marden as president of its information and media services division, which includes BusinessWeek and the company’s stable of powerful b-to-b brands such as Aviation Week & Space Technology and Engineering News Record.
For years, the heads of this division essentially acted as caretakers for the b-to-b products, doing little beyond cutting costs, industry observers say. But some signs indicate that Marden, a former COO of Marvel Entertainment Group Inc., is being allowed to unleash the inner Spiderman in McGraw-Hill’s b-to-b segment instead of behaving like a mild-mannered Peter Parker.
While the company’s b-to-b properties have consistently generated profits, McGraw-Hill has not aggressively grown the division. "They think of this group as a little bank," said one industry observer. "It’s all paid for, and it throws off money."
Joel Novak, managing director of Veronis Suhler Stevenson Partners L.L.C., a New York-based media investment bank, said, "B-to-b publishing is no longer at the core of their strategy going forward."
But after a quarter century of divesting trade publications ranging from Coal Age to Modern Plastics, McGraw-Hill may be looking to grow its b-to-b group by acquisition again. In September, the company bought Financial Times Energy, a complement to its Platts unit, which provides pricing information to the energy industry.
"I think Scott Marden would like to build through acquisition and organic growth," said Wilma Jordan, CEO of the Jordan Edmiston Group, a New York-based media investment bank.
"My first mandate is to take the existing group, take the core businesses, and find new ways to grow these businesses," Marden said. He added that the means open to him include further acquisitions and perhaps expanding into vertical markets beyond the energy, aviation and construction industries where McGraw-Hill has a strong presence.
Founded in 1888, McGraw-Hill defined b-to-b publishing for much of the 20th century. "It’s the granddaddy of b-to-b publishing," said Roland DeSilva, managing partner of DeSilva & Phillips Inc., a New York-based media investment bank.
Beginning in the 1970s, however, the company began shedding b-to-b titles, even though many remained strong and profitable brands. For instance, the core of McGraw-Hill’s chemical publications—including Chemical Week, Chemical Engineering and Modern Plastics—now operate together under Chemical Week Associates.
McGraw-Hill has shifted its focus to its other businesses, most notably its Standard & Poor’s operation and educational publishing. Today, the company is a $4.6 billion operation.
"If one takes a long-term perspective, McGraw-Hill has gone through a substantial transformation in becoming an education publisher and financial information company," Novak said. "They moved away from their roots and accomplished this quite successfully."
In the industries where McGraw-Hill remained an active b-to-b publisher, it has built a different kind of media company. It is not as focused on advertising revenue or as subject to the vagaries of a cyclical economy. Instead, it generates business information and solutions that users are willing to pay for on a consistent basis.
For example, in McGraw-Hill’s construction segment, the Sweets and Dodge units are two key profit centers. Sweets is a product reference source for architects, engineers and contractors. Dodge provides the same audience with project news, plans and other information.
Advertising still a factor
The information and solutions strategy doesn’t completely insulate McGraw-Hill from the chill of an advertising downturn, however.
After generating $240 million in earnings before interest, taxes, depreciation and amortization in 2000, McGraw-Hill’s EBITDA declined 62% to $91 million last year. BusinessWeek saw its 2001 ad pages decline 37% from 2000, according to the Publishers Information Bureau. And because of low advertiser demand, McGraw-Hill merged Global Energy Business and Energy IT to create a new publication, Global Energy Business and Technology.
Additionally, its information and media services division last year took a pre-tax charge of $34.9 million, primarily for restructuring and asset write-down of the construction group’s e-commerce initiatives. About 300 positions were cut.
Marden, however, sees potential for growth. He is focusing on a three-prong approach: expanding market share, finding new customer bases for existing products and extending products’ geographical reach.
The FT Energy acquisition did all three, he said. McGraw-Hill gained market share, particularly in the gas industry, a main focus of FT Energy. Additionally, the deal enabled Platts’ petroleum information to be marketed more easily to FT Energy customers. And, because FT Energy was strong in Europe, it gave McGraw-Hill a foothold overseas.
Marden also hopes to boost his division’s revenue by creating new ventures between McGraw-Hill brands. For instance, McGraw-Hill will host a Homeland Security Summit & Exposition in Washington, D.C., June 6 and 7. Aviation Week, BusinessWeek, McGraw-Hill Construction, Platts and Standard & Poor’s are producing the conference.
McGraw-Hill held a similar conference in November. "Two weeks after Sept. 11 we began pulling it together," Marden said. "We had the first conference about six weeks after the event, the interest level was so high."
Last year BusinessWeek began producing "BusinessWeek TV," a program covering business and personal finance that runs on Sunday mornings on 150 ABC affiliates, including four owned and operated by Marden’s group.
Twenty such ventures linking the brands and skills of the various businesses within the information and media services group are under way.
But industry observers remain skeptical of how serious McGraw-Hill is about building its b-to-b segment.
Many investment bankers say the company is just as likely to sell a b-to-b property as it is to buy one. They say, in particular, McGraw-Hill might be interested in divesting its medical information properties.
"Historically, this group has not received a tremendous amount of investment or strategic support from the corporation," said Robert Crosland, managing director of AdMedia Partners Inc., a New York-based media investment bank. "Obviously, BusinessWeek is an exception. But [b-to-b] doesn’t appear to be a core business to the corporation. Unless they change their historical direction, it’s likely that various pieces will be divested at opportune moments in future years."