Tim Andrews, who wears fashionable frameless glasses and a goatee, doesnât look like the stereotypical b-to-b media executive. But as CEO of Primedia Business Magazines and Media, Andrews has found himself doing what just about any other b-to-b media executive has to do in this brutal advertising market: wielding a big ax.
Andrews, a former Dow Jones & Co. executive, has cut jobs, trimmed facilities and slashed costsâall in an effort to maintain earnings amid falling revenues.
Like nearly every b-to-b media company, Primedia's B2B Group, which includes Primedia Business, has struggled in the past two years. In the third quarter of 2002, the unit posted revenue of $80.5 million, down 16.9% from the same period in 2001. It reported earnings before interest, taxes, depreciation and amortization of $8 million, down 46.3% from a year earlier. For the first three quarters of 2002, Primedia's B2B Group posted $267.9 million in revenue, down nearly 18% from $325.9 million in the same period of 2001. EBITDA fell to $24.8 million from $54.7 million, a drop of nearly 55%.
Trimming the fat
Since taking over in January 2001, Andrews has pared the ranks of Primedia Business print properties by 25 titles and has cut the number of offices from 60 to 30. "We had 1,700 people; now weâre down to 1,100 people," he said.
The division cut expenses by $11 million for the third quarter of 2002, compared with a year earlier.
When advertisers and advertising agencies see those kinds of cuts, they worry that muscle is being trimmed from their advertising vehicles. However, Andrews insists the cutting has been judicious. "Weâve done it not out of editorial or sales staffs," he said. "Weâve taken a methodical approach."
Andrews said the division was careful to ensure that many of the cuts came out of production. "Our cost per page in terms of pre-press is 70% less than last year," he said. "Every magazine is completely computer-to-plate. â¦ We had fewer than a dozen a year ago."
Andrews gets high marks from Primedia management. "Tim has done a very effective job in doing things he wasnât, in the first instance, hired to do, and that is address the cost base of the business," said Charles McCurdy, president of parent company Primedia Inc. and president-CEO of the companyâs B2B Group. "He was very effective in that regard."
Outside reaction to Andrewsâ cuts is mixed. While some industry observers believe they have not gone deep enough, others say the cuts are exactly what Primedia Business needs to ready itself for the recovery.
"Theyâll be the recipients of some nice profits when ad pages turn around," said Roland DeSilva, managing partner of media investment bank DeSilva & Phillips Inc.
Robert Crosland, managing director of investment bank AdMedia Partners Inc., said: "Enormous costs have been taken out throughout the company. Theyâve probably been more successful in taking out costs than anybody would have imagined a year ago. â¦ The real question is have they taken out too much in certain areas."
Cutting costs is the easy part, Crosland said. "Anybody can cut," he said. "The real question is how to allocate resources when they become available to rebuild the division as a more robust business."
Primedia Business is often maligned for having few No. 1 titles. Its flagship print publication, in the opinion of many, is Telephony, a magazine that has suffered along with the telecommunications industry it covers.
Telephony generated revenue of $9.2 million in the first nine months of 2002, down 54% from $19.8 million in the same period of 2001, according to Competitive Media Reporting. The 30 Primedia Business publications that CMR followed in 2001 and 2002 showed an aggregate revenue decline of 21%.
In January 2000, Andrews left Factiva, a Dow Jones joint venture with Reuters, to become president-CEO of IndustryClick, Primediaâs b-to-b Internet venture. He said heâs attempting to apply to Primedia and its properties a key lesson he learned at his former employer. "At Dow Jones, the primary focus was on producing a great product," said Andrews, who described himself as "a journalist at heart."
Trade publishers, he said, have to realize that their magazines compete with a variety of other media sources for readersâ time. "The b-to-b strategy has been to get as many ads as you can in a product thatâs good enough," he said.
That approach has been jettisoned at Primedia, Andrews said. "I donât want to have any of our magazines look like a trade rag," he said. "We compete with consumer magazines. Our magazines have to be as good as any consumer magazine in the world."
To that end, Andrews has created an internal design team to revamp nearly every Primedia Business publication. In a conference room at Primediaâs Chicago office, he held up a previous incarnation of Video Systems magazine and said, "Look at the logo: Itâs crap." Then he grabbed the redesigned version, which featured a cleaner logo and a consumer magazine look. The publication is a rarity: Through the first three quarters of 2002, its ad revenues of $4.5 million were up from $4.4 million in the year-earlier period.
Andrews is also bullish on several other parts of Primedia Business, including Wardâs Auto World and Registered Representative, a publication that serves the financial industry. Primedia has redesigned both publications.
In the case of Registered Representative, Andrews moved the publication from Irvine, Calif., to New York and hired an entirely new staff. The top editor came from BusinessWeek, and the No. 2 editor came from Smart Money. Andrews cited these moves as proof that he is boosting the editorial firepower of Primedia Business.
"This product is doing exceptionally well," Andrews said. In the extremely sluggish financial industry, the magazineâs ad revenues were $9.5 million in the first three quarters of 2002, compared with $10.2 million in the same period of 2001, a decline of about 7%.
Donât forget the Internet
In addition to improving editorial products, Andrews said he has paid special attention to the Internet. Since his tenure began, the number of Primedia Business e-mail newsletters has jumped from one to more than 70. Telephony alone has nine e-mail newsletters.
Some industry observers have viewed the cost cutting and other activity at Primedia Business and theorized that Primedia Inc. and its primary owners, leveraged buyout firm Kohlberg Kravis Roberts & Co., are contemplating a sale of the unit. Primedia Business is not, some observers said, a good fit with the consumer side of the parent companyâs business, which currently is digesting two large acquisitions: About.com and Emap USA.
Andrews said such speculation is news to him. "Primedia seems very happy with us," he said.