A former McGraw-Hill executive, Ed Fitzelle worked at media investment bank AdMedia Partners for eight years before joining Whitestone Communications in 2006.
Media Business: How much did the credit crisis impact deals in the b-to-b media sector in the first half of 2008?
Fitzelle: In deal value, we haven't seen many of the big deals in the first half. Our “Who's Buying Whom” kind of showed that. I don't know if it's the credit crunch or oil prices that have put us in a situation where people are much more cautious. The big deals that need major financing are not getting closed. What seems to be happening is the private equity guys are doing deals that they've targeted and that they could do without needing to go to the banks.
MB: The number of deals actually went up in the first half, even though the value of the deals declined. What's driving this? Is the b-to-b media and information market still attractive to investors?
Fitzelle: I think very much so. What I always talk about is the microeconomic relationship between the information providers and the readers. That's what all the value of b-to-b media is based on. If we provide information that you can use to make money, you'll keep reading our publication or buying our newsletter.
MB: Business information seems to be much more attractive than traditional advertising-driven business media to investors. Why is this the case?
Fitzelle: I don't know if it is. Certainly, that's the perception. If you look at advertising numbers and pages, advertising has been in a cyclical downturn. ... I think the subscription-based products make people feel much more comfortable than the cyclicality of advertising. Look at Reed Elsevier (a company that has placed its Reed Business Information unit, which consists largely of advertising-based magazines, on the block). You don't have to scratch the surface too deeply to see that Reed people and the Elsevier people really like subscription-based businesses.
MB: McGraw-Hill Cos. has spent the past 20 years shedding advertising-based businesses but is said to be interested in Reed Business Information. Why?
Fitzelle: They're in two big markets—education and financial services—and both of them have some uncertainty that wasn't there before. If they are looking at Reed, they could be happy with it. They've been successful in that area in the past. They'd be comfortable with it.M