Although they are unrelated, recent moves by b-to-b media companies Reed Elsevier, United Business Media and Ziff Davis Media share a common thread: They are all responses to how quickly the distribution of business information is changing.
Ziff Davis Media filed for Chapter 11 bankruptcy protection on March 5 in order to restructure its operations and pay down its debt. The company cited a decrease in revenue from print advertising and subscriptions as contributing to its decline.
Ziff Davis Media, whose assets include PC Magazine and EGM (Electronic Gaming Monthly), filed for Chapter 11 protection in U.S. Bankruptcy Court for the Southern District of New York. It said it had reached an agreement with an ad hoc group of noteholders on its plan to restructure. (Private equity firm Willis Stein bought Ziff Davis in 1999 for about $780 million.)
The restructuring, if approved by the court, would reduce $225 million of Ziff Davis Media's debt. The company has a total of about $400 million in debt
The restructuring plan “provides a significant injection of capital to allow us to continue and execute our business plan, which is showing momentum, particularly on the digital side,” said Jason Young, CEO, adding that in the fourth quarter Ziff Davis Media's online audience grew 30% compared with the same period in 2006.
“Following a successful outcome from bankruptcy proceedings, Ziff's debt-burdened financial structure will no longer be the major obstacle to the company's growth, as it has been for the past several years,” said Richard Mead, a managing director of media investment bank Jordan, Edmiston Group.
Less than a week earlier, UBM announced that it had restructured CMP into four market-focused businesses, each with its own CEO. The CMP name has been eliminated.
UBM's announcement was, in turn, preceded by Reed Elsevier's decision to put its Reed Business Information unit on the block to reduce the parent company's exposure to cyclical advertising markets.
Rumors abound that British private equity firms Apax Partners, Permira and Guardian Media Group are interested in acquiring RBI's portfolio, which includes Broadcasting & Cable, Publishers Weekly and Variety. The unit is expected to fetch between $2 billion and $2.5 billion.
Tom Kemp, a managing director at private equity company Veronis Suhler Stevenson and former chairman-CEO of Penton Media, said the circumstances of the moves by Reed Elsevier, UBM and Ziff Davis Media are “totally different.”
“But the collective notion is the decline of print products as an underlying asset and the difficulties in managing the migration of ad dollars from print to online,” Kemp said.
Reed Elsevier also said it has agreed to buy ChoicePoint, which provides technology and information-based risk management products, for $4.1 billion. The move is designedto enhance Reed Elsevier's work-flow services, an area that many other b-to-b companies are eager to get into.
“As print continues to struggle in so many industries, all b-to-b companies are still trying to answer the digital question: How do we make money?” said Mike Parker, a managing director at media investment bank AdMedia Partners. “As volume increases in the digital space, [ad] dollars need to catch up to print levels.”
Parker said UBM's restructuring of CMP should, at least on paper, improve customer relations by “splitting [the company] into vertical silos, as opposed to a horizontal sell.”
The four new divisions, now part of UBM-U.S., are:
*TechWeb, formerly CMP's Business Technology Group. It includes Black Hat, Interop, VoiceCon and Web 2.0 events; InformationWeek, MSDN and TechNet; bMighty.com; and the TechWeb Network.
*Everything Channel, formerly CMP Channel. The unit includes the ChannelWeb online network, CRN and VARBusiness.
*TechInsights, formerly CMP's Electronics Group. The unit includes EE Times, Embedded Systems Conferences, Portelligent, Semiconductor Insights and TechOnline.
*Think Services, formerly CMP's Game, Dr. Dobb's and International Customer Management Group. Its products include Dr. Dobb's Journal, the Help Desk Institute and International Customer Management Institute.
Marketing executives said UBM's restructuring of CMP is a step in the right direction but would have no immediate impact on their media spending.
“We'll continue to partner with them,” said Keith Turco, senior VP-global branding at CA, referring to TechWeb. “The realignment positions [the four divisions] better for customers' needs.”
Bruce Delahorne, senior manager of national advertising at CDW, said the changes would not affect the software company's relationship with TechWeb.
“We'll continue to spend a meaningful amount of money” with InformationWeek, he said.
There will be no CEO in charge of UBM-U.S; all four CEOs will report to UBM CEO David Levin. The new businesses will share a strategic account team for integrated ad sales.
David Rowe, VP-media director of b-to-b ad agency Doremus, was skeptical that the four divisions would cooperate on behalf of clients other than the biggest ad accounts.
“Based on past experiences, only the Microsofts of the world” will be able to bundle ad buys across the new divisions, Rowe said. “They seem to be giving away the key advantages that CMP had in covering multiple [technology] audiences. The message they seem to be sending to the market is that there are four distinct companies.”
Levin insisted that the changes reflect market realities. “We're increasingly serving different markets, and CMP as a holding company was not an enabler but was holding the entity back,” he said.
In 2004, print generated 75% of CMP's revenue. However, after 18 acquisitions worth about $225 million in the last three years, print will account for about 24% of revenue this year on a pro forma basis, followed by events (40%), online (20%) and data and services (16%).
The reorganization came three months after Steve Weitzner stepped aside as CEO of CMP to run its international division. In January, Weitzner became chairman-CEO of CMP rival Ziff Davis Enterprise.
Mead applauded UBM's move. “It streamlines the management structure and decision-making, while freeing up divisional management to grow their businesses and compete for investment capital,” he said. “Furthermore, the new structure will provide David Levin, UBM's CEO, with many more strategic options going forward.” M