Wanted: One White Knight, Preferably With a Bag of Gold

Why Forbes, Fortune Really Hope BusinessWeek Fetches More Than TV Guide Did

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NEW YORK (AdAge.com) -- BusinessWeek is not TV Guide, OK?

Sure, it may seem like the business weekly's heyday coincided with the time TV Guide was on every house's coffee table, but insiders insist it is poised for a different fate.

Even if ad pages come back, business books need to adjust to an altered landscape.
Even if ad pages come back, business books need to adjust to an altered landscape.
TV Guide, another formerly profitable major magazine institution to go on the block during this recession, famously fetched a whopping $1 at auction -- in a deal greased by nearly $10 million in sweetheart 3% loans for the buyer. The specter of a dollar sale for BusinessWeek became the master meme last week after the Financial Times quoted one banker calling it "the kind of deal that would be obtainable."

But TV Guide was sold without its accompanying website and reached a very different audience, a BusinessWeek executive retorted. "If you want to reach mothers who buy Nabisco in the grocery store, you have a lot of options," the executive said. "If you want to reach executives and business decision makers, there are more and more options but still only five or 10 good ones."

For all the challenges in the credit market, not to mention the tens of millions of dollars BusinessWeek is said to be losing, its competitors had better hope it can fetch a lot more than a lone greenback. Both Forbes and Fortune are profitable, but a token dollar transaction for their competitor would represent a vote of very little confidence in the future of their category.

That's because, despite specific circumstances that helped BusinessWeek slide into the red, they're all facing pretty much the same questions: If ad-page sales don't regain their old momentum, how well can they make digital compensate? Can they continue to meet the needs, and capture the dollars, of their particular advertisers, who are changing pretty rapidly themselves? What will be their story after the recession ends?

"Offline those brands have an opportunity to be around for some time, but I think they'll be smaller and smaller offline, while online they can be bigger and bigger," said Forbes.com CEO Jim Spanfeller last Thursday, following the news last week that he was leaving after nine years.

"Any business title that is not drawing most of its revenue from digital within, say, three years will most likely not be in business," he added later. "Even with a recovery, I simply do not see huge ad revenues coming back to print."

Jeff Fischer, senior VP-managing director at Universal McCann, where he oversees the print-activation group, said that may well be true. Most magazines cover areas about which readers are passionate and will remain passionate, Mr. Fischer said. So that's a good thing. Business magazines' print editions are perhaps more functional, though -- and that's a space with which electronic media competes very well. "Ad pages will come back, but not to the pre-recessionary levels," he said.

Plenty of people disagree, of course. "I do believe that a lot of the advertisers who value these audiences are going to be back," said Hugh Wiley, publisher of Fortune. "And they're going to be back big."

Can't rely on ad pages alone
Even if that proves to be true, the business books cannot rely on ad pages alone, and need to adjust to an altered landscape. As recently as 2004, BusinessWeek's top advertisers were IBM, Hewlett-Packard, Toyota Motor, Nissan Motor, Oracle, General Motors, Microsoft, Xerox, Accenture and Ford. Last year the equivalent list was IBM, Dell, Accenture, Sprint Nextel, T Rowe Price, Breitling Switzerland, Samsung, Verizon, Honda Motor and Dun & Bradstreet. Obviously the meltdown in Detroit has afflicted all kinds of media sellers, but automakers' cutbacks left the business magazines even more exposed to financial-services companies -- which have also suffered tremendously in the recession.

That's probably almost entirely a cyclical problem, at least, one that will be more or less remedied by any recovery. But the structural shifts are big too. Today's top advertisers in these titles are also increasingly committed to other, often more targeted ways of reaching their customers. IBM, for example, spent an estimated $8.9 million advertising in BusinessWeek last year, according to TNS Media Intelligence. It devoted 16% of its ad spending to magazines, up from 11% the year before. But it also spent 9% on the internet, up from 4% in 2007.

Dell, BusinessWeek's second-biggest spender last year, with an $8.3 million outlay, devoted 10% of its ad spending to magazines in both 2008 and 2007. But it increased its allocation to the web to 15% last year from 10% the year before. IBM and Dell declined to comment on their advertising strategies.

All the business brands are online in major ways by this point, but with varying results and, of course, head-to-head with all the challenges and competition that internet publishing brings. Growth is neither automatic nor never-ending. Unique visitors last May totaled 7.3 million at Forbes.com, down 12% from May 2008; 7.2 million at CNNMoney, the site that subsumes Fortune magazine, down 6% from the prior May; and 3.5 million at BusinessWeek.com, up nearly 1% from the same month a year earlier, according to Nielsen Online.

Internet revenue is even tougher for outside observers to estimate than web traffic. Forbes.com collected $288.1 million in online revenue last year, for example, according to TNS Media Intelligence. CNNMoney got $205.3 million and BusinessWeek.com pulled in $11.3 million.

Insiders said those figures are very generous. But whatever the true numbers are, they are headed in the right direction. Forbes.com revenue grew 69% from 2007, according to TNS, while CNNMoney revenue rose 55%, and BusinessWeek.com revenue shot up 77%.

Leaning on franchise rankings, events
This year, of course, has proved a much tougher market, which is why the business titles are increasingly leaning on -- or maybe squeezing dry is a better metaphor -- their big franchise rankings and events.

Forbes and Fortune each rely on key franchises they can monetize a million different ways, such as the Forbes Global 200 list of the biggest companies and the Fortune 500.

BusinessWeek has less to offer: its well-established business-school rankings and the less influential BusinessWeek 50, a list of the best-performing companies based on data from Standard & Poor's, its sibling for now within McGraw-Hill.

"The lists are a gold mine," said Steve Forbes, chairman-CEO of Forbes Inc. as well as editor in chief at the magazine. "Thankfully we've had a tradition, whether it was our grading on mutual funds going back to the 1950s to the Forbes 400 in the 1980s to the listings we have today, whether it's dead celebrities or the value of franchises or sports valuation."

Those franchises help the other brands, but they haven't really been in BusinessWeek's DNA. "Yeah, I wish the BusinessWeek 50 was more synonymous with great companies, but it's just not what we do," the BusinessWeek executive said. As for lists with perhaps less relevance to running a business, such as Forbes's "The World's Top Earning Models," BusinessWeek has so far shrugged. "We kind of felt like the answer was to go deeper in business, not dilute our audience."

Events are also becoming a bigger part of the magazine brands' businesses. Forbes has a Global CEO Forum planned in Malaysia this September, for example, but also conducts virtual iConferences, such as one it just convened for financial planners. "Even though the numbers are hardly big, it is the kind of thing you give your right arm for as a marketer," Mr. Forbes said.

Fortune's latest Most Powerful Women Summit meets in California this September; its Brainstorm: Green conference last March included first-time sponsors such as AT&T, HP, Qualcomm and IBM. Here, too, perhaps BusinessWeek could do more; it typically offers smaller events built around programs designed for advertisers.

BusinessWeek's costly print schedule
On the cost side, BusinessWeek suffers from a weekly print schedule, which has some advantages but in recession also means putting out issues that lose money. Production and distribution costs haven't taken a break in the downturn, after all. As a result, BusinessWeek has combined issues into doubles two extra times this year; each one gives it an extra week off at the printing plant. But readers still expect to see an issue pretty much every week.

"The truth of the matter is we got hit with an ad depression with a weekly publication with a slightly more robust journalistic model that had worked for many, many years and probably will again," the BusinessWeek executive said.

Depending on conditions going forward, the weekly BusinessWeek and the biweekly Forbes and Fortune might all want to consider reducing frequency as a way to save costs.

It's far from obvious who might buy BusinessWeek in this environment, however powerful its brand may be and however successful it's been in previous years. Even if the sale price were so low that no financing was required, taking on its red ink will be another expense in itself. Mansueto Ventures, which owns Fast Company and Inc., might want to take a look; a spokeswoman declined to comment on the prospect. OpenGate Capital, which bought TV Guide, may not want to take on another money-losing title while it's focused on the one it has. Rupert Murdoch's News Corp. has already said it is not interested.

So BusinessWeek may find itself hoping for a new white knight to emerge. Any white knight, however, will definitely need some armor as it sets about evaluating the business model; perhaps cutting the lengthy masthead; likely pushing further into business lines not so reliant on advertising and subscription sales; and, of course, facing the growing hordes of competitors.

The weekly's new competitive set include the likes of The Economist, which has made major inroads in the U.S. in recent years, and more aggressive pushes from dailies such as the Wall Street Journal and Financial Times. And that's before you get to the digital-only competition, which includes everything from social media to portals to marketers' own sites.

For the moment BusinessWeek, understandably, is thinking about its near future and going about its routine. "We're focused on doing what we do best which is serving our audience and our customers," a BusinessWeek spokesman said, declining to elaborate. Editorial's softball team still took the field last Thursday night after work.

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