Magazine publishers can get confused about the future. Long-established, much-loved print brands have loyal, passionate readers. And many remain highly-trusted media, seemingly unaffected by the explosion of general news that has battered daily newspapers. Even now, many magazines have relatively stable circulations. But many too are in trouble because their business model has been wrecked by the loss of print advertising. So, although most observers predict longevity for magazines in print and digital, publishing profits have fallen sharply.
For many, the downward spiral has been accelerated by pressure on cover prices from the growth of free and sponsored magazines – and online content. The inevitable response has been to reduce costs and seek to diversify revenue sources. But – as elsewhere in legacy media – the much-needed transformation is undermined by historic loyalties, traditional cost structures, and memories of a super-profitable past.
Decisive change
Changing the business model demands strategic clarity, determination, some new people and many new skills. Glossy brochures and whizzy websites frequently claim such re-invention, but they’re often from publishers stubbornly dominated by print-bound editors for whom digital media remains an ancillary activity managed, all too often, by the IT department. Whether or not they go the whole way and separate new media from old – like Clark Gilbert’s ground-breaking Deseret Media – many print-centric groups do need to change decisively.
They could do worse than study the UK-based Immediate Media, whose transformation plan is made more remarkable by the fact that its flagship brand is a 91-year-old programme listings magazine called, of all things, Radio Times. The weekly was launched by the BBC in 1923, and kept its name when it extended to TV 13 years later. It has long been one of the UK’s most profitable magazines. Circulation peaked at 8.8m copies in the 1960s, and 11.2m copy sales of its Christmas issue in 1988. The publicly-funded BBC wanted more and, in 1989, acquired the five-year-old London-based customer magazine pioneer Redwood which had launched titles for American Express, Marks & Spencer and British Rail.
It always seemed like an odd deal for the BBC whose networks (then as now) were free of advertising. But Redwood’s founders Mike Potter and Christopher Ward had an innovative plan for the world’s oldest broadcaster: they launched some of the first ‘TV masthead’ magazines in conjunction with many of the BBC’s biggest programmes: The Clothes Show, Gardeners’ World, and world-beating Top Gear.
The magazines were the foundations of a successful specialist portfolio across almost every area of BBC television output, and an international network of over 60 licensed editions. But rival publishers screamed “foul” as the tax-funded broadcaster promoted its magazines in airtime not available to competitors.
Industry protests intensified and the original Redwood customer magazine business was eventually sold back to its founders in 1993 (before being sold on to agency group Omnicom). But the BBC continued quietly to build its portfolio of programme-branded magazines, including Good Food, Top of the Pops, Music, Sky at Night, History, and Nature. The magazines were part of BBC Worldwide which exported programme content, channels, and merchandising, in order to subsidize domestic TV, radio and online services.
In 2004, the BBC stepped back into controversy with a decision to invest in enthusiast publisher Origin. And, in 2007, it further outraged commercial rivals by acquiring The Lonely Planet travel guides for an egregious £132m, only to recoup just £80m when pressured to sell-off the business six years later.
Those deals proved to be two commercial steps too far and eventually prompted the 2011 sale of the BBC’s magazines. The auction was won by UK-based Exponent private equity which paid a much-less-than-predicted £113m for BBC Magazines. It was merged with the lossmaking digital specialist Magicalia to form Immediate Media, which is now the £165m-revenue publisher of more than 70 media brands across print, digital and events.
They include: the magazines Radio Times, Olive, Homes & Antiques, Mountain Biking UK, Focus, and Perfect Wedding; digital brands such as MadeForMums.com and BikeRadar.com; and exhibitions including The Triathlon Show. Immediate has a profitable but suitably complicated relationship with the BBC on whose behalf it publishes Top Gear, Good Food, EasyCook and Lonely Planet Traveller; and other titles under licence including BBC History, Gardeners’ World, Focus, and the CBeebies children’s comics. It sounds tricky but the BBC branding is valuable. Recently, the company took advantage of rival Future’s (latest) woes by acquiring its profitable cycling magazines and powerful web sites for £24m. It looks like a steal.
Strongest growth
Immediate Media is one of the UK’s largest magazine-centric groups, alongside Bauer, Hearst and Time Inc. But it is growing more strongly than any of them. In its first three years, revenue has increased by 12% and EBITDA profits by 57% (see below). It sells more than 76m magazines each year, has 33m monthly unique users, and Radio Times is still the UK’s most profitable title. As if to emphasise the contrast with its peers, Immediate’s newsstand revenues have increased by 9% to £125m in the past three years, subscriptions have increased by 31% to 1.3m ,and its share of the UK consumer magazine market has grown from 8% to 12%. Immediate’s total print circulations have fallen slightly, but are four-times better than the market average.
That’s not how it’s meant to be for a magazine group in churning, digital times. But it’s only half the story with which CEO Tom Bureau wowed potential investors at a conference in London last month. In a forum dominated by self-confident digital entrepreneurs, he told an unfamiliar story
of a traditional media company’s “evolution and internal disruption” and its ultra-bright prospects.
It was eye-catching stuff from the modest but enthusiastic CEO who is one of an all-too-small group of 40-something media bosses who span the divide between digital ‘natives’ and ‘immigrants’. Their experience combines traditional media and digital insurgency, giving them a better chance of getting the balance right.
Bureau saw the potential of online in the early 1990s, and co-founded Business & Technology magazine. When it was sold to Dennis Publishing in 1996, he and his partner cannily kept the online technology with which they then developed the Silicon B2B tech site.
The Silicon Media Group had a glittering launch in 1998 among the dinosaurs at London’s Natural History Museum – intended to symbolise the death of print journalism. But four years later, Silicon itself fell victim to the dotcom collapse and to disastrous expansion in France and Germany. In 2002, the company’s assets were sold to CNET for a small fraction of the £30m that shareholders had invested.
The tough reality was Tom Bureau’s business school, and he bounced back as UK managing director of CNET. In five dramatic years, he steered the US-owned company from a single business information site to become the UK’s biggest online-only publisher. Its five UK web sites (CNET, GameSpot, silicon, ZDNet UK, and AtLarge) had a reach of 10million unique users – then some 31% of the total UK online population – and were highly profitable. The whole CNET international business was acquired by CBS in 2008. But not before its CEO had left to become “a digital entrepreneur”.
In 2007, he teamed up with Exponent to bid for the specialist division of EMAP consumer magazines, alongside Hearst which thought it wanted the company’s since-savaged mass market titles. Bureau’s consolation (when cash-rich Bauer trumped all bidders for EMAP’s magazines and radio
stations) was to become CEO of Magicalia. And then, in 2011, came Exponent’s acquisition of BBC Magazines for a pro rata price some 50% less than Bauer’s eye-watering EMAP purchase four years previously.
The former CNET boss hit the ground running and said that the newly-formed Immediate Media was “geared towards developing its e-commerce proposition and shifting the business away from print to a content and services platform. Retailers have been good at becoming publishers, it’s about time publishers got good at becoming retailers. We’ve done some testing which shows that you get much better results if an offer is deeply integrated into a brand and share the brand values. It is essential to focus on the deep collaboration between our editorial and brand teams and transactional teams. We’ve invested in creating an offer that is embedded into the product, strong in its own right but has the benefit of being a platform to drive a transaction.”
Bureau told a UK publishing conference earlier this year: “This is a multi-million pound investment. We now have the equivalent of a mid-scale software house in the middle of a content company.” Part of this approach led Immediate to build its own IP, which has given the company “a lot of advantages…It gives us control of our systems integration. It gives us control over the pace of our development. It allows us to get brands moving really fast.”
Changing culture
Along the way, that has meant changing the culture of a magazine business: “We’re shifting away from being a magazine publisher to being a content development business, and I have explained that the role of editors is even more important in that process, as the guardians of the brand.” What the Immediate boss skates past is an admission that the real challenge is to slip quietly into a “new” world where the ambassador for the brand will not necessarily be the editor. The days of the Prada-wearing devil may not quite be gone but the custodian of a cross-media brand will be the person who best understands readers/ users and that is increasingly likely to be a digital native in tune with the analytics and real-time behaviour of customers.
Bureau says: “Historically, the editor has been king or queen. Now there has to be room at the table for product development and technology”. Part of this is centred on Immediate’s creation of “a single customer view” of readers, in order to develop future sales. “We want to think more like a
retailer and having the right database environment to underpin this is important. It’s about engaging our customers and developing a relationship with them, creating a rich, scaled single customer view. Our ambition is to change our centre of gravity from print towards being a content platform and services business, which means putting brands at the centre of our strategic development and looking at the business models beyond print.”
The company hired international technology company CACI to build its customer database and then set to work on developing e-commerce business, initially through Radio Times whose readership (unusual for the news-stand-focused UK market) is 30% postal subscriptions. The early results are encouraging. It has sold 10,000 holidays valued at £7.5m in the last 18 months and £10m of “equity release” financial services in just the last six months.
Immediate is, of course, far from the only magazine company to be chasing e-commerce earnings. But publishers everywhere have to choose their level of commitment from what can be seen as the four broad stages of e-commerce:
- The easy route into e-commerce is as an affiliate in which the media owner simply gets “click through” commission (of some 4-5%) from sales achieved through advertising or editorial content.
- The second stage on the e-commerce progression is where media owners can effectively be equal partners with suppliers of products and services, with full access to the data and analytics – and commission of at least 10%. This is where Immediate’s e-commerce operations currently are. But it has been extra smart in insisting on ‘lifetime’ deals whereby it receives commission from sales indefinitely and not just from a customer’s initial purchase.
- The third stage involves total ownership of the sales process and contracts with suppliers, with the media owner assuming much of the risk.
- The ultimate step is to become a fully-fledged retailer and own the whole transaction, product creation and inventory.
Immediate’s strategy is inspired by the success of the UK-based Saga Group which has progressed in 55 years from selling holidays to ‘grey’ consumers to becoming a leading provider of cruises, holidays, healthcare and financial services. It also has a monthly magazine with 450,000 subscriptions and a total readership estimated at 1m. In the UK, the name Saga is synonymous with relatively affluent 50+ consumers. The company, which has almost 3m customers and a database of 10m, successfully floated on the London Stock Exchange this year and now has a value of £1.7bn.
Further learning comes from the 56-year-old non-profit AARP (originally the American Association of Retired Persons) which has 37m members, a turnover of more than $1bn – and the country’s two largest circulation magazines. Like Saga, it generates huge revenues from financial services. It’s a similar story with the $10m revenue, 200,000-member National Seniors Australia.
It all underlines the attractiveness of the ‘grey’ market which, in many Western countries, represents the fastest growing and most affluent population group. It is the market that should have been dominated across the world by the 92-year-old Readers Digest, but for its bankruptcies of recent years.
Immediate’s magazine-led audiences are concentrated on the 40-60 year old ABC1s which have some 80% of the UK’s disposable income and are described by the company as “Generation Wealth”. In that sense, Radio Times’ readership is perfectly positioned, with an average age of 57 years. That makes it a strong potential challenger for Saga, from which Immediate this year recruited its e-commerce director.
Bureau has put together an executive team that blends experience in magazines, e-commerce, and pure-play digital. The head of strategy is a one-time P&G brand manager who has lived the Bay area life as a manager in eBay and Ancestry.com. Other key people include the former Hearst leader of Runners World which built a powerful e-commerce business (taking marathon bookings and selling kit) before most publishers had even considered that magazines might not be their whole future. More than 50% of Immediate’s 135 new recruits in 2013 came from a tech or digital background. The tech team is now some 120, more than 10% of the company.
Profit growth
The strategy is starting to pay off with “digital and data” EBITDA profits increasing five-times in the past three years, although that is still “only” £2.8m for 2014-15. The sobering reality is that this exciting “new” media company is still earning 85% of its £33m profits from magazine circulation and advertising – and three-quarters of that comes from Radio Times.
The strength of Radio Times was, ironically, one reason why the 2011 BBC Magazines’ auction fell short of expectations. Analysts simply found it difficult to make convincing long-term forecasts for a mere listings weekly – despite the sector’s long-time resilience. Somehow, even though most of the country’s national daily newspapers offer free listings magazines with their strong-selling weekend editions and increasing numbers of people use ‘electronic programme guides’, the huge appetite for these paid-for TV weeklies continues. The UK’s three bestselling magazines are all listings titles. The circulation market leader is Bauer’s TV Choice (1.3m circulation), followed by Time Inc’s What’s on TV (1m) and Radio Times (756,000).
But Radio Times’ £60m revenue is by far the largest. The strength of Immediate’s flagship is reflected in aggressive cover pricing that has thrilled its investors and surprised its rivals, not least because it has hardly affected sales volumes.
The magazine’s current £1.80 cover price is an increase of no less than 50% in the past three years. And the 2014 Christmas double issue, which traditionally sells more than 2m copies, is expected to be priced at £3.50 (up from £3.20 in 2013 and just £2.20 five years ago). So that single edition of Radio Times may this month account for up to 15% of Immediate’s total profits.
Over recent years, the magazine’s profit has consistently been in the range of £15-20m, so Immediate’s most successful brand is effectively funding the company’s whole transformation strategy. The magazine that helped depress the auction price of the former BBC business is, perversely, the reason that its current owner is now worth so much more. In many ways, of course, Radio Times is more than a listings magazine. It has a substantial volume of non-listings content and, crucially, the kind of resonance enjoyed by Australian Women’s Weekly, Good Housekeeping, and Time magazine. All four are legendary magazines with powerful, trusted brands – and the opportunity now to future-proof their business models. But that still takes some doing.
Radio Times’ solid readership is clearly key to Tom Bureau’s strategy in more ways than just bankrolling it. His company is full of talk about “insights”, integrated media and customer engagement. And, for all the fact that it has taken over an established stable of magazines and hundreds of people from the BBC (albeit with a tradition of innovative TV tie-ins), Immediate really is a new company, with a level of optimism rare in an industry depressed by digital. But, then, the company also has a UK-leading total of 1.3m subscribers in a market where most magazine publishers are now paying the “easy-come, easy-go” price for being seduced by the once quick-fire sales of the newsstand.
E-commerce potential
The early evidence of Immediate’s e-commerce potential is RT Travel, an online holiday, cruise and travel sales service which builds on Radio Times’ long tradition of reader offers. It has sold some 10,000 holidays worth £7.5m, and £10m of ‘equity release’ financial sales in two years of more than 100,000 e-commerce transactions. It’s a promising start.
The company’s also deep into the sales of wine, books and other financial services and is extending its transactional model to Gardeners’ World (seeds, bulbs and garden tools). It is working too on You and Your Wedding where it has cast envious eyes at The Knot in the US, whose integrated media business profitably embraces e-commerce, events, video streaming, and publishing. More of a challenge, though, is the Made for Mums digital competition with the UK’s 14-year-old powerhouse Mumsnet.
It is clear, though, that Immediate Media is fast becoming a great case study for the digital transformation of magazine-media.
It has clearly been been able to shift the balance of its operations by investing strongly in new people, skills and technologies. In doing so, it has benefited from the extraordinarily resilient Radio Times which is not only the UK’s most profitable magazine but also, perhaps, its fastest growing. And its web site is notching up a market-best 6m+ monthly unique users.
The Radio Times waterfall of profits that so few bidders would have dared predict in 2011 has painlessly enabled Immediate to invest expansively in e-commerce. But what happens next will be even more interesting. In the way of private equity, Exponent (which has previously made big financial gains from media investments in Times Educational Supplement and Gorkana) will now be working out how best to sell Immediate and to whom.
We should expect a sale within the next 2-3 years. And, for all the company’s strong profits and strategy, it is not easy even to predict the most likely type of buyer. Will it be a media group like Hearst (which went cold on the listings market before) or a newspaper group, or a retailer targeting the ‘grey’ market, or Saga itself? And will the best price be secured by selling Radio Times separately from the specialist magazine-media portfolio? Or will Immediate effectively IPO via a reverse takeover for the stockmarket-listed but under-loved Future Plc?
One clue might be in the way that companies like Saga and AARP are viewed. Publishers talk about these companies as if they are, well, publishers. But the insurance industries see things entirely differently – and that’s where the profit come from. Likewise, online fashion retailers ASOS and Net-a-Porter have the trappings of media companies (magazine-like web sites, plenty of media people and even printed magazines). But they are retailers, albeit ones which skilfully exploit media content. And the UK’s supermarket chains are responsible for producing some of the country’s best food-related content online and in print – but it’s all serving the core retail business.
The point is that the e-commerce operations, growing strongly from a small base at Immediate, might actually do much better if they were the primary business. For all the “new” digital skills that Tom Bureau has brought to a once old-fashioned magazine business, it is still dominated by print magazines. That is reinforced by the pedestrian ‘RT Travel’ branding, which even conflicts with an independent company called RT Holidays. It is actually quite difficult to understand why Immediate has not sought to develop a new future-proofed e-commerce brand distinct from Radio Times. That is a clear option for the future.
The role of traditional media in e-commerce is not, of course, uncontroversial. How far can media go in competing with their own advertisers or moulding their reader-trusted content in order to promote sales? And can media companies really become ‘fully-fledged’ retailers? Those questions can be as hotly debated as the ones about the longevity of print – and they are linked.
The way that retailers (and increasing numbers of other digital operators) are using printed magazines for content marketing helps to identify part of the future of hard copy. But it doesn’t make them media companies. Every company is in media now, even if the profits come from retail.
The online cycling retailers with content-rich web sites are, after all, competing directly with Immediate’s own BikeRadar. The integration works but, as business schools have been teaching for decades, companies need to understand precisely what business they are in. The bulk of the portfolio of Immediate and other specialist and hobby publishers across the world justifies total retail-media integration. There are increasing numbers of specialist companies and markets where this neat mix of ‘content, community and commerce’ is working perfectly – and profitably. But the major consumer markets (like those served in the UK by Radio Times) with powerful e-commerce and digital media groups might ultimately require single-minded retail skills – and to be cut loose from nerdy audiences for cycling, embroidery or extreme sports.
Whether or not the name of “Immediate Media” survives the coming private equity divestment, Tom Bureau’s exciting company seems set to influence the future strategies of magazines and retailers alike. Keep watching.
8 May 2016 UPDATE (from City AM):
Immediate Media, the publisher of some of Britain’s most popular magazines like Radio Times and Top Gear, is rumoured to be on sale for £300m. According to the Sunday Times, the publisher’s private equity owner Exponent is interviewing advisers for handling the sale that is expected to be completed before the summer. One of Britain’s biggest magazine publishers, Immediate Media sells 74m magazines every year including BBC titles like Good Food, Homes & Antiques, Gardeners’ World, and Match of the Day among others. The media house also owns other UK consumer titles like Triathlon, Urban Cyclist, You and Your wedding, and Horrible Histories.
The company boasts over one million subscribers and reaches 33m people online every month. In April, the publisher launched Clangers Magazine for three to five-year olds, based on the hugely popular CBeebies show. The magazine house, which is said to make profits of £40m a year, was formed in 2011 as a merger between Bristol-based Origin Publishing and publishing house Magicalia. It employs over 1,000 staff at its offices in London, Bristol, Camberley and Manchester. Last year, it was named the “Media Company of the Year” at the British Media Awards. (www.cityam.com)
UPDATE 12 January 2017: Hubert Burda Media, the Munich-based technology and media company, today announced the 100% acquisition of Immediate Media (formerly BBC Magazines + Magicalia) from Exponent private equity. Immediate claims to be the UK’s leading and fastest-growing special interest content and platform company. It publishes Radio Times, the world’s first listings magazine and the UK’s most profitable magazine brand. Radio Times’ performance is a UK stand-out in other ways: its 668k paid circulation is reasonably steady with almost one-third of the total accounted for by posted subscriptions.
Immediate “engages over 19m passionate consumers each month, offering them world-class content and innovative new products and services, including e-commerce and TV shopping”. The company is believed to have a subscriptions database of more than 1m.
Immediate made £35.4m of EBITA profit on its £169.5m revenue) in the year ended 31 March 2016. It is believed that Radio Times accounted for about 50% of the company’s total profits.
The Christmas 2016 “double” edition of the listings magazine is now known to have sold 1.7m newsstand copies, at a cover price of £4.50 – 40% higher than three years before. This issue of Radio Times had net newsstand revenues of some £4m – before adding in subscriptions and advertising revenue. So, it is likely that at least 10% of Immediate’s total profits (or up to £4m) were generated by this single edition of its bestselling magazine.
Hubert Burda Media and Exponent have not disclosed financial details of the sale. But it is believed that Burda have paid £265m – more than twice what the private equity company had paid five years before. So it is likely that, with profits earned, Exponent’s investors have more than trebled the value of their investment in the former BBC Magazines.
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