International Herald Tribune
09-15-2009
Numbers aren't helping BusinessWeek sale; Weak results aren't helping BusinessWeek's sale ; Besides better numbers, magazine searches for relevance in a Web world
Byline: Stephanie Clifford
Type: News
With bids due Tuesday to buy BusinessWeek magazine, at least six investors are reviewing the publication's financial results, numbers that show a loss last year that is not expected to disappear soon.
Numbers sometimes tell a story. And the figures for BusinessWeek magazine suggest it is having one tough time.
Bids are due Tuesday for the magazine, which McGraw-Hill has owned for 80 years. A handful of potential investors, including Bloomberg L.P., are still looking at the publication. But initial interest was much higher.
BusinessWeek lost more than $43 million last year, though that includes costs like rent and overhead for which, a document sent to potential investors contends, McGraw-Hill charged too high a rate. A buyer would also have to assume much of the $31.9 million in debt.
This year is proving to be not a good time to sell news media outlets. Print advertising is down and readers' attention is being diverted to the Web. Business magazines, including BusinessWeek, Forbes and Fortune, have been hit particularly hard as automotive, financial services and technology advertisers have pulled back their marketing spending.
So far, about six investors appear interested in BusinessWeek: OpenGate Capital, which bought TV Guide for $1 last year; Warburg Pincus; Platinum Equity, which is also bidding for The Boston Globe; Bloomberg; Joe Mansueto, the founder of the ratings firm Morningstar who bought the magazines Inc. and Fast Company in 2005; and Bruce Wasserstein, the chairman and chief executive of Lazard, who also owns New York magazine.
Peter P. Appert, an analyst at Piper Jaffray, said BusinessWeek's future was cloudy. "I don't think the prospect of meaningful earnings recovery is particularly good," he said.
BusinessWeek executives declined to comment for this article, as did a McGraw-Hill spokesman, Steven H. Weiss. He referred a reporter to a July news release in which McGraw-Hill said it was "exploring strategic options" for the magazine.
BusinessWeek was founded in 1926 with a simple aim: to summarize business news each week. It soon became a handbook for managers, covering strategy, marketing and the big issues affecting business, like policy, energy and debt.
Stephen J. Adler, the magazine's editor in chief, joined in 2005 from The Wall Street Journal, where he had a variety of editing assignments, including working on the paper's Web site, directing legal coverage and handling some investigative projects.
When he joined BusinessWeek, he pushed it beyond its traditional mix of corporate coverage, adding columnists like Jack Welch, the former chairman of General Electric; and Maria Bartiromo, a CNBC anchor. He also created an investigative unit that has produced award-winning articles, and was behind the cover article this week on accusations of corruption at Glock, the gun manufacturer.
But Mr. Adler arrived when the magazine was struggling with an existential question: How do you make a weekly magazine relevant in the Internet age?
As the global economy weakened and advertising dropped, Mr. Adler and Keith Fox, BusinessWeek's president, decided the magazine needed to re-establish itself as an essential publication for its core audience of business executives.
In February, Mr. Adler and Mr. Fox called editorial employees into a meeting to announce a solution. The magazine would focus on what executives needed to know for their jobs, and shed its sports, lifestyle and politics articles. And writers needed to consider a business point of view, rather than a consumer's.
"Our mission is to move business forward," said a mission statement handed out at the meeting, and to help readers "make smarter decisions in their businesses, careers and investments."
Some editorial employees liked the change. "We're trying to serve business readers at a time when business is in disarray," said one employee, who spoke on the condition of anonymity because employees are not authorized to speak publicly about the sale. "I think we've done remarkably well doing that."
But other employees saw a different subtext: Their role now was to help business leaders make more money. Though the investigative unit has continued its work, other staff members say their harder- hitting stories have been killed, held or edited into submission.
The regular feature "How to Play It," which advises readers on profiting from articles in the issue and is often written by the reporter who wrote the article, has drawn particular ire. The Sept. 7 issue, for example, urged investing in Monsanto to benefit from population growth.
As the editorial side has tried to find its footing, the business side has been slammed by the economic downturn. BusinessWeek was buoyed by dot-com advertisements in the late 1990s, and had more than 5,000 pages of advertisements in 1999. Last year, it had about 1,900 pages. Its share of the ad pages among competitors -- Fortune, Forbes, Inc. and Fast Company -- has fallen in the last six years.
Revenue from print advertisements has plummeted to an estimated $60 million this year, from almost $110 million in 2006, according to the information memorandum for the BusinessWeek sale. In the same period, advertising revenue from the Web site has increased $897,000, to an estimated $20.5 million this year.
The memorandum hints at why. Though BusinessWeek.com attracts a lot of page views, 45 percent of those are for slide shows, which Web publishers consider a gimmicky way to increase hits. Only 16 percent of page views came from original articles for the six months ended in April. BusinessWeek.com also pulls in just $19.28 per thousand advertisement views, almost a quarter lower than what it was earning three years ago. And it sells only about 38 percent of the available advertising space, down from 79 percent in 2006, according to the document.
Some advertisers seem to be wondering whether BusinessWeek is still the best place for their money. When Intel, once a major BusinessWeek advertiser, recently brought together media partners to talk about future projects, BusinessWeek did not merit an invitation.
"Weekly publications in general have to deal with the fact that the Internet does provide current news, and that's what the purpose of a weekly magazine started out to be," said Petra Arbutina, executive vice president and director for contact strategy for Brunner, a media buying company.
According to the information memorandum, BusinessWeek lost $17 million last year. But that does not include more than $26 million in charges like overhead and rent from McGraw-Hill. BusinessWeek said that those charges were too high, and a new owner could set lower rent rates and reduce other charges included in that $26 million. Still, they are counted as expenses.
Including those charges, BusinessWeek lost $43 million in 2008, and projects losing $41 million this year, before interest, taxes, depreciation and amortization.
McGraw-Hill reduced the magazine's physical size, and in January, it announced its fourth round of layoffs in two years. This time, a quarter of the editorial staff will be cut, along with workers in other departments, for a total of 85 of BusinessWeek's 421 jobs.
With bids about to land, investors and employees are debating the future of BusinessWeek. There are levers to move, like decreasing circulation or raising the magazine's price. But it is still a weekly in a nanosecond world.
"They have to be unique, must-read," said Stephen B. Shepard, the editor of BusinessWeek for 20 years and now dean of the Graduate School of Journalism at City University of New York. "That's the only hope for almost all these publications."
Copyright International Herald Tribune Sep 15, 2009
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