Content Matters

Tolman Geffs, of Jordan Edmiston Group, led a session entitled Vanishing Icons.  Along with Carter Bales, of Wicks Group, and Jim Friedlich of Zelnick Media, he raised the question of whether the traditional media conglomerates would succeed going forward.

Tolman Geffs started us off by contrasting a few sets of competitors, one who had navigated change well and another which had failed to do so.
For example, comparing Knight Ridder to Scripps:

Knight Ridder:
-Modest online growth
-CareerBuilder (worked well)
-Real Cities (less so)
-Smaller bests (not enought)
-Dismantled in 2006

vs.

Scripps
-Big bet on cable in 80's & 90's (Food Channel, H&G)
-Now, big bet in online comparison shopping
-Acquired Shopzilla & uSwitch for $1b
-Big growth - 12x trailing EBITDA

Also, Ziff Davis vs. United Business Media:
Ziff Davis Media
-Highly respected b2b publisher
-Bought by PE fund Willis Stein in 1999 for $780 million
-Struggled to expand online
-For sale, but no buyers for whole business

vs.
United Busimess Media
-Now out of the newspaper business but major player in international b2b media (CMP Media,PR Newswire, Commonwealth)
-Acquired 15 companies in 2006
-Significant online and data growth

Carter Bales, Managing Partner for the Wicks Group of Companies, who focus on middle-market companies in specialty media talked about the market environment.  Despite challenges of the recent years, the fundamentals of the business remain fairly  strong.  However, many weaknesses of media conglomerates are showing through.  While the public markets used to reward scale, the advantages of scale and diversification are reduced.  Today, timely-managed companies with top management will produce more economic value than these largely diversified large media companies.  The economy will now reward performance rather than scale.
Private equity has done very well in this market because:
1. These are solid businesses
2. Can be bought when they're not performing well from large companies

Jim Friedlich, Partner, Zelnick Media, a private equity-backed holding company.  They have made acquisitions including a market research company, Columbia Music Entertainment, Naylor Publications and others. 
They have moved print companies to online.  For example, bought Lillian Vernon and have grown it to 50% online, where it had been 15% a few years ago.

Friedlich believes that some of the giants will wake up and thrive ("Gulliver media"), such as NewsCorp and TimeWarner. 

According to Bales, going forward, due to disruptive business practices and technologies, management will matter, as opposed to the old days of monopolistic publishers. 

As context, Geffs displayed a slide showing that Google + Yahoo added $5.5B in revenue in 2006 (49% growth), while the next 10 largest media companies together added $4.6B in new revenue (4% growth).

The clear message was to buy small companies, build them up and sell them off to private equity firms.  Scale is no longer a benefit; it can merely be an anchor.