This is the time of year when prognosticators attempt to handicap the future while, at the same time, trying to explain why they were so horribly wrong with respect to the prior year. I am no different. 2007 saw some stunning developments in the publishing and media space--particularly in mergers & acquisitions—and, broadly speaking, I see several trends emerging. First, I expect more change driven by M & A activity in 2008. Second, as more companies bound by traditional publishing models migrate online and join those already there, the application of technology in our industry will accelerate. Third, we will see a ‘squeezing’ of the value-chain (from author to publisher to consumer) driven by publishers looking to build community models around content and authors.
Associated media markets, such as broadcasting, newspapers and games, also influence our industry in interesting ways. We are starting to see our traditional segment descriptors – publishing, newspaper, broadcasting, information – become meaningless as content becomes ubiquitous and network access (or distribution) becomes universal. Publishers and information providers must expand their capabilities beyond traditional market segments if they want to remain competitive. On a related note, there is an escalating ‘compacting of media’ taking place, where the interests of all media players are converging on issues like rights, piracy, market concentration and access to markets or even consumer attention. (Text) book content, broadcast TV programs, movies, music, games and news can all be delivered via Xbox or Ipod: In this environment, where does the power lie? Who “owns” the customer? And how are content-selection decisions made? A publisher can no longer be one-dimensional and hope to survive, which is why companies like Lexis, West and Pearson are building delivery ‘platforms’ where (traditional) content is only a part of the offering.
In the not-too-distant future, we may look back on 2007 as a significant transition year for the media business. In education, a number of large companies were taken private and will reemerge five years from now as fundamentally different, platform-based companies. The Hollywood writers strike will redefine how content producers are compensated as content distribution expands to the Internet. Journal publishers will trace the history of their ad-based revenue models back to Reed Elsevier’s experiment with oncologyonline. And in the news & information segment, NewsCorp’s purchase of Dow Jones and Thomson’s acquisition of Reuters will radically change the model of information delivery. Even the self-publishing market showed a level of maturity with the consolidation of AuthorHouse and iUniverse.com. Outside our immediate universe (but no less relevant as advertising becomes a more important revenue stream) is the purchase by Google of adserver Doubleclick.
Here are my predictions for 2008:
- Recognizing the potential for aggressive competition, McGraw-Hill will reorganize its business much as Thomson has done. MGH education could be sold to private equity.
Cengage will spend aggressively to round out its content and assessment products with course management and school resource planning tools.
- We will see at least one mega-deal involving, perhaps, D&B, the information assets of McGraw (S&P) or Bloomberg. Following closely on the heels of past investments in tax, legal, financial information, the insurance segment will become a focus of aggressive new investment for information providers.
- It also seems inevitable that there will be some additional consolidation in trade and this could result in a higher profile for Hachette, Bloomsbury and/or Macmillan. One publisher may get out of the self-publishing market but another will jump in with both feet. A company like Lulu.com or the AuthorHouse/iUniverse combination could be targeted by a trade publisher seeking to expand its market and build an author community. More trade publishers will eliminate imprints in favor of theme-specific content.
- The ongoing rumors of a Barnes&Noble/Borders combination will continue until one of these retailers purchases a third. This new combination will not materially change the book retail market, but the combination of the two companies will result in a financially stronger retailer.
- Broadcasters will have a strong advertising year due to the political calendar and the Olympics. (A three-party race for President will be an added boost).
- Facebook and Linkedin will join forces, but we will also see the development of more ‘by invitation only’ social networks. (Potentially, these could be administered by the current incumbents but they are more likely to be new entrants).
- As many as ten brand-name magazines will cease publication or reduce their frequency due to ad-base declines and the rise of specialty web sites.
- News sites (either branded or not) will ramp up efforts to harness niche bloggers and online publishers (either by acquisition or association) in an effort to boost traffic, broaden audience and develop more relevant op/ed and reportage. Incumbent news providers are realizing that acquiring an established online presence with a built-in audience represents a path to growth and they will begin to employ this tactic during 2008.
As always, it looks like the coming year will be an exciting one in media. At least according to me.