Among the trends noted in the predictions post this week, I touched on the expectation of some consolidation in the applications software market. Earlier this week, Media Services Group (MSG) announced that they were being acquired by NewsCycle.
Media Services Group was established in 1972 and their application software (elan) is used by book publishers, magazines and newsletter publishers and events and conference providers. By their count they have hundreds of customers located in North America and Europe. These customers include AARP, Hearst Business Media, Penton and other similar companies. Increasingly, their solutions are provided to their customers as cloud based services. Their customer base has been large enough for them to hold a well attended annual user conference in Florida each year.
Press release here.
Newscycle was not one of the companies I covered in my technology report because they primarily serve the global newspaper marketplace. With the acquisition of MSG that profile changes but most importantly the heft and scale of Newscycle will provide MGS with more capability to expand and compete.
In their words, Newscycle systems power more than 8,000 media sites and publications around world, including 92 of the top 100 U.S. newspaper publishers. More than 70 percent of the world’s largest news media companies use Newscycle software. For Newscycle, the addition of MSG market knowledge and software capability will allow the company to broaden the marketplace in which they compete.
In the mid-market segment of the publishing solutions market there exists 10-12 software providers which are all in the $10mm to $20 in revenue range. At that level, it can be difficult to achieve business scale, maintain consistent software development and support even modest ROI. This is why consolidation and/or recapitalization in this space is likely since that is more likely to enable a succeeding business to expand, take market share from others and (importantly) compete more aggressively to gain customers. Additionally, the ability to accelerate development will widen the technology gap between themselves and others in the space and allow the software company to add features and solutions that will appeal to ancillary media markets (like newspapers for example) to broaden their competitive market.
This Newscycle acquisition may change the dynamic in the mid-market for publishing technology.