What the Selling of Forbes Tells Us about the State of Business Media (Part I)

According to the New York Times media columnist David Carr, Forbes will be sold to an international company sometime in the next few months. You can read his article, "Foreign Buyers Eying Forbes Magazine, a Chronicler of the World’s Wealthiest." 

But here are some lessons learned, gleaned from the article and our experience:

• Standalone magazine companies are at a disadvantage to conglomerates that can spread costs and profits across a family of magazines, according to Carr. For the most part Carr is right -- but Forbes actually publishes several other titles -- ForbesLife, Forbes Europe, Forbes Asia as well as 29 international editions. (It's probably not a good time to purchase advertising in Forbes Russia, Forbes Ukraine.) Forbes also runs a very popular website (more on that below) and RealClearPolitics.com family of website. Our point is: it's not just publishing a range of publications -- it's publishing magazines that reach a range of readers. After all, if you put all your eggs in one high-value Birken bag, when advertisers pull back on your demographic, you could get hit 29 times.
• Sometimes selling isn't a matter of making money but in preventing additional losses. The estimated price that Forbes may sell is $250 million (though some say that estimate is low). But Elevation Partners paid $264 million for a minority stake -- so their portion is certainly underwater. Carr says the Forbes family is unlikely to make money from the sale. The question becomes: why sell? Seems clear that the reason is that it continues to be tough for media companies to build value.
• The value shoring up Forbes is not its popular website -- but its conference division. The publication is probably generating tons of revenue from its growing number of conferences, including luxury cruises offering insights and access to top stock pickers. Conferences have re-emerged for Forbes and other publishers as a profit generation tool. Conferences may have been a difference in the valuation of BusinessWeek for $5 million (and the assumption of debt) when it was acquired by Bloomberg. The same for Newsweek, which had no conferences and was sold for $1 and the assumption of debt. The bottom line lesson: perhaps leverage a successful conference series and turn that into a multimedia property (which is what TED is doing). 
• Forbes could generate more money by establishing a paywall around its content. Carr makes the point that Carr makes the point that others -- including the Times and Wall St. Journal -- have successfully boosted revenue by establishing paywalls around their content. Yet Forbes.com aggressively promotes the website in a bid to generate views that can translate into higher revenue. It has been very successful in developing a community of columnists (many of them people trying to position themselves as thought leaders). The bottom line here: there's still no single, accepted way to generate sustainable revenue online -- neither free access (and higher revenue from advertisers) or paywalls (and subscription fees from access) are really replacing print advertising revenue that will never return to pre-mobile/digital levels.
• Circulation is holding steady but it may not generate steady revenue. Last year, Forbes was offering print subscriptions for $10 -- that's a steep discount from prior years. Keeping circulation high is important to advertisers (and the amounts you can charge them) but discounting clearly hurts profits.
• Forbes is very creative in finding revenue. It's been a leader in pushing advertorials. It can sometimes feel like a 1/5th of the magazine is devoted to advertorials. But more significantly, Forbes is a pioneer in native advertising (though I don't think that's the term they use) through its BrandVoice section on the website and in the magazine. Here's how Forbes describes it: "Forbes BrandVoice™ is an integrated and by-invitation content-sharing platform ...(that) is an innovative approach to integrating marketers’ content with Forbes’ editorial and users’ content — allowing marketers to demonstrate their thought leadership on the Forbes platform using the same tools as content creators." What does it take to receive an invitation to be a Forbes BrandVoice partner? We've heard estimates of $800,000 in annual advertising just to get to the point of discussing BrandVoice. (In other words, BrandVoice spending is on top of a company's annual advertising buy.)
• Not all ways of charging access are reader friendly. While Forbes doesn't charge to access its website, it does charge to access its content via your iPad. If you're already a subscriber to the print edition, Forbes charges $9.95 for an annual iPad subscription.  When you consider Forbes' $10 print subscriptions price, charging $9.95 to access the iPad version is like a 100% tax increase.

Carr makes the point that it's ironic that a magazine with a strong heritage of America-first is now being sold to an international company. I agree -- but I also think that the sale (likely to an Asian company) makes sense because Forbes is more likely to be seen as a trophy property for companies based in Asia than anywhere else in the world.

What Carr doesn't discuss or speculate is how an international owner will change Forbes. For that, stay tuned! You can check out a subsequent look at the selling of Forbes here. 

2012 Trends Report Card, Part IV

Here's Part IV of our report card of how we did with our 2012 predictions. 

 Ongoing stories we’ll see covered in the media

·         The 2012 election, healthcare, taxes and tax reform, and job creation.  The candidates, the process, the election as horse race, Super PACs, the strength and weakness of the Tea Party and the Occupy Wall St. movement (as well as the 99% vs. the 1%), and sometimes the actual issues. Grade: A – of course this was a gimme but it would have been odd to leave this one out.

·         The euro and euro zone economies and the debt crisis -- particularly troubled Greece and Italy and stable Germany and France -- and the impact of all of this on the US economy. Grade: B because while the EU economy did generate U.S.-based coverage, it was not as big a story in 2012 as it was in 2011.

·         Facebook’s IPO and its implications for the rest of the social media sector. Grade: A- because we did not predict that it’s IPO would be flawed.

·         The battle between Facebook v. Google+. (Interestingly, Twitter won’t be considered even an also-ran in this story.) Grade: B- because Google+ has not competed effectively with Facebook.

·         The battle between huge companies. Apple v. Google v. Microsoft. Oracle v. Everyone Else. Grade: B+ because we did not mention Apple v. Samsung.

·         The state of the media – because the media love reporting on their competitors as well as themselves. Grade: C because this was basically a non-story in 2012.

·         Online privacy will continue to be an important story. Grade: B, which would have been higher if we had linked online privacy with Facebook’s changing privacy policies. Sample New York Times article: “Facebook Changes Privacy Settings, Again.”

·         Online reviews – specifically whether they are from real customers who have bought the product or whether they are positive phony reviews paid to counteract real negative reviews – will generate coverage.  Grade: B- because while this generated some attention (like in a Mr. Know-It-All column in December’s Wired), this was not a big story.

·         The economics and environmental impact of fracking, an efficient but controversial way to extract oil and natural gas from shale. We expect climate science and global warming to be issues during the general election, specifically when discussing regulations. Grade: B.

·         Net-specific issues such as net neutrality (the need to prevent broadband providers from blocking access to competitors), the e-tax loophole (in which e-retailers don’t require customers to pay sales tax, which gives Amazon and others an advantage over bricks-and-mortar retailers that do charge customers sales tax), and anti-piracy legislation (Stop Online Piracy Act aka SOPA and Protect Intellectual Property Act aka PIPA). Grade: B+/A-. Sample Wall St. Journal article: “Cybersecurity Bills Duel Over Rules for Firms”; sample New York Times article: “Security Bills Bruised by Lingering Fight.”

·         Cyberattacks on B2C websites. As more high profile sites get hacked, expect more reports that reinforce fear and uncertainty of online commerce. Grade: A because this got a lot of attention this year. Sample Wall St. Journal article: “Cybersecurity 2.0: Encouraging companies and intelligence agencies to share information freely is a good first step.”

·         Cyberwarfare: the act of attacking one’s enemies by hacking. It’s happening on both sides in the Israeli-Palestinian conflict and the US media has reported that China is using cyberwarfare against the US, including corporate espionage, so expect it to spread elsewhere. Grade: A+ because this got a lot of attention this year. Sample New York Times articles: “Asleep at the Laptop,” “Expert Issues a Cyberwar Warning,” “Mutually Assured Cyberdestruction?,” and "U.S. Suspects Iran Was Behind a Wave of .”  Sample Bloomberg BusinessWeek article: "Life in Cyberia: A new brand of warfare is under way. Our five experts discuss the best defenses."  Forbes:  “Gauss: Yet Another State-Sponsored Virus?” Bloomberg BusinessWeek: “Cyberwars Reach a New Frontier: the Airport.” Wall St. Journal: “Iran Blamed for Cyberattacks; U.S. Officials Say Iranian Hackers Behind Electronic Assaults on U.S. Banks, Foreign Energy Firms.”

·         The rising threat of Chinese businesses, the Chinese economy and the Chinese military. Grade: A because this got a lot of attention this year. Sample Wall St. Journal article: “FBI Traces Trail of Spy Ring to China” while Bloomberg BusinessWeek made this a cover story: "Inside the Chinese Boom in Corporate Espionage" and the New York Times reported: "The Electoral Math of Romney's Stance on Trade with China."

·         One story not likely to be covered for most of 2012: Tim Tebow. Not that his 15 minutes is up. Expect the media to regain its interest with the start of the next NFL season. Grade: C- because Tebow continued to generate media attention, though not at the level of 2011.

We'll issue more grades in tomorrow's post.

In the meantime, let us know if you have any questions or comments.