Its a sad story, but one we must learn from. Businessweek was founded in 1929, and by the 1990′s was seeing a circulation of more than 1 million people. It used to carry more advertising pages than any other US magazine (up to 6000 pages in 2000), and was a profitable, valuable, and well-regarded publishing success. And as the digital publishing revolution began, BusinessWeek was there – experimenting, spending, and learning.
In 2006 the print magazine was making $110 million in revenue, and almost another $20 million online. It was charging $25 CPM for online inventory, and selling 79%.
A few long turbulent years later, and print revenues have almost halved to $60 million, with ad pages falling to around 1,250 in 2009. Online, traffic has grown, and revenues have risen marginally (to $20.5 million), although CPMs have slipped and sell-through of online inventory has fallen dramatically. It’s the classic case of digital pennies not equalling print pounds.
The troubling thought about the Businessweek story, is that despite making innovative and positive moves forward with their online offering, despite spending a huge amount on digital, despite cutting costs, they will lose over $40 million this year, and are probably going to be sold for a nominal $1. Ouch.
According to many ‘digital experts’, they made bold moves that should have turned out better:
- They built a strong online offering.
- They spent a lot to build a strong and valuable social networking/bookmarking element to their service. Which they then promoted heavily across their properties.
- They were one of the first business publications to see the value in integrating with the LinkedIn API.
- They launched a range of blogs (currently 28 at last count).
- They engaged readers in creating content, as well as crowdsourcing questions for interviews with business leaders.
- They experimented with multiple channel delivery, including e-paper.
- They launched iPhone and Blackberry apps to ensure their audience could get the content anywhere.
- They were one of the first mainstream media sites to build upon the Twitter API.
- They talked the right talk.
They did the right things. But it cost too much. As an example, the social networking element they launched, Business Exchange, has cost $21 million over three years. Even now it makes around $600k a year in revenue. As Rafat Ali asked, “With tons of white label social net services out there, and the value of being a media org, BW couldn’t get a cheaper and better deal?”
But digital spending isn’t what is killing Businessweek. The trouble is that all the above simply tries to achieve the wrong objective. It is all about maintaining the existing structure, the existing editorial standards, and existing cost-base, and not about evolving into an entirely new one that could survive.
Let’s do some quick (and no doubt wildly inaccurate but hopefully directionally correct) maths. Based on what Businessweek currently makes off each unique monthly user ($3.64 per year), in order to cover this year’s loss, online traffic would have to more than triple to 15 million monthly uniques. And that is just to break even. And that assumes that the print side of the business maintains its current revenues (which is probably unlikely). And it also assumes there are 15 million people ready and waiting to read what Businessweek has to offer. Fantastic, so the solution is just somehow, someway, drive traffic. EXCEPT that as mentioned above, Businessweek does not even sell all their online ads now. In fact they now sell only 38% of their inventory. So even if traffic rose dramatically, Businessweek would likely only see a very marginal growth in revenue from display advertising.
As Jeff Jarvis recently wrote about newspapers, the problem is simply that they have been guilty of “not running a business. It was not creating a sustainable P&L.” The old cost structures just don’t work in the modern media landscape. Howard Owens, who has run online-only news sites since 1996, explained his revelation:
In a market where the newspaper newsroom might cost $10 million, I knew how to make $1 million online, or even $2 million, but I didn’t know — and still don’t — how to make $10 million. So if I can make a million online, why do I need operate a $10 million newsroom, especially given the greater efficiencies of online publishing?
Businessweek, as a print magazine, is all about the last 5%. That is to say, the finalising, careful editing and re-editing, and re-editing again, the intricate design decisions, and the polishing. It’s the last 5% that keeps 400+ people employed. But the tragedy is, that despite the historical value of this type of approach, it just doesn’t matter that much anymore. Only 16% of Businessweek’s online readers viewed original Businessweek content (the stuff that really costs). The rest looked at slideshows (45%) and other content aggregations. That’s incredible. And it underlines the business case for changing the way major publishers create content.
As Clay Shirky wrote:
“If the old model is broken, what will work in its place?” To which the answer is: Nothing. Nothing will work. There is no general model for newspapers to replace the one the internet just broke.
The new owner of Businessweek (if it ends up being sold), would be wise to:
- Push up the print cover price, to improve profitability.
- Continue moving the print version to provide analysis and in-depth reporting that is separated from the fast-moving cut-and-thrust of news publishing.
- Keep building the digital strategy, supplementing original content with aggregations and reader-created content, pushing out via multiple channels, engaging readers with social elements, and publish for the ‘audience of one’ using personalization methods.
- As the most fundamental point, take a step back and plan the staff requirements from scratch. Everything that can be done by the crowd, the audience, technology, other complementary or even competing services, should be done those ways. And everything that doesn’t add tangibly to the bottom-line, must be ignored in the first instance.
The last one about staff costs will be especially painful for all concerned. But it is the only way. Whilst mainstream media stood back and criticised new publishers such as Techcrunch for not having high enough editorial standards, or not providing enough original thought, it is now the turn of the growing ranks of online-only publishers to say, “One word, two syllables: profitable” (yes that’s an Office reference, not a typo…). Oh and growing like a weed. And not drowning in debt obligations. And hiring new staff.