VSS report bodes well for b-to-b media
By Sean Callahan
Veronis Suhler Stevenson's recently released “VSS Forecast Mid-term Update” on the communications industry contained good news for the b-to-b media sector. The targeted media category, of which b-to-b media is a part, is expected to grow 8.1% this year, according to VSS. The b-to-b media portion of the category is expected to grow 5.5%.
Total U.S. communications industry spending is expected to reach $1.185 trillion this year, a gain of 5.6% over last year. That growth rate will outperform U.S. GDP growth this year, which is projected to be 4.4%.
John Suhler, president of VSS, spoke with Media Business about the potential effect of an improving economy on b-to-b media, on how innovation is at a premium in the sector and how b-to-b media executives are transforming their businesses.
Media Business: What impact will an improving economy have on b-to-b media?
John Suhler: We show b-to-b media flat over the years 2005 to 2010, and we show b-to-b media as having slightly better than GDP growth in 2011 and 2012. Our CAGR for (b-to-b media through 2015) is 6.1%. That's pretty good stuff. Five years ago, b-to-b publishers were just starting to realize the seriousness of the game ahead, and I think their focus on live events and their focus on digital has been tremendous. Five years ago, the distinct minority of publishers were actually funding developer staff roles and their websites in a blue-sky sense. Today, it's a distinct minority that are disregarding (these trends) and having their heads in the sand. B-to-b publishers have really realized that the magazine may not be the center of the wheel; it may be a spoke. And that the definition of community, which the business magazines do so well, has many more channels that a publisher has to think about, including the one they're least comfortable in thinking about, which is a pure portal, industry vertical that is not necessarily branded with their periodical name.
The 2005-2010 period (brought) a bruising restructuring of the economy. I don't think it was just digital alternatives and maybe the commoditization of advertising pricing structures (that caused that downturn). The downturn took a serious toll across all advertising media, and b-to-b was not spared. Since the second world war, improving, expanding economies drive advertising- and marketing-expenditure growth disproportionate to the GDP growth. And when you end up having a slowdown and you have disproportionate contraction, you end up having an expansion that's prolonged.
MB: What is your outlook on M&A activity in b-to-b media?
Suhler: Over the last 10 to 15 years the private equity involvement in b-to-b media has been significant and broad, so there's hardly a bank that hasn't had either a direct credit or a syndication participation in a b-to-b media credit. Some of them have done well; some of them have experienced restructurings.
Today, b-to-b media financing capability is still on the conservative side compared to other areas that we see day in and day out. It's not that easy for a b-to-b media company to get credit lines to enable them to acquire businesses, unless they're really up the food chain in terms of size—companies of $100 million or $200 million revenue, of which there aren't that many, that have a nice mix of live and digital. The smaller guys who are more print-dominant—not so easy.
MB: Would you say innovation is at a premium in b-to-b media?
Suhler: It's much more about developing digital products and digital conversions, and creating new live events, and integrating what used to be separate editorial and advertising teams. That doesn't go anymore. There is no such thing anymore in a b-to-b environment as separation of church and state. Smart editorial people are involved with innovating digital and live event products. It's just a fact of life. The successful companies have integrated processes, integrating thinking as opposed to editors going one way and marketing people thinking another, and all being frustrated that they can't really work together.