Managed retreat

2 March 2008

There is a stark statistic in the presentation that United Business Media used in the analyst call and webcast from Friday, when the company said it had decided to split CMP Technology (formerly CMP Media) into four units. Headlined "the CMPTech print experience", the text alongside two graphs illustrating the slump in print advertising noted that the 29 per cent drop in ad sales from 2001 to 2002 was larger than the total revenue that CMP Technology (as was) expects to see during 2008.

Think about that for a moment: print ad sales for CMP Technology this year will be less than a third of what they were in 2001, which was not a great year by any stretch of the imagination. If you assume a similar fall in print advertising sales to that seen from 2006 to 2007, the four units that made up CMP Technology will be lucky if they can achieve a quarter of the $388m total print-ad space sold in 2001.

And no, online did not make up for the shortfall. Using the graphs in the appendices of the presentation, it seems that print advertising accounted for around 70 per cent of divisional revenues in 2005, dropping to around 35 per cent in 2007. Online advertising was less than 15 per cent in 2005 and has rose to just 20 per cent in 2007. It means that CMP Technology was down 30 per cent on total advertising sales from 2005 to 2007. This is priced in UK pounds rather than US dollars, so the slide in the value of the dollar has taken its toll as well. Even so, it's still a fairly large fall.

Despite that, CMP Technology turned over roughly the same revenue in 2007 as it did in 2005 – events and recently acquired data and information services made up the shortfall. Recent cutbacks – 200 positions gone – helped the company push up operating margins, although they are someway behind other parts of the company. Looking at the slump in ad sales, you can see why those job cuts were so deep.

In the two-year period from 2005 to 2007, print-ad revenues dropped by more than 45 per cent. It is not clear what happened between 2002 and 2005, but it seems that the move away from print ads in CMP's technology titles accelerated in the last two years. At CMPi, the decline was slower but not that far behind at 35 per cent. And these are titles that are way less tech-centric. Until recently, CMPi did not even report online ad-sales numbers and, today, they account for a tiny percentage of revenues for that group: less than 5 per cent.

CMP Technology's revenue split for 2005 and 2007

One thing is clear in all this: UBM is betting the future on events and paid-for information. That is not all that dissimilar from the strategy being pursued at Reed-Elsevier, which put its trade-magazines operation up for sale in late February. The difference at UBM is that, unless it wants to chop out magazines individually from the operating units, the company will hang onto the controlled-circulation magazines while it builds up other services, presumably, just as long as their costs can be controlled so that they don't lose money. The problem is working out where the near-term bottom in this market is.

I believe it is possible to arrest the flight from print in controlled-circulation magazines and newspapers like EETimes, at least until technology finally renders paper obsolete. But that does rely on a reality check at the remaining advertisers, as well as those who have quit the market. The problem, at the moment, is that an increasing number believe that vanity publishing will give them as good results as going into independent publications. That kind of thinking will make them concentrate more on vendor events and inhouse mags that nobody attends or reads. When they pull out of that cycle, they suddenly realise they have no effective way to promote to people who aren't already customers (and even those who are hate them because of all the sales spiel foisted on them at every opportunity).

However, until there is that realisation, the publishers will continue their managed retreat not just from print but from magazine publishing in general in favour of more profitable areas. Or they may decide to play a short-term game and just go for the vanity-publishing market. Either way, if advertisers thought some of the bigger technology publishers were banking on their business...think again.

For some other viewpoints on the breakup of CMP Technology take a look at the posts from former EETimes editor-in-chief Brian Fuller and EDA PR specialist Lou Covey.