May 3, 2021

What Next for Immediate Media? [Contributor]

Ten years ago, the BBC and KPMG were organising an auction for the UK state-owned broadcaster’s magazine publishing. Within three months, Exponent private equity had outbid Bauer to acquire the magazines for a published price of £121m, which became £113m during due diligence – 6 x operating profit and 60% of revenue. The deal gave ownership of six magazines outright and licensing rights to more than 20 others. Six years later, Exponent sold what had become Immediate Media to Hubert Burda, of Munich, for £270m having also made more than £100m in trading profit.

In a decade when the magazine industry everywhere has been shredded by lost advertising and readership, this one company has notched up nine consecutive increases in EBITDA, and overall revenue growth of 65%. The company’s headcount has grown by almost 40%.

The transformation of the former BBC Magazines is made all the more remarkable by the fact that its flagship brand is the 98-year-old programme listings magazine called Radio Times. The world’s oldest broadcast listings magazine was launched by the BBC in 1923, and kept its name when it moved into TV 13 years later. It had once generated 25% of the BBC’s total revenue, was Europe’s largest circulation magazine, and has long been the UK’s most profitable. Weekly circulation peaked at 8.8m copies in the 1960s, and 11.2m copy sales of its Christmas issue in 1988.

In the decades before the BBC augmented its revenue from the UK’s quaint TV licences with £1bn+ of profit from programme exports and worldwide channels, the broadcaster had been ambitious to expand its magazines.

In 1989, it acquired the London-based customer magazine pioneer Redwood which had launched advertising-funded titles for American Express, Marks & Spencer and British Rail. It always seemed like an odd deal for the BBC whose networks were free of advertising. But the Redwood team launched some of the first ‘TV masthead’ magazines in conjunction with many of the BBC’s biggest programmes: The Clothes Show, Gardeners’ World, and world-beating Top Gear. The magazines were the foundations of a successful specialist portfolio across almost every area of BBC television output. But rival publishers screamed “foul” as the publicly-owned broadcaster promoted its magazines in airtime not available to competitors.

As industry protests intensified, the Redwood customer magazines were sold back to their founders in 1993. But the BBC continued to build its portfolio of programme-branded magazines, including Good Food, Top of the Pops, Music, Sky at Night, History, and Nature. The magazines were part of BBC Worldwide (now BBC Studios) which exported programme content, channels, and merchandising, in order to subsidize UK TV, radio and online services. In 2004, the BBC stepped back into controversy with a decision to invest in enthusiast magazine publisher Origin. And, in 2007, it further outraged commercial rivals by acquiring The Lonely Planet travel guides for an egregious £132m, only to recoup just £80m when pressured to sell-off the business six years later.

Unsurprisingly, those deals proved to be two commercial steps too far and led to the 2011 auction of BBC magazines.

Exponent’s winning bid was lower than had been predicted. But, although Bauer came a close second, many other publishers had been wary of buying the listings magazine which accounted for most of the profit and whose demise seemed to be inevitable. The package was also complicated by licensing deals to publish some of the magazines and to use the BBC brand. In the event, the trusted brand has helped to ensure that even relatively small magazines about history, astronomy, and music can become safely profitable.

Today, Immediate Media is:

  • £241m revenue / £42m EBITDA (2019)
  • 63 magazines, 25 events
  • 2.3m average circulation
  • 74m global online users
  • 1,100 employees

Those 2019 financials represent nine consecutive years of growth. Revenue increased by 65% and EBITDA by 90% during 2012-19. The draft numbers for pandemic year 2020 show revenue/ EBITDA of £200m/£35m. This year, Immediate is budgeting a bounce-back with better-than-2019 results, and profit margins back to almost 20%. Wow.

The continuing profit growth is despite the sheer scale of the 63-magazine portfolio. Immediate’s specialist subsidiary (the former Origin company) in Bristol – 120 miles from London – accounts for about 25% of Immediate’s total revenue but 40% of the people – and profit margins that are consistently less than half of Immediate’s 19% average. But a suspiciously long-tail portfolio doesn’t seem to be getting in the way – yet.

Immediate’s best-in-class performance was underlined by average circulation figures for July-December 2020 which – at 2.3m copies – were 9% up on the previous year. And, in a UK market still dominated by news-stand sales, Immediate has more posted subscriptions than anyone else: 1.1m which was 14% up. The ABC figures showed double-digit growth for Immediate’s food, gardening, and children’s brands including BBC Good Food, BBC Gardener’s World, and Frozen.

The publisher has been launching new products in print as well as digital, building increasingly ambitious web sites and e-commerce channels, and investing in a new systems infrastructure. But the most remarkable thing about Immediate is that Radio Times, the magazine brand whose future prospects once scared off would-be buyers, is still the star performer.

Somehow, even though the UK’s national daily newspapers offer free listings magazines with their strong-selling weekend editions and increasing numbers of people use ‘electronic programme guides’, the appetite for these paid-for TV weeklies continues unabated. The print is declining, but relatively slowly, and digital is growing strongly.

Radio Times is (by far) the UK’s most profitable magazine. Although circulation has declined 45% in the 10 years since it was sold by the BBC, cover and subscription prices have trebled. So profit has soared. The two-week Christmas edition last year sold 1.5m copies at £5 (double the cover price of 2010). The edition accounted for more than 15% of Radio Times’ revenue in 2020. The world’s first listings magazine also has a powerful digital presence – with up to 25m monthly uniques. But there’s more. Radio Times sells 230k news-stand copies (47% of its weekly circulation) at a cover price of £3.50, whereas its leading competitors are: TV Choice (Bauer) selling 1m copies at 69p, and What’s on TV (Future), 690k copies at 75p. This is one strong market leader.

Radio Times accounts for fully one-third of the revenue of Immediate Media and more than 55% of its profit. It and BBC Good Food magazine (bought by Immediate for £32m in 2019) may together account for more than 65% of total profits. What is the UK’s leading food magazine – with a monthly paid circulation of 200k – is (in revenue terms) more digital than print. Its 1.4bn global page-views in 2020 were 69% up on the previous year. It now has revenue of almost £20m.

For all the extraordinary growth of Radio Times – now making more profit than at any time in its history – Immediate is a broad-based specialist media company with strong market positions across many sectors. Even the 45% of profits not made by Radio Times are equal to the best profit made by BBC Magazines in the year before it was sold to Exponent.

The success defines Tom Bureau who has been the company’s CEO throughout the decade of Immediate Media. Back then, he was one of a small group of forty-something media bosses who combined the experience of traditional media and digital insurgency. They were the people who had a better chance of getting the balance right.

Bureau had seen the potential of online in the early 1990s, and co-founded Business & Technology magazine. When they sold it to Felix Dennis in 1996, he and his partner cannily kept the online technology with which they then developed the Silicon B2B tech site.

The Silicon Media Group had a glittering launch in 1998 among the dinosaurs at London’s Natural History Museum – intended to symbolise the death of print journalism. Yes. But, four years later, Silicon itself fell victim to the (first) dotcom collapse and to some disastrous expansion in France and Germany. In 2002, the company’s assets were sold to CNET for a small fraction of the £30m that shareholders had invested.

Bureau bounced back as UK managing director of CNET. In five dramatic years, he steered the US-owned company from a single business information site to become the UK’s biggest online-only publisher. Its five UK web sites (CNET, GameSpot, silicon, ZDNet UK, and AtLarge) had a reach of 10m unique users – and were highly profitable. The whole CNET international business was acquired by CBS in 2008. But not before its CEO had left to become “a digital entrepreneur”.

In 2007, he teamed up with Exponent to bid for the specialist division of EMAP consumer magazines, alongside Hearst which thought it wanted the company’s mass market magazines. Hearst’s consolation in losing out to a Bauer knockout bid both for EMAP’s magazines and radio stations was the ensuing collapse in the profits of the mass market weeklies that had most interested it. A close escape.

Bureau became CEO of the specialist magazine-turned-digital publisher Magicalia, owned by Exponent. Then, in 2011, came the acquisition of BBC Magazines for a pro rata price some 50% less than Bauer’s eye-watering purchase of EMAP four years previously.

The former CNET boss declared that the newly-formed Immediate Media was “geared towards developing its e-commerce proposition and shifting the business away from print to a content and services platform. Retailers have been good at becoming publishers, it’s about time publishers got good at becoming retailers. We want to think more like a retailer and having the right database environment to underpin this is important. It’s about engaging our customers and developing a relationship with them, creating a rich, scaled single customer view. Our ambition is to change our centre of gravity from print towards being a content platform and services business, which means putting brands at the centre of our strategic development and looking at the business models beyond print.”

Moving the centre of gravity from print to digital – and becoming ‘media agnostic’ – is easier said than done, especially in a company still thriving on print. But, although print magazines can indefinitely be an attractive, accessible – and relatively low-cost – media channel, they are increasingly likely to be something other than the primary medium in any sector. That shift into a world where once-dominant magazines may become mere ‘content marketing’ for digital services or events is the 21st century challenge for publishers everywhere.

For all its digital smarts, Immediate generates some 70% of its revenue from print compared with 20% from digital and 10% from events (in 2019). But the longterm prospects of media companies will increasingly be measured by the proportion of their revenues that come from readers-users-viewers-members – rather than from advertisers or marketers. That emphasis on paying readers (especially subscribers) may become a more crucial distinction than, say, print v. digital. That’s where Immediate really does differ from most multi-sector magazine companies in the UK: some 80% of its revenue comes from readers. For Radio Times, it’s 90%. Not as old-fashioned as you think.

Beyond that, Immediate’s secret sauce may be its audience focused on the 40-70 year old ABC1s which have some 80% of the UK’s disposable income and have been described by the publisher as “Generation Wealth”. In that sense, Radio Times’ readership is perfectly positioned, with an average age of almost 60 years. The company – like the quality daily newspapers shared by many of its readers – is in a sweet spot,

The task now is to broaden this direct-to-consumer emphasis to step-up e-commerce revenues, which currently total about £15m (or about 7.5% of revenues in 2020), from entertainment, technology, cycling and cookery equipment. Like most magazine companies chasing e-commerce, more than 50% of this revenue comes from low-margin affiliate e-commerce; the fight is on to build direct business and, with it, first party data on reader-buyers. It’s a work in progress.

The trouble is that the sheer strength of the traditional Immediate business can dwarf most of its ‘new media’ initiatives. But one embarrassingly visible diversification was the 2015 acquisition of the shopping channel Jewellery Maker. The deal captured the imagination of Immediate executives, presumably encouraged by Blackstone’s £200m purchase of the Create & Craft shopping channel a few months earlier.

In 2016, Immediate’s new home shopping channel recorded a first time profit of £378k on £5.8m revenue – just before Burda acquired Immediate Media. But that – believe it or not – was the channel’s first and last profit, and was followed by three years of losses. With the acquisition cost, Immediate losses totalled some £30m. It disposed of the £18m-revenue business in 2019. Insiders admit they had under-estimated the complexity of TV shopping and over-estimated the leverage of their craft magazines. But Blackstone got it wrong too – and lost its own investment in a business which had once seemed so promising.

The consolation for Immediate Media, two years later, was the sale of its Hitched wedding business for a windfall gain that neatly cancelled out the £30m of TV losses.

Notably, the Burda people – who talk admiringly of the strong morale and collegiate culture of their UK subsidiary – have forgotten about Jewellery Maker. Their calm acceptance of a risk that didn’t pay-off reflects the entrepreneurialism of a 118-year-old, family-owned company which has grown into one of Europe’s largest and steadiest publishing groups.

Its real rise to prominence began in 1949 with the launch of Burda Moden, now called Burda Style, a German magazine containing sewing patterns for housewives in post-War Germany. Burda now has one of the world’s largest databases of digital sewing patterns.

Across 17 countries (mostly in Europe), the €2.7bn-revenue Burda publishes more than 500 magazines and digital services, including: the German news weekly Focus, celebrity magazine Bunte, and local editions of Elle, InStyle, and Playboy. Hubert Burda ran the company himself for 30 years until 2010, when he handed day-to-day control to former McKinsey consultant Paul-Bernhard Kallen. Burda – which is an increasingly active venture investor across Europe – is admired by magazine people everywhere, and 52% of its revenue now comes from digital. For Immediate Media, which accounts for some 10% of Burda revenue and more than 50% of its international business, that digital shift is the prompt for Tom Bureau.

Having this year recruited digital pureplay CEO Sean Cornwell (ex Travelex and Direct Ferries) to manage Immediate’s “multi-platform brands and business models”, the quietly impressive Tom Bureau – as executive chair of Immediate Media – has also become CEO of Burda International. He is now responsible for growing the 16% of Burda revenue outside Germany. That may mean further expansion in Poland, the company’s third largest market, and elsewhere in Europe. But further investment and acquisitions in the UK are also expected. Online learning, education, and personal development is a likely target.

The 10-year story of Immediate Media is unmistakeably about how Radio Times is funding the transformation. In many ways, it is much more than a broadcast listings magazine. It has a good volume of non-listings content and, crucially, the kind of brand resonance enjoyed by the likes of Australian Women’s Weekly, Good Housekeeping, and Time magazine.

All four are legendary magazines with powerful, trusted brands – and the opportunity to future-proof their business models. But that takes some doing. The future of print-centric media must be based on using the power and profits of legacy brands to create a “runway” to new opportunities, including:

  • Digital services in existing markets
  • E-commerce
  • New all-digital services
  • Events and experiential

Such strategies can inevitably conflict with print brands and that is the point. Immediate Media has used print profits to create the team, culture and digital infrastructure necessary for a future well beyond magazines. But major digital adventures outside the existing brands may create familiar legacy media challenges: how readily will the company risk competing with its own traditional brands?

There’s a long list of traditional media which have suffered at the hands of all-digital competitors able to take advantage of an incumbent’s reluctance to compete with itself. Insurgents have no such hangups.

In a magazine publisher where most employees are involved in print – even though the future is all about digital – ground-breaking innovation risks being suffocated by current pressures. But magazine companies might heed the lessons of newspaper publishers Axel Springer and Schibsted which smartly rolled out their digital classifieds business in “new” geographical markets where they had no existing newspapers to defend.

All companies must commit to R&D investment. Of course. But the strategy should also involve giving some senior executives the independence to create the products and services of the future – free from the constraints and cautions of existing business. Nobody really knows what the future profitmakers will be: some low-cost ancillary developments from existing brands might become major products and services, but you wouldn’t bet on it. Maximum success is likely to depend either on hands-off investment in entrepreneurial businesses. Or a heavy committment to sustained innovation in the main business.

Beyond the formalities of research and consulting, companies must create the time, space and resource for their brightest minds to think big and explore the unthinkable. Success in new product development involves, inter alia, improving the strike rate of innovation. But it’s also about creating a culture which gives ‘fresh air’ R&D a status to match, say, managing the biggest existing brand. That’s the way to motivate the people who can help achieve ground-breaking innovation.

That is, of course, no easier for Immediate Media than for anyone else. But, once its 10th anniversary celebrations are finished, the agenda becomes clear.

Reproduced with permission from Flashes & Flames, the weekly subscription newsletter for media executives and entrepreneurs.