March 9, 2021

Do Events Companies Regret Selling Media Assets?

In the years prior to Covid, there was a major effort by events brands to shed digital assets. Events were in their heyday and they didn’t want to be bogged down with expensive media properties.

Only months prior to realizing the severity of Covid, Informa sold more than 20 b2b titles to Endeavor Business Media. And in years prior, it had made similar deals with Questex and Progressive Digital Media Group. Some of these were print publications, but there were quite a few digital properties included as well.

I never understood why anyone would want to own an events business without also owning an audience-generating media entity. Yes, I get it… the margins were better on events and all of that. But when thinking about it as a complete ecosystem play, the media business complemented the events.

And yet, events were the focus. Media brands were afterthoughts for so many of these companies.

I can’t help but wonder, now that we are starting to see glimmers of hope that Covid might be behind us, whether the event brands that survived will look to pick up media assets once again?

According to a story by the Financial Times (paywall):

New Scientist, one of the world’s leading science magazines, has been bought by the publisher behind the Daily Mail in a £70m deal. 

DMGT, which owns news titles, events and data businesses, said on Wednesday that its media arm had acquired the magazine from a group of investors led by businessman Sir Bernard Gray.

It derives about three-quarters of its revenue from subscriptions and is expected to generate operating profit of about £7m this year on sales exceeding £20m.

It’s incredible to see this considering the magazine was acquired by investors in 2017 for £18.5m. The other point that is worth looking at is it was acquired for approximately 10x operating profit.

There are two ways to look at that. The first is that the business is clearly growing and DMGT believes there’s a big opportunity with New Scientist. The second is that DMGT might be feeling pressure to diversify into new revenue sources; in particular, away from events. Although the story says very little about events, the subhead of the story reads, “struggling events business prompts group to turn to media assets.”

This makes sense to me for the reason I list above… New Scientist has an audience that returns to it regularly, providing a sort of cushion against any volatility in the events business.

But we should pay close attention to the type of businesses that are going to be acquired. As the story explains, New Scientist is predominately a subscription-driven business. Not much of its revenue is coming from advertising.

If we look at the types of businesses that Informa divested in the years prior to Covid, they were predominately advertising-driven businesses. The ones that they kept were high-priced subscription-focused businesses.

In a press release issued by Informa in the beginning of January:

Demand for specialist data and knowledge remained strong throughout 2020, despite the widespread disruption and uncertainty created by the COVID-19 pandemic. This was evident in the consistent performance of our Subscription-led businesses, in aggregate contributing more than £300m of adjusted operating profit in the year and providing the Group with strength in the face of significant disruption to our physical events businesses.

Across the different businesses, renewal rates remained consistently over 90%, Annualised Contract Values positive and forward sales pipelines strong. This is expected to deliver underlying revenue growth for the year of just under 2%, in line with the first-half run-rate.

If events businesses are going to start acquiring media assets, this is where they’ll focus. While I think it misses the point and they’re leaving a good audience on the table by not targeting non-subscription businesses, the recurring revenue gives them the stability they want.

None of this takes into consideration that these events businesses are likely in horrible financial shape, just trying to scrape by until they can get back to physical get-togethers.

But it does make me wonder… is there a play to identify some of the best-known events and legacy publications in a specific industry, acquire them, and relaunch them as a cohesive unit? We know that Covid will be behind us eventually, so that de-risks some of the concern about events never coming back.

To do this right, we can’t think of the businesses as separate. It’s not a media business and an events business. It’s one business that monetizes its users across multiple levels. Yes, the event component might generate a higher margin, but the media side gives you the ability to have negative CACs for the event.

We’ll see how the next year plays out, especially as events start to relaunch.

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Sports betting and media a growing business

According to Axios, casinos are investing a ton of money to create sports betting content with the hope that customers will bet at their properties.

How it works: Media companies make money by referring customers to sportsbooks, Axios sports editor Kendall Baker and I write.

Wynn Resorts’ deal with Blue Wire is meant to help lure potential sports betters to the casino’s online betting arm WynnBET. Blue Wire focuses on long-form sports narrative and conversational podcasts.

Entercom launched a six-year audio partnership with FanDuel last year to co-produce audio betting content. The radio giant acquired the QL Gaming Group for $32 million last year, which includes the sports betting app BetQL.

The above quote only includes a few of the deals that various media and gambling-related sites are working on. On the surface, these deals are compelling, but I think they will struggle.

In February of 2020, I wrote about sports gambling and media:

These are really just glorified ad deals. Sure, William Hill is going to have its personalities appear on CBS Sports content. And sure, CBS is going to look at using data from the bookmaker to make in-depth content that entices users to click over. But at the end of the day, this is just William Hill sponsoring CBS Sports. Throw in a little sponsored content when people from William Hill offer their expertise and voila, you’ve got an advertising deal.

These are the same thing. If Blue Wire, for example, is creating shows and then WynnBET is running ads in it, that’s just an advertising deal. It’s nothing fancier than that.

The right approach for any of these big gambling companies is to outright acquire the media components. You then integrate the gambling and content together in one cohesive brand. It’s the same as how we handle commerce businesses. Affiliate revenue is fine, but it’s likely more lucrative if you’re able to sell your own line of products.

With so much gambling content being produced, I think the big winners will be those that can truly integrate the content and gambling. We’re talking Barstool and Penn National, Fox Bet, and Yahoo Sports. These all have branded sportsbooks.

As more states legalize sports betting, there’s going to be a tsunami of new, prospective gamblers. This is the time for major casinos to take a swing and acquire assets. Unify the brand, the content, and the gambling into one product and you have something very exciting.