Reed Elsevier isn’t often associated with media’s leading edge.
In fact, despite owning the UK’s biggest consumer magazine company, IPC,
the word that most often springs to mind is ’dull’. This is the company
that in the past 30 years has flirted with, and then run a mile from,
national newspapers (the Mirror titles), satellite television (BSkyB)
and consumer book publishing (Methuen, Heinemann, Mandarin, Minerva,
Secker and Warburg etc). Reed has often appeared to have the desire to
be a big media owner without the nerve or the flair to stand in the
spotlight - preferring the relative anonymity and predictability of
business publishing.
But we may have to reassess that judgment in the light of recent
events.
The word being whispered these days is ’vision’. And Reed has had more
than its fair share of the limelight this year. First a scandal with
overcooked circulation figures at its travel guide division in the US,
then the announcement of a merger with Wolters Kluwer and, to cap it
all, the news that IPC is up for sale.
And perhaps a pattern is emerging - the history of Reed may now be seen
as the story of the rise and fall of media’s infatuation with paper.
Coming in on the coattails of a boom in popular newspaper publishing a
century ago, it started life as a newsprint manufacturer and spent its
first 50 years diversifying into related commodities - ink, paint,
packaging and even wallpaper. But by the 60s it had realised that
content rather than commodity was the more important side of the
business and it began a rapid transformation into a major media
owner.
The rollercoaster years lasted from 1970, when Reed International, as it
then was, bought the International Publishing Corporation (including the
Mirror titles as well as consumer magazines), until 1993, when it merged
with Elsevier, one the world’s leading business and professional
publishers.
The Elsevier deal put an end to the dabbling in consumer media. The
Mirror titles were long gone, sold to Robert Maxwell in 1984, but now
its stake in BSkyB, its consumer book empire and its regional newspaper
chain were obviously destined to come under the hammer.
Reed had already built up a substantial business-to-business magazine
portfolio, including Cahners in the US, and this dovetailed perfectly
with Elsevier’s strengths. The merged company had a clear focus on
providing essential information for business and the professions - trade
journals, guides, databases and textbooks. Professional information is,
the company would argue, the ’purest’ medium there is.
This love of pure information made the group less reliant on
conventional presentation formats, such as paper and ink. Was it time
for a radical rethink? The answer came in 1994, when it shelled out
dollars 1.5 billion to acquire the US outfit, Lexis-Nexis, the world’s
largest online information provider, specialising in legal data. And it
used the Lexis skills base to develop ScienceDirect, an online system
for accessing the information in all of the Reed Elsevier scientific
titles. It also signed an agreement to supply scientific, professional
and business information to Microsoft’s Internet systems.
The merger with Wolters Kluwer makes the new company the largest
professional and scientific publisher in the world. The jewel in the
Wolters Kluwer crown is CCH, a specialist publisher of tax and
commercial law material in the US, Canada and Australia. It also has
legal, medical, scientific and business publishing interests across
Europe.
The new company, whose chief executive will be Cornelis Brakkel, the
Wolters Kluwer chairman, will be operational from next year - assuming
it gets clearance from European and US competition authorities. It will
be worth pounds 19.5 billion and, on last year’s figures, it will have
combined annual revenues of pounds 5 billion and profits of pounds 1.2
billion.
Around 20 per cent of existing Reed Elsevier revenue is derived from
online subscriptions and its strategy is to drive that figure rapidly
upwards. That will come partly from organic growth, but more importantly
from acquisitions - and there will be no shortage of funds. This year
alone, Reed Elsevier has spent pounds 600 million on acquisitions, not
counting the merger, which in any case will largely involve a swap of
shares.
Next year, fuelled by the proceeds of the IPC sale, it will have an even
larger war chest, which is likely to go on deeper penetration of the
online financial information world. Giants such as Reuters or Bloomberg
could be possible candidates.
One thing that will not be a priority in the future is advertising
revenue, which Reed has long considered too unpredictable for
comfort.
In short, the IPC sale signals not just a further retreat from paper,
but from the world of double-page spreads and recruitment tombstones
too.
The move will take Reed Elsevier out of the consumer market altogether,
but advertising agencies still can’t ignore it. After all, it’s out
there with the Microsofts of this world, roadtesting the online media of
the future.
REED ELSEVIER
FINANCIAL BACKGROUND
Reed Elsevier made pre-tax profits of pounds 805 million, up 9.5 per
cent year on year, on total revenues of pounds 3.38 billion in 1996. In
October it agreed a merger with the Amsterdam-based business publisher,
Wolters Kluwer, to create a company with equity worth pounds 19.5
billion
WORLDWIDE MEDIA INTERESTS
IPC The UK’s largest consumer magazine publisher with 70 titles
including Woman’s Own, Marie Claire, Loaded and Country Life. Turnover
in 1996 was pounds 314 million. Now up for sale with asking price of
between pounds 750 million and pounds 1 billion
Reed Business Publishing UK business-to-business titles including
Estates Gazette
Misset Leading business-to-business publisher in the Netherlands
Reed Travel Group Subscription-based travel information, including OAG
World Airways Guide and Hotel and Travel Index
Reed Consumer Books Has sold most of its better-known imprints but is
still trying to offload its illustrated, children’s and reference
divisions
Butterworths Legal and tax publishing
Reed Educational and Professional
Publishing Elsevier Science Scientific journals
Reed Elsevier Business Information Includes US business-to-business
publisher, Cahners (which publishes Variety), and Chilton Business
Group, including 39 US trade magazines, acquired from Disney in June for
dollars 447 million
Lexis-Nexis World’s largest online data provider
MDL Information Systems US scientific information management systems.
