On this side of the Atlantic, we sometimes forget (if we ever really knew) just what a media giant the Hearst Corporation is in the US. Over there, the company isn't just about magazines - it has a dozen daily and 20 weekly newspapers; its Hearst-Argyle subsidiary owns 28 TV stations, representing a combined reach of almost 20 per cent of the US population; and it also owns or has significant stakes in cable channels, including Lifetime, A&E, The History Channel and ESPN.
All of which makes its UK operation, The National Magazine Company, seem rather sleepy and pinched in its outlook. It may have flirted in the past with concepts such as masthead TV, but the scope of its ambition is, arguably, there for all to see above the door. It lives and breathes ink and glossy magazine stock.
So if the company is to evolve -and management in the US is very keen to promote growth - then, while digital is important, it really has to focus on expanding its share of the magazine market. And one sure-fire way of achieving growth in the consumer magazine business these days is acquisition. Preferably an acquisition that gives you an increased presence in the weekly market.
That's why Victor F Ganzi, the Hearst president and chief executive, was reputedly just a little bit disappointed with the news, back in December, that the NatMags bid for Emap's consumer magazine assets had fallen at the 11th hour. It was pipped at the post by the rival publisher H Bauer, which picked up Grazia, FHM and Zoo and the rest of the former Emap stable for a cool £1.14 billion.
NatMags' UK management was admirably philosophical about the whole business, but you have to suspect that a gnawing sense of lost opportunities probably, in turn, had no small part to play in provoking last week's events. NatMags rather abruptly ended its joint venture relationship with Australian Consolidated Press and took full control of the weeklies it publishes: Best, Reveal and Real People.
1. The 50:50 joint venture between NatMags and ACP was signed in September 2004, and Best, which NatMags had acquired from Gruner & Jahr in 2000, was transferred into its ownership. NatMags, under the chief executive, Duncan Edwards, had begun to recognise renewed growth potential in the weekly market (especially in celebrity and sensationalist titles aimed at younger women), but also acknowledged that it might not have the right sort of expertise to take advantage. ACP, with which Hearst already had a strong relationship (it publishes the likes of Cosmopolitan under licence in the Asia-Pacific region), would provide that expertise and help spread development costs.
2. For instance, the joint venture's first launch, Reveal, which came to market in October 2004, had a three-year marketing budget of £16 million, with £10 million slated for the first year alone. That was said to be a record in UK publishing. Speaking at the launch, ACP-NatMags promised that it would pursue further weekly ideas "very aggressively".
3. The ACP-NatMags chief executive was Colin Morrison. He has effectively been made redundant - and sources close to him have indicated he may seek a new role with a private equity company.
4. Two other non-core areas NatMags has been exploring recently are men's health magazines and generic web portals. The men's titles are housed in a similar structure to the former ACP-NatMags set-up - this time a 50:50 joint venture with the US publisher Rodale, which was signed in May 2004.
5. The company's digital operations are housed in a division called Hearst Digital. Its sites are aimed at two main audiences: younger women with interests in fashion, beauty and gossip; and women aged 45 and over, looking for recipes and home improvement ideas. Sites include handbag.com, allaboutyou.com, getlippy.com and netdoctor.com. The division also houses digital magazine brand extensions such as cosmopolitan.co.uk, goodhousekeeping.co.uk and prima.co.uk.
The portal sites (handbag and its sister sites) were acquired from the Barclay brothers in October 2006, and their managing director, the highly rated digital guru Nancy Cruikshank, came with them. But Cruikshank departed a year later to join VideoJug. The division is now headed by the managing director, Alex Ballantyne.
WHAT IT MEANS FOR ...
- Sometimes media companies have to weigh acquisition pros and cons in exactly the same way as a football club manager looks at the transfer market. In both worlds, failure to flash the chequebook can result in accusations that you lack ambition - and that can prove a hard judgment to shake off.
- There would have been little consolation in the discovery that the NatMags bid for the Emap properties came within a whisker of success. Or that it has arguably acted prudently, especially as the Emap asking price included radio assets which would have to be sold on.
- But it may turn out to be just as expensive for NatMags to implement Plan B, which will be to launch its own weekly titles into the women's weekly market. That's where the best growth prospects are in the medium term - and weekly coverprice revenues can work wonders for your cash flow figures. But it's a competitive marketplace.
- "NatMags can draw on its expertise in distribution," Paul Thomas, a managing partner at MindShare, says. "And it is more than capable of buying in the weekly expertise it doesn't already have."
- This almost guarantees the prospect of more choice for advertisers in the weekly market - and choice is always good for advertisers because it encourages better editorial quality while driving down ad rates.