Reed, Pearson and Future: lessons in media strategy

12 magazine logos: Some of the magazine brands Future in buying from TI Media

Fifteen of the 41 magazine brands Future is buying from TI Media

In my days as a media academic, I developed a case study comparing the corporate strategies of Reed International and Pearson. Their progress has been brought back to mind as I ponder what Future is planning for the 41 media brands it is buying from TI Media. These are the remnants of what used to be IPC – Britain’s ‘Ministry of Magazines’ as it was called for its massive size and bureaucracy – and one of the biggest divisions of Reed back in 1980.

At a basic level, it’s a nice little project to map TI’s list of iconic brands, against Future’s justification for the £140m purchase. What divisions would you put the purchased magazines into? And why? Notice that Future lists Country Life in both the Lifestyle and Home Interest ‘verticals’; so where should that venerable title – founded in 1897 – belong? I argued two years ago that it was one of brands being neglected under TI:

[Moving Country Life out of London into a business park] suggests a lack of investment by its owners. However, even if this penny-pinching strategy leads to a decline in Country Life‘s fortunes, its history and contacts should enable it to attract a better owner – and its history can never be taken away. If I were the editor, I’d be trying to do a management buy-out.

And what will Future do with all the yachting and boating titles – sport or lifestyle? Do the hunting and shooting titles fit Future’s skills and company ethos? Where does CelebsNow belong? That’s the digital stump of Now, all that’s left since the magazine, which had a reputation for upsetting celebrities, closed in March last year. Is it worth pushing further into the celebrity sector?

Future’s managers will no doubt be running the Boston matrix over their purchases, deciding which ones are a good fit, which stars to fund for their growth potential, and which dogs to close or sell on to companies where they are a better fit. The UK periodical publishing industry is nothing if not dynamic.

200 years of Reed and Pearson history

More at the business degree end of things, Reed and Pearson are fascinating companies and between them encompass the fortunes of a huge part of British magazine and book publishing for much of the past 175 years. They are among only 28 survivors of the original companies in the FTSE 100 when the index was created in 1984; Future did not yet exist. Yet Reed and Pearson both have their roots outside publishing.

Reed started out as a papermaker in 1895, growing quickly alongside the boom in magazines and newspaper publishing that created a massive demand for newsprint made from wood pulp. This was a time when Fleet Street was the centre of the global media world and Reed’s business brought it into contact with printers, publishers and the building trade. Being a well run and profitable company, it had the cash to buy up companies in these sectors, so by 1980 Reed Group controlled IPC Magazines, Mirror Group newspapers, Odhams printers, Crown wallpapers and paints, and Polycell, among others.

Financial Times eggcup photo: Pearson owned the FT from 1957 to 2015

Pearson owned the FT from 1957 to 2015

Pearson was founded in 1844 as a building contractor and evolved into an international group working for governments across the world. If you’ve ever been to Malta, some of those Valetta harbours and fortifications are of its making, as are chunks of infrastructure in New York, London, Cairo and Mexico. It was also big in oil services. In the 1950s, Pearson became a conglomerate running a portfolio of companies in five sectors: financial services, publishing, oil, manufacturing, and investment trusts. The assets included Lazard bank, the Financial Times, the Economist, Penguin, Longman, Westminster Press, Yorkshire TV, Château Latour, Wedgwood, Royal Doulton and Madame Tussaud’s. The only common factor was that each one was regarded as being the best in its field.

Future was founded in 1985 by Chris Anderson (now better known for heading up the TED talks). Future’s first title was Amstrad Action, a games magazine for owners of Alan ‘Your Fired’ Sugar’s Amstrad computers. It was produced cheaply using computer technology outside London and the company then expanded into hobbies such as cross-stitch as a self-professed ‘anorak publisher’. Pearson actually owned Future for four year from 1984 as it pursued growth in multimedia.

Reed and Pearson were both massive and successful companies, with market capitalisations of £2.4bn and £1.7bn respectively in 1988. However, conglomerates were out of fashion and found it hard to justify their strategies to the financial markets. They were regarded as takeover targets that were more valuable by being split up; and Pearson was described as a ‘collection of rich man’s baubles’. They decided to change their strategies and concentrate on media – both were founder investors in British Satellite Broadcasting in 1989. However, they met with very different results.

All change in 1990s media

The May 1994 first issue of Loaded - a landmark title under James Brown

The May 1994 first issue of Loaded – a landmark title under James Brown

Reed sold its building divisions, newspapers and print plants; out went book publishing and IPC, publisher of iconic magazines such as Country Life, NME, Woman’s Own and Loaded. By 1990, it had changed analysts’ views – they regarded its share price of 443p as undervaluing the company compared with other international publishing businesses. It then merged with Elsevier, a Dutch professional publishing group, and concentrated on information and data that could be sold internationally over digital networks at high prices.  It moved up the ‘value pyramid’ in marketing jargon, away from high volume, low value fiction paperbacks and weekly magazines into expensive, global professional information and data. The nearest it kept to a consumer magazine was Reed Business Media and New Scientist – and that went in 2017. The strategy was a great success and Relx, as the company is now known, has a market capitalisation of £37bn and employs 30,000 people. Its share price is 1,905p and it is ranked 15 in the FTSE 100.

Penguin logo: Penguin was controlled by Pearson from 1970 to 2013

Penguin was controlled by Pearson from 1970 to 2013

Pearson sold Penguin and its other consumer imprints to concentrate on academic and educational publishing, student testing, and the FT and Economist. The strategy worked and by 1990 its shares were at 777p. The share price shot through the roof in the ‘dotcom boom‘ of 2000 – peaking at about £24 – because the company was seen as a ‘digital play’ for investors. But that bubble popped. The company’s valuation recovered to about £14 under former Economist publisher Marjorie Scardino as she pursued a ‘learning company’ strategy, but has since bombed under her successor John Fallon. He sold the FT and Economist to focus even more on education and testing, but exposed the company to falling sales as students and schools in the US cut back on buying books, its digital distribution did not take off and the share price dropped like a stone. Today, Pearson has a market capitalisation of £5bn and employs 24,000 people. Its share price is 634p, and it has dropped to 96th in the FTSE 100.

So, in 1980 Reed had a market capitalisation half as big again as Pearson’s; 30 years later it is seven times as big. Two conglomerates tried to focus on digital media, Reed executed the strategy far better.

So, what about Future?

Amstrad Action magazine first issue cover: Future's first title magazine in 1985

Amstrad Action was Future’s first magazine in 1985

Bath-based Future is a minnow compared with Reed and Pearson, just 35 years old with a market capitalisation of £1.4bn and 1,200 employees. It is ranked at about 240 on the FTSE. Future went through the dotcom bubble – publishing Business 2.0, which mapped the hopes for the ‘new economy’ – and nearly became a cropper through over-expansion and reliance on the US economy.

Now, Future plc has a similar level of turnover per employee as the enviable Reed. However, does it really have the skills and resources to exploit the historic shift being forced on periodical publishing by digital media? Investors think so. Future’s share price tripled in 2019 because they reckon it can buy up moribund print magazines and turn them into digital goldmines. That’s what Future says it will do with the 35 magazines and six websites it has bought from TI Media. What do you think?

 

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2 Responses to “Reed, Pearson and Future: lessons in media strategy”

  1. Rod Says:

    The digital experience in reading magazines is inferior in most respects to the physical experience but l feel that people are more inclined to seek specific information now rather than browsing a magazine for entertainment.

    • magforum Says:

      I’d agree with that. Also, I occasionally get sent digital books to review, but I never get round to them. The expansion of independent magazines suggests reading habits are changing. This appears to follow the trend since the 1950s away from mass market generalist weeklies to longer reads (though less fiction) and monthlies. Exceptions: Private Eye and Economist, though their specialist nature makes them special cases

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