What next for maverick magazine publisher Future?
Back in the mid-to-late 1990s, the UK magazine industry was the most lively and competitive in the world. There were around 5,000 titles available on the newsstands, with every possible interest or type of person catered for, and scarcely a week went by without someone launching a big new magazine.
And the sales figures in those pre-internet days were enough to make your eyes water. Around 10 titles sold more than a million a week (now there are just two doing those sorts of numbers, and both of them TV listings). The scene was so lively that in 2001 AOL Time Warner (as it was then) paid over £1bn to buy IPC, at the time the UK’s largest magazine house.
How things have changed. It’s been widely reported that Time Warner has been looking at ways to spin off IPC; privately-owned Bauer swallowed up IPC’s great rival EMAP to become Britain’s biggest mag publisher; BBC Magazines has been spun off; and many venerable titles and publishing houses have either disappeared, been swallowed up, or are shadows of their former selves.
However, one company from that fast-paced era is still with us, and is, after some bumps in the road, doing rather well – Future plc, which recently bought a 35 per cent stake in Handpicked Media, the blog and website network.
Future was always something of a maverick publisher, even by the standards of the time. Set up by Chris Hughes with a £10,000 bank loan in 1985, the company’s first magazine was Amstrad Action, which has not only a hit, but set the tone for the company’s tech-focused approach. One of Future’s big innovations was to offer, in 1987, a cover-mounted computer diskette every month, something that became common practice, and which powered Future on to enough success to make it an attractive prospect for FT publisher Pearson to acquire in 1994. Future won an exclusive licence to publish titles for Sony’s (then new) PlayStation console in 1995, and, buoyed by success, launched into new sectors, such as film, music, cycling, crafts, motoring and science fiction.
In 1998 Pearson sold its baby to a private equity-backed management buyout, and the company floated on the Stock Exchange a year later. Unfortunately, downward pressure on copy sales and advertising, the cyclical nature of the computing/games market on which so much of the publisher’s fortunes depended, some underperforming acquisitions and, of course, the rise of the internet, caused the company significant discomfort.
However, it bounced back and is still with us… and still publishing successful magazines. Total Film, T3 and Computer Arts are three of its 70 or so news-stand titles, but it’s also doing well with tablet apps and websites (Gizmodo and Tech Radar are both hugely successful) aimed at specialist users.
Future is probably the UK publisher which has best managed the transition from print to digital. Although it reported a 9 per cent fall in revenues to £112.3m in the year to the end of September, it delivered a significant uplift in statutory pre-tax profit to £5.8m versus the previous year’s £1.1m.
It is doing this through the transition of its revenues from print to digital – digital revenues grew by 38 per cent last year to now represent 32 per cent of the total revenue base, whereas print declined by 3 per cent. Crucially, the business has now passed the milestone of more than half of total ad revenue coming from digital – 59 per cent of its ad revenue now comes from its digital platforms. It has also kept costs under control, but has prospered by doing what it has always done best - focusing on niches. CEO Mark Wood seems to be pressing a lot of the right buttons – particularly being noted for cracking the issues they faced in the US and focusing those operations online.
As mentioned above, at the end of last week Future announced it had acquired 35 per cent of Handpicked Media in a deal that makes perfect sense for both parties. Handpicked is essentially a marketing network (with particular expertise in social media, which makes it doubly attractive) and represents over 500 independent websites and blogs, together reaching over 3.5 million unique users a month in the UK and six million globally. By themselves these sites wouldn’t necessarily be hugely attractive to a generalist advertiser, but as part of a managed portfolio appealing to tightly targeted audiences and interests, they are.
So, Future gets access to a roster of influential blogs and independent sites across a range of lifestyle channels including fashion, beauty, food, celebs and entertainment. These are all areas in which Future clearly has ambitions – it has been quietly moving into “women’s media” for some time now and access to sites like www.salihughesbeauty.com, www.movie-moron.com, www.recipesfromanormalmum.com, www.beautyandthedirt.com, fashioneditoratlarge.blogspot.co.uk.
All these sites may be somewhat small in the grand scheme of things, but they have highly engaged audiences, and they don’t have large legacy costs to worry about.
So, what does Krista Madden, the entrepreneur who set up Handpicked only four years ago, get in return for giving up a third of her creation? The press release states Future will “drive the effective commercialisation of those sites". This means that Future will sell ads and offer support in the shape of better tech and design.
And, acting with admirable speed, both parties have given their joint venture a name – Handpicked Future. Headed up by Madden and aided by Future’s Head of Women, Jo Morrell, this will be offering clients (including Gucci, Karen Millen, Vodafone, Nivea and Intel) social media strategy, blogger outreach, content creation, events and integrated campaigns for a range of brand partners.
While terms of the transaction were not disclosed, what’s exciting about this deal is that it provides Future with additional online sectors and revenue streams, while Madden retains the majority stake of a business that could quickly ramp up to make her 65 per cent worth more than the original whole.
As well as women’s interests, Future also has print and digital brands in technology, sport, auto, creative and design, photography, music, films and games. Many of these will serve tightly-knit and highly engaged online communities, and it’s more than likely that the Handpicked model can be applied to, say, photography buffs or Linux geeks. Individually these people won’t necessarily spend much, but collectively they do; advertisers have long wanted to target them but haven’t always found it easy to do so. Now they have a channel.
Some pundits have wondered whether Future might be looking to eventually go up against the big women’s portals, such as Shortlist Media’s Never Undressed, or the offerings from the likes of Hearst and Conde Nast. But I’m not so sure.
As mentioned above, Future has always been a specialist publisher, not a generalist. And publishing, be it online or in print, is much the same as any other activity. You cannot afford to be in the middle - so you’re either Waitrose or Aldi, Hermes or Primark, as being Morrisons or M&S is becoming more difficult; but you can prosper by being focused, fulfilling needs not met by others and serving audiences un-served elsewhere.
Back in the glory days of print, staff on mass-market weeklies and celeb glossies used to mock or patronise those funny, low-circulation titles (many of them published by Future) aimed at cross-stitchers, railway modellers and mountain bike riders. Possibly the boot is now on the other foot, as those specialist titles have held on to their audiences, and in all probability their profit margins too.
Tony Walford is a partner at Green Square, corporate finance advisors to the media and marketing sector.