A few years ago, so the story goes, the deadline was approaching for the production of some Association of Publishing Agencies (APA) publicity material. The APA was waiting for vital information from only one member – Redwood. When the APA warned that production might have to go ahead without this information, it is said that someone important at Redwood responded: “Redwood is the APA.”
Although the APA’s other members would probably have disagreed with this statement, it was nevertheless an accurate appraisial of the comparative strength and size of Redwood in the industry.
Redwood remains the UK’s largest contract publisher, but the spate of mergers and acquisitions that has taken place recently means the gap is closing in terms of size and resources.
All the large international media networks – WPP Group, Publicis, IPG and Omnicom – now have a contract publisher in their stable. Among the most recent acquisitions have been IPG’s move on TPD, which became Just Customer Communication, and WPP’s purchase of Forward Publishing. More recently, John Brown Publishing – the second-largest publisher – merged with Citrus to become John Brown Citrus Publishing (JBCP).
Empty middle ground
All these changes, which have happened in a relatively short space of time, will alter the nature of the business – but this may only become obvious once the markets start to pick up again. The most visible change, however, is the widening of the gap between larger, network-owned publishers and the rest (JBCP being the exception to the rule).
Just Customer Communication chairman Julian Treasure says: “I wouldn’t want to be a small publishing company now.” But he does concede that there will always be room for smaller players, “for those clients with small budgets who want a more personalised service”.
He adds: “Large projects can only be handled by publishers that are part of a substantial group. It will be difficult for smaller independents to compete in terms of quality and research.”
Treasure predicts that the contract publishing sector will follow the advertising industry where, increasingly, the job of agencies is to differentiate themselves from the rest of the pack.
It is Just’s new-found access to measurement and prediction tools, through its sister company McCann Relationship Marketing Partners (MRM), that has most pleased Treasure as a result of the acquisition. He says: “As a publisher, Just lacked the credible prediction tools that the big agencies had. We are now adopting these, which will allow us to forecast what a magazine can do and its return on investment. To me, that is what will differentiate us from the rest by autumn this year.
“Clients are saying that they need proof that magazines work and they want to see a solid business case, with numbers that make sense. Small independents can’t do this.”
But some small publishers are doing very well – and it seems that part of their success lies in their ability to pick up business that larger publishers don’t want or are unable to do cost-effectively.
Whereas most of the larger publishers are admitting to sluggish growth at best, smaller publishers seem to be thriving. Wardour Communications, for instance, claims to have grown by 20 per cent in the year to April and predicts growth of 30 per cent this year. Its client list is impressive – it includes Deutsche Bank, HSBC, Lloyds TSB, Norwich Union, Safeway and Unilever.
The secret of Wardour’s success lies in its work on internal communications and annual reports. This is work that many large publishers wouldn’t touch, but internal communications is a particularly strong growth area in contract publishing and one that larger publishers will not be able to ignore for long.
Wardour managing director Martin MacConnol says that his company produces a staff magazine for Deutsche Bank – a publication that provides Wardour with its highest turnover. Wardour also produces the staff magazine for Safeway, which has 95,000 employees.
MacConnol says: “Being small means we are more nimble when it comes to finance. Accountants in the big agency groups are always demanding that certain margins are met. We can make more flexible decisions about projects.”
He says that Wardour Communications has been approached by larger groups interested in acquisitions, but adds: “So far I have not seen anything that would tempt me to sacrifice our equity position.”
Another smaller publisher, The Writer, is also doing well out of internal communications. It produces internal customer magazines for the Post Office and BT.
Managing director Martin Hennessey says: “There has never been a better time to be an independent publisher. Publishing is becoming more and more bespoke. There are far greater opportunities for small, commercially savvy publishers to spot an opportunity and take it.
“I think the bigger publishers will struggle, just as ad agency groups are suffering right now. Increased overheads will put pressure on them to find the largest contracts, which will lead to major pricing competition with their rivals.”
Hennessey points out that the internal communications is growing quickly, helped by a European directive that comes into force over the next few years and which will mean companies with more than 150 staff will have to inform and consult them on a whole range of issues.
One larger publisher with no desire to be part of a global media network is JBCP, whose chief executive Andrew Hirsch says: “I’ve worked for a large media group before, and it’s not fun. Half the time you are doing flash forecasts and talking to bean-counters in another country, who don’t really understand your business.”
JBCP is in the enviable position of being independent and large. Hirsch nevertheless maintains that “size is a complete red herring”. He says: “Small publishers can make it. This business is completely different to consumer publishing; and it is not rocket science.”
For obvious reasons, publishers tend to defend their own particular positions. Redwood managing director Keith Grainger, while admitting that the gap may have closed between the rest of the sector and his own company, maintains that “a gap exists when it comes to experience, creativity, knowledge and the way we work”.
Grainger’s argument is that smaller publishers, apart from finding it more difficult to “absorb problems or bad news” don’t have the ability to attract and keep top talent. Recovery from big account losses is also a serious issue. When Just lost the ITV Digital business – through no fault of its own – it must have been relieved it did not happen earlier. It is difficult to know how TPD, as it then was, would have sustained the loss of such a large account when it was still a smaller independent.
But, more importantly for Grainger, publishers like Redwood are able to attract what he calls “top players”.
He says: “First and foremost, clients are buying our creative output. But we also have a highly resourced research department – something that smaller businesses would struggle to provide.”
It’s who you know
The network-owned publishers will also claim the advantage of being able to get access to agency clients and, although none of them is claiming to have won business this way, it seems a lot of discussions are taking place. As Treasure says, being part of a network enables publishers to set out their stalls before anyone else does.
Although all the big agency groups now have publishers as part of their networks, it is unlikely that the corporate activity is over. Omnicom, after all, owns both Redwood and Cedar. Hirsch has also hinted that JBCP, rather than being bought out, might well go on its own shopping trip. And if, as is very likely, internal communications becomes an increasingly significant source of revenue, those smaller publishers who are doing so well out of it now will increasingly become targets for the acquisitive networks, always on the look-out for new ways of making money.