EMAPs head on the block

Gary Hughes and Stephen Carter, among others, must be counting their blessings. Both were linked to the chief executive role at EMAP when it last fell vacant over four years ago. Luckily for them, outgoing David Arculus’ golden boy Tom Moloney got the job – or should we say poison chalice? – and it is him, not them, who is now hurtling to earth like Icarus.

Moloney’s precipitate exit, just days before the announcement of this year’s preliminary results on May 22, raises some interesting questions – to say the least.

Here was the ultimate insider candidate. He joined EMAP in 1981, rose to prominence on the back of the consumer magazines boom in the eighties and became the respected Arculus’ protegé. Arguably, no one else who made the ceo shortlist could have known the company’s culture better; it looked like a formidable ace in the pack.

So what went wrong? And does Moloney’s exit imply that, if he can’t fix EMAP, then no one else can either?

That’s certainly the opinion of the City which, in the aftermath of the Moloney announcement, gleefully marked up the shares 48p to 885p. The implication being that a rudderless EMAP was now ripe for that private equity break-up deal which has long been mooted.

One of Moloney’s cardinal mistakes (in the eyes of brokers’ analysts, at any rate) seems to have been an unswerving belief in EMAP’s existing business model. He made it clear from the outset of his reign that he favoured careful, evolutionary change rather than flashy, transformational deals or, alternatively, a radical downsizing and refocusing of the company.

Steady she goes
In the light of EMAP’s recent history, this was entirely understandable. After all, under chief executive but one Kevin Hand, EMAP had made some bombastic-sounding acquisitions in the USA and France which very nearly led the company to ruin. A bit of corporate healing wasn’t such a bad idea.

Then again, EMAP had to all outward appearances an attractive multi-media strategy very much in keeping with the times. In the shop window, a formidable range of consumer assets, from magazines such as Heat and FHM, to radio stations-cum-music television channels such as Kiss, offered cross-media leverage to advertisers who were allegedly baying for it. Behind it, the less glamorous but hugely cash-generative business-to-business titles and the exhibitions operation assured the company’s growth.

This multiple-stranded story played an important part in propelling EMAP back into the FTSE 100 during the early part of the century, after the aforementioned foreign forays and a horrendous advertising recession. So it was no surprise to find the newly installed Moloney cautiously building upon that heritage with, for example, the 28% stake in Scottish Media Group.

No surprise, but a mistake none the less. For what Moloney, and others at EMAP, had fatally underestimated was the speed with which the internet would recover after the dotcom bust – and come back to haunt the publishing industry.

In a nutshell, Moloney found himself overweight in old media and telling yesterday’s story, while the rest of the world was steadily migrating online. That is not to say that EMAP was without its triumphs during this period: witness the revamped Heat and Grazia. Nor that the group has been wholly unsuccessful at developing a digital revenue stream: currently it accounts for over 10% of the group’s total.

The vision thing
But that is not enough. Others have coped much better with the seachange in publishing, and the City openly recognises that fact. Reed Elsevier, for example, is expected to generate about 45% of its revenue online this year. While David Levin at United Business Media is seen to have been much more effective than Moloney in turning round a traditional media conglomerate.

Levin early on spotted that business-to-business publishing was much better positioned to withstand the digital erosion of advertising revenue and reshaped UBM accordingly. By contrast, although EMAP has very strong business-to-business assets, Moloney arguably failed to capitalise upon them. As an EMAP lifer, he perhaps lacked the independence of vision to make the necessary surgical decisions.

In the end, Moloney seems to have run out of ideas – the only option was to bring in the management consultants, in the guise of the Boston Consulting Group. But delivering short-term cost-savings is no substitute for a robust future strategy. EMAP’s results may indeed be in line with expectations on May 22. But where it’s heading next year is anyone’s guess.

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