Publishing Futures, the research project that we regularly feature on this page, is about to morph into Media Futures. Jim Bilton explains why, and also picks out some of the key things to look out for in the latest research.
As you are reading this article, the fieldwork for Media Futures 2018 will have just been completed – Publishing Futures has been rebadged this year, as both the survey itself and the industry it tracks have been changing and broadening out. The results will be presented to participating publishers on September 12.
Yet even though the industry may well have changed markedly over the last twelve months in a number of important ways, the key metrics that track those shifts remain the same. Four key factors are measured in the project: turnover growth, profitability, productivity and confidence.
1. Turnover growth
* In 2017, 58% of the participating companies reported that their topline turnover was growing. That was well down on the 72% seen in the previous Publishing Futures survey in 2015. 2017 turned out to be a much tougher year than anticipated, especially in consumer magazines. Yet the industry was feeling more optimistic about the up-coming year with the figure flicking back up to 72% again for 2018. The latest survey will show whether that optimism was justified – for some, it was not.
* In terms of the average rate of growth, that shows the same pattern. Turnovers were rising at +5-6% per year, then slowed to +3% in 2017. The prediction was that 2018 would be back up to +5% again. Again, the latest survey will give a clear read on that.
* 79% of the participating companies were in profit in 2017. As with turnover, this was well down on previous years, but was forecast to bounce back to a record-breaking 90% in 2018.
* Looking at the actual profit margins of those companies that were in the black, these were averaging at just over 12% and were predicted to hold steady.
Despite all the pressures, the media business is still delivering profit margins that many other industries would kill for. Yet this is the result on ongoing and grinding cost control which is now baked into the culture of most companies.
As media companies streamline and restructure, tracking productivity is essential. The survey uses a topline measure, turnover per full-time employee (FTE). The average across the participating companies was £229,000 per FTE, but this average conceals a massive range, from £31,000 up to £484,000. The key drivers of the ratio are (1) the level of outsourcing or sub-contracting that a company uses and (2) company size. Yet, although it is the larger companies which can drive scale economies most obviously, there is a wide range of productivity among the major publishers themselves, especially in consumer. However, it is clear that a strong ratio can often be due to deep and negative cost-cutting rather than as a result of positive underlying efficiency.
Beneath the topline, there are other productivity measures that companies are using in every area of activity: editorial, marketing, admin, etc, with automation being central to driving efficiency through the whole organisation.
Here, the survey question is, “How confident do you feel about the financial success of your company over the next two years?” There is a massive range from some low 2s, which point to debilitating depression, up to some manically high 10s, which smacks of blind over-confidence. Both extremes are dangerous!
Overall, confidence levels dived in 2017: only 44% said that they were more confident than the year before in comparison to figures consistently over 60% in previous years. The early signs from the 2018 survey is that the industry is feeling more positive about the future.
Although this is the “softest” measure, it is actually very important. In a “twist & tweak” business environment, self-belief, resilience and sheer staying power are increasingly important corporate characteristics.
Managing the metrics
The fact is that most companies already monitor the metrics. The questions are whether the drivers behind them are fully understood and also whether they are managed and drive company activities in practical terms.
How the metrics inter-relate to each other is also important, balancing growth against profitability being a core issue. Here, there appears to be a link between turnover growth and profitability. Those companies in growth are also among the most profitable: it looks like a virtuous circle. Contracting turnover companies are polarised between loss-makers (a vicious circle as they spiral downwards out of control) and high profit margin (as they cut back on costs, but sometimes too much). Companies with static turnovers are actually the least profitable, presumably because they are stagnating.
Two other factors come into play when looking at the total picture: scale and company ownership. There are real and obvious pros and cons about the size of the company: smaller organisations can often be fast, agile and responsive, but can lack the resources (financial and headcount) to do what they would like to do. In terms of ownership, those organisations that can take a long-term view rather than being driven by short-term financial targets look to be the eventual winners in the current marketplace.
Standing back from the detail, the early signs from the latest survey show that there are some real changes in the key operational performance metrics, but also some significant shifts in attitude. Media Futures 2018 will provide all the answers.
“Self-belief, resilience and sheer staying power are increasingly important