Public Companies: Meredith Corporation
Friday, January 17, 2014 7:00 AM
It is safe to say 2013 was a huge year for Des Moines-based Meredith Corp. and its shareholders.
By the end of the year, the company’s shareholder return strategy -- launched in October 2011 -- drove a return of more than 125 percent, according to Meredith Chairman, President and CEO Stephen Lacy. At a national media level, Meredith is reaping the benefits of acquisitions, including Every Day With Rachael Ray, Family Fun and EatingWell magazines as well as allrecipes.com. In its Local Media Group, the company generated a record $40 million in political advertising revenue in fiscal year 2013, saw a 25 percent jump in advertising revenue from websites affiliated with its TV stations, and this past fall launched a daily lifestyle television show called “The Better Show,” which reaches 90 million American cable TV households.
Lacy has no plans to stop there, however, and is aware of the challenges still faced by the company. Leaders at Meredith are continuing to monitor threats to advertising tax deductibility as well as the financial state of the U.S. Postal Service, the company’s only means to deliver magazines to 30 million consumers. Finally, although advertising has improved, it has not returned to pre-recession levels, nor does Lacy expect it to.
“We think certain categories are still recovering,” Lacy said. “One of those that has not gotten back on its feet is automotive. While we think the home category with the improvements in the housing market will, in fact, recover some, we have a strong belief that it’s not good to wait around for things to go back to the way they were in the past, because that rarely happens. We work really hard to create new streams of revenues that continue to drive the top line.”
Lacy is continuing to look ahead. He is optimistic about many things, including how the company will continue to see increased financial benefit from its acquisitions as well as continue improvement in overall financial performance.
Meredith saw great success in 2013. How do you plan to capitalize on that success for 2014?
To continue our momentum, we are aggressively pursuing three parallel paths. First, we’re growing our existing businesses organically. Second, we will continue to pursue consolidation of the magazine and related media industries. Third, we are actively pursuing opportunities to grow our television footprint to add scale in what is a very profitable and strong cash flow business.
What’s the biggest opportunity you see on the horizon this coming year?
We have many outstanding programs in place, and I believe 2014 will be the year that many of them really gain steam. Examples of these include consumer marketing initiatives such as subscription bundling; the Meredith Sales Guarantee, which we are expanding to digital; the continued benefit of our recent acquisitions; and more.
We have tremendous momentum at Allrecipes. We are growing Allrecipes’ mobile presence as more and more women use their mobile phone or tablet in the grocery aisle to look up recipes and keep track of their shopping lists. On the tablet, Allrecipes is available on all of the major digital channels, and we are aggressively promoting bundled print and digital subscription options. We are also very excited to be extending Allrecipes to video formats, starting with the launch of Allrecipes segments on “The Better Show.”
I also believe that – assuming we can find the right property at the right price – a television or magazine acquisition could be a very significant opportunity for Meredith.
What exactly are you looking for when it comes to making these acquisitions?
Anything we acquire has to fit with our portfolio, and we have to be able to acquire it at the right price. In the Local Media Group (broadcast TV stations and their associated websites and apps), criteria in evaluating expansion opportunities include the size of the market, upside audience and revenue potential, opportunity to increase our network diversity, and finding ways to create operational efficiencies. In the National Media Group (primarily magazine and book publishing, plus related websites and marketing activities), the key criteria would be the fit with our portfolio reaching 100 million American women, the size of the brand, the quality of its circulation and advertising, and opportunities to grow and improve the brand.
When you were contemplating the purchase of allrecipes.com, what specifically made that product stand out as a target to purchase?
We have always been one of the largest players in food in print, but not in digital. Since allrecipes.com is the largest digital food site in the world, it made for a perfect fit for our portfolio because digitally, we were No. 1 in food. Second, we have been very aggressive with social media across all our brands, and Allrecipes is the original social media business. It’s like the church cookbook online. Finally, we have been working very hard to sell more print subscriptions digitally. This doubled our digital audience and it was where we had the opportunity to launch the Allrecipes magazine. It added a lot of scale to our digital business.
What are your thoughts on what happened with the Time Inc. deal last year and why it did not go through? Will Meredith be looking at any big deals like that in the future?
The sticking point was the fact that we wanted some of the Time Inc. brands, but not all of them. The content we create at Meredith is life-stage or seasonal, but we don’t really create time-sensitive information. Part of Time Inc.’s portfolio is creating time-sensitive information. Time magazine, Sports Illustrated, Fortune - those were the parts that didn’t fit very well with us. They also have some wonderful businesses that create life-stage or seasonal content. It was a monthly activity, and those were the parts that fit very well with us. It had to do with the type of content. Ultimately Time Inc. made the decision to spin off the entire business as a separate company instead of selling part of it to Meredith. We will certainly continue looking at potential deals.
Where would you say Meredith stands in what it offers both consumers and advertisers in terms of digital mediums? Would you say these two things have been directly influencing each other?
We deliver content in the manner our consumer most wants to receive it, whether through a magazine, a tablet, a mobile device, television or a consumer website. Key to our success is the fact that we view ourselves as a content creation business, not as a magazine company or a TV company or a digital company. The most important thing we can do is maintain that strong consumer connection – regardless of the delivery device. If the consumer connection is strong, the advertising will follow.
It’s important to note that our media platforms are all growing, and not at the expense of each other. We strongly believe in magazines AND digital – not magazines OR digital – and our results support that.
What went into the decision to reverse-publish allrecipes.com by creating a print product for it?
We knew that consumers had a very strong affinity for the Allrecipes brand. So we decided to send out a magazine test issue. This was in line with our Meredith philosophy of serving consumers across multiple platforms. It generated 400,000 paid orders immediately. So we knew from the test that consumers would respond to a subscription magazine based on Allrecipes.
Meredith has played a role in supporting downtown Des Moines redevelopment. Why is this something you feel strongly about?
I want Des Moines to be a strong and vibrant home for our employees, their families, and our potential employees and their families. I have been very committed to this community through two years as chair of the Greater Des Moines Partnership, chairing the 2011 United Way campaign, currently chairing the Des Moines Redevelopment Co., and more. I am proud of the way Des Moines’ private, public and nonprofit entities work together for progress. It’s our “secret sauce,” and I feel a deep responsibility to be involved in that process. I am also proud of the way Des Moines has created opportunities for young professionals, who will be taking the lead from my generation in the future.
Where do you see the company at in five years?
I expect that we will be providing more consumers with our outstanding content across multiple media platforms. There may be media that we are not even aware of today, but I believe our core competency of providing consumers with content when, where and how they want it will remain a strong growth strategy.
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