Outsell Now

New Conference for Pharma Information Professionals

Important Details: We recently got wind of a new European conference called Pharma-Bio-Med, geared specifically for information professionals in the pharmaceutical, biotechnology, biomedical, medical, and health sciences industries. The first annual conference is set for November 2006 in Lisbon, Portugal, and promises the standard fare: plenary sessions, workshops, training seminars, and an exhibit hall.  What’s new is the interesting vertical focus on "the role of the information professional through all stages of a drug’s progression, from discovery research through pre-clinical assessment, clinical, regulatory, safety, post marketing surveillance, and business and competitor information." Also new is the powerhouse steering committee of information managers in leading global pharmaceutical companies, representing an array of European-based industry associations, such as Pharma Documentation Ring (P-D-R), the UK’s Information Managers in the Pharmaceutical Industry (IMPI), European Association of Information Services (EUSIDIC), and European Association for Health Information and Libraries (EAHIL), among many others.

In Outsell’s Opinion: Outsell has long advocated aligning information management (IM) to key business processes, and it’s exciting to see a conference that aims its sight at the heart of the pharmaceutical industry to tie IM to the drug development cycle. Whether the conference content keeps its focus on this aim remains to be seen - but it’s refreshing to see this approach to applied IM rather than IM as a topic on its own. We also welcome what looks like a much-needed forum to fill the void left when the Drug Information Association (DIA) IM interest group died out.

The New AT&T and TV: It's about Replacing Lost Dollars

It's a dizzying alphabet, well-represented in the shifting names of the San Francisco Giants' ballpark (the House that Barry Built?). Christened Pac Bell Park at its 2000 opening, it then became SBC Park, and this year AT&T Park, all within six years. Of course, it's not just baseball fans who are confused. All of us who buy cable service, phone service, and Internet service are at the mercy of corporate mergers, not knowing who's going to own and run our services when we get up tomorrow.

Now the new AT&T has given birth to its own triple play, recently announcing a partnership with Akimbo. Akimbo, which has partnered with numerous TV and movie studios, will provide video on demand (VOD) - as many as 10,000 movies and archival TV shows - to customers of AT&T's soon-to-be-launched (summer, in telco beta) service. The video, which will be offered alongside the Dish satellite service for current TV, is one play. Data, through high-speed modems, is the second. And the old familiar voice is the third. Triple play, and then add in such services as DVR functionality, caller ID, and Yahoo! photo sharing.

Outsell gives the SBCs, we mean AT&Ts, credit. As the blogosphere was awash in end-of-the-world warnings that all "voice" would soon be free, these voice companies, those selling traditional telephone (and isn't that an anachronistic word) services, figured out that they'd better get some new revenue streams to replace those that would inevitably thin, if not die.

Not to be outdone, cable companies like Comcast are moving quickly into the traditional telco sphere, offering high-speed Internet and a range of calling options, lining up at fiber light speed the same kind of consumer triple plays.

In Outsell's Opinion:  Traditional print publishers, especially newspaper and magazine publishers, can learn from the example. No matter how much effort newspaper companies invest in online classifieds products, their ability to maintain market share and pricing power is inevitably diminishing. The newsweeklies and business magazine weeklies and monthlies also inevitably see their users finding the immediacy and dailiness of the Internet another reason to buy and read magazines less frequently. What print publishers can learn is how other legacy companies - faced with inevitable loss of substantial revenue streams - are reinventing themselves to find new customers and new products that make sense in the emerging media landscape.

McClatchy Should Be a “Strategic Seller”

Today, the next act of the Knight Ridder drama begins to play out. Almost as soon as Knight Ridder announced its sale to McClatchy Co. on March 13, McClatchy CEO Gary Pruitt announced that McClatchy would immediately sell off a dozen of the newly acquired properties. First bids are being accepted by McClatchy today. Those 12 are not just small markets, but also unexpectedly large ones, including the San Francisco Bay Area and Philadelphia. They amount to 43 percent of Knight Ridder's current revenue. Perhaps as significantly, they account for 55 percent of Knight Ridder Digital’s total unique visitors and 36 percent of its page views, as of February.

The bidders are a motley lot. They are led by newspaper brethren Media News and Gannett, with Lee Newspapers expected to be a player as well. ValuePlus, a new company created by The Newspaper Guild, Yucaipa, a private equity firm, and assorted individuals and local consortia of businesspeople interested in picking up their local newspaper are also in the hunt. It has even been suggested that Yahoo! pick up the Mercury News in order to further print/online experimentation.   

Clearly, McClatchy’s prime goal is to defray as much of its $4.5 billion (plus $2 billion in debt) price for Knight Ridder as possible. It expects most of the papers to be sold to other newspaper companies intent on regional clustering, a way of reducing print-oriented expense through production/advertising/finance efficiencies. That’s well and good.

Outsell affiliate analyst Ken Doctor believes that McClatchy has another opportunity to use its newspaper lures to do some big-picture hunting. With McClatchy the second biggest American newspaper company even after the 12 are divested, Pruitt could wield his new leadership – and market power – to forge and hone industry networks. Here are three possibilities:

- The CB/CV Play: Knight Ridder owned one-third of major recruitment player CareerBuilder and a lesser percentage of Classified Ventures, which specializes in autos and apartments. The other major owners, Gannett and Tribune, have the right to buy out KR’s share – or they can allow McClatchy to assume it. Play: McClatchy can allow Gannett to buy the properties it wants at a fair price, as long as McClatchy becomes a full CB/CV partner. Pruitt can also make CB/CV affiliate participation a requirement for all buyers of the 12. That way the CB/CV network can attain even greater scale against its keen competitors.
- The Yahoo! Card: Why not consider Yahoo! (or another GYM player) as at least a minority owner in the Mercury News or some combination of the papers sold, or some kind of strategic investor in McClatchy itself. The news industry needs to come to grips with the distribution power of Yahoo!, as well as Google and MSN. And it has other strategic needs, best solved by GYM: 1) better-advantaged relationships around ad-matching systems provided by the three; 2) an accommodation of content distribution that will put more money in publishers’ pockets; and 3) provision of content-useful tools to multiply page views. The industry needs leadership here, and the new McClatchy can provide it.
- The National Content Card: McClatchy inherits some parts of KR’s acclaimed Washington Bureau and, we assume, half of the KRT NewsWire - one of four major wires in the country - specializing in features, photos, and graphics. The T in KRT is Tribune, which is apparently not bidding on the 12 papers, but also has its issues. It not only needs a strong classifieds partner, it needs to rationalize its KRT investment, which is struggling financially, and figure out how it fits with its L.A. Times-Washington Post wire investment, which it inherited in buying Times Mirror in 2000. McClatchy now participates in the NYT Wire, the Scripps Howard News Service, and the Scripps McClatchy Western Service. The industry needs more consolidation here. McClatchy can decide how best to consolidate both of its own retained operations, and how it wants to be a national news player, and again, include its new buyer/partners in on the vision and the deal.

“Strategic selling” is a mold-breaking way of doing business, but worth considering in a time that is clearly not business as usual. These steps wouldn’t solve McClatchy’s and the industry’s formidable transformation from legacy print to dual-platform businesses, but they would help build a pathway there.

KR’s Sale Brings Urgent Reshaping of U.S. News Map

What a difference a week makes. One week ago, McClatchy was emerging as the successful bidder in the Knight Ridder auction. Late Sunday, the white smoke emerged with the news that McClatchy had indeed won KR’s 32 dailies, at a not-bad-considering price of $67.25 per share, or $4.5 billion plus $2 billion in debt. It further emerged that the deal was 60 percent cash/40 percent stocks. This week, the print world, its analysts, and some of its reading customers have tried to make sense of the twisting and turning deal, which is reshaping the map of U.S. newspaper ownership. Outsell believes that a fundamental revaluing of newspaper properties is a clear result of the deal. The KR sale price is a little bit north of 10x EBITDA, a far cry from the almost 13x Lee paid for Pulitzer 14 months ago.

In Outsell’s opinion, the increasing uncertainties of market share and future revenue streams have caught up with news publishers. Those valuation questions will be further tested immediately. As the ink on the deal was barely dry, 12 of the KR papers – including flagships in Philadelphia (the Inquirer) and San Jose (the Mercury News) – learned that their buyer was putting them on the block. It was a rude interruption of their celebration. (Their surprise was shared by KR CEO Tony Ridder, who told the Mercury News that he was shocked that his hometown paper and 11 others would not remain in McClatchy’s fold.) The reason was clear: CEO Gary Pruitt had made good on his read-my-lips promise to his shareholders. As the KR auction moved forward, he told them that McClatchy would not waver from its relatively successful strategy of buying higher-margin properties in higher-growth markets. Philadelphia, San Jose, and others didn’t meet that standard. Not said but very much an issue: most of the 12 have unions, making cost savings more difficult and time-consuming to achieve. As Pruitt went on a whirlwind goodwill tour of media and analysts, he made the point that he wanted the deed done quickly. The 12 papers – currently producing 42 percent of KR’s revenues – were to be ready to be transferred to their eventual owners on July 1, when he takes ownership of KR. In Outsell’s opinion, Pruitt’s urgency makes sense. McClatchy is in the throes of all the same issues as its brethren companies. Those issues center on the disruptive effects of the Internet, as readers become online users and advertisers move to the seductive allures of measurable online reach. In fact, before Pruitt gets to his next stage of the familiar Innovator’s Dilemma – transitioning a successful old business into new territory – he must first resolve the Remodeler’s Dilemma. That is, how to put quickly in order the newly enlarged House of McClatchy, so he can get on with the business of the future. He’s got to be mindful of Tribune’s experience with its 2000 purchase of Times Mirror, an integration that most agree has sapped way too much of the acquiring company’s core energies.

McClatchy Interactive head Chris Hendricks made a quick trip this week from Sacramento to Knight Ridder Digital in San Jose. He offered his own brand of optimism, deferring most integration questions as premature. Hendricks estimated that Internet operations consolidation would save $15 million. Critical to McClatchy’s plans and the future of newspaper-owned online classifieds sites is what happens with CareerBuilder, the crown jewel of newspaper-owned properties. It has gained about one-third of the highly profitable online recruitment market for its equal-share owners - Tribune, Gannett and Knight Ridder. Though Tribune and Gannett can buy out KR’s share now, Pruitt made the case loudly that he wants to take over the KR share and that by bringing all the current McClatchy papers into the fold, it would only be stronger. Allowing McClatchy to assume KR’s share would mean CareerBuilder will have a greater market presence. Leaving McClatchy in the cold would be another signal of newspaper industry fragmentation. The CareerBuilder puzzle is just one of many about how KR’s prized and honored operations will be sorted out:

- Classified Ventures: This auto/apartments set of products is already affiliated with McClatchy’s papers, but not as an owner. The resolution of KR’s ownership here should parallel Career Builder’s – more newspaper company cooperation or more fragmentation.

- Knight Ridder’s Washington Bureau: This has done some of the best and most original work covering the Bush Administration and the Iraq War. McClatchy could take on a national/global news presence or decide it’s too expensive, leaving the field to AP, Reuters, the Times, and a few others.

- Knight Ridder Tribune Newswire: KRT is the leading features/photo/graphics supplementary wire to AP. Tribune may not rationalize its L.A. Times/Washington Post wire relationship. Or again, McClatchy could assume KR’s position, further positioning itself as the new quality chain – but without the baggage.

McClatchy’s sales price may adjust with market conditions. The 40 percent of the price that will be paid in McClatchy stock is subject to McClatchy share price fluctuation – there is no “collar” to adjust the sales price should the share value fall. That value has fallen since the announcement – and with it KR’s share value. Now we’ll see a redrawn U.S. newspaper map, as Pruitt tries to pay down his investment as much as possible and other publishers buy according to their own strategies. Look for Media News to expand its California holdings in a bid for the Mercury News, Contra Costa Times, and Monterey Herald. It makes sense that Gannett will look at medium- and smaller-market properties overall, and that Lee will build on its Midwest smaller city ownership. The wild card is the Newspaper Guild, which along with its partners Ownership Associates, Inc. and Duff & Phelps Securities, Inc. is bidding on nine of the 12 through its buying entity, ValuePlus Media. As it plays that card, it throws a new joker on the news table: public or quasi-public ownership of community-servicing news media, which would somewhat reshape the nature of the news business in the years to come.

Latest Outsell Research on News Consumers Available as Free Download

Outsell’s study of more than 2,800 consumers’ news habits finds that most Americans get their news from television, and that newspapers continue to cede readership to the Internet. The responses also show that:
- Television is consumers’ top choice for national news.
- Local news remains a stronghold for newspapers.
- News companies are losing their central place in commerce.
- The Web is now consumers’ first choice for health, wealth, and travel information.

Read our press release for more information, or download the full report. 

Dow Jones Reorganization: A Fundamental Shift

The outlines of what modern print-based media are becoming can be seen in Dow Jones’ reorganization announcement. In short, Dow Jones severed the knot, refocusing from “channel delivery” (print, online) to audience (consumer, enterprise, and community media), and appointed three new heads of those operations: Gordon Crovitz, Clare Hart, and John Wilcox, respectively. Recently appointed Dow Jones CEO Richard Zannino is pushing for full integration of the companies’ print and online products. Both the New York Times and the Boston Globe have moved toward greater news operations synergies over the past year, but Dow Jones’ announcement is a more fundamental shift. 

Outsell affiliate analyst Ken Doctor sees these tectonic moves in the restructuring:

·  It’s Not How You Get Our Product, But Who You Are and What You Need When: Publishing structures have been defined by their end physical product – whether in print or pixels – and then essentially organized backward. The reorg shows that Zannino gets the idea that it is the intended audience that should determine how you produce the goods. Those audiences increasingly don’t want paper or pixels. They want news and info delivered to them as their needs change through the day, over weeks, among different content types, and with easily customizable delivery options (made more interesting as mobile news and information goes mainstream).
- The Umbrella of Like Brands Is More Important Than the Individual Brands: The Wall Street Journal. WSJOnline. Barron's. Now MarketWatch. These are all great brands, and each has served distinct but overlapping audiences. Seeing these brands as contributors to a whole unleashes much potential power, especially at a time when Time Warner has bundled all its business-oriented brands into CNN Money.com. Most importantly, online is no longer a stepchild product or brand.
- Advertising Alignment Gets Real: Such print/online alignment is a matter of both bringing advertisers coordinated, across-media solutions and making the selling process more efficient.
- News 24/7 for All Readers: Paul Steiger, the Wall Street Journal’s well-respected managing editor, now heads all editorial operations. It’s a tough mandate, but Steger has the clout and now the responsibility to turn one of the world’s best newsgathering operations into a true real-time newsroom.
- Real-time Reuse of Business Content Within the Enterprise and Within Media Is Now a Central Dow Jones Business: All publishers have been focused heavily on that first publication in or on their owned properties, aiming at their first deadline, and then doing what they can to make money on reuse. Dow Jones' new focus on enterprise means the company understands more clearly that the second and all subsequent uses are the moneymakers in a short-, medium-, and long-tail Internet world. For Dow Jones, a major opportunity should be in bringing WSJOnline, now purely consumer-facing, into the enterprise in ways that uniquely satisfy industry needs and forge powerful internal information/research machines.

As a company, Dow Jones ranks No. 83 in the Outsell 100(SM), swimming in place while many of its publisher colleagues have fallen back. Gannett, Tribune, Knight Ridder, and the New York Times Co. have all dropped from 21 to 38 places over the last three years. Zannino’s move is clearly a recognition that the time to move is now, if the race is to be won.

One clear winner in the restructuring is Clare Hart, who comes back to Dow Jones from her industry-leading post as Factiva CEO. Hart has been praised both for her understanding of audiences – initiating a market-facing restructuring within Factiva – and for her ability to execute, often ahead of her competitors at LexisNexis and Dialog. Unclear in the announcement is how the new DJ enterprise push will affect Factiva, which it owns 50-50 with Reuters. The key here: aligning the DJ enterprise business in whatever way makes the most sense for DJ and Factiva customers, so that their news-based research experience flows as seamlessly as possible. Hart will become chairperson of Factiva.

Another winner is Gordon Crovitz, longtime WSJ journalist, who has been heading Electronic Publishing. Electronic Publishing now extracts more than $500 million in revenue from its 768,000 subscribers and related ad sales. The Journal’s paid Web site has long been an anomaly in the newspaper world, owing much to its expensability by business customers. It has been challenged, however, by the same low usage – in frequency and duration – that has dogged news publishers online. The launch of the personalizable mywsj.com, due in late March, is one step in making the site more of a daily essential in its subscribers’ lives and winning back time share from GYM (Google, Yahoo!, MSN). The challenge for Crovitz will be his ability to make the new partnership with Steiger work in a way that no American dailies have yet achieved. That means re-thinking newsgathering, newswriting, and the real-time addition of visuals to news reports. It also means rethinking how technology and production can be best and most cost-effectively harnessed in a combined print/digital world. 

Dow Jones’ latest moves recognize challenges from other players who have been upping the ante in the business news world. Time Warner’s announcement in January that CNN Money would encompass Fortune, Small Business Fortune, Money, and Business 2.0 was one competitive warning shot. Conde Nast’s new business magazine (planned for 2007) is another. Yahoo! Finance and MSN Money wait in the wings, with potent market shares and the ability to build on them from a Web-centric point of view. The Associated Press is pursuing a user-centric and integrated news operations strategy similar to Dow Jones’, but does not have Dow Jones’ end-to-end supply chain. AP relies primarily on its member newspaper companies for the “final mile and final click” delivery to its customers. 

Yahoo!’s Entertainment Play Puts Core Newspaper Franchise at Risk

Eat, drink, and be merry. Seems simple enough in the terrestrial world, anchored by newspapers.

Research for an upcoming Outsell HotTopics on users’ changing news consumption habits shows that newspapers’ entertainment and event planning franchise is still quite healthy - with more than 50 percent of Americans still turning to print newspapers for entertainment planning. In fact, newspapers are their primary choice. Many readers use the Friday tab entertainment sections and are conditioned to find everything from local concerts to yoga sessions in calendars throughout the paper.

On the Web, several competitors have aimed to use the Internet’s interactive abilities to peel back that newspaper franchise. While early ones have had limited impact, Yahoo!’s new entertainment browser promises - and threatens - to have a greater one. In beta with no announced release date, it should realize the vision of that first do-it-better-than-newspapers site, Sidewalk.

Bill Gates' Sidewalk awed the publishing world in 1997 when it vowed to revolutionize entertainment delivery on the Web, hiring impressive editing talent from the country's newsrooms, staffing up in numerous cities, and presenting semi-database-driven, best-bets-oriented listings. Sidewalk foundered because of its labor-heavy staffing (it failed to partner with newspapers, which already collected most of the data) and its lack of a business model, which paid search would eventually provide.

Later, City Search, which bought Sidewalk’s remains, established itself as a reliable, if thin, site, whose clear purpose was to sell tickets through its sister Ticketmaster site.

Yahoo!’s new product is built on the base of Upcoming.com, which it bought last year. A large map dominates the opening page, putting users and their cities first and foremost. AJAX mapping (which Google Maps wows users with) is central.

Users pick a part of the city, an entertainment type - museums, art, movies, etc. - and a date range, using a handy calendar, and they're off to the races. With the fun of AJAX, they can see the info literally move with their desires.

Though the beta is sparse in areas and lacks some intuitiveness in how users set parameters, we can see where this is going:

- Yahoo! will layer on user-generated reviews and comments, in line with its new social media religion.    
- Mapping and directions take users to events, incorporating the best of modern mapping and surfacing nearby restaurants.
- Movie times and ticketing will be a click away.
- Ticketing overall will be offered, as the primary (Ticketmaster) and secondary (eBay, StubHub) markets mingle and merge.
- All will be contextualized and personalized, as Yahoo! connects up its dots of Yahoo! 360 (networking), My Yahoo! (personalization), and My Web (saved and sharable searches and search results).
- Yahoo! Local contains user restaurant reviews, but requires too many clicks to find them. We expect this connection to get quicker and easier.

This innovation has been long in coming, and users will quickly adapt to it and share it virally. Young users, already fueling their own informal, casual entertainment sites like San Francisco-based Yelp.com, will lead the way. For news companies, the best route is to understand how Yahoo! and fellow tools wizards will dominate the user experience in entertainment.

If users make the Yahoo! site a habit for planning their weekends and leisure time, it will be just one more case where newspaper companies cede a franchise that sustained their print operations for decades.

Why? There's a lot of money around entertainment: ads for movies, restaurants, concerts, clubs, and more. On the Web, add ticketing and reservations and you have two new revenue sources, potential upsides for traditional publishers.

As it moves online, all that revenue will follow the users. And in Outsell's opinion, the users will like what they see in Yahoo!'s new product.

Most local Web sites, produced by newspaper companies, have failed to capture their local users' imagination. Outsell research shows that only 15 percent of Americans use online newspaper sites for entertainment planning, a fifth choice after print newspapers, TV, word-of-mouth, and radio.

Why? Too many serve old restaurant review data or make it too hard to find what's happening where, and where the best events are. Many online entertainment sections pale in comparison to Friday print sections, unable to port over systematically and dynamically all the information their newsrooms gather.

And most have failed to harness the value of local interaction, comment, and sharing of reviews.

A few exceptions exist, models publishers should look to. The Chicago Tribune's Metromix, now being exported to Baltimore and Orlando by parent Tribune Company, has proven to be one of the most durable, comprehensive local city guide/entertainment sites. The Washington Post's City Guide also has excelled, deftly including critics' and users' comments. 

As beta becomes reality, Outsell affiliate analyst Ken Doctor believes publishers face the following challenges:

- Harness their valuable entertainment data - making sure it's tagged properly with meta-data and easily exportable - so that they can strike good content licensing deals with the Yahoo!s. This needs to be done quickly, before the entertainment browser moves onto a phone near you.
- Build on a platform such as Metromix's to add the kind of functionalities Yahoo! is adding, and syndicate that platform among publishers. This alternative enables maintaining and growing relationships with local entertainment-oriented advertisers. Make it easy for users - and travelers - to move between cities.
- Partner with Yahoo! (or any other emerging next-gen entertainment browser) to co-brand a product for local markets, gaining full functionality and pouring local content into it.
- Build new revenue streams by licensing entertainment content to the aggregators, both desktop and mobile.
- Maintain and grow relationships with local entertainment advertisers as best possible, either by improving local sites or striking deals with the aggregators to sell into their products.
- Most importantly, get beyond the mid-'90s browse-oriented entertainment products that are up on too many sites.
- Lastly, on the M&A level, learn how Yahoo! has taken an acquisition and integrated it smartly into its core business.

Outsell's Ad Spending Study Shows Online Ad Penetration Higher Than Previously Reported

We've recently released results from our Annual Ad Spending Study, which provides a new and unprecedented view of the advertising market. Based on interviews with over 1,200 advertisers who together control $2.4 billion in ad budget, the study is the first to analyze differences across advertisers and cover all of the markets they target — B2B, B2C, and healthcare. Companies can find answers about never-before-tracked areas, such as:
- Budget allocation, growth rates, and trade-offs across all types of advertising, including print, TV/radio, online, and events.
- Advertisers' views about the effectiveness of Google versus Yahoo! and Microsoft's MSN.
- Performance of keyword ads versus contextual and behavioral ads.
- Why advertisers choose one channel over another.

One major finding of the study is that 80 percent of advertisers now use the online channel, higher than previously reported. Outsell, in fact, projects more than 90 percent adoption by 2008.

Further details are available in the report, Annual Ad Spending Study: Where and Why Advertisers Are Moving Online, available as a free download.

See our press release.

See further coverage of Outsell's study in the Boston Globe. 

ProQuest To Restate Financials, Two Suits Filed

ProQuest has issued a release announcing that it will restate previously issued financial statements going back as far as 1999. The company has incorrectly accounted for its handling of deferred income and accrued royalty accounts in its subscription-based businesses. This is everyday stuff for accountants in the information industry, but a little obscure, even for stock analysts, on the outside. It's all about the fact that most information company contracts are paid at one time, but services are delivered throughout the year. 

The crux of what happened to ProQuest is that the company delayed putting certain amounts of royalty payments to publishers on its books while at the same time recognizing portions of long-term subscriptions too soon. Therefore, it reported lower expenses and higher revenue than it should have. The firm's statement says that correcting this "will materially reduce earnings from continuing operations for many of the affected periods," so these were not just rounding errors, but likely systematic failures to apply standard revenue and cost accounting procedures.

Two law firms that often represent investors in claims of securities fraud are out looking for plaintiffs, having filed suits Friday and today looking for members for a possible class action suit. This is not a scandal of the sort inflicted on customers of the now defunct divine, inc., involving libraries that paid subscription fees to divine that were diverted to other purposes. 

The scorecard of players and victims:
- Customers: neutral - no customers were incorrectly billed.
- Content owners: neutral - none were paid incorrectly.
- Lenders and private placement holders (who rely on certain representations to back certain debts): misled
- Shareholders (the ones who bother to read financial statements): misled

The bottom line is that ProQuest has mismanaged its basic subscription business accounting. This does not seem to be an exotic misdeed involving foreign accounts, offshore accounts, derivatives, or the like. That this apparently went on for five years is amazing and a huge black eye for the internal financial staff, internal auditors, and external auditors. The only "color" in the press release is that ProQuest's Audit Committee has engaged the whitest of the white shoe law firms, Skadden, Arps, to conduct an investigation, and that Skadden has hired "forensic accountants" from Chicago Partners. ProQuest seems determined to be very public about issuing a statement that - hopefully - there was no foul play. The story is ongoing, and we’ll update our analysis as it unfolds.

The $285 Billion Information Industry Pie

Outsell’s preliminary 2005 information industry market size and share data was released last week at the SIIA Information Industry Summit and is available in our HotTopics, “Information Industry Market Size And Share Rankings; Preliminary 2005 Results.”

Overall industry revenue is now over $285 billion. In 2005, the industry grew by 7.7 percent overall, down from a 9.8 percent growth rate in 2004. Growth of the top 20 firms was higher, at 8.6 percent, largely due to M&A activity rather than organic growth. Google and Yahoo! moved up from No. 18 and No. 14 in the market share rankings last year to No. 5 and No. 8 this year, respectively; without them the rest of the Top 20 grew by just 3.8 percent. The search players continue to gain market share, disrupt and outgrow the rest of the industry, and drive the industry’s rapid push into ad-funded content. Outsell’s final analysis, available in May, will provide market size and share rankings for all companies over $5 million in revenue.

Slices of the Information Industry Pie, 2005
(click image to enlarge)

Source: Outsell’s Publishers and Information Providers Database                  
© 2006 Outsell, Inc. Reproduction strictly prohibited.

Relative size of the segments is shown on this chart.  News is the largest segment of the industry with $75.3 billion in revenues. Search, Aggregation & Syndication and Education & Training tie as the next largest segments, with revenues of $37.5 billion and $38 billion respectively. The Yellow Pages & Directories segment, at $30.9 billion last year, ranks fourth in overall revenue generation. Compared to 2004, all segments held their percentage share of the industry, with the exceptions of News, which dropped from 28 percent to 27 percent, and Search, Aggregation & Syndication, which increased its share from 12 percent to 13 percent. The single point drop in industry share for News is noteworthy given the relative size of this segment, and illustrates in stark terms the Google-and -Yahoo!-driven shift of ad dollars out of News and into Search, Aggregation & Syndication.