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'Where's the value?' Reed Elsevier continues the long march from print to digital B2B publishing

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Patrick Smith, TheMediaBriefing Experts' Blog, B2B Media


Is the challenge of reorganising legacy B2B media brands for the 21st century more trouble than it's worth? Global scientific, technical, medical (STM) publisher Reed Elsevier seems to think so, having unsentimentally sold off many of its magazine-based Reed Business Information (RBI) brands in recent years in favour of workflow-based data products in growth markets.

And that's not the end of it. At the announcement of Reed's 2012 results today, CEO Erik Engstrom said: "This is about local, print advertising-based business that we don't want to be in... The question is do we see value creation in it? And if not, then why don't we give it to someone else?"

There are times when the effort spent in transforming legacy business works, he said and the company claims user and subscription revenue now accounts for almost 70 percent of RBI's revenues and electronic income accounts for more than half the total.

However, Hollywood journal Variety, which RBI sold for $25 million in October 2012, was "a very good business but not the kind of business we want to be in," says Engstrom. And as for more sell-offs? "You can't say that's going to be the end of that process, but it might be higher or lower amounts during the year."

Earnings boost with worries ahead

As for the health of Reed generally, the clouds are parting - but the digital transition is proving slow and painful, with some macroeconomic challenges ahead. Engstrom says the plan is to "systematically transform our business into a professional information solutions provider that combines content & data with analytics and technology," with particular focus on emerging high growth markets.

The Anglo-Dutch group today announced a revenue lift of four percent for 2012 to £6.1 billion and profits up six percent to £1.7 billion. At the end of 2012 electronic and face-to-face revenues account for of all Reed's income but there's a big discrepancy between the divisions:

-- Reed Business Information: Revenue of £663 million is a two rise year on year - but RBI's operating profit increased 10 percent to £119 million. But it's a mixed bag: utilities data provider ICIS and BankersAccuity both achieved double-digit revenue growth, but weakness in US construction data businesses cancelled out that lift. Sell-offs during 2012 include: RBI Australia, RBI Spain, TotalJobs and Marketcast.

-- Scientific technical medical: Revenue was up one percent at constant currencies to £2.06 billion as STM grapples with declines in print book revenue. "Strong demand for electronic solutions" isn't enough to boost growth beyond "modest". Online growth took article submissions beyond the one million mark for the first time in 2012, with 11 million users downloading some 700 million of them.

-- Risk Solutions: An area where Reed has heavily invested in digital workflow tools, Risk revenue is up one percent year on year £926 million. "Big data" analytics products are the big goal here.

-- Legal: Down one percent to £1.6 billion - the story is the same here as elsewhere: print declining, online modestly improving. LexisNexis has invested heavily in its HPCC "big data" tech to make legal info searchable and usable - but this is only being used by 45 percent of US users.

-- Exhibitions: US and Japan are good sectors for expos for Reed, helping the division to a 25 percent increase year on year (biennial events give this number a natural boost). Some 30 new events were launched and following the lead of expo rival UBM Reed launched a JV with leading Brazilian events business Alcantara Muchado and Turkey's Tüyap. There's now a digital element to 70 percent of Reed's events.

Meanwhile, investors will be happy today with a seven percent dividend increase and the £242 million raised in divestments that has been used to buy back shares to protect the earnings per share number.

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