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Reuters Media Targets the Consumer Market: About Time, Too (Again!)
There are few places in the world where the Reuters brand on a news story or picture does not stare you in the face when reading the daily newspaper. But the revenues from that business are a drop in the ocean compared to Reuters overall business serving the financial community. Now the company has taken a giant step forward to making media a financial powerhouse in its own right. And it’s about time, too, once again!
Reuters’
media business uses the wholesale model. It sells its products to
newspapers, television stations, web sites, etc., and they in turn provide
that product to consumers, via a subscription or financed from
advertising, or both. But now the Reuters strategy is, “Why Not have
your cake and eat it?” Still be a wholesaler, but also go directly to
the consumer. If they do it right, the consumer financial returns should
eventually overtake wholesale.
Some financial analysts question whether the new approach can be successful. Actually, it’s not new to Reuters. The media department already experienced successfully going directly to the consumer several years ago, but it was an idea before its time. Then senior media managers were absolutely married to the wholesale only model, they were appalled by the experiment and they eventually killed it. But the experiment worked.
The
lessons learned have probably been lost with time and management changes,
but the strategy was a proven success; even the fallout from media
subscribers not happy with Reuters sharing its news directly with the
consumer was handled without loss of revenue.
And
how do I know? Because I did it.
Birth of sportsweb.com
At
the time, in 1997, I was manager of the Reuters Europe, Middle East and
Africa media business and the global Internet business was booming. Media
represented just some 7% of Reuters’ overall revenues and try as we
might we couldn’t really get that percentage higher. So new thinking was
called for. One day I said to my Internet business manager, “Those
people we are selling our news to are making web fortunes. So why don’t
we make a fortune – let’s do what they are doing.”
To
cut a long story short sportsweb.com was born in just six months. It
contained all of Reuters sports news. We borrowed an Einstein Webmaster
who automated nearly the entire site, we co-opted a wizard editor from the
sports department, and before long the site was earning four-star and
five-star reviews from global web judges. And it ran on 2 ½ staff!
An
advertising house sold banners, but that was our Achilles heal -- we
didn’t know the advertising world very well and we didn’t keep a close
enough eye on that part of the business.
Meanwhile,
Reuters senior media managers and some major European media clients were
not happy. The media managers based in New York were aghast. They were
making piles of money by selling news wholesale to Internet sites – how
could they show their faces to the wholesale community when Europe was
putting the entire sports report on the web? They wanted the site
gone. Quickly. No convincing them you could make more retail than
wholesale.
Back
in Europe, some of the largest traditional media clients let it be known
they didn’t see why they should pay Reuters as much as they were
paying while all that sports news – some 15 per cent of the overall news
report -- was on the web for free. It was clear that how those complaints
were handled at that time would determine whether wholesale and retail
could live side-by-side. I handled those client discussions personally,
and the bottom line is we did not lose any customers and we did not lose
any revenue. Yes, you can have your cake and eat it!
Sportweb.com Sold
But
the folks in New York wouldn’t give up. And eventually they arranged the
sale of sportsweb.com to sportsline.com. The global media manager in
London agreed the deal; sportsline took over sportsweb and immediately
closed it down. The experiment was over.
Fast
forward (a favorite Reuters expression these days) to 2001 and a “Last
Supper” for the retiring global media manager. By then the Internet boom
was over. US media revenue was hemorrhaging as almost daily another web
site went out of business. He
was asked, “What do you believe was the single biggest mistake you
made?” Stroking his grey
beard for a few seconds, he turned to look me straight in the eyes,
“Probably selling the sportsweb,” he said quietly.
Fast
forward again to the present day. It’s a new senior management and it
takes a much more positive view about Reuters positioning on the Internet,
no doubt paying close attention to various forecasts indicating an
absolute boom in Internet advertising, even surpassing what it was during
the so-called boom days.
Reuters.com
and various regional web sites now attract some nine million unique
visitors each month, according to Tom Glocer, Reuters CEO.
Reuters has announced its video service will be a part of
Microsoft’s new Windows XP Media Center in the US, and it has also
appointed an executive charged solely with going after media consumer
business in China.
Reuters
is unique among news agencies in being able to enter the consumer market
so easily because it is publicly owned. Most other agencies are beholden
to owners who do not want that agency competing with their own business
opportunities. In Denmark, for instance, during the Internet boom days the
Ritzaus news agency endured journalist strikes because the owners, Danish
newspapers, didn’t want Riitzaus getting into the web world with its own
site competing against newspaper sites.
Building the Brand
Reuters
enjoyed a head start in its wholesale web business because other
international news agencies simply were not there – they had to convince
their newspaper owners that serving wholesale web sites was the right
policy. Those delays by others probably was the single most important
reason that Reuters was able to build its brand to consumers around the
world, particularly in the US, because Reuters was all over the web
as THE news source.
You
won’t find a “value” in
the company financial reports for that brand recognition earned from the
wholesale web business, but it is enormous. Today, management is
capitalizing on that earned value by going after the consumer market and
the financial returns should be very pleasing
Reuters
media business is worth some EUR225 million globally and no doubt reaching
that figure for the consumer business must be an eventual target. Glocer
has stated very clearly that Reuters sees the media consumer market as a
major priority and that he understands achieving financial goals won’t
happen overnight. “I have big ambitions for our media business which I
believe can grow with our brand to serve millions of consumers
directly,” he told staff in an internal memo, and he reiterated how
important he thought this business could be when he commented on the
company’s third quarter results.
Some
financial analysts still have doubts. One told the Guardian
newspaper that the wholesale policy was the right one. They are “the
seller of spades in a gold rush rather than the gold digger,” he said.
Luddite!
Not
only does Reuters sell the spades in the gold rush, it already owns the
biggest gold mine of all from which others dig. It will continue to sell
the spades while at the same time selling its gold into additional new
markets. What’s wrong with
that?
Forgive
the ego trip, but seven years on from the sportsweb there’s a certain
amount of satisfaction in seeing one was seven years ahead of his time.
© Philip M. Stone of Stone & Associates, a partner in followthemedia.com