Digital Publishing Business News: Economist Value Yields Interesting Lessons

Effort to stay private for venerable magazine shows collision of digital publishing, business; plus, relax on ad blocking, and several open source options for content management

The digital publishing business gets more and more interesting by the week. Time Inc. digital investments and innovations have been relentless; recent personnel changes from Ogden to Bloomberg Businessweek have kept the industry on its toes; and mergers & acquisitions are approaching peak activity. Combine all of this with the daily maneuvering of titles trying to go all-in on multiplatform publishing, and you have a whole lot to pay attention to if you’re running digital magazines.

But recent bombshells about the sale of the Financial Times and the inner-workings of negotiations over the fate of The Economist have captivated our attention today. Fusion has a fascinating article titled “How staying private paid off for the Economist,” and we have to start there!

What Publishing Executives Can Learn From Economist Transactions

Believe it or not, The Economist is worth $1.5 billion, according to a recent valuation. With the sale of the Financial Times to the Nikkei Group, major stakeholders Pearson dangled their shares of The Economist, and the magazine fought tooth & nail to retain private ownership – albeit against little competition – Fusion reports.

So, how did it all shake out? Well, in the end, they spent $734 million for 50%.

“In the price negotiations over The Economist, the company itself, along with deep-pocketed board member John Elkann, had every incentive to drive a hard bargain and to pay Pearson as little as they could for their stake. What’s more, they knew they weren’t competing against anybody else: there was no underbidder, and they knew that Pearson had zero strategic interest in holding on to its stake after having exited the rest of its publishing-industry holdings. And yet, somehow, the final price ended up being so high that The Economist had to sell its iconic St James’s headquarters in order to raise the necessary cash,” Felix Salmon writes.


“What explains this topsy-turvy world in which noncontrolling corporate stakes are worth more when they’re private than when they’re public? Part of it is the fact that investors in private companies naturally have longer time horizons. If you buy a large chunk of The Economist at a valuation of more than 20 times its annual earnings, it’s not because you think you can make a profit by selling it in one year or one month or even one second. That’s public-market thinking. It’s because you think that the asset is going to be a valuable one over decades or more, for your grandchildren, and possibly for theirs, too. The Economist has been around for 172 years, and in a world where the 30-year German Bund yields just 1.3%, a decent dividend alone would do better than that.”

Ad Blocking Will Not Bring Down Digital Publishing Business

Salmon’s back with another interesting piece on ad blocking. While many in the digital publishing business fear the sky is falling with readers’ ability to stymie advertiser efforts with installed software, Fusion points out that there has always been a risk for wasted spending when it comes to marketing, and that the upside for reaching online audiences is still strong.

Fusion’s Latest Open Source Offerings

We are big fans of Fusion here at Mequoda, in large part because of their exemplary multiplatform model. But they also work to further the digital publishing business, building a foundation with open source software compatible with WordPress CMS. Recently, they’ve announced Publishing Checklist, Speed Bumps, and Shortcake Bakery. Check these tools out – we plan to!

What digital publishing business news are you following? let us know in the comments!

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