Media giants sacrificing long-term opportunities for short-term gain, Punnett

Rogers iMedia’s plan to shutdown one web site, and cut costs at others, shows that most media giants are focused more on quick returns than on research and development, according to an industry analyst. Sam Punnet, VP of Innovation for Delvinia Inc (formerly Multimediator Strategy Group), says companies like Rogers are still in an excellent position to turn a healthy profit on their Internet properties, but they shouldn’t be so quick to walk away from what market share they’ve managed to secure. "People are certainly using this stuff, so what are you going to do? Are you going to surrender the turf to your competition or do you take on the expense?" asks the longtime industry watcher. iMedia announced this week that it would close its recently launched Springboard.ca women’s site, eliminating 40 jobs, and cut expenses at its other sites, including Chatelaine.com and Today’s Parent.com, in an effort to ensure each of its web properties is profitable within 12 months.Brian Segal, president and CEO of publishing and online services at Rogers Media Inc, which owns Rogers iMedia, says it isn’t that the web sites aren’t generating money, they just aren’t generating enough. "When you look at our properties, they are generating significant revenues. The issue is, we can’t continue to spend at the rate we’ve been spending because it’s a lot higher than the revenues coming in." He says the company is projecting advertising revenues in 2001 to grow 50 per cent over 2000, and predicts that by 2005, Internet advertising revenue will be in the $350-400 million range – the same as for consumer magazines. "At the end of the day, it’s not much different than a magazine," he explains. "Sure, we’d love to produce another 18 editorial pages in a particular magazine. But, you’ve got to manufacture that and it’s expensive. If you can’t generate the revenue, then you don’t do it ... the focus really has to be on creating the content/tools that will maximize the revenue, and that’s what we’re trying to do." Turning a profit within 12 months may be ambitious, but Segal believes its doable. "We think we’ve brought the costs in line with our revenue projections. As the revenue increases, we will continue to invest in those businesses. We believe that what we’ve put in place, unless the advertising world collapses, we think that those have an exceedingly good shot at being profitable within 12 months." Punnett questions whether the industry is taking a realistic business approach to its Internet investments. The analyst is one of several in recent months that have urged the online sector to take a longer and broader term view of their return on investment. For example, he says not every web site has to be profitable to bring value to a company’s overall media operations. "I think it’s about media-heads wrapping their heads around the fact that you’ve got to have the channel. Don’t think less than integrated. You can’t not have the web channel because that’s what your audience is dialed into now. The revenue model is about serving the audience," he explains. "Let’s face it," he adds, the biggest challenge of convergence is that some of those companies, like some of these media folk, have had it pretty good for the last 50 years. The broadcast guys are going to get beat up pretty badly and spit out. The publishing guys have been operating in a pretty protective environment. My point is that some of these guys are not predisposed to R&D – they’ve never had to before."

Media giants sacrificing long-term opportunities for short-term gain, Punnett

Broadcast | April 5, 2001

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