AAN Case Study Utopia Media
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Transcript of AAN Case Study Utopia Media
Case StudyCase StudyCase StudyCase Study
Utopia Media, Inc.AAN Publisher Conference
Santa Fe, New Mexico10/31—11/1 2008
Presented by Terry GarrettBusiness As If and
Oasis Web Logistics—CMS for news media [email protected] 415.302.9583
PurposePurposePurposePurpose
To demonstrate what is urgently required of publishers to tackle a new media economy.
Process ParticipationProcess ParticipationProcess ParticipationProcess Participation
1. Read market situation2. Read Utopia Media profile3. Contribute your expert opinion in the
prediction market4. Engage in interactive ‘Strategy Sprint’ at
the conference
Here’s howHere’s howHere’s howHere’s howPublishers coordinate supply and demand of a two-sided market.Consumer attention has shifted from abundance to scarcity.
And…And…And…And…
•Advertisers follow consumers.
•Advertisers supply the money.
•Where consumers go, so goes the money.
Follow the moneyFollow the moneyFollow the moneyFollow the money
From perspective of two major demographic groups
Past Present Future
Younger 18-39 Print Digital
Print Digital
Older 40+ Print PrintDigital
DigitalPrint
Survival dependsSurvival dependsSurvival dependsSurvival depends
•Choosing the right business model to coordinate content
And
•Deliver attention and advertising plus other services
Utopia Media, Inc.Utopia Media, Inc.Market ProfileMarket Profile
Utopia Media, Inc.Utopia Media, Inc.Market ProfileMarket Profile
Utopia—Market Statistics Comments
Population 18+ 1 Million DMA
Demographics Proportionate to US
# of business est. 40,000 Same as US average
Major University Yes Several colleges
Other Same as US averages Avg. Temp 72°
Utopia Media ProfileUtopia Media ProfileUtopia Media ProfileUtopia Media Profile
Utopia Print Statistics
Circulation 80,000
Pages 68—84
Average $CPM
$20
F-T Employees
28
Years in business
20
Utopia Digital Statistics
Visitors 65,000
Page views 150,000
Average $CPM
$5
F-T Employees
1.5
Years in business
8
Utopia Media Financials Pg.1Utopia Media Financials Pg.1Utopia Media Financials Pg.1Utopia Media Financials Pg.1
In thousands (000) 2005 2006 2007 2008
Sales 3,500 3,300 3,200 2,900
Fixed asset investment 50 80 20 0
Cost and expenses
Cost of goods sold 25.71% 26.52% 26.56% 28.45%MSG&A 65.00% 69.70% 70.31% 72.41%Dep. & Amortization/sales 0.14% 0.30% 0.31% 0.38%Average days & other
Receivables 32.3 30.4 27.4 31.5Payables 36.8 43.6 28.3 32.4NetPrft/AvgNetFxdAssets 146.17% 36.54% 26.67% -14.69%Debt/equity 0.25 0.26 0.19 0.11
Utopia Media Financials Pg.2Utopia Media Financials Pg.2Utopia Media Financials Pg.2Utopia Media Financials Pg.2
2005 2006 2007 2008
DuPont Power Analysis
1.Return on Sales 8.46% 2.88% 2.50% -1.52%2.Asset Turnover 5.41 4.60 4.52 4.14 3.Return on Assets (1 x 2 = 3) 45.71% 13.24% 11.31% -6.28%4.Financial Leverage 2.59 2.13 1.81 1.77 5.Return on Equity (3 x 4 = 5) 118.40% 28.15% 20.51% -11.13%
3 Bottom Lines +ROA
Operating Cash Flow (OCF) $331 $60 $95 -$28OCF / Sales 9.46% 1.82% 2.97% -0.97%Net Profit (Loss) $296 $95 $80 -$44Return on Assets (ROA) 45.71% 13.24% 11.31% -6.28%
Financial DashboardFinancial DashboardFinancial DashboardFinancial Dashboard
Market SituationMarket SituationMarket SituationMarket Situation
“A marginal business always goes down disproportionately more whenever the economy goes down, and it comes up disproportionately less whenever the economy comes up. With every turn of the business cycle, it becomes weaker.
And once a business has become marginal, it is exceedingly difficult to reverse in this downward drift; in fact, it is almost impossible.”
Peter F. Drucker
Market SituationMarket SituationMarket SituationMarket Situation
1. Have print publications become marginal? Yes
2. Are alt-weeklies immune from the trend of dailies and magazines? Not entirely
Three Really Big QuestionsThree Really Big QuestionsThree Really Big QuestionsThree Really Big Questions
1. What to do with Print product and with digital products?
2. What is the right size for each?
3. How are they positioned demographically and psychographically?
Utopia Print is heading SouthUtopia Print is heading SouthUtopia Print is heading SouthUtopia Print is heading South
How far South will sales go in 2009, 2010?
A. $2.0 to $2.3MB. $2.4 to $2.8MC. $2.9 to $3.2MD. Greater than $3.2M
Ok, so what does Utopia do?Ok, so what does Utopia do?Ok, so what does Utopia do?Ok, so what does Utopia do?
Assess the situationWhat is the external reality, i.e. market forces and where is that taking us?
Past Present Future
Younger 18-39 Print Digital
Print Digital
Older 40+ Print PrintDigital
DigitalPrint
Economic climate down for foreseeable future.
Internal Assessment of KPI’sInternal Assessment of KPI’sInternal Assessment of KPI’sInternal Assessment of KPI’s
Financial Metrics Operating Metrics Cultural Metrics
35% 35% 30%
3 bottom lines Productivity yields Unity with purpose
Sales Contraction impact Unity with strategy
Investment in future Optimization at right size Levels of satisfaction
What is our trend and what is important to use for assessment?
Know Your Primary ResourcesKnow Your Primary ResourcesKnow Your Primary ResourcesKnow Your Primary Resources
Knowledge Capital TimeCrucial
Physical Assets
Financial literacy Cash Productivity Infrastructure
Tech literacy Leverage Measurement Technology
Market & Cultural literacy Equity Alignment/
AllocationCoordination/Optimization
Informs us of the things we need to know & learn, and where & how to apply it
How much we need to stay in business, grow & where allocated
When to do things, how long it takes
What tools, space, etc. do we need to optimize the other resources’ value
KnowledgeKnowledgeKnowledgeKnowledge
Knowledge = ‘right info’ + performance experience + intuitive and reasoned judgment
Knowledge = ‘right info’ + performance experience + intuitive and reasoned judgment
What do we know and what don’t we know?Requires Systematic:
1. Gathering2. Filtering3. Analysis4. Evaluation5. Application6. Measurement
How these work togetherHow these work togetherHow these work togetherHow these work together
Strategy defines and allocates resources.
Operations reflects strategy by coordinating resources to achieve goals.
Culture determines the amount of friction encountered and thus effectiveness, sustainability and efficiency.
Where is Print positioned andWhere is Print positioned andwhat’s the right size?what’s the right size?
Where is Print positioned andWhere is Print positioned andwhat’s the right size?what’s the right size?
40 years & older demographic?
LOHAS (Lifestyles of health and sustainability) & Moderns psychographic?
$1.5 to $2M sales?
What if…What if…What if…What if…
A Print operation at $1.5M is the right sizeA Print operation at
$1.5M is the right size
With capacity to increase to $2.0M?
With capacity to increase to $2.0M?
Net profit at $1.5M — 12%, $180,000
ROA —30%OCF—12%
Even better performance at $2M
Net profit at $1.5M — 12%, $180,000
ROA —30%OCF—12%
Even better performance at $2M
And you shrink the number of And you shrink the number of customers by drawing the linecustomers by drawing the lineAnd you shrink the number of And you shrink the number of customers by drawing the linecustomers by drawing the line
Full
3/4
2/3
1/2
1/3
1/4
1/6
1/8
1/12
1/16
Full
3/4
2/3
1/2
1/3
1/4
1/6
1/8
1/12
1/16
Move smaller advertisers to web directory pages &
reverse publish to print seasonally
Print ad sizes
Number of Accounts by SizeNumber of Accounts by SizeCut Print Customers in HalfCut Print Customers in HalfNumber of Accounts by SizeNumber of Accounts by SizeCut Print Customers in HalfCut Print Customers in Half
Reduces transactions by 63% and space by 34%Reduces transactions by 63% and space by 34%
Revenue by SizeRevenue by SizeMove 1/3 of income to webMove 1/3 of income to web
Revenue by SizeRevenue by SizeMove 1/3 of income to webMove 1/3 of income to web
Move all small accounts to web directory. Can reverse the flow into print directories.
Free Cash FlowFree Cash FlowFree Cash FlowFree Cash Flow
Proactively reduce print operation to a highly profitable level by:
• Only sell ¼ page and larger sizes
• Fewer transactions means fewer print reps and production work flow diminishes, which lowers costs and the product looks better.
• Reduce circulation from 80,000 to 60,000 in order to target 40 year olds +
• Build vertical websites and mobile web to reflect digital opportunities—one site to marry with print product; one site for younger folks that has heavy user-generated content and drives mobile web; other vertical sites as opportunity arises.
It’s easier and more profitable to manage a stable, slightly growing print operation in contrast to a contracting one.
After Right-sizingAfter Right-sizingAfter Right-sizingAfter Right-sizing
Goes from negative operating cash flow to $232,000 in first year.
Invest in Digital CustomersInvest in Digital CustomersInvest in Digital CustomersInvest in Digital Customers
In the traditional media economy, marketing drove popularity, i.e. relatively cheap and abundant consumer attention was less expensive to acquire than the more expensive investment in scarce production and distribution.
In the new media economy, quality drives popularity and network effects amplify it (connected consumption/ user-generated content) made possible by web and mobile.
Make cash while you still can in print and move it to digital.Make cash while you still can in print and move it to digital.
Case StudyCase StudyCase StudyCase Study
Utopia Media, Inc.AAN Publisher Conference
Santa Fe, New Mexico10/31—11/1 2008
Presented by Terry GarrettBusiness As If and
Oasis Web Logistics—CMS for news media [email protected] 415.302.9583