Hearst’s CEO Addresses Staffers

hearst-logoIf you woke up this morning and thought, “Man, the new year has been okay so far, but what I’d really like is to read a 1,700 word memo from Hearst Corp.’s CEO Steven Swartz,” you’re in luck. We have that exact thing for you!

We’ve already heard from Hearst Magazines‘ David Carey, and now Swartz has his chance. In his note Swartz addresses the successful year that was.

“Our major businesses, newspapers, magazines, broadcast television and business information all posted profit gains for calendar year 2014, and our cable networks were also up for their fiscal year, which ended September 30,” writes Swartz.

For a lot more, see below.

Dear Colleagues,

Thanks to your hard work and creativity I am able to report that your company has achieved record revenue and profit for the fourth straight year.

Our major businesses, newspapers, magazines, broadcast television and business information all posted profit gains for calendar year 2014, and our cable networks were also up for their fiscal year, which ended September 30.

The digital revolution that is transforming almost every aspect of life in many respects makes our job on the consumer side of our company harder. New platforms and new brands compete with us for people’s time and for advertising dollars.

But if 2014 teaches us one overarching lesson, it is that being the best at what one does still breaks through the clutter. And that, along with continuous innovation and diversification, hiring and holding onto the best people, supporting good causes in our communities, and maintaining our reputation, earned every day, as a great business partner, will carry us to greater gains ahead.

Being the best means Hearst Magazines standing alone in its industry in repeatedly launching successful new magazines like Food Network and HGTV with our partners at Scripps, and Dr. Oz THE GOOD LIFE, our latest exciting effort with Dr. Oz and his wife, Lisa. It’s Hearst Newspapers pioneering the effort to bring digital marketing support and services to the small businesses in the communities it serves while building stand-alone digital advertising agencies to service larger customers. It’s Hearst Television’s award-winning political coverage that earns our stations a leading share of support from viewers and advertisers in the communities we serve. It is ESPN.com’s position as the number one digital provider of sports information in this country based on page views, unique audience or time spent. It is the A+E television networks having more shows averaging one million or more viewers per night than any other group of cable networks. At each of these powerful cable TV franchises, as well as at 15 of our television stations, we are proud to be partners of The Walt Disney Company.

Our fastest growing division is our Business Media group, where the digital revolution, in addition to our own considerable efforts, is actually making these businesses stronger, as new digital tools make us better at gathering and analyzing data and better at delivering that data in a customized way to our clients. Our expansion in Business Media represents a hallmark of Hearst’s approach to business over the years: investing aggressively for faster growth in areas adjacent to an already successful business where over time we prove our expertise. We used our television station experiences to inform our push into cable TV in the early 1980s, reminiscent of how our founder used our newspaper publishing know-how to push into the faster growing magazine industry at the turn of the 20th century. In each case, the winning approach was to start slowly and invest more as our investment thesis proved correct. In the case of Business Media, our early efforts stemmed from magazines, namely when MOTOR, started as a consumer lifestyle magazine in 1903, morphed over the years into MOTOR Information Services, a leading database for car repair and car parts, and when, in 1980, a publication we owned at the time, American Druggist, acquired a database that we built into First Databank, the nation’s leading information source for hospitals and pharmacies on all sorts of drug dosing and drug interaction data.

Through all this change and diversification, however, the businesses we are in still remarkably reflect the products and services offered by our founder, William Randolph Hearst in his original business, the San Francisco Examiner. Today, the principal businesses of the Hearst Corporation, although diversified into every contemporary platform, still deliver entertainment, information, and services, as did our founder in 1887.

A highlight of the year for many of us occurred at Hearst Tower in October when the management team that most successfully channeled Mr. Hearst’s early vision and set us on our current path—longtime CEO Frank A. Bennack, Jr., now executive vice chairman, and onetime magazine division head, and then COO of the Corporation, Gilbert C. Maurer, now a director—held back-to-back evening Master Class sessions on the subject of how we got where we are. Amidst the considerable warmth and humor, and memorable phrases too numerous to detail here, Frank and Gil reminded us that it was a combination of organic growth through startups and remaking and strengthening existing businesses, along with some highly successful acquisitions and investments, that put the company on its current trajectory.

Your efforts in 2014, it is fair to say, lived up to their model in all respects. ESPN, led by CEO John Skipper and the A+E Networks, under CEO Nancy Dubuc, each successfully launched new cable channels this year—the SEC Network and the FYI channel, respectively. We took our highly successful collaborations with TV producers Mark Burnett and his wife, Roma Downey, to a new level by partnering with MGM and forming a new entertainment company with a storied brand name, United Artists Media Group. We branded our strong collection of healthcare companies Hearst Health, under the leadership of Business Media President Rich Malloch and Hearst Health President Dr. Greg Dorn, and launched new products like Knowledge Analyzer, a software program that helps our Zynx Health team study a hospital’s treatment plans and recommend changes based on best practices assembled by our researchers. Hearst Newspapers, under President Mark Aldam, expanded its digital marketing services business, under the LocalEdge brand, to Australia and New Zealand in a partnership with Fairfax Media Limited. Hearst Magazines, under President David Carey and international chief Duncan Edwards, launched in the U.K. a paid ratings and reviews digital site from the Good Housekeeping Institute, and in one of many innovations spearheaded by Publishing Director Michael Clinton, launched in the U.S. a free-to-the-consumer fashion publication called TrendingNY, which will publish monthly in 2015.

We were active on the acquisition and investment front as well. In one of the largest moves we have made on the investment front to date, we agreed to acquire an additional 30 percent of Fitch Group, which when completed after regulatory review will bring our stake in this great asset to 80 percent. Fitch has an exceptional management team led by CEO Paul Taylor. More and more companies around the world are turning to the debt markets for financing, and thus, we believe, cyclical downturns notwithstanding, the global market for high-value financial information such as ratings and other data and analytics products offers us strong long-term growth prospects. We are also pleased that our partner at Fimalac, the French investment company, will continue to hold 20 percent, and that its Founder and Chief Executive, Marc Ladreit de Lacharrière, will continue to serve Fitch as its chairman. Fitch itself broadened its business portfolio with the acquisition of Business Monitor International, a provider of industry, economic and political analysis on emerging growth countries.

We made two investments in perhaps the fastest growing media sector today, digital streaming video, as, under the leadership of Entertainment & Syndication Co-President Neeraj Khemlani, we acquired 25 percent of a company aimed primarily at the teenage girls’ market, AwesomenessTV, led by Brian Robbins and Brett Bouttier, from our new partners, DreamWorks Animation SKG. A+E acquired 10 percent of edgy news and lifestyle video company VICE Media, led by Co-Founder and CEO Shane Smith. These investments, coupled with the 9 percent we own in CEO Jonah Peretti’s BuzzFeed through an early investment by Hearst Ventures, under George Kliavkoff, Ken Bronfin and Scott English, give us one of the strongest portfolios in this space.

Hearst Magazines built on its emerging portfolio of business services companies by acquiring 80 percent of KUBRA, a leader in providing digital as well as print-based bill presentment and payment services on behalf of corporate clients in the U.S. and Canada, led by CEO Rick Watkin. Hearst has been in the bill presentment and payment space largely on behalf of magazine industry clients including Hearst Magazines for more than 40 years through our CDS Global unit led by Debra Janssen, and it’s through CDS that we came to this exciting new opportunity to become a bigger digital player in this space. At Hearst Magazines International, our Hearst Shkulev Media partnership agreed to acquire the 50 percent Hearst doesn’t own of our other magazine partnership there, Fashion Press, from Finnish media company Sanoma. Under the leadership of CEO Victor Shkulev, it is our intention to put our two businesses together, with the appropriate government approval.

Hearst Television, under President Jordan Wertlieb, acquired two television stations, WVTM, the NBC affiliate in Birmingham, Ala., and WJCL, the ABC affiliate in Savannah, Ga., bringing our total to 31 stations.

Also in Business Media, Hearst Health acquired CareInSync, a software-based communication platform that helps coordinate a patient’s care among multiple healthcare providers both within the hospital and when released to rehabilitation or home care. The business has been renamed ZynxCarebook.

Finally, our digital engineering efforts, under the leadership of Chief Technology Officer Phil Wiser, took a leap forward with the acquisition of the programming team at the former BranchOut software company, with 12 top mobile programming engineers joining us under the leadership of Rick Marini.

People are our number one asset and priority and some great ones joined our senior ranks in 2014. At A+E, David Granville-Smith joined as CFO, and Paul Buccieri joined as head of our A&E and HISTORY channels. Also at A+E, Mel Berning, our longtime ad sales leader, was promoted to president. At Fitch, Ted Niedermayer joined as CFO. And in our corporate group, David Hahn joined as head of digital security, and Pascale Thomas joined as head of benefits, succeeding Ed Rusgo, who retired after more than 40 years of service, but who will remain with us as a consultant.

All of our divisions benefit from the daily work of our senior corporate officers, CFO Mitch Scherzer, Chief Legal and Development Officer Jim Asher, General Counsel Eve Burton, Communications SVP Debra Shriver, and SVP and Special Assistant to the CEO Lincoln Millstein.

We look forward to 2015 with a great deal of excitement and enthusiasm about our people, products and services. On behalf of our Chairman, William R. Hearst III, and Frank Bennack, I want to thank you for what you do for us each day, and wish you all the best for a successful 2015.