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IQ News: Analysis - All the Right Moves

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Primedia is methodically positioning itself as a major Internet player.
New hires, new ventures, new investors--Primedia has already written many chapters in its new Internet story, but is it one worth reading?
Yes, say some analysts. In fact, they say, while Primedia's plans may not have attracted much buzz in the nearly three months since the New York-based company announced a combined $400 million investment from CMGI and Liberty Media, its new media story nevertheless may have all the makings of a multimedia hit.
"They're the niche king and the Internet is about niche properties," says Patrick Keane, a senior analyst with New York-based research firm Jupiter Communications. "And if anyone can exploit it, they can."

Changes At the Top
But first a little history: Until last summer, Primedia was the vision of William Reilly, who with backing from †ber-investor Henry Kravis, built what is now a $1.7 billion publisher of 250 consumer and B2B titles as well as 232 information products, 47 trade shows and 200 Web sites. Ten years later, however, acquisitions wouldn't be enough, and as Primedia's stock price languished, Reilly was out and former NBC executive vp Tom Rogers was in as chairman and CEO.
With Rogers--who spent 12 years at NBC, leading the charge to establish both CNBC and MSNBC--came talk of a Web strategy and sure enough, six months later he was announcing CMGI and Liberty Media's investments as well as a slew of online initiatives. Rogers hired Meredith Corp. broadcasting president John Loughlin to be president and CEO of a newly formed Primedia Magazine and Internet Group, announced plans to invest up to $120 million in its new media units and said it would sell off 20 properties for as much as $150 million combined, while also doubling its 1999 new media revenues to $50 million in 2000 and $100 million in 2001.

Mining Its Audience
That was in March. Since then, says Jeffrey Dearth, a managing director with DeSilva & Phillips, a New York-based media investment banking firm, Primedia has seemed to keep its head down while continuing to reorganize and fill key positions. That's not too surprising, though. Says Dearth, "It takes a while to turn a ship around."
Considering, however, that Rogers is the one piloting Primedia's new media ship, the publishing company has missed at least one rocky shoal. "The key to making this happen is commitment from the top," says Dearth, "and Primedia seems to have that."
Primedia also has self-selecting, willing-to-buy audiences supporting some 90 different enthusiast titles and 100 B2B titles in addition to its well-known consumer brands such as Seventeen and Modern Bride. On the enthusiast side, quilters, hunters and gardeners alone share eight Primedia magazines, but it is the automotive enthusiasts who command the most ink, with 35 titles in all.
And while many of these auto-related titles already have their own Web sites, Primedia opted in February to soft launch Gr8ride.com, a new online umbrella brand with a personalized-license-plate name meant to combine the company's automobile expertise in print with the Internet's ability to create communities and link buyers and sellers. The site plans to launch "Get Parts," an e-commerce component, by the end of June.
"By creating an umbrella brand, we are able to let the enthusiast define the community," explains Daniel McCarthy, president and CEO of Primedia's Enthusiast Group, who noted that the auto titles will continue to maintain their individual Web sites, although they will now be fed by Gr8ride's content and commerce databases. But through Gr8ride, he says, "the bottom line here is that we can sustain much smaller communities."
According to McCarthy, Gr8ride, established as an independent entity of Primedia's Enthusiast Group, also has the potential to aggregate an otherwise fractured $22 billion aftermarket parts market served by 3,000 different manufacturers. Such fragmentation often can make it difficult to gather consumer information, but by bringing retailers together and tracking where the purchasing is going "we'll have unprecedented market information on which direction the aftermarket is headed," he said.

Going Local
Primedia isn't only interested in hot rods and low-riders. McCarthy says his group is also considering an umbrella brand for its photography titles that could launch before the end of the year. And, he says, "there are other markets where clearly what we need to do is drive our national strategy more locally. Outdoors is a good example of that, hunting and fishing. Aggregation is tailored for areas with high, existing direct-to-consumer sales."
Aggregation should also work with "anything that's project-driven," adds McCarthy. "Where you're able to put a list of ingredients together and you're able to drive commerce around that project, that's contextual selling and that's a great space for us."
For now, McCarthy says his Enthusiast team is continuing to evaluate its Internet opportunities and the way to see them through. "If [the ventures] have enough scale, they'll try to become an independent entity or we'll take an investor on the online part," he explains. "Or we'll try to take advantage of the technology we've got and build these marketplaces under one umbrella."
And, at least for Gr8ride, that means creating one sales force to sell both offline and online advertising space.
To Keane, who just last month met with Rogers, that's a key move. "I think it's really important to break those walls down now," he says. "I think that's really mission critical." Also important for Primedia, he says, will be information services, creating searchable databases and archives of old content.
But while much still needs to be done, Dearth says Primedia is "at least proclaiming that they're going to reinvent themselves and a lot of companies need to. In that sense, they're out front," he says.
And if anything, he adds, "they're more in the catbird seat now than they were three months ago, because it used to be that the dot-coms didn't need the old brick-and-mortar world so much. But I think you're going to find a lot more cozying up between traditional media and new media," especially, he says, as venture money begins to dry up. "That's going to put the squeeze on a lot more dot-coms, and they're going to be looking for strategic partners to cozy up with."
For now, though, says Keane, Primedia seems to be making the right moves. At this point, "it's all about execution. I think they have all the pieces in place, they just have to be able to move along the execution chain of events," he says. "Tom Rogers has proven in everything he's done the ability to do that, so I don't see that it's going to be any different here."
Says Keane, "I'm usually not so rosy about the companies I talk to and as I said, it's going to take a lot of execution, but they are the company with very strong niche power in a medium that thrives on niche. So I think if anyone can do it, they can.