Hearst’s Swartz Eyes B2B Media, Entertainment, for Growth

Signals shift away from advertising-based revenue

Hearst Corp. had record revenue and profits in 2013, when it marked the fourth year in a row of growth on both fronts since the 2008 recession, Steven Swartz said in a New Year’s letter to employees recapping the year he took over as chief executive.

Swartz, formerly the head of Hearst’s newspaper division and the company’s chief operating officer, succeeded Frank Bennack Jr. last June, and his letter (full text here) going out today makes clear he plans to continue on the path set by his predecessor.

Bennack led a dramatic diversification effort during his 30-year tenure, expanding the company beyond its newspaper roots into broadcasting and syndication and the less-glamorous but highly profitable business media. He didn’t ignore print, either; Hearst’s $900 million acquisition of Lagardère’s non-French titles in 2011 broadened its magazine footprint in the U.S. and abroad. 

Nevertheless, Hearst has made a deliberate effort to diversify away from ad-based traditional media, with its recessionary swings, a shift that is likely to continue under Swartz. Today, about 60 percent of Hearst's revenue comes from non-advertising sources, including carriage fees for cable and TV stations; subscription revenues; and marketing services fees. The company is diversifying geographically, too; fully one-fifth of its revenue now comes from outside the U.S.

"A hallmark of Frank’s tenure has been the continued allocation of capital to the sectors of the media and information landscape that have offered the best prospects for growth," Swartz wrote. "While this is of course harder than it sounds, we are confident that there are two areas where we have shown particular skill and where the underlying growth prospects are quite strong: business media and entertainment."

A significant portion of his letter is spent recapping accomplishments in Hearst Business Media, which publishes medical, financial services and automotive data for professionals; and Hearst's stakes in ESPN and A+E Networks.

Traditional media companies are grappling to keep up with the digital revolution, and Swartz also ticked off a number of initiatives Hearst has going on in this area. They include launching an audience ad exchange, creating a digital studio to test new products and installing new digital leadership at its magazines.

As for the core businesses, he said the company continues to invest in its TV, magazine and newspaper properties, upgrading its magazines’ digital sites, launching TV Everywhere apps and selling digital marketing services through its newspapers.