Publishers Are Paring Down Their Portfolios Following Pandemic M&A

You might not be alone if, flush with cash during the doldrums of the pandemic, you spent too much money on something you never actually needed—in the last month, several media companies have felt the same way. On Wednesday, Vox Media announced it would spin off the social video publisher NowThis, which it acquired in December 2021 after buying Group Nine Media in an all-stock deal. The news follows a similar announcement from Recurrent Ventures, which on Monday sold its food and beverage property Saveur back to its longtime editor after acquiring the title in 2020. And last month, G/O Media sold its property Lifehacker to Ziff Davis, a shuffling of its portfolio prompted by its purchase of Quartz early last year. Ad-Tech Firm EMX, Behind on Publisher Payments, Files for Bankruptcy Taken together, the spin-offs reflect a sober reassessment of purchases made during the frothy days of the pandemic, before interest rates rose and digital readership dwindled. As economic conditions have worsened over the past year, media companies have shifted their priorities from growth to cost-savings, a transition that has cast the value of these purchases under greater scrutiny, according to media analyst Brian Morrissey, the author of the newsletter The Rebooting. With an eye toward efficiencies, some have decided to cut loose certain titles that, while profitable, might fit unevenly into a larger portfolio or divert attention from more critical ventures. “When you have fewer resources, you put them toward what is working,” Morrissey said. “Right now, people are taking a hard look at their portfolios—it’s no different than the tech platforms pulling back from their non-core initiatives.” The pandemic buyers market has given way to belt-tightening Mergers and acquisitions reached a fever pitch during the early years of the pandemic, according to data from KPMG Advisory. In the media and telecommunications sector, overall deal volume jumped 48% in 2021, and overall deal value rocketed 83%, to $941 billion. Publishers also enjoyed windfall advertising revenues in the latter half of 2020 and throughout 2021 as consumers spent record amounts of time browsing media properties. To take advantage of the moment, deep-pocketed media companies began snatching up distressed properties. When advertising demand began to dwindle in 2022, the cost of running these properties came under greater scrutiny, both in real dollars and opportunity cost, according to Ameet Shah, a partner and senior vice president of publisher operations and strategy at Prohaska Consulting. To compensate, media companies began whittling down parts of their portfolio to find savings, a trend that will likely accelerate as the economy continues to normalize. “Many publishers are facing declining revenues and missing targets, and many have had to resort to layoffs to have the business survive,” Shah said. “Not every transaction lives up to the expectations for a variety of reasons, which forces these hard strategic questions.” More adjustments are on the way The timing of these portfolio adjustments comes as the advertising downturn continues to press media companies to find cost savings. Although first-quarter revenues across the industry avoided freefall, publishers have now endured nearly a year of depressed advertising interest. While some analysts predict ad spending will rebound in the second half of the year, media companies that tapped into their cash balances to stay afloat could be nearing the end of their runway, prompting infusions like the one Vox Media received from PMC in February. How AI-Enabled Search Will Affect Publishers’ Affiliate Businesses Further, merging companies takes time, and many of the acquisitions made during the pandemic are only now coming into focus. At Dotdash Meredith, for instance, the process of combining the two portfolios remains unfinished, a timeline that likely applies elsewhere. This means that media companies that went on shopping sprees during the pandemic, such as Outside Media, Trusted Media Brands or The Arena Group, could be looking to trim down in the coming months. Others, like Dotdash Meredith, have talked openly of finding a better home for certain properties, such as People, which is a traffic firehose but one whose business model runs counter to the Dotdash Meredith blueprint. Similarly, Vice Media has explored the notion of spinning off parts of its business to generate cash. "The macro economy and advertising economy are filled with uncertainty as budgets are more difficult to predict," said Michael Hirsch, the managing director of digital marketing, media and technology investment banking at JEGI Clarity. "Rather than be in aggressive growth mode as they were in the past couple years, companies are now much more focused on strengthening strategically core operations."

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Publishers Pare Down Their Portfolios Following Pandemic M&A

Vox Media, Recurrent Ventures and G/O Media all trimmed titles in the last month

Mark Stenberg

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Mark Stenberg