The Source of Integrated Growth

Chris Argentieri was put in charge of the country’s largest special-interest media company, Source Interlink Media (SIM), in 2010. His new role as president held him responsible for 78 publications, 101 websites, 800 branded products and more than 50 annual events. In all, the publications generate 7 million paid subscriptions and 2 million single-copy purchases. With publications such as Motor Trend, Automobile Magazine, Hot Rod, Off-Road, Motorcycle Cruiser, Surfing, Skateboarder and Home Theater, among others, the company reaches one of the largest groups of the highly coveted 18- to 34-year-old male demographic. Like most publishing companies today, SIM has been striving to evolve into a full-blown integrated media company, and Argentieri believes part of the company’s significant success in this area is the result of its early investment into emerging media—including developing an in-house group that manages mobile and tablet development, marketing and more for all the company’s brands. Its acquisition of Automotive.com added Web expertise, and its acquisition of Mind Over Eye established strong digital marketing capabilities. In February, the company launched its Motor Trend YouTube Channel, building on the six-year success of the company’s own ad-supported Motor Trend channel, which has drawn more than 153,000 (free) subscribers and 147-million-plus video views. Here, Argentieri talks about SIM’s fastest-growing revenue segments, strategies for maximizing the company’s print and digital growth, SIM’s biggest opportunities and challenges, and where it is investing most heavily. The Revenue Picture Noelle Skodzinski: What is SIM’s fastest-growing revenue segment? Chris Argentieri: Our digital business—so the web, but also now tablet, social media, video. We’ve grown consistently about 20 percent each year over the past 3 or 4 years. More importantly, we now earn more profit from our digital business than any other line of business—print, events, etc.Skodzinski: To what do you attribute that? Argentieri: It really traces back to the acquisition of Automotive.com in early 2000s. That acquisition brought us true digital talent, so we weren’t just a bunch of magazine folks tripping around the Web. We had legitimate digital engineers who grew up online and put us in a much different position than a lot of our competitors. More recently, I think we realized that our editorial folks have a lot to offer—… not only creating online content, but also helping our product and engineering folks as we look to improve engagement. … They’ve pretty much spent their whole careers focused on engagement, which in a lot of ways can be more challenging in print than in some of the newer, emerging platforms. So really trying to focus continually on marrying true digital talent with some of the other core competencies within … our business—content being a key driver of our audience on the whole. We also were an early developer of some emerging media products. We have a variety of mobile and tablet applications. Tablet has been a great avenue for interactive magazines. Pretty early on we formed an internal group we refer to as Mediaworks. It really acts as an internal agency that handles the multitude of business requests from all of our brands in these areas. … That has … allowed us to be at the forefront of some of these platforms, or at least as close to that as we could be. Another area is creation of custom video and of integrated microsites. It has been a continually growing business for us, supported by some of our larger marketing partners. We acquired a company called Mind Over Eye that bolstered our digital marketing capabilities and … allows us to do some pretty cool things by way of the advertising experience. We have full digital capabilities that have been a big driver of our tablet business for one. Skodzinski: Does Mediaworks offer services to marketers as well? Argentieri: It does. We’ve built a few branded applications as well (… for outside brands). And we would love to grow that business, but one of our challenges … is just the vast number of brands we have—somewhere around 100 on any given day. So they have quite a task managing internal requests. Skodzinski: Did you hire specifically for Mediaworks? Argentieri: Yes. We try to focus on really defined areas of expertise. … So Mediaworks is run by … Mike Beller, who has a defined digital sales and marketing background, and he reports to Raghu Bala, our CTO, so that Raghu really supports the innovation from a product standpoint, and Mike can liaise with our sales and marketing team as we continue to put more and more responsibility on them … [with] more things to sell. Skodzinski: What is the company’s largest revenue segment? Argentieri: It remains print advertising, so just about 40 percent of our total revenue. Skodzinski: Where do you see that figure in two years? Five years? Argentieri: Driven by the growth of our digital business—we expect to get to a truly integrated revenue base, meaning somewhere around 50/50, between print and non-print. Because print advertising would be about 40 percent, as our largest segment, but print overall [including ad revenue, subscriptions and single-copy sales] still remains about 70 percent of our revenue. But we expect that 75-25 ratio would probably move because digital is growing so rapidly. Skodzinski: What percent of your total revenue is driven by digital (Web, e-newsletters, etc.)? Argentieri: We’re at about 25 percent of revenue, but as I said earlier our digital business is larger than other lines of business, from a contribution standpoint. Skodzinski: What are some initiatives you’ve implemented to grow your digital revenue? Argentieri: As I mentioned, content creation. … We’re now producing more content that’s exclusive for the Web [including more shorter-form content] and more and more content exclusive to mobile and tablet that, in our opinion, should be even more short-form, more social, if you will. We’re certainly not a divided house between print and digital. Our editorial teams are responsible for content creation regardless of platform. So that’s been … pretty enlightening and a big driver of success from a traffic standpoint. We’ve built substantial in-house video production capabilities. We now have real talent in … both pre- and post-production, so that’s been a huge driver of our video business. We look at video in three areas: editorial, entertainment, and recently some purely advertising content. In-house capabilities have enabled us to do these much more efficiently … and have been a driver of the recent launch of the Motor Trend channel on YouTube that we’re all pretty excited about. Additionally, the formation of Mediaworks has been a huge help in that obviously anything new can be very speculative, which drives a bit of risk, so having experts focused on new platforms has been a huge advantage. Skodzinski: How are you monetizing video? Argentieri: A variety of ways: We earn a bit from pre-roll, but generally custom video content either with the brand’s participation in the strategy or just simply as an integrated sponsor has really been the biggest driver of revenue in that area. Skodzinski: You hold more than 50 events a year. Argentieri: Events have been a very stable business, even through the downturn, for us. They represent about 5 percent of our revenue, led by Motor Trend Auto Shows, Hot Rod Power Tour, a number of action sports events. We have a Nike 6.0 sponsored surf event (we manage the event, with Nike as the sponsor)—just to give you an idea of the type of events. We’re coming off a year where events did grow, single-digit percentages. Events are a growing business, and … they’re critical to us in terms of being able to interact with our audience. … So the fact that we get nearly 2 million people a year to come out to our events is hugely important to us. … Skodzinski: How has your circulation fared at a time when many publications are struggling to grow their subscription and newsstand sales? Argentieri: Our circ has performed quite a bit better than the market. Some of that having to do with the fact that we have quite clean circulation from a subscription standpoint. But it has been challenged—like everybody else. We remain very much committed to newsstand sales, and have had some success with new products in that area, more in the lifestyle domain. We launched a tattoo magazine, Bound By Ink, last year that’s now one of the top-selling tattoo magazines. We recently launched Recoil in the gun enthusiast space, which early indications are that that’s done quite well. We are committed, we’re willing to invest in new product as well as invest and improve product quality in some of our flagship brands. Print is still a key driver of our business. … I think one of the key drivers of print that gets lost sight of from time to time is that it does bring a much higher level of credibility—both from an audience-creation standpoint, but also in terms of supporting our marketing partners. Skodzinski: Have the new media services gained traction with your marketing clients? Argentieri: Yes. If our overall digital contribution represents a little more than half of our total profits, emerging media would be now probably 10 percent of that number—so it just gives you an idea that there’s been true profitable scale amassed there, and with the significant proportion of those earnings coming from sponsorship and advertising. Skodzinski: Do you produce editorially based e-newsletters? Argentieri: Some of our brands produce them. Automobile Magazine is one for example. It is an area we’ll be expanding in the future. … We believe it to be a real area of growth for us. Skodzinski: Source Interlink produces 800 “branded products.” Can you give examples of these and how they impact your bottom line? Argentieri: It’s a pretty diverse group of products, from branded apparel, to Hot Rod-branded toys, die cast model cars, as well as a variety Motor Trend roadside assistance products, Motor Trend-branded cellular products for the car—it pretty much stretches the gamut. We are a licensing business that’s relatively stable—probably around 5 percent of our revenue overall. Some of the exciting, newer programs … are maybe a bit of the true-branded product to sell at retail and more program-based. We have a program called Motor Trend Certified Advantage, which is a certified used-car program, where we partner with a company, EasyCare—the largest provider of after-market warranties in the marketplace. And that’s an opportunity that we believe very strongly in and has grown quite nicely over the last two years. Skodzinski: Are you selling products directly through your websites? Argentieri: A very little bit. We’re working on initiatives now primarily in action sports to expand that and really looking at commerce opportunities …—in a couple areas, but one is that we really need to do a better job of selling our own products, and we should take a more integrated approach in recommending other people’s products. And down the line, we’ll get into exploring ways where we can actually sell other people’s products. …Skodzinski: How are you primarily selling your branded products? Argentieri: Through traditional retail channels—both e-commerce partners and brick-and-mortar. Skodzinski: What are other significant revenue drivers? Argentieri: I mentioned the acquisition of Mind Over Eye, a digital marketing studio that … is a market leader in CGI technology. So we’ve combined that with the internal creative services group that we had prior to the acquisition and have had recent success providing creative solutions for third parties, many of which were our marketing partners, and in some cases totally new business for us. So that’s a pretty exciting area. We’ve produced print creative, digital creative stuff for interactive units for tablet and mobile, and do really look to that area as an opportunity for growth going forward. … In many cases the [marketer’s] brand doesn’t have appropriate creative for enthusiast audiences, and we certainly don’t want that to be an obstacle to us driving revenue, so we found that being able to offer those creative solutions ourselves has been a good path to take. Moving Forward Skodzinski: What are your largest growth areas? Argentieri: Both digital and emerging media. That’s also where we’re making the most investment. We talk as an industry about the digital revolution, and we’re committed to an understanding that the Web is the traditional online business and is really quite mature [now]. … With that in mind, we’re focusing investment in the digital area—a lot of emerging media, as I mentioned, but also moving away from where the website itself is the actual product, and getting more focused on product sets that are tools that can be used by our audience to enhance the experience, whether that’s buying a car or looking for the next wave … rather than each site being a product, we expect products of the future to be tools we will deploy across all platforms. Skodzinski: What are the company’s biggest challenges? How are you addressing them? Argentieri: Resource management has taken on even more important identity with the proliferation of all these new platforms. The requirements and demands on our people continue to multiply with every new device and operating system. And it creates real challenges to ensure that you’re going after the changes that lead to the most opportunity. Skodzinski: What are your company’s biggest opportunities? Argentieri: What we really would like to see happen—not just for us, but for the industry …, as time passes there will be more and more companies like ours that generate equal-to or more contributions from non-print sources—we’d like to be perceived within the marketplace as an integrated media company that happens to have magazines. I think that’s important for the perceived and actual value of our industry as a whole. Even More Interesting Stuff Skodzinski: Has your role as president changed recently? Argentieri: I think going back to the [fact that] the people process has become more and more significant and should be representing at least half of business leaders’ time. The volatility of the environment we operate in creates all kinds of new challenges for our various teams, and from a leadership standpoint takes on more importance than [ever]. Skodzinski: What’s the best business decision you’ve made during the past year or two? Argentieri: … Making the investment as early as we did in some of the emerging platforms—tablet, mobile, social media. … When we really started to look at these in a serious way, there wasn’t a clear path to monetization, so it was a bit risky, but has paid off. Skodzinski: Has your company restructured to adapt to a shifting marketplace? Argentieri: Yeah. … We’re in the midst of continual evolution from an organizational standpoint. We’re trying to become product-focused, so we’re building teams around products—whether individual online tools or new sections of print products that help drive value of the brand. Editors are getting involved in content creation across all media, so we can go beyond maintaining websites. And the evolution of sales and marketing: We have more than 5,000 active advertisers, so that creates a challenge for us to focus on parts of our business that work for them, while presenting new things to them. We’ve been constantly adapting, and we’ll continue to adapt. … Skodzinski: What keeps you awake at night? Argentieri: Right now, the broader economic issues—employment, gas prices. A lot of the enthusiast markets we’re in are certainly discretionary, so the economy affects spending. And fuel prices—while they [create] opportunities for new products as OEMs [original equipment manufacturers] look to develop more fuel-efficient cars—our truck segment, for example, is challenged during times of high fuel prices.Skodzinski: What helps you sleep? Argentieri: The people I work with. We’ve had a lot of success through a pretty challenging environment. Maintaining key members of our team and attracting new contributors has been essential, and I’m proud of the fact we’ve been able to do that. We’re confident that whatever the market brings, we’ve put a team in place that we’ll be able to thrive going forward. PE

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The Source of Integrated Growth

Noelle Skodzinski

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Noelle Skodzinski