Emap’s decision to sell looks simply like a rank bad one

J Arthur Rank had long departed the world when Alun Cathcart, then chairman of Rank, sold off the company’s last remaining interest in the film business. Rank had become an unloved conglomerate, far removed from the organisation controlled by the Methodist flour miller whose British movie interests stretched from Pinewood to Odeon, by way of the Carry On films. Mr Cathcart, now the chairman of Emap, dismembered what was left, selling off the Deluxe film-processing business and the Hard Rock cafes, leaving just the bingo halls and casinos.

Doubtless that was right for Rank; but Emap is not the same. It would be nice if Mr Cathcart built up a media business rather than just flogged one.

Emap can be broken down into three businesses: magazines, including men’s mags featuring pneumatic ladies; the business-to-business division, which includes a different type of cantilevering on Construction News; and the Kiss to Magic group of radio stations.

It is easy to tag the conglomerate label on to this kind of structure but there are, by media industry standards, far more synergies here than simply using writers expert in the uses of silicone on both FHM and Materials Recyling Week. Emap, at least, has digital radio stations that use its magazine brands; the skills required to be a journalist or sub-editor on one of its professional titles are not so different. In truth, there is rather more in common between the businesses than those owned by Time Warner, which has IPC, or News Corporation, parent of The Times.

Until relatively recently, Emap’s creative engine was hardly broken either; its troubles far less deep than, say, ITV’s. Its consumer magazines have nurtured a generation of creatives, as Emap has played its part in modernising Britain, with Heat, Closer, Grazia and Zoo; the business-to-business activities are generally powerful operators in their field. The bargain that Emap struck with the City was hardly an outrageous one: what cyclicality there was in magazines, and more prominently in radio, was tempered by the steadier business-to-business activities; a balance far better than, say, at ITV or any other broadcast stock.

However, Emap struggled in the last couple of years of Tom Moloney’s control. It has not embraced the internet convincingly, and became too dependent on men’s magazines at a time when its titles lost their edge and rival IPC hit the spot with Nuts. For a long time, there was talk that the weekly mags would erode the circulation of tabloid newspapers, but the difficult birth of First, the women’s news and lifestyle weekly, is a reminder that all fashionable theories run their course. Zoo may sell 250,000 copies a week, but the Daily Mirror manages 1.5 million a day and The Sun double that. But the fact that magazines are not replacing newspapers is hardly proof positive that the glossy is in terminal decline, even if recent advertising figures are horrible.

Still, the bankers have already been called in to help with a “strategic review”. There’s still no replacement for Mr Moloney, but no doubt any would-be chief executives will be delighted by the notion that every bit of the company is up for sale. Significantly, so far, there have been no offers for the company as a whole – rather, prospective buyers want to cherry pick. Radio is wanted because it is consolidating, and business-to-business because private equity likes the defensive qualities of the titles that are making a better fist of shifting to digital. And just because the consumer magazines are not in vogue now, it does not follow that this state of affairs will always be so.

When you don’t have much of an idea what to do, it is easy to start selling things. Of course, now and again somebody does turn up with a killer price, but usually it is better to try to make sense of what’s on the table. Chrysalis, for example, finally yielded to City pressure and sold its Galaxy to Heart radio operation, for a price that underwhelmed, and did little for the share price. Investors’ only remaining hope there is to bully Chris Wright into selling the music publishing operation, too.

Over at Trinity Mirror, Sly Bailey is struggling to sell the various unloved parts of the newspaper group: the Racing Post was meant to fetch more than £200 million, then a bit under. Now sources closer to the preferred bidder are talking about less than £180 million. Overall, Trinity Mirror said last week that it may raise only £450 million in total, rather than the £550 million or so it had originally hoped for. Get locked into a sale process when markets are choppy and it is easy for buyers to chisel away on price.

The solution to Emap’s problems may be much simpler: appoint a decent chief executive, the strategy that ITV has adopted. It takes time to rebuild, but the future for magazines is not necessarily bleak. At Time Inc in the US, management at Sports Illustrated are working on ways to steal broadcast ad dollars from the sports TV network ESPN; that could be a generator of growth.

It is amazing how successfully a business can be reinvigorated when somebody argues the case for a company or a business instead of rolling over and giving up at the first sign of a tentative offer for a few choice assets. Many boardrooms of British media companies are characterised by a lack of imagination and investment. Emap should break out of that club; it is not, after all, as rank as the old Rank conglomerate. Britain should be able to support a major independent magazine company, rather than see glossies go the way of the movie business that Rank was once in – where business decisions are taken elsewhere

Dan Sabbagh: Media Analyst
The Times