Media Forum: Can Pearson grow FT success?

£32 million and £9 million in 2003 and 2004 respectively
have been superseded in the 2005 figures by a £2 million
profit.

Luxury goods led the way as ad revenues kept improving right across the
year, with the strongest performance coming in the last quarter. And
there's growing evidence that the FT is managing to leverage its brand
across multiple platforms - it is becoming routine for advertisers to
book campaigns running across both the paper and FT.com.

But all is not sweetness and light. City investors have begun to urge
Pearson to sell while the going is good.

Pearson, its critics say, is basically a book publisher. As the owner of
Penguin Books, plus a wide range of educational publishing assets, it is
one of the classiest acts in the book world - but that doesn't
necessarily make it a good newspaper publisher. In an arena where dog
has been known to eat dog, more aggressive instincts are often called
for.

On the other hand, you suspect that more mainstream publishers might
struggle to understand the rarefied world inhabited by the FT and its
readers. But there are those who believe that the brand has lost some of
its sheen in recent years. Editorial cuts have led inevitably to a
decline in the paper's scope and authority. Over the past few years, too
many decent stories have slipped through its net and libel proceedings
have undermined its reputation for God-like infallibility.

There's a free paper now in the City; and each day, it seems, new
sources of business information keep popping up on the internet.
Pearson, in short, still faces a Herculean task. Is it up to the
challenge?

Nick Manning, the chief executive of OMD, says the nature of the
challenge is obvious - but that doesn't make it any easier to crack:
"The FT is an incredibly strong brand. The question, of course, is how
it chooses to mould those brand values to a new multiplatform world,
where content is king. Would you choose to go to a Google or a Yahoo!
for business information?

Probably not. You'd almost certainly prefer to go to the FT or The Wall
Street Journal or The Economist. But monetising content on these new
platforms isn't easy and choosing the route to go down is a huge
challenge."

Manning believes that, having learned some painful lessons, Pearson may
now be in a good position to profit from its past mistakes. Paul
Richards, a media analyst at Numis Securities, isn't so sure: "Pearson's
revenue base remains relatively small - £200 million for the main
FT brand and another £130 million from Les Echos and
business-to-business publishing.

Revenues of £330 million for a newspaper publisher remain modest
on an international basis. Compare that with the resources Dow Jones is
able to put behind The Wall Street Journal. Or think what News Corp
could do with it."

Antony Young, the chief executive of ZenithOptimedia, says this is
becoming a high-stakes game of poker. "None of its competitors in the
business market - online publishers, free papers and other national
dailies - appears to be turning a profit. Lots of players are throwing
chips into the middle of the table hoping someone else folds first. The
card the FT can play is that it has a terrific brand that is
transferable to multiple channels. It also has a global product,
targeting an ever-more-global business world. The challenge faced by the
management is whether it can monetise its content and brand more
effectively and efficiently - and whether it can do so with sufficient
urgency."

But Neil Jones, the managing director of Carat, points out that, though
the bounce back has been commendable, there are aspects of the figures
that continue to give concern. He says: "You can certainly argue that it
is ahead of the game in the UK, in terms of blending the on- and offline
products. But you can also argue that the online revenues were
disappointing given the fact that online ad revenues grew by more than
50 per cent in the UK (2005 versus 2004). Traditional print (advertising
and circulation) continues to be a declining market - so it will be
interesting to see how Pearson manages to maintain its enthusiasm for
this business."

YES - Nick Manning, chief executive, OMD

"I don't think anyone doubts that, for those with the right content, new
digital platforms are on the verge of being incredibly lucrative.

So you could well argue that, having come this far, this is not the
right time, from Pearson's point of view, to be considering selling the
FT."

NO - Paul Richards, media analyst, Numis Securities

"I think it is clear that the FT remains an underdeveloped asset. It is
a powerhouse brand and in terms of developing it, FT.com has been a
success, albeit with a huge investment. Arguably, however, there are
groups out there who could make more of (the brand)."

MAYBE - Antony Young, chief executive, ZenithOptimedia

"The FT is not alone in facing these challenges. Every company the FT
writes about is trying to figure out their digital and international
strategy.

If the FT can crack theirs, then they have a bright future. I think they
can do it, but Pearson needs to decide if they want to play this
hand."

NO - Neil Jones, managing director, Carat

"It's a fantastic brand - a global leader - and there will always be a
market for it. It has done well compared to the dreadful years
previously but I think it will struggle to maintain that growth. Is
Pearson the right company to take it forward? You really would have to
question that."

- Got a view? E-mail us at campaign@haynet.com.