tad-smith.jpgWho wasn’t gobsmacked by Reed Elsevier’s announcement this AM that it plans to sell Reed Business Information, the magazine publishing division that includes Variety and Daily Variety, Broadcasting and Cable, Multichannel News, and Publishers Weekly. Well, everyone except RBI-U.S. CEO Tad Smith who sent a memo reassuring his staff that “the announcement this morning neither surprises nor worries me”. And Reed Business CEO Gerard van de Aast, who thinks “we will continue to do well under new ownership”. (See full texts of their email blasts below…)

variety-title.jpgAccording to the official statement, parent company Reed Elsevier chief exec Crispin Davis said the move was aimed at “reducing exposure to advertising markets and cyclicality,” enabling the Anglo-Dutch group to focus on its core business of “subscription-based information and workflow solutions.” (Oh, c’mon, we all really know this is because so many writers cancelled their subscriptions to Variety because of its slanted coverage of the strike, right? Just kidding…)

My first thought is: dear god, don’t let Rupert Murdoch buy Variety. My second thought is how this development really presents a dilemma for Hollywood: what if someone buys Variety and turns it into a real news-gathering operation and not just an echo chamber for the powers-that-be that control showbiz? There’s also been a lot of talk that debt-loaded Nielsen may be looking to dump its publishing arm as well (the beleaguered Hollywood Reporter, Mediaweek) but CEO David Calhoun denies it.

Here are the memos:

From: Smith, Tad (RBI-US)
Sent: Wednesday, February 20, 2008 11:11 PM
To: RBI-US All Employees; RBI-US RCD – Canadian Employees

As many of you now know, our parent company Reed Elsevier announced this morning that it was putting Reed Business’ worldwide publishing business up for sale.  Reed Elsevier no longer views advertising-dependent businesses as aligned with its growth strategy.

The announcement this morning neither surprises nor worries me.  We have a vibrant and exciting business that is successfully making the transition from print to online across dozens of market sectors in countries all around the world.  There will be a healthy appetite for our business and your many contributions as staff members.

The sale process will commence immediately, but it is unclear how long it will take to complete.  For my part, I am committed to leading our business as your CEO during the sale process and thereafter.  In the meantime, business will continue as usual and everyone’s jobs, benefits and pay will be unaffected.

Reed Elsevier also announced a restructuring program this morning.  RBI-US has a 7-year history of diligent cost and headcount management actions, including some taken earlier this year.  At this time, RBI-US has no plans for a large scale layoff or other special headcount reduction program beyond the extreme care we continue to exercise on headcount additions.

Tad Smith, CEO, RBI-US

Please read the attached communication from Reed Business CEO Gerard van de Aast for more information.

February 2008
Dear Reed Business colleagues,

Let me first address the question why Reed Elsevier has decided to divest Reed Business Information (RBI).  RBI is a well managed, high quality business.  However its strategic fit with Reed Elsevier is less clear since Reed Elsevier has decided to move away from advertising driven revenue models and focus on subscription based models.  It is important to note that this says nothing about the quality and attractiveness of our business and the markets we serve.  On the contrary we are a strong, well run business and our markets offer many opportunities, particularly in the online space.  RBI is well positioned and I would like to share with you my view on our business and my confidence that we will continue to do well under new ownership.  Let’s start by summarizing our key assets and attributes.

Attractive markets
The B2B markets that we operate in show solid, sustainable, long term growth of around 5-6% per year.  Our advertising customers need to promote their brands, generate leads, create awareness and support their products and services and our readers keep themselves up to date through our print and online content.  Although marketing spend and reader behaviour is shifting, in particular to online, the value proposition that we offer is as strong as ever.

Leading brands
We own many of the leading brands in our markets.  The list is long and impressive with franchises like Variety, Interior Design, EDN, New Scientist, Estate Gazette, Totaljobs, Elsevier, Boerderij, Stratégies, Australian Doctor and so on.  All our brands have a rich heritage going back in many cases over decades, but even more importantly have an exciting future as well through our online developments which are starting to have a real impact in our markets and enrich our long established brands.

Financial stability
Our business has size, scale and financial stability.  RBI’s revenue in 2007 was $1,709m with adjusted operating profits of $253m, cash conversion was 109% providing a stable and attractive cash flow.  Size and scale also matter allowing us to effectively manage our business and fund new developments derived from continued scale benefits and savings.  RBI employs 8,164 people.

Clear strategy
Our strategy has been very clear and effective.  It is built around protecting our core print business, driving online growth and making sure we have the best people in the business.  We have complemented this with targeted acquisitions.  Our strategy is very effective given our results in 2007 and prior years.  We now have over $500m of online revenue which grew by 30% versus prior year.  We will continue with this successful strategy going forward.

The best people
Most important of all we have great people that are very much connected with the markets we serve.  Be it in editorial, sales or support functions we have great strengths and competence.  We also have made great progress in understanding and executing online business models.  Combined, this will continue to be the bedrock of our success.

Looking ahead
In the coming period, senior management together with Reed Elsevier will focus on finding the right new ownership for the business.  We all can contribute to this by staying focussed on our business and deliver the results as before.  Nothing changes in the short term and we should not be sidetracked by the divestment process.

Reed Exhibitions
Reed Exhibitions has pursued a very successful strategy in the last few years.  This strategy, which focuses on organic growth enhanced by targeted acquisitions and development of our business in high growth economies (BRIC), has proven to deliver strong growth.  In 2007 results again were good with revenue growth of 12%.  Going forward we will continue with this strategy and add programs for online development which will become increasingly important.  Reed Elsevier will continue to invest in the business and support the strategy.  There is a Q&A specifically related to our exhibition business available to answer questions that might arise.

I would like to thank you for a good 2007.  All businesses in Reed Business met or exceeded their targets and delivered good growth.  In particular Reed Exhibitions performed strongly and in publishing we did see continued strong growth in online.

Although the publishing and exhibition businesses will go their separate ways, both are well positioned. I do understand that all this might raise questions including what it means for you personally. A list of frequently asked questions is available on your local intranet site and aREna today. I also encourage you to discuss concerns with your management.  Communication will be straightforward and timely. When we have new information we will share it with you.  Let me close by expressing my confidence in our future and give you my commitment that I will lead us through this process.

Kind regards,
Gerard van de Aast
CEO Reed Business