Family-run publisher McGraw-Hill announced this week that it is "exploring strategic options" for one of its longest running publications, Business Week. In reality, most people expect the company to sell this once gleaming asset.
The owning McGraw family has been working in the publishing sphere since the company's inception in 1909, so difficult trading conditions are nothing new. The difference between this recession and many of its predecessors is that it coincides with the decline in demand for weekly news magazines, including Business Week and rivals Newsweek, Time and the Economist.
A 30% drop in second quarter advertising at the magazine has played a significant part in reducing profits. This, coupled with the rise of the internet as a source of news and information, has made trading particularly difficult for the title, which has an estimated 4.8 million readers in over 140 countries.
There is speculation that little money will change hands for Business Week – some suggest the title could be sold for as little as $1. However, despite selling for such a nominal sum the sale would be beneficial for McGraw-Hill as it would lose an asset that is currently draining it of between $10 and $20 million a year.
Peter Appert, a business analyst with Piper Jaffray investment firm, suggested in a report released on Monday that the sale would remove "a continuing distraction" for McGraw-Hill. He went on to comment that instead of viewing the sale in a negative light the move actually signals "a more proactive stance on the part of management in efforts to eliminate underperforming assets and optimise the company's portfolio."
In fact, other than losing a household name, the sale of Business Week would not have major implications for McGraw-Hill, who publish a variety of financial and educational material and also own the rating agency Standard and Poor's.
Instead of continuing to bankroll a publication that is no longer proving profitable, the company is attempting to adapt to the changing climate and focus on its more successful ventures.
The company's history spans four generations of the McGraw family and has seen six family presidents. McGraw-Hill began in 1909 when John Hill and James McGraw merged the book departments of their respective publishing companies. Hill became president and McGraw became vice president, until the sudden death of Hill in 1916. This prompted the complete merger of the publishing companies in 1917 and the McGraw-Hill Publishing Company Inc was created.
In 1979, it successfully rebuffed a takeover bid by American Express, after which McGraw-Hill decided to switch focus from media to market orientation. The move appeared to work as revenues reached $1 billion for the first time in 1980.
Current CEO Harold McGraw III is great-grandson of the founder and has had the top job since 1998. He once outlined the company's attitude to publishing as follows: "What [publishing] is about is change and how we manage change. We have to reinvent ourselves continuously," he said.
Such a willingness of the business and the family to adapt is one of the secrets to their longevity and the potential sale of Business Week is just the latest example. It also demonstrates clear thinking that is not clouded by sentiment.
Year on year revenues for McGraw-Hill dropped from $6.8 billion in January 2008 to $6.4 billion in 2009, but its shares rose 1.3% to $30.48 following news that the company was assessing its options. In spite of the difficulties facing the media industry, the rise is part of a consistent trend this year that has seen McGraw-Hill shares climb 31%.
If it does end up selling Business Week, McGraw-Hill will again demonstrate that the family business is not scared to the take difficult decisions necessary in order to adapt, survive and grow.