Last week's resignation of Emap chief executive Tom Moloney, with full-year trading figures highlighting the vulnerability of its consumer division, has reignited speculation about a break-up of the company.
Emap's divisions - consumer magazines, radio and business-to-business publishing - are separate entities that offer few opportunities for integration and would each be more valuable and efficiently run on their own, so the argument goes.
Emap Consumer Media is the division suffering the most, with the once-venerable lads' magazines market in freefall and around 175 jobs cut earlier this year on the recommendation of Boston Consulting Group. In 18 months, 20 consumer brands have been closed, including the print edition of Smash Hits and the US edition of FHM, or sold, such as Bliss. Several senior executives have departed, most recently Louise Matthews, managing director of Emap Entertainment.
Easy money
NatMags' chief executive Duncan Edwards sympathises with Moloney's struggle to usher in the digital age after devoting most of his working life to building strong magazine brands. "Cut him in half and he's got Emap written through him," he says. "The consumer business is exceptionally well run and it would be a mistake simply to say there's easy money to be made from changing that. His departure suggests a disagreement about strategy rather than an operational issue."
Meanwhile, the b2b arm, Emap Communications, now accounts for 32% of revenues and 45% of profits, despite wrestling with declining public sector advertising. The acquisitions of risk management information company Groundshore and the booming WGSN b2b fashion business suggest that this area of business will remain hot, according to Paul Gooden, analyst at ABN Amro.
"At the moment business is regarded as a third arm, but its digital (strategy) is much better evolved," he says. "In three years, it is likely that Emap will be seen as a b2b publisher with a consumer offshoot."
Roger Parry, a candidate for the job when Moloney took over the reins from Robin Miller four years ago, says Emap took the wrong path in launching ever more expensive consumer magazines at a time when the b2b arm was clearly in a boom market. Moreover, he says, it has artificially tried to pull together different parts of the group to no avail. "It's nonsensical to have a sales force selling both radio and magazines," he says. "It will never work because media buyers don't want it."
Rather than a break-up, Emap needs to call off the hunt for cross-media opportunities and recognise that it has separate businesses, each with their own strengths, he adds. "Whether they like it or not, they're not an integrated company, but a media conglomerate. Even Rupert Murdoch lets different parts of his empire do their own thing."
Emap maintains a break-up is not on the cards. But observers believe that for the whole of the company to remain greater than the sum of its parts, it will need exceptional talent from outside.
Emap chairman Alun Cathcart, who is leading the company in the interim, has cast his net wide. "I've asked headhunters to look specifically in the media sector, but not exclusively," he says. "If people from other backgrounds can demonstrate strong leadership skills and can ruthlessly execute decisions, they will have a chance."
Emap's digital success will also rely in no small part on who takes on the digital director roles the company is still looking to fill. Critics of Moloney's online strategy point out that it took Emap eight years to take Heat online, without the foresight to register the name heat.co.uk. Despite once being the leader in the teen mag market, it failed to exploit this online, allowing sites such as mykindaplace and social networks such as Bebo to thrive.
Slow execution
Shaun Gregory, the former managing director of national brands at Emap who now runs Telegraph Media Group's new-media strategy, says: "The strategy has always been solid, but the execution, particularly around digital media, has been somewhat slow. When you've got someone at the top who's been at the company for 26 years and was wedded to brands and people, then change was always going to be difficult."
David Pullan, Emap's former strategic marketing and brand development director, agrees. "They're not building new digital revenue channels quickly enough. Fundamental changes have been needed for some time to make the consumer side futureproof."
Emap remains at the mercy of its shareholders, and its new leaders will have to move fast to reassure them that it has the vision to position its brands for the digital age
EMAP: THE WAY FORWARD
Consumer magazines
- Reviewing Australian consumer magazines division and French exhibition business, Agor
- Ongoing review of UK portfolio - titles most likely to be sold or closed include Arena, MaxPower, Top Sante and New Woman
- Rumoured to be developing a young women's weekly magazine, under the codename Project Villa, and a free title targeting men
- Earmarked £25m for new product development in 2008, matching this year's spend
Radio
- Irish radio business up for sale, but strong denials of similar rumours about its Scottish division
- Developing branded content for titles such as Closer as part of Channel 4's bid for the second digital multiplex
Business-to-business
- Relocating all b2b operations into a single office
- A further £5m investment in sales and marketing for WGSN.