The following article was submitted by Mazars USA LLP, sponsor of the 2017 Connectiv Business Media & Information Revenue and Operating Cost Report, available here to Connectiv members.
The Media, Information and Technology Group at Mazars USA LLP was pleased to assist Connectiv, The Business Information Association division of SIIA, which is the leading trade association for companies involved in the creation and delivery of business information, in the development and completion of its 2017 Business Media & Information Revenue and Operating Cost Report, which looks at basic financial metrics relating to its members’ recent and projected results [a Connectiv member user name and password are required to access the report]. The 23 CFO respondents were a good representation of companies balanced between those over and under $50 million in annual revenue, as well as being geographically dispersed throughout the U.S.
While only 48% of respondents reported that their revenues and EBITDA had increased from 2015 to 2016, 91% of those same companies projected that revenue would increase in 2017 over 2016 and 74% projected increases in EBITDA for that same period. Clearly, there is optimism about the future.
We also found that, comparing 2015 to 2016, the business centers contributing to the total revenue mix (consisting of print advertising, paid content and information services, marketing services, events and digital) were consistent year over year with paid content/information services showing some growth. And, in spite of a generally pessimistic perception of print advertising, that business center represented over 30% of respondents’ revenue in 2016 - only 1% lower than 2015.
The respondents also reported that digital services, including websites, native advertising, e-newsletter lead generation, mobile apps, mobile delivery and subscriptions, resulted in an average contribution margin of 65% - the highest of the reported business centers. Our experience serving this industry has shown that there is a wide disparity in the way companies allocate costs to their various business centers, creating possible distortion of the actual business segment performance. We recommend that all companies evaluate their cost allocation methodology to assure that the results for digital operations are representative of the segment’s contribution margin.
The survey also asked about the length of time required to prepare unaudited year end financials. Of the 23 respondents, 8 indicated that such preparation exceeded 60 days, of which 6 were respondents reporting less than $50 million in annual revenue. Our experience in this area has indicated a strong correlation between rapidity of closing the books and profitability. We strongly encourage management to put in place the investments, controls and discipline to complete the closing and reporting process within 45 to 60 days.
The survey results indicate that companies are evolving along with the ways in which their audiences are consuming information, finding new ways to interact with users. This is confirmed by greater allocation of capex expenditures to both information services and digital business segments. Being in the forefront of changing product and consumption behavior will serve this industry well. As Henry Ford said, “If I’d asked people what they wanted, they would have said faster horses.”
We thank SIIA/Connectiv for permitting us to participate in this effort.