Articles of the Week


Gijrath Media Group Could Interest Glam Media — Glam Media, the California-based lifestyle media company, would consider discussing a partial acquisition of Dutch peer Gijrath Media Group (GMG), a company
source said. Joint ventures could also be a possibility, the source added.
“We built out our luxury channel not too long ago, so [this] would
definitely be an area that is of interest to us”, the source said. “International [targets are] definitely on the radar in terms of acquisition potential,” the source said when asked about GMG. A sector banker lent credence to the source’s argument, pointing out that the groups could use each other’s content interchangeably in their publications. Other potential US-based suitors for GMG could include Modern Luxury, another American lifestyle media group, a second sector banker suggested. In reaction, GMG’s owner and chief executive officer Yves Gijrath said he “could be open to” approaches by Glam Media or other players. He added that he would have to become better acquainted with Glam Media’s operations before commenting further on the matter. GMG will have 100 full-time employees in 2009. Gijrath confirmed news reports that the recent Amsterdam edition of GMG’s “Millionaire Fair” had revenues of around EUR 200m, according to preliminary figures. He declined to provide further financials. Earlier, Gijrath said the Amsterdam-based company would consider a minority stake sale to an industry player to stimulate growth. Gijrath specified that an external investor must bring more than capital. GMG is also open to joint ventures with industry players, especially outside the Netherlands, he said. A player with a strong profile in the Internet sphere, or a niche player such as Conde Nast, would be an appropriate suitor, Gijrath said. Conde Nast, however, may be scaling back its M&A activity, one sector banker said. He cited the recent dismissal of Kourosh Karimkhany, vice president of corporate development at its sister company, CondeNet, as a signal to this effect. Source: mergermarket.

Hulu CEO: More Global Moves Planned For ’09 — In just a year, Hulu has morphed into what is arguably the most successful television
network online. The co-venture of NBC Universal and News Corp.’s Fox
already is the sixth-most-viewed online video hub, providing insights into
how consumers transfer their television viewing preferences and habits to
the Web. Here’s what Hulu CEO Jason Kilar told MediaPost about that future.

Social Media Wins In Marketers’ ’09 Plans — Marketers are directing their 2009 budgets toward content, custom media and social media initiatives, according to a new study from online marketing resource and vendor-matching tool Junta42. More than half–56%–of marketing and publishing decision-makers plan to increase their content marketing spending next year, Junta42 found after surveying its community of corporate marketers and publishing/agency professionals.

Britain Introduces Movie-Like Ratings For Web Sites — The British
government is looking into rating Web sites in a similar manner to the way
movies are rated by the Motion Picture Association of America in the U.S.
Britain’s Minister For Culture Andy Burnham told The Daily Telegraph that
the government was planning to negotiate age ratings for English language
sites with the administration of President-elect Barack Obama. “The more we
seek international solutions to this stuff — the U.K. and the U.S. working
together — the more that an international norm will set an industry norm,”
Burnham said. “This is an area that is really now coming into full focus.”

Online Advertising To Weather Recession — It matters little what sector you’re in: 2008 was a lousy year for most businesses, particularly
advertising. And if you believe the forecasters, 2009 isn’t supposed to be
much better, either. Just last week, Barclays Capital lowered its
projection for advertising in the U.S. to a negative 10% next year, with
every single traditional media sector receiving a major hit. By comparison,
advertising fell just 1.9% in the 1991 recession, and 6.2% in 2001.
However, while Barclays and others expect the rest of advertising to get
torched, online advertising is still expected to grow between 6 and 10%
next year over 2008 levels. In fact, according to BusinessWeek, advertising
may see the kind of seismic shift next year that is now bringing about
unprecedented changes to the financial and automotive sectors. “The
harbinger of advertising’s radical transformation is the sustained growth
of online,” the report says, noting while the rest of the sector takes a
big hit, “online is holding its own.”

Bonnier Eyeing Six Possible Targets Within Digital Media — Bonnier, the Swedish privately-owned media company, is looking to expand within digital media via acquisitions, according to Svenska Dagbladet. The Swedish daily cited Sara Ohrvall, director at Bonnier, who said that the company needs to grow via acquisitions, especially within new business areas which will help the company move forward quickly. The paper reported that Bonnier is currently eying six possible targets and that most of them are digital media companies and that the acquisitions are to occur both in Sweden and internationally with a focus on the US. The item noted that Bonnier has a turnover of SEK 30bn (EUR 3.1bn). Source: mergermarket.

NYTCo Lays Groundwork To Raise Funds Through Debt, Equity — With a $400 million revolving credit line expiring in May, the New York Times Company (NYSE: NYT) continues to put its fund-raising ducks in a row. The latest: an SEC filing setting the stage to secure debt or raise equity. The terms in the prospectus are as vague as possible—an unspecified amount, indeterminate price—and meant to allow the company to move fast should it go this route. Times spokeswoman Catherine Mathis explains: ‘In these difficult markets, the company wants to ensure that it has maximum
flexibility and, accordingly, is filing a shelf that would permit it to
offer both debt and equity.” The Washington Post Company (NYSE: WPO) filed a similar prospectus in November for possible debt securities.

Blinkx Debuts ‘Un-Roll’ Streaming Video Ad Unit — In the ongoing pursuit for the killer Web video ad, video search engine blinkx has introduced a new ad unit that allows users to engage with a brand continuously throughout the duration of a streaming video. The Un-roll unit, as the company has dubbed it, was developed in-house by blinkx in response to the industry’s need for an alternative format to traditional pre- and post-roll ads.

Arrington: January Spending To ‘Fall Off A Cliff’ — The U.S. may have been in recession for a year now, but TechCrunch’s Michael Arrington says the fact is that most Internet-base companies haven’t seen their revenues drop yet. Amazon, for example, recently recorded its “best ever” holiday sales period. Of course all that’s about to change for content sites, he says,
starting this week. “Display advertising revenue is going to fall of a
cliff in January according to a number of content sites I’ve spoken with
who rely on advertising for revenue,” Arrington says. One sales exec said
that sales through December remained strong as advertisers used up their
marketing budgets, but “there are few buyers for this next fiscal quarter,
and those few that are buying are looking for steep discounts.”

Digging In To MySpace And Facebook’s (Projected) Slump In Ad Sales — Earlier this month, eMarketer lowered its social media ad spending outlook for 2008 through 2013, with revised forecasts for News Corp.‘s MySpace and Facebook. In an update, the online research firm offers details for why the two nets will take in less money this year: Slower growth overall at FIM: eMarketer lowered its MySpace ad revenue forecast for 2008 by more than 22 percent—from $755 million to $585 million—partly because of slowed revenue growth at parent company Fox Interactive Media (NYSE: NWS) (FIM). Over the course of News Corp.‘s past fiscal year (which includes half of 2007 and half of 2008) FIM’s year-over-year revenue growth sputtered from 87 percent at the end of Q2, to 55 percent in Q3, to just 23 percent in Q4. The downward trend continued in the company’s most recent earnings report: for the quarter ended September 30, 2008, FIM’s revenues were up just 17 percent year-over-year, and eMarketer expects the trend to continue. Just don’t tell that to MySpace CEO Chris DeWolfe: at the Reuters Media Summit he said that the social net hadn’t really seen “any impact” from the financial crunch and that he expected revenues to grow next year.

Internet Tops Newspapers As News Source — The Internet is now the most popular source of news after TV, according to the Pew Research Center for the People & the Press, which released its year-end roundup of news media consumption last week. While TV is still king of the hill, its steady
decline in the face of Internet competition bodes ill in the long term.

ComScore: First Drop In Online Holiday Sales Since 2001 — E-commerce sales fell 3% this holiday season, marking the first drop since 2001, according to data released by comScore. The Web measurement firm attributed the falloff to five less shopping days in 2008 between Thanksgiving and Christmas and the impact of the recession on consumer spending. ComScore had predicted sales from Nov. 1 to Dec. 23 would be flat to last year, at $26.3 billion. The total came in shy, at $25.5 billion.

2008: Worst VC-Backed Liquidity Year Since 2003 — With no initial public offerings (IPOs) and just $3.9 billion generated via mergers and
acquisitions (M&As) of 65 venture-backed companies in the fourth quarter,
2008 proved to be the worst year in terms of liquidity for U.S. venture
capitalists since the post-tech-bust doldrums of 2003, according to
official statistics released today by Dow Jones VentureSource (
http://www.venturecapital.dowjones.com). Overall, U.S. venture-backed
companies generated $24.1 billion in liquidity through IPOs and M&As in
2008, down 58% from the $57.6 billion in liquidity produced in 2007. Just
seven companies completed public offerings in 2008, raising $551 million —
a far cry from the $6.8 billion generated through the public listings of 76
companies in 2007 and the lowest totals recorded since VentureSource began tracking the industry in 1992.

Lee Enterprises Says Does Not have Sufficient Cash Flows To Meet Both Its Requirements For 2009 Operations And Repayment Of Pulitzer Notes — In its Form 10-K filed on 31 December, Lee Enterprises made the following disclosure: The Company generated cash flows in 2008 sufficient to reduce net debt by USD 102,225,000, pay dividends totaling USD 32,573,000 and acquire shares of its Common Stock in the amount of USD 19,483,000. The Company does not have sufficient cash flows to meet both its requirements for 2009 operations and repayment of the Pulitzer Notes. 2009 principal payments required under the Credit Agreement totaling USD 142,500,000 are expected to exceed the Company’s cash flows available for such payments. As a result, the Company expects to utilize a portion of its capacity under its revolving credit facility to fund a portion of the 2009 principal payments required. At September 28, 2008, the Company had USD 207,000,000 outstanding under the revolving credit facility, and after consideration of the 2009 Amendments, letters of credit and other commitments, has approximately USD 162,000,000 available for future use. Principal payments under the Credit Agreement totaling USD 166,250,000 are due in 2010. The Company expects to utilize the remainder of its capacity under its revolving credit facility to fund a portion of the 2010 principal payments required. The Pulitzer Notes mature in April 2009. The Company is actively engaged in discussions with the Noteholders, and to the extent their approval may also be required, the Lenders under the Credit Agreement, to extend or refinance the Pulitzer Notes. The Company has also initiated discussions with the Lenders related to changes to the Credit Agreement to maintain sufficient long-term liquidity. However, the timing and ultimate outcome of such discussions cannot be determined at this time due, in part, to the abnormal condition of the domestic credit markets and the overall recessionary operating environment in which the Company, Pulitzer, and other publishing companies are currently operating. Continuing instability or further disruptions of these markets could prohibit or make it more difficult for the Company to access new capital, increase the cost of capital or limit its ability to refinance existing indebtedness. There are numerous potential consequences under the Credit Agreement, and Guaranty Agreement and Note Agreement related to the Pulitzer Notes, if an Event of Default, including expiration of existing waivers, occurs and is not
remedied. Many of those consequences are beyond the control of the Company, Pulitzer, and PD LLC, respectively. The occurrence of one or more Events of Default would give rise to the right of the Lenders or the Noteholders, or both of them, to exercise their remedies under the Credit Agreement and the Note and Guaranty Agreements, respectively, including, without limitation, the right to accelerate all outstanding debt and take actions authorized in such circumstances under applicable collateral security documents, any of which would impair the ability of the Company to operate its business as a going concern. Source: mergermarket.

Microsoft To Lay Off 17% Of Workforce? — Fudzilla, a tech blog, reports that Microsoft may lay off 17% of its work force, or 15,000 people, on Jan. 15, but Silicon Alley Insider contends that a cut of this magnitude is
unlikely. “Unless Microsoft’s business has been absolutely crushed in the
past two months, there is no reason for the company to suddenly cut this
much cost,” writes Henry Blodget. He points out that Microsoft’s margins
are actually fine, as much of the company’s revenue is generated from
multi-year contracts that aren’t expiring anytime soon. Blodget says the
only way Microsoft would lay off this many people is if decided to
eliminate whole businesses, but again, this is unlikely, because the
software giant would be more likely to sell rather than shut down any
divisions it no longer wanted. This includes MSN, which Fudzilla cites as a
major recipient of the pending job cuts. Blodget adds that if Microsoft
wanted to get out of the Internet biz, the best way would be to combine its
online operations with Yahoo and then take a majority stake in the combined entity. However, Microsoft just hired a new head of MSN, and while it’s possible he will make some cuts, “15,000 sounds extreme,” Blodget says.

Publicis Continues To Bet On Internet Ad Spend, Despite The Risks — Looking back at the growing strains on the traditional ad business over the last year, Publicis Groupe CEO Maurice Lévy expresses his continued enthusiasm to the NYT that the rise of digital media will save the
industry. Lévy, who spends most of the article professing his ardor for
Barack Obama, says that despite the global economic downturn, online growth will remain solid. As he has maintained since last year, by 2010, Lévy expects 15 percent of global ad spend will be tied to the web. He has also previously said that 25 percent of Publicis’ revenues would be related to the internet by next year, but the NYT interview didn’t include an update
on whether or not Lévy still holds that view. Risks to betting on internet
ad spend: To be sure, banking on the growth of online as traditional ad
spend was cutting back was a fairly safe one when Lévy first made it in May
2007, a Morgan Stanley report on Publicis says that the company might want to rethink its past bets internet gains. “This has recently become a
higher-risk strategy,” the Morgan Stanley report says, pointing to the last
downturn, when online spending suffered the most. Still, the current signs
suggest that even with the significant economic pitfalls, online appears
fairly resilient, although that’s mainly attributable to lower cost search
ads.

Social Gaming: Challenges And Opportunities For ’09 — Social gaming may be a growth sector, but GigaOm’s Wagner James Au warns the coming year will bring challenges as well as opportunities for social gaming startups. One of the biggest challenges, he says, is that the majority of startups are still at the mercy of top social networks like Facebook, which have a habit of suddenly changing their policies. Such changes can have an adverse affect on third party application makers. There’s also unpredictability in competition. Most social networking games are easy to reproduce, so developers often find themselves competing with knockoff versions of their own app. Also, the proliferation of poor quality games could hurt the sector as a whole, says Kristian Segerstrale, CEO and co-founder of Playfish: “Poor quality user experiences or misleading monetization mechanisms like some of the aggressive CPA practices we’ve seen in 2008 could jeopardize the perception of social games and our growth potential as an industry.”

Online Or Bust: Why 2009 May Be The Nail In Newspapers’ Coffin — Optimistic newspaper proprietors like Sly Bailey and Tim Bowdler blame the business’ current malaise (we’ve covered over 1,000 newspaper job losses in UK since October alone) on an advertising downturn that’s merely
“cyclical”. In reality, 2009 is more likely to bring more layoffs, further
consolidation and the death of certain long-running titles than it is a
cyclical upturn in fortunes, as publishers grapple with the truth that
their businesses have changed fundamentally and forever. In 2008, every
newspaper group either cut regional budgets, closed offices, shut titles or
cut staff – in some cases, all of the above. In one way, this is nothing
new – cutbacks are part of life for most newspapers and magazines nowadays. But there’s a strong case for saying 2009 will mark a shift from seasonal, sensible belt-tightening to the long-term shrinking of the newspaper industry in Britain.

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