Reuters Media Targets the Consumer Market: About Time, Too (Again!)

Philip M. Stone October 25, 2004

There are few places in the world where the Reuters brand on a news story or picture does not stare you in the face as you read your daily newspaper. But the revenues from that business are a drop in the ocean compared to Reuters overall business serving the financial community. Now the company has taken a giant step forward to making media a financial powerhouse in its own right. And it’s about time, too, once again!

Reuters’ media business uses the wholesale model. It sells its products to newspapers, television stations, web sites, etc., and they in turn provide that product to consumers, via a subscription or financed from advertising, or both. But now the Reuters strategy is, “Why not have your cake and eat it?” Still be a wholesaler, but also go directly to the consumer. If they do it right, the consumer financial returns should overtake wholesale.

Some financial analysts question whether the new approach can be successful. Actually, it’s not new to Reuters. The media department already experienced successfully going directly to the consumer several years ago, but it was an idea before its time. Then senior media managers were absolutely married to the wholesale only model, they were appalled by the experiment and they eventually killed it. But the experiment worked. The lessons learned have probably been lost with time and management changes, but the strategy was a proven success; even the fallout from media subscribers not happy with sharing their news with Reuters sharing its news directly with the consumer was handled without loss of revenue.

And how do I know? Because I did it.

At the time, in 1997, I was manager of the Reuters Europe, Middle East and Africa media business and the global Internet business was booming. Media represented just some 7% of Reuters’ overall revenues and try as we might we couldn’t really get that percentage higher. So new thinking was called for. One day I said to my Internet business manager, “Those people we are selling our news to are making web fortunes. So why don’t we make a fortune – let’s do what they are doing.”

To cut a long story short sportsweb.com was born in just six months. It contained all of Reuters sports news. We borrowed an Einstein webmaster who automated nearly the entire site, we co-opted a wizard editor from the sports department, and before long the site was earning four-star and five-star reviews from global web judges. And it ran on 2 ½ staff!

An advertising house sold banners, but that was our Achilles heal -- we didn’t know the advertising world very well and we didn’t keep a close enough eye on that part of the business.

Meanwhile, Reuters senior media managers and some major European media clients were not happy. The media managers based in New York were aghast. They were making piles of money by selling news wholesale to Internet sites – how could they show their faces to the wholesale community when Europe was putting all the sports news on the web for free? They wanted the site gone. Quickly. No convincing them you could make more retail than wholesale.

Back in Europe, some of the largest traditional media clients let it be known they didn’t see why they should pay Reuters what they were paying while all that sports news – some 15 per cent of the overall news report -- was on the web for free. It was clear that how those complaints were handled at that time would determine whether wholesale and retail could live side-by-side. I handled those client discussions personally, and the bottom line is we did not lose any customers and we did not lose any revenue. Yes, you can have your cake and eat it!

But the folks in New York wouldn’t give up. And eventually they arranged the sale of sportsweb.com to sportsline.com. The global media manager in London agreed the deal; sportsline took over sportsweb and immediately closed it down. The experiment was over.

Fast forward (a favorite Reuters expression these days) to 2001 and a “Last Supper” for the retiring global media manager. By then the Internet boom was over. US media revenue was hemorrhaging as almost daily another web site  went out of business. He was asked, “What do you believe was the single biggest mistake you made?”  Stroking his grey beard for a few seconds, he turned to look me straight in the eyes, “Probably selling the sportsweb,” he said quietly.

Fast forward again to the present day. It’s a new senior management and it takes a much more positive view about Reuters positioning on the Internet, no doubt paying close attention to various forecasts indicating an absolute boom in Internet advertising, even surpassing what it was during the so-called boom days.

 

Reuters CEO Tom Glocer

Reuters dot com and various regional web sites now attract some nine million unique visitors each month, according to CEO Tom Glocer.  Reuters has announced its video service will be a part of Microsoft’s new Windows XP Media Center in the US, and it has also appointed an executive charged solely with going after media consumer business in China.

Reuters is unique among news agencies in being able to enter the consumer market so easily because it is publicly owned. Most other agencies are beholden to owners who do not want that agency competing with their own business opportunities. In Denmark, for instance, during the Internet boom days the Ritzaus news agency endured journalist strikes because the owners, Danish newspapers, didn’t want Riitzaus getting into the web world with its own site competing against newspaper sites.

Reuters enjoyed a head start in its wholesale web business because other international news agencies simply were not there – they had to convince their newspaper owners that serving wholesale web sites was the right policy. Those delays by others probably was the single most important event that built the Reuters brand to consumers around the world, and particularly in the US, because Reuters was all over the web as THE news source.

You won’t find a  “value” in the company financial reports for that brand recognition earned from the wholesale web business, but it is very considerable. Today, management is capitalizing on that earned value by going after the consumer market and the financial returns should be enormous.

Reuters media business is worth some EUR225 million globally and no doubt reaching that figure for the consumer business must be an eventual target. Glocer has stated very clearly that Reuters sees the media consumer market as a major priority and that he understands it won’t happen overnight. “I have big ambitions for our media business which I believe can grow with our brand to serve millions of consumers directly,” he told staff in an internal memo, and he reiterated how important he thought this business could be when he commented on the company’s third quarter results.

Some financial analysts have their doubts. One told the Guardian newspaper that the wholesale policy was the right one. They are “the seller of spades in a gold rush rather than the gold digger,” he said. Wrong.

Not only does Reuters sell the spades in the gold rush, it already owns the biggest gold mine of all from which others dig. It will continue to sell the spades while at the same time selling its gold into additional new markets.  What’s wrong with that?

Forgive the ego trip, but seven years on from the sportsweb there’s a certain amount of satisfaction in seeing one was seven years ahead of his time.

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