Thomson Reuters: The Pointy End of a Business Sector
March 28, 2013
Thomson Reuters has been a leader in professional publishing for many years. I lost track of the company after the management shake up which accompanied the departure of Michael Brown and some other top executives. Truth be told I was involved in work for the US government, and it was new, exciting, and relevant. My work for publishing companies trying to surf the digital revolution reminded me of my part time job air hammering slag at Keystone Steel & Wire Company.
I read “Data Don’t Add Up for Thomson Reuters.” (This online link can go dead or to a pay wall without warning, and I don’t have an easy way to update links in this free blog. So, there you go.) You can find the story in the printed version of the newspaper or online if you have a subscription. The printed version appears on page C-10, March 28, 2013 edition.
The main point is that Thomson Reuters has not been able to grow organically by selling more information to professionals or by buying promising companies and surfing on surging revenue streams. This is an important point, and I will return to it in a moment. The Wall Street Journal story said:
Shares of Thomson Reuters remain 13% below where they were when the deal closed in April 2008, partly reflecting difficulty integrating two large, international companies.
The article runs though other challenges which range from Bloomberg to Dow Jones, from ProQuest to LexisNexis. The article is short, so the list of challenges has been truncated to a handful of big names.
Do the professional publishing companies have access to talent on a par with Julius Caesar’s capabilities? In my opinion, without management of exceptional skill, professional publishing companies will be sucked through the rip in the fabric of credibility which Thomson Reuters’ pointed spear has created: Flat earnings, more wrenching cost cutting, and products which confuse customers and do not increase revenue and profits. Image from Wikipedia Vercingetorix write up.
But let’s set aside Thomson Reuters. I want to look at the Thomson Reuters’ situation as the pointy end of a spear. The idea is that Thomson Reuters has worked hard for 20 or 30 years to be the best managed, smartest, and most technologically adept company in the professional publishing sector. With hundreds of brands and almost total saturation of certain markets like trademark and patent information, legal information, and data for wheeler dealers—Thomson Reuters has been trying hard, very hard, to make the right moves. Is time running out?
Like the professional publishing sector which includes outfits as diverse as Cambridge Scientific Abstracts, Ebsco Electronic Publishing, Elsevier, and Wolters Kluwers to name a few outfits with hundreds of millions in revenue. Each of these companies share some components:
- Information is “must have” as opposed nice to have
- Information is for-fee, not free
- Customer segments are not spending in the way the analysts predicted
- Deals have not delivered significant new revenue
- Management shifts replace executives with similar, snap in type people. Innovative and disruptive folks find themselves sitting alone at company meetings.
What these similarities mean to me is that the professional publishing companies are likely to follow the path of the Thomson Reuters spear. Thomson Reuters punches a hold in the fabric of confidence for the sector. The other companies then trail after Thomson Reuters leaving the artifacts the Wall Street Journal identified: Flat earnings, the end of easy cost cutting, and management missteps.
Can other professional publishing companies avoid trailing along after Thomson Reuters? The answer is a yes with a caveat. For the companies with which Thomson Reuters competes, innovation is part of the answer. But the bigger challenge is attracting management talent which can move in promising new directions and generate new revenue more quickly than the old, traditional revenue erodes.
The behavior of professional publishing companies in general has been, at its core, more of the same. The companies professional publishing firms buy look and feel similar to companies the acquirer has purchased before. Thomson Reuters purchased professional publishers in Argentina which were the equivalent of the company’s UK and US holdings. I would generalize across the professional publishing sector and suggest that upstarts like Fact Set Research have been left to grow because the segment leaders assumed that Fact Set Research was not equipped to compete with the big guns. Bad assumption.
I want to emphasize that fancy technology which allows a publishing company to slice and dice content to create new products is not an answer. Solutions like MarkLogic and other information management systems allow licensees to produce products at comparatively low cost by repurposing information. The quality of those products can vary. But companies with slicing and dicing approaches generate products which are difficult to differentiate and difficult for sales professionals to sell. You can find examples of slicers and dicers at on the Thomson Reuters’ A to Z page. Another example is the Ebsco Electronic Publishing list on that company’s Ebscohost page. Proliferation of products worked for Ragu, but the tactic can run out of sales gas quickly in the professional publishing sector where the number of lawyers and librarians and Wall Street analysts has been shrinking. Ragu sells sauce to consumers. Despite the economy, folks keep having children, thus providing a market for dozens of different kinds of sauce. Lawyers behave differently. Problem: tactical. Solution: No Julius Caesar capable of capturing Vercingetorix is available I fear.
Net net: Thomson Reuters is the pointy end of a spear. The spear has torn asunder the myths of the money which can be made from professional publishing, legal databases, and similar “must have” products. The challenges Thomson Reuters has been able to minimize to some degree now threaten to overwhelm the company. Stakeholders may eye breaking up the company. Changing senior management has not worked. Buying other companies hasn’t worked. Time for radical action perhaps?
My hunch is that 2013 is going to be one in which the entire professional publishing sector will be engaged in making deals and implementing tactics to repair the fabric pierced by the pointy end of the Thomson Reuters’ spear. Should be exciting for the managers of these companies. For employees, the thrill may be somewhat reduced. Customers may become more hungry to embrace alternatives which deliver free but “good enough” information. (The European Commission is well on its way to legitimize “good enough” information with its various initiatives, including the Promise project. See the stunning Promise Retreat Report Prospects and Opportunities for Information Access Evaluation. Amazing stuff for the “good enough” movement.
But more remarkable shifts are ahead.
Stephen E Arnold, March 28, 2013
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