Hard struggles in the publishing industry

By now we’re familiar with the idea that the internet has caused a revolution in the way people consume their media, and that consumer attitudes to purchasing online news have also changed dramatically. In this article, licensed Insolvency Practitioner at Robson Scott Associates, Chris Horner gives us his view of the practical struggles that publisher, Team Rock Ltd has faced in this rapidly changing marketplace. Unfortunately, Team Rock was unable to successfully adapt its business model and was placed into administration on 19 December. In the process, 73 staff across its Scottish and London offices were made redundant just before Christmas.


Lessons from Team Rock: why businesses must adapt and evolve

Team Rock Ltd

Team Rock Ltd was formed in 2012 and included four magazine titles: Classic Rock and Metal Hammer, which it purchased in a £10.2 million acquisition in 2013; together with Prog and Blues. It also included a website and a digital (later becoming an online) radio station, plus brand assets: the Golden Gods Awards and the Classic Rock Awards. 

Although the acquisition made the company appear solvent on its balance sheet, Team Rock in fact struggled to raise revenue over the last four years. We can see from the company’s statutory accounts losses of around £30,000 in 2012 growing to an excess of £12m in accumulated losses in 2015. In order to complete the acquisition in 2013, Team Rock had been heavily reliant on capital from its shareholders.

team-rock

Changes in the marketplace

Part of the reason for the company’s failure seems to have been it’s inability to effectively adapt to the public’s changing attitudes and behaviours to online media. Specifically, amongst modern online consumers there is a general expectation that:

  • Information can be obtained for free
  • Information can be obtained as soon as it’s available

 

This has had a massive effect on the way publishers are able to generate revenue. Emerging younger generations are far less likely to purchase magazines than their predecessors. Some publishers have responded by setting up online members’ areas in which they ask consumers to subscribe to content. In a diverse and crowded marketplace though, consumers are often much less willing to do this because of the availability of alternative media operations which offer free content. The biggest avenue for income from online content immediately then becomes advertising, but advertisers are only willing to pay for content from which they can be certain they will make a profit.

Responding to change

Team Rock Ltd appeared to have hit peak consumer levels in Summer of 2015 when it had in excess of 1 million listeners to its radio station. Nevertheless, the company’s actions around this time point to its struggles and management’s loss of faith in the company:

  • The Company dropped its digital radio station and went online only
  • The Company dropped all radio advertising, advertising only its own labels and promotions

 

Seemingly, the company intended to make money by encouraging listeners onto their website, a lower cost platform, from which the company could generate advertising revenue and push its subscription services. Unfortunately, this move resulted in a huge drop off in listeners and subscribers, in part because:

  • 63% of UK radio listeners listen only in their cars, where online radio is largely inaccessible due to the high data charges
  • The majority of Team Rock listeners were overseas, so unable to benefit from the UK only subscription services
  • The new structure also appeared to turn off emerging artists who were unwilling to be used as promoters

What can we learn? Team work: know your stakeholders

According to its administrators, Team Rock has over £3m hits on its website monthly. Despite this, it has ultimately been unable to compete with the likes of the Bauer Media Group which owns a significant proportion of the UK radio stations and owns competing station, Planet Rock Radio. Planet Rock Radio has had great success in promoting new emerging artists, and generating income from artist promotions and advertising. 

Earlier in 2016, Team Rock was forced to make significant redundancies. The publisher dropped all of its radio hosts, trying to attract subscribers with non-stop music, whilst constantly missing deadlines to announce their “new format”. This appeared to cause subscriptions to plummet again with 66% of radio listeners looking for the full package of hosts and music, or turning to CDs and the likes of Deezer and Spotify to customise their own music mixes, rather than having playlists dictated to them. All of which has resulted in further plummeting revenues, from subscribers and subsequently, advertisers and promotions. Ultimately, we can trace the company’s demise back to a failure to understand and effectively respond to the modern consumer market. 

People power

Whilst this has been something of a grim tale, there has been one uplifting piece of news from this story. An incredible amount of support has been offered to the company’s employees, which was initiated by a number of new and established artists. Origin Goblin guitarist, Ben Ward set up a Just Giving page to try and offer some monies back to the Team Rock employees who were made redundant without pay before Christmas. By early January 2017, the page has helped raise in excess of £84,000 for the staff through crowdfunding.

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