FT breaks out
Pearson aims to take Wall Street by storm, writes Peter Koenig
Sunday 07 September 1997
On Tuesday Wall Street will be flooded with free copies of the newly relaunched US edition of the FT. There will be a pounds 12m advertising blitz. Billboards at US airports from JFK to LAX will come alive with the "No FT, no comment" tag line.
Over the next five years Pearson will invest pounds 100m in the FT's international edition, mostly in the US. "Our goal is to enhance the FT brand name worldwide," says the paper's managing director Stephen Hill, "but North Am- erica is obviously a key market."
Richard Lambert, who moved to New York to oversee the editorial side of the relaunch, is Americanising the paper's US edition. "US businessmen want to know what is happening outside the US," Lambert says. "We think there are a growing number of internationally-minded American businessmen interested in our style of news."
Beginning Tuesday, the FT's US edition will blossom with four-colour layouts, a crisp front-page table of contents, and other conventions of what is known in the US as the McPaper approach. The idea is to take such subjects as European Monetary Union for an American audience and make them a good read for fund managers on Wall Street and marketing directors in Silicon Valley. The US edition of the FT intends to cherry pick US stories it feels well placed to cover - "not Detroit," says Lambert, "but, for instance, stories on US trade."
The initiative is attracting the attention of the City. "We had 60 analysts here for a presentation on the US edition," Hill says. "The questions went on and on."
Publicly, the FT has declared it wants to treble US circulation to 120,000. In private the paper is more ambitious still. One Pearson employee mentions a target of 400,000. The company believes that if the FT can win the loyalty of a critical mass of top US readers, it will be an attractive option in the world's lushest ad market. Analysts believe the US edition is not profitable at its current circulation levels, but they point out that its existence has allowed the FT to win global advertising campaigns from companies like Merrill Lynch.
The US strategy has a precedent. Ms Scardino turned The Economist into just such a publishing phenomenon before joining Pearson last November. Between 1985 and 1996 the British weekly trebled its circulation to 610,000, mostly in the US, where Scardino began as The Economist's marketing director.
With pre-tax earnings of pounds 252m on sales of pounds 2.2bn in 1996, Pearson cannot compete against integrated media giants like Rupert Murdoch's News Corp or Ted Turner's Time-Warner, whose sales are three times as large. But the City is waiting to see if Pearson can establish itself as a niche player.
More, however, may ride on the success of the FT in the US than Pearson's profits. In financial markets the pink paper and the City are identified with one another. If the FT shines, the City will shine, and will be better placed to defend its position as the European capital of finance.
Even the Government may have an interest in the FT prospering in the US. Prime Minister Tony Blair has rejected the Old Labour policy of subsidising selected corporate "national champions". But New Labour wants to boost the global competitiveness of the country's corporate sector. The Government will be watching to see what rewards Pearson's investment in the FT in the US reaps. Pearson could become a model for how old-fashioned British companies can modernise themselves.
Much of Pearson's strategy for building the FT's brand name comes from two influential voices on the company's board - Reuben Mark, chairman of Colgate-Palmolive Company, and Vernon Sankey, the chief executive of Reckitt & Colman. But as a former employee of Guinness and the Boston Consulting Group, FT managing director Hill has his own experience of brand management.
Hill explains Pearson's plan to market the paper and ancillary FT business information services as a single brand. "With our global ad agency, Bozell, we have drawn up guidelines for agencies," he says. "These guidelines are designed to ensure that everywhere in the world we are delivering the same message."
Assaulting the US newspaper market, the FT will, however, go head-to- head with its arch rival, the Wall Street Journal. The Journal's circulation is 1.8 million, compared to 300,000 for the FT worldwide. The Journal owns 18 printing plants in the US. At $170 a year its subscriptions are two-and-a-half times cheaper than the FT's in the US. Charging $180,000 a page its ad rates are 10 times those of the FT in the US.
The FT is attacking the Journal's home turf at a good time. The American paper's parent, Dow Jones, has just launched a four-year $650m investment programme to save Telerate, the company's screen-based financial information service, which is losing ground to market leader Reuters and newcomer Bloomberg.
But the Journal's vulnerability appears to have made it even more determined to fight the FT's US initiative. Dow Jones spokesman Dick Tofel disparages the logic of what the FT is doing in the US. "The FT is a very fine paper. But it is a British paper," he says. "What is it going to do in the US we do not do already?"
This week the Journal is adding a page to its foreign coverage and doubling the listing of international stock quotes to 900. Meanwhile, it continues to fight the FT on its home European market with the European edition of the Journal.
Appraising the FT's bid to grow in the US, Dow Jones spokesman Tofel says: "If they Americanise the product, lower the price, and promote the paper, circulation will grow. But they've been specific about none of those things."
The FT does indeed face a difficult task in the US. It is planning to solicit new subscribers through direct-mail marketing. This is an expensive way to approach the market. It usually involves offering discount subscriptions. Hill will not discuss the details. But he concedes that up to half the pounds 100m for the international edition over the next five years will go on marketing.
Meanwhile, Pearson must master the arcane arts of newspaper printing and distribution in the US - about half the cost of putting out a newspaper. Pearson contracts two printing sites in the US for the FT. But this leaves the great American hinterland out of range. To deal with America's geographical imperative Pearson will open a new printing site in Chicago. But it has yet to address the challenge of serving financial hubs like Dallas and Miami.
Newspaper distribution can be a cut-throat business. Hill says he has contracted out the FT's US distribution. But he will not say whether he has negotiated a flat revenue sharing arrangement with his distributors - desirable, according to Joe Werlinich, European general manager of USA Today - or an arrangement through which the FT pays a flat fee and a percentage of revenues on top - undesirable, according to Werlinich.
Werlinich recognises the FT as an awesome brand name. He and other US newspaper executives are impressed by the scale of Pearson's investment in the international edition of its paper. "A hundred million is a big number for anyone," he grunts.
But the judgement of Werlinich and others is that pushing the FT into profit in the US will be a gruelling task. It took USA Today 10 years to go from scratch to profit," Werlinich says. The question is what Pearson will do if the FT's US edition falls short of its interim business targets.
The pounds 100m to be invested in the international edition of the FT is supposed to come partly in the form of anticipated revenues. If these revenues do not materialise, or if costs overshoot, Pearson will have to decide: dig deep or scale back ambitions?
Pearson has room for manoeuvre: the FT is motoring. The paper's profits in the first half of the year went from pounds 3.5m to pounds 22.4m.
The City believes Pearson faces a strategic choice. "We believe the group will have to focus on either entertainment or information/education," says Merrill analyst Geldens.
Hill, who at 35 is the closest thing Pearson has to a management wunderkind, is guarded. Asked what Pearson will do if it is forced to choose between increasing its investment in the FT's US edition or scaling back its ambitions, he offers the latter half of the paper's famous "No FT, no comment" tagline.
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