Hearst President & CEO Steven R. Swartz Letter to Employees on Hearst’s 2017 Performance

Hearst achieved record profits for the seventh straight year, as our efforts to build and acquire great companies in the business data and software sector helped overcome a tough year for many of our consumer media franchises.

Our biggest majority-owned business, Fitch Group, led the way with an outstanding performance across the world, particularly in its core bond ratings business.

Strong profit growth was also achieved by CAMP, the aviation safety company we acquired in late 2016, as well as Hearst Health, our portfolio of six essential healthcare businesses, and Hearst Transportation, our auto sector group. All of these businesses, which we collectively call Business Media, sell data and software that customers use in their daily activities, a powerful proposition in the increasingly cluttered information landscape. In 2017 these businesses accounted for 28 percent of our total profit, a number that has more than tripled over the past decade, and one that will continue to grow over time. Our only regret is that we failed to make another big acquisition in this sector in 2017. We can only say it wasn’t for lack of trying.

Total Hearst profit was also helped by gains on the sale of investments. Revenue was flat at $10.8 billion, although this included an expected big drop at our Hearst Television group coming off the record highs of 2016 powered by gains from the presidential election and the Olympics. With elections and Olympics back on the agenda, Hearst Television will have a strong year in 2018, and we expect the company’s revenue to grow along with it.

2017 was another great year to be a consumer of media products but less so to be a provider of that content. While platform companies like Google, Facebook, Amazon and Netflix thrived through their dominance of advertising and ecommerce channels, many individual media brands struggled to get their share of the advertising pie and consumers bought fewer television bundles or magazine subscriptions.

We are fortunate to be in a host of different media sectors in all different stages of taking on disruptive forces, and those that have been in the battle the longest offer constructive and quite optimistic lessons for those businesses that are newer to the fight. Our television group, now 30 stations strong under President Jordan Wertlieb, went through an early form of disruption from cable television, but fought back thanks to tenacious programming and sales efforts in our local markets, winning significant gains in fees from distributors, and strong political advertising gains due in part to our best-in-class political journalism. If it weren’t for the terrible hurricane that struck our Houston and Beaumont markets, Hearst Newspapers, under President Mark Aldam, would have recorded its sixth straight year of profit gains in 2017 after previous years of struggle when the internet took away much of its classified advertising business. The keys to the turnaround were unique local editorial products, a huge ground game of local sales professionals, such digital innovations as starting local digital ad agencies in each of our major markets, and getting our readers to pay us a fair price for the products we deliver to their door and their mobile devices each day. (A special salute is in order for our San Francisco Chronicle team of Publisher Jeff Johnson and Editor Audrey Cooper and the Houston Chronicle team of Publisher John McKeon, Editor Nancy Barnes and Managing Editor Vernon Loeb. Their leadership at our largest newspapers at a time of great challenge for the industry has been exemplary.)

Now our magazine and cable television groups are in the crosshairs of disruption. In magazines, led by President David Carey and Publishing Director Michael Clinton, our world class digital operation made significant gains in 2017, and some of the newer magazines we have launched over the past 10 years, namely Food Network Magazine and HGTV Magazine, are among our best editorial products and most profitable titles. (Special thanks to Food Network’s Editor-in-Chief Maile Carpenter and Publisher Vicki Wellington, as well as HGTV Editor-in-Chief Sara Peterson and Publisher Dan Fuchs). In 2017 we tested another new magazine, this time with Food Network star Ree Drummond, called The Pioneer Woman Magazine, and it looks like we and our great partner Scripps Networks have another winner on our hands. (Scripps, led by Ken Lowe, has agreed to be acquired by Discovery, so we look forward to welcoming our new partner, under CEO David Zaslav, in 2018.)

Still, the magazine business needs more change. With respect to many of our titles, we need the readers to pay more for the product. And we need to find a way to make digital subscription products work for magazines in the way that they are starting to work for newspapers. Near the end of 2017 we agreed to acquire Rodale’s magazine business, with such well-established titles as Men’s Health, Women’s Health and Prevention. The addition of these titles will give our magazine business a shot in the arm and some new talent to help in our efforts to keep innovating and experimenting as we reset the business model for the future.
more at:  http://www.hearst.com/newsroom/hearst-president-ceo-steven-swartz-letter-to-employees-on-hearst-s-2017-performance

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