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Cannibalization or a Free Lunch? Syndication & the

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The Internet is creating an exciting new market for business publishers. The thirst for information has never been greater, and as part of a strategy to tap this explosive demand, forward-thinking publishers are partnering with firms who can help them to reach new customers and increase revenues.
The process of syndication is not new: it basically involves aggregating original content from a multitude of publishers and originators, adding value by filtering and organizing content to meet specific customers’ needs, and then distributing the new product to new customers. But the Internet is making syndication an increasingly powerful proposition, and a wide range of firms is hungry for content.
Satisfying the Demand
Online databases, such as Lexis-Nexis and Dialog, have been operating for almost 30 years and continue to gain market share. According to Simba Information—a leading authority for market intelligence and forecasts in the media industry—the number of online databases is doubling every seven years and currently stands at well over 13,000. Lexis-Nexis—the legal, corporate, and government information provider, now part of Reed Elsevier—is typical of this sector with 2.8 billion searchable documents from nearly 30,000 sources delivered direct to end-users.
Recent years have seen an explosion of new players—such as iSyndicate, Moreover, and Screaming Media—who collect and package digital content for resale to their clients. These companies ultimately redistribute the content to end-users, primarily as a way to drive traffic to their Web sites. Founded in 1996, iSyndicate now provides content from over 1,200 sources, and distributes to almost 300,000 Web sites. iSyndicate is constantly adding new publishers and syndicates this content to customers in the finance, telecoms, and retail sectors. And their recent 50/50 joint venture with Bertelsman will help growth.
There are clearly great opportunities for business publishers, yet many are still not taking advantage. There are a number of doubts that seem to be preventing publishers from forming profitable new relationships with syndicators.
Do Syndicators Really Add Value?
Many publishers believe that syndicators would take a slice of their profits, without really adding value to their business. On the contrary, syndicators can give publishers—particularly the smaller companies—invaluable market reach and presence that could never be achieved on their own. Katherine Webb, Contributor Relations Executive for Thomson Financial, a provider of financial data and business research, puts it well: “Online databases, such as Investext, bring new customers to the table for publishers. We currently have over 10,000 customers and a sales force of some 200 employees. That is a great resource even for the largest publishers.”
A successfully-managed syndication program can add 5 to 10% of direct revenues for little cost, but with most publishers operating at margins of 10 to 15% that can make a significant contribution to the bottom line.
Is There a Risk of Cannibalization?
Most online databases charge users on a pay-per-view basis and share revenues with publishers, provoking fears that customers will drop lucrative subscriptions to take just the content they need and leave publishers with lower one-off fees. Web-based syndicators, on the other hand, provide feeds for a pre-determined fee further heightening the risks of cannibalization. Yet by carefully selecting the right partner, negotiating suitable terms, and developing an appropriate pricing strategy, it can be a win-win situation. By ensuring that syndicators charge a premium fee for end-users to select smaller pieces of intelligence, the customer has the choice of exactly the right piece of information through the syndicator or a cheaper subscription direct from the publisher. In theory, both customer and publisher win.
Who Owns the Customer?
Few online databases share customer details and few publishers would have the resources available to manage such key accounts even if the data were available. Although the web-based syndicators do share more, control over customer ownership remains a thorny issue. The publisher should ensure that syndicators provide both excellent customer service and product feedback. Indeed, many syndicators are now enabling publishers to develop relationships with the end-user through focus groups and meetings, reworking the relationship rather than replacing it. Thomson Financial, for instance, invites contributors, end-users, and brokers to “seminar triangles,” acting as facilitator in a roundtable on market research. It is obviously in their interest to keep the user happy. In this context, again, everyone wins.
So What’s Next?
Publishers such as the Economist Intelligence Unit have been working successfully with syndicators since as early as 1992 and increasingly others are also becoming convinced of the arguments. Business Monitor International, a leading source of business information on emerging markets, has decided to test the water. “Syndication is part of our increasing push to embrace new channels: providing intelligence in the format of the customer’s choice,” states Richard Londesborough, co-founder of the London-based publisher. “We see syndication working as a complement to our growing direct sales force.”
Clearly, if publishers want to take advantage of this expanding market, they must act quickly. And if they don’t, the syndicators will be sure to find someone who will. But needless to say, managing the process is not as easy as it sounds, and publishers are advised to take several key steps.

Know the market: Publishers need to understand the dynamics of a rapidly changing sector. Many of the online databases are currently undergoing integration issues as the industry rationalizes (for example, Thomson’s purchase of Dialog and the Reuters/Dow Jones joint venture Factiva), which can delay the initial set-up. And many syndicators have yet to build up a significant customer base. Some are good with news; others are good with market research. Publishers should know the alternatives before making any decisions.

Know what you want—and what you can get: Contracts can be complex and the negotiation of terms difficult. Talk to other publishers about their financial arrangements, or use a consultant with experience. Publishers also need to review delivery requirements carefully, which can in some cases prove cost-prohibitive. That is why it’s important that the relationships are the right ones.
Know how to get it: Signing the contract is just the beginning. Publishers should be prepared to work at the partnership, in particular to help the syndicators to train and develop their sales force. Joint marketing initiatives help to seal the relationship and ensure that the publisher gets as much as possible from the relationship. Imagine it as an extension to the sales force.
So there are opportunities and pitfalls, but the former far outweigh the latter. Although there is no free lunch, publishers do need to be at the table. Many competitors are already seated.

Andrew Rogerson is co-founder of Grist (http://www.gristonline.com), an Internet content and marketing services consultancy specializing in deriving value from content. They are currently working with Business Monitor International on their redistribution strategy. Rogerson spent the last 10 years with The Economist Intelligence Unit, both in London and New York. In his last role as Director of Web Marketing, Rogerson was responsible for the online redistribution of EIU’s full collection of content to over a dozen high profile databases.

 

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