For those of us who live in the northern part of the country, this is the time of year when we begin to look hopefully for signs of spring.  Last weekend in NY the temperature went over 40 degrees, the snow from the last set of storms began to melt, and it started to feel like the seasons were ready to change.  And just this past week I've noticed that it is light out in the evening when I head for home, a sure sign that the days are getting longer and that spring must be around the corner.

And yet those of us who long for spring but have lived in this region for awhile know that winter has a habit of hanging around longer than we might like.  It almost always snows at some point in March, and the temperatures can certainly still go well below freezing.  The change from winter to spring is not always a smooth, straight line -- there have even been snow squalls in late April long after the flowers have begun to bloom. 

Recessions are a lot like winter.  We want the down economy to end and look hopefully for any sign of recovery.  Aren 't book sales tracking favorably compared to last year?  Wasn't the buzz at LegalTech overwhelmingly positive? And renewal rates for our newspapers and magazines seem to be stabilizing, right?  All true and all good signs. 

And yet Old Man Recession refuses to let go.  The legal industry is notorious for coming out of economic downturns later than the rest of the economy, and that looks to be holding true this time around as well.  And while the commercial real estate industry seems to have stabilized, it remains a very troubled sector and has a long way to go in order to return to normal. 

We see the continued weak economy at work primarily in display and law firm advertising in our legal magazines and newspapers. Both of those revenue lines are off to a slower-than-expected start to the year.  Some of that appears to be timing and will correct itself in future months. But most of that slow start can be traced to advertisers who are holding back, waiting for confidence that the market has returned and will be receptive to buying whatever they are selling. 

And, I should note, that some of that slow start has nothing to do with recession and everything to do with advertisers moving their spending out of print advertising into other forms of marketing.  That trend won't come to an end when the recession does -- it will be the story of media for the next several years at least.

But while the newspaper/magazine advertising market waits for spring, we aren't standing still.  We continue to invest in building new products on the substantive law side of our business (i.e. books and research products), and building up those areas -- like custom publishing -- where we have identified advertising clients with a hunger to reach our audience.  We remain focused on improving the technology that supports our business, from upgrades to our websites and the content management system that supports them, to our content tagging project, as well as the workflow tools we are developing for those who rely on us for court information.  All are critical to our future success.

Meanwhile, just as we continue to wear our winter coats even while we long to put on lighter weight clothing, we must continue to watch our expenses carefully until more positive economic signs are evident.  With a few exceptions, our staffing remains tight and will continue that way for the foreseeable future.  We have been hiring selectively, focused primarily on filling gaps in the IT and web production departments, and in vital sales areas where we see potential gains, but otherwise we are not adding to our headcount.  Other expense lines continue to be managed with an eye toward improving efficiency, negotiating more favorable contracts, and figuring out new approaches that will save us money with minimal impact on our customers.  We succeeded with that approach last year, and I'm sure we can do it again in 2010.

Spring is coming.  Maybe not as quickly as we would all like, but it is on the way.  And when it gets here, we'll be ready for it.

Posted by Bill Pollak at 6:41 PM | Permalink | Comments (1)

I just emailed this note to the staff, but thought I would post it here as well.  Feel free to post comments or questions below.

Welcome back.  I hope you had an enjoyable break for the holidays and took the time to celebrate with your family and friends.

As we begin the New Year, I thought a few words about what 2010 looks like from my desk and how we'll proceed would be in order.  It has been, as you know, a challenging 15 months at ALM and in the media industry since the downfall of Lehman Brothers and the downturn in both the general economy and, particularly, the markets we serve.  Nonetheless, through a great deal of sacrifice and creativity, we managed our way through the crisis and remained true to our mission - providing high value content to our sophisticated audiences while finding creative ways to meet the needs of marketers seeking to reach those same audiences.  And we did so while maintaining the confidence of our investors and lenders, no small feat in the current financial environment.  You have my thanks for all you have done to help us through the storm.

The Road Ahead

Looking ahead, as I mentioned on my blog a few weeks ago, my long-term view of the business is optimistic even though I think the challenges of 2009 will carry through for at least the first half of the new year.  I am very confident that our decision to invest in product development opportunities in the research/information services sector as well as the reorganization of our national advertising sales team will leave us poised for success when the economy rebounds.  But since we do not expect to see that growth for many months we will need to exercise the same fiscal discipline in 2010 as we did in 2009.  That means keeping our expenses low, our spending conservative and our investments focused on areas that will lead to significant revenue growth in the coming years.  Unfortunately it also means that we will once again be asking employees to take 5 days of unpaid furlough in 2010.  We did not come to this decision lightly but given our short term revenue predictions and the significant savings that the furlough provides we simply can't afford to eliminate it at this time.  Or, put another way, we would rather keep a larger staff employed for 51 weeks, than a smaller staff employed for 52 weeks.  We think that's a better choice for all of us and for our customers.

This year's furloughs will work much like last year's with many employees taking their days during the last week of the year when much of the Company will be closed.  To help answer your furlough questions, the HR Department will be distributing detailed furlough guidelines later today.    

Our hope is that by aggressively managing our expenses through furloughs and the other initiatives mentioned below we will be able to avoid the type of large scale lay-offs we experienced last year.

Compensation Adjustments

The good news is that we have designated a portion of this year's budget for potential mid-year compensation adjustments. But utilization of those funds is contingent on meeting our financial targets for the first half of the year.  If approved, I would assume that increases will primarily be given on a merit basis or where market conditions absolutely require salary adjustments.  I will have a better sense of how this process will work as the summer approaches and will update you at that time.

Voluntary Unpaid Vacation and Reduced Work Week

In 2010 we will continue allowing employees, on a voluntary basis and with management approval, to take up to one week of additional unpaid vacation time and/or to request a reduced work week schedule.  Unlike the furlough which employees must take, the additional unpaid vacation and reduced work week programs are completely voluntary.  The Human Resources Department will be distributing detailed guidelines about these programs later today. 

No Vacation Carry-Over

As we did in 2009 and per our Vacation Policy, employees must use all of their vacation days in the year in which they are earned. 

Travel and Entertainment

We will continue with the guidelines developed last year for all travel and entertainment expenses.

Tuition Assistance

The Tuition Assistance Program which was temporarily suspended in 2009 will be re-implemented in the second half of 2010.  Employees who are interested in participating in the program should refer to the Educational Assistance Policy in the Policies and Guidelines section of InHouse.

Bonuses

We are working with our Board of Directors to create a bonus pool for over-budget performance by the company as a whole (somewhat akin to a profit-sharing plan).  Our intent would be to use that pool to provide merit bonuses at year-end for both staff and management. 

401K Plan

With respect to our US employees, we are not planning to make any changes to our 401K plan in 2010 which means we will continue providing participants an employer match of 25% of the first 4% of contributions.  US employees who are not yet enrolled in the 401k should consider doing so at this time.  We are also pleased to announce that beginning this year employees in Canada will be eligible for Company RRSP contributions.  Additional details about these contributions will be sent to employees shortly.  Staff members in the U.K. and Hong Kong are covered by local benefits plans, which will be addressed separately as appropriate.

If you have any questions about these programs please contact Felicia White at FWhite@alm.com or 212-457-9430.

Once again, thank you for all you have done over the past year for ALM and its customers. 

Regards,

Bill

Posted by Bill Pollak at 11:07 PM | Permalink | Comments (0)

The most often asked question that comes my way from staff members is, what's going on with our business?  There are certainly indications that the economy as a whole seems to be coming out of recession--we've all watched as Wall Street indicators have turned upward and the banks seem to be doing better.  So, what about ALM?

Taken as a whole, our business has been relatively flat.  Some areas have done well--our newspaper group, for example.  Others have seen the declines in the early part of the year slow down but have not yet flattened out--our legal and real estate magazine businesses being two good examples.  Public notice revenues remain extremely strong while law firm and classified advertising suffer continuing retrenchment.  Those of our businesses which rely on print subscription revenues see on-going challenges, as renewal rates come down from their high points.  But our online revenue streams are growing as more advertisers utilize the web to reach their audiences.

So, again, taken as a whole our business is relatively flat and my expectation is that it will remain so for at least the first part of 2010.  I believe that, even though the US recession seems to be winding down which should be good for our advertising-based businesses.  That's because the structural change in the media business--in particular the move from print to digital--will not end as the economy recovers.  If anything, it will continue to accelerate and will negatively impact print display, law firm and classified advertising, print subscription renewals, our book and newsletter businesses, and any other part of our business where our audience or customers are rapidly moving to digital.

My longer-term view, however, is much more positive.  That's because virtually every part of our business is now in the midst of a major transformation to new business models supported by new technologies.  Here are four examples:

1.  Our newspapers are now undergoing fundamental changes in the ways in which we go to market.  We're learning how to marry our traditional local legal news coverage to more in-depth court and substantive legal information to be delivered digitally to paying subscribers. These research services may never replace Lexis or Westlaw, but many attorneys tell us that we can create a viable service, at a price point they can afford, without the level of in-depth information provided by the market leaders.  We'll launch in NY in the next few months--but then keep your eye on California.  

2.  We're beginning to rollout new websites which take advantage of new technologies which will meet both user and advertiser requirements.  More video.  Much more intelligent search tools, tag clouds and other means of finding relevant information.  Greater use of two-way communication tools with our users, for commenting, social tagging, reviewing, etc.  Widgets in the planning stages for smartphones.  And more sophisticated web analytics tools for tracking our users and helping us to monetize their visits.

3.  Our colleagues at Law Journal Press are beginning the process of digitizing our treatises so that we can enter the e-Book business, selling books via download to digital devices like the Kindle.  That digitized content will also be available to our new research sites, allowing us to make money with portions of our book content rather than having to sell the entire book.

4.  As I posted on this blog a few weeks ago, our Event business is now moving rapidly into the digital space.  We're seeing month-by-month increases in the number of webinars we are offering on law.com, GlobeSt.com and our other sites.  Our CLE Center is about to be revamped to improve the user experience as they pursue required continuing education credits.  And we have just hosted our first Virtual LegalTech tradeshow, which was a great success and points the way for future virtual events.

So the answer to the question "what's going on with our business" is that we are at a time of transition.  From an economy in recession to one that seems to be recovering.  From an "old media" world to a dramatically restructured "new media" world.  From business models across all of our businesses which have been extremely successful to new business models which require a lot of work to implement but in which we have great confidence. 

Personally, I think it's an exciting world and a time for us as individuals to try new things, look for new solutions, exploit new technologies, and create new opportunities.  I hope you think so as well.   

Posted by Bill Pollak at 8:11 PM | Permalink | Comments (1)

Our June financials are now closed, so I can update you on our financial performance through the first half of 2009.

As I have been reporting since the beginning of the year, this has certainly been a challenging period for us. On the revenue side, we have seen substantial declines in virtually every revenue category we track, with the only strong gains coming in the Public Notice Advertising arena. Otherwise, during the last three months we saw a continuation and, in some ways, a deepening of the trends we saw during the early part of the year. The biggest areas of concern continue to be Law Firm/Display Advertising, Seminars/Tradeshows and Books. Most of those declines against budget and last year reflect cutbacks by law firms in their spending, whether on advertising, conference attendance or legal information. Industry trends show that spending on legal services by corporate clients is dropping and that is having a big impact on the law firms themselves--on the numbers of people they employ as well as their willingness to invest in marketing, technology or information products like our books. In addition, our real estate division continues the trend of very weak advertising sales in that troubled sector.

The good news for us continues to be our successful efforts to reduce costs. Last winter I set a goal of finding $6 million in expense savings. As our revenue forecast declined during the spring, we looked for additional cost savings opportunities. At this point, I can report that we have found over $8 million in cost savings to offset those weaker revenues. Those savings come on virtually every expense line we track, and reflect the creativity and commitment of our staff. We'll continue to look for additional ways to save as the year progresses.

But there are places in our business where we are spending and investing, and I want to highlight those as well. When the recession ends, we need to be well-positioned within the legal information industry and ready to quickly build back our real estate brands and conference offerings. That's why we have increased our spending on new technology, and are continuing to invest in new product development. While we have virtually frozen our hiring, we have selectively brought in some new staff and, in oother cases, engaged outside consultants to help us move forward with key initiatives where existing staff just don't have the time to take on additional work. Tightening our belts for the short-run cannot mean that we stand still for the long run--we need to keep our eye on building value for the future.

Soon many of us will turn our attention to 2010 budgets (hard to believe, but true!). It seems that the outside world is not yet ready to declare an end to the recession, and we'll need to be very careful in our assumptions about both revenue growth and costs. We'll need to think in terms of alternate scenarios--what we'll do if the economy improves but also what we'll do if the economy continues on the current path or gets worse. And we'll need to carefully consider how best to exploit the new technology we are investing in, particularly with respect to the web. I'm looking forward to those budget discussions.

Let me know if you have questions about our current financial performance, our expectations for the future, and our strategy for both the short-term and long-term.

Posted by Bill Pollak at 9:04 AM | Permalink | Comments (0)

You will by now have seen Tim Weller's email to the full staff at Incisive Media responding to an article that appeared yesterday on the Financial Times' website. Just so we're clear, that article primarily concerned the refinancing of Incisive UK's debt and reported various rumors which may or may not prove to be true. Those negotiations continue and, as Tim's note said, we hope to hear soon that a mutually acceptable deal has been reached.

As regards Incisive North America, the refinancing of our debt has been moving along at a good pace. Our team (Allison Hoffman and Eric Lundberg, backed up by their respective staffs and outside counsel, as well as our colleagues at Apax) have been busy negotiating the credit agreement. As a non-lawyer I marvel at the ability of our team to work their way line-by-line through these complex loan documents and keep all the different terms straight. We are hopeful to have this wrapped up by the end of July, and I'll let you know as soon as we do.

For those who have been with the company for awhile, you will recall that this is at least the third time we have redone our debt in the past ten years, reflecting both our own ups and downs, as well as changes in the credit markets. I don't see this as particularly different, or as having much impact on our day-to-day operations. Our investors and lenders have all seen our business plans and understand full well what we are doing both for the short-term as well as the long-term. All understand that we are, first and foremost, a profitable media company in the midst simultaneously of a brutal recession and significant structural change in the way information will be distributed and consumed. We need to invest in technology and new product development in order to survive in the short-term and thrive in the long-term. And we will keep doing so.

If you have questions about the FT article or anything related to the refinancing, post them below or send me an email. And as soon as we're done with the refinancing I'll be sure to share that with you as well.

Posted by Bill Pollak at 7:59 AM | Permalink | Comments (0)

As part of my commitment to improve transparency and ensure that everyone in the company knows what and how we are doing, I have been encouraging Incisive staff members to send me comments and questions, whether through this blog or privately. And I'm pleased that some of you have taken me up on the offer.

One strain of questioning has concerned the way in which we are reducing our costs and, particularly whether senior management in the company are sharing in those sacrifices. We are. To be specific:

1. Every member of the senior management team is taking a week of furlough, just like everyone else at Incisive North America. That includes me.

2. Every member of the senior management team has had their salary frozen, just like everyone else at Incisive North America. That includes me.

3. For 2009, senior management understands that there will be no bonus payments for anyone unless the company as a whole beats its budget. In addition, our plan for this year calls for a staff discretionary bonus pool to be created in proportion to senior management bonuses, so everyone at all levels of the company has an opportunity to benefit from our hard work during this difficult year if we succeed in beating our budget.

I should note that, for most members of senior management, their individual bonus targets represent a very high portion of their total compensation--generally 25-35%. To go two years without a bonus represents a significant loss of income for the senior management team, but one which we understand we need to accept in order to protect the financial well-being of the company.

My point here is simply to reassure those who wonder whether everyone, at all levels, is pitching in. We are. And we will continue to do so until this current economic downturn has passed and our businesses return to full health.

Any further questions?

Posted by Bill Pollak at 10:53 AM | Permalink | Comments (5)

I returned last night from London, where I attended the monthly Incisive Media board meeting. Having shared with my colleagues on the board our performance for the first three months of the year, I want to do the same for you.

As we projected would happen back at the start of the year, this has been an extremely challenging few months. We knew that advertising sales would be difficult--and they have been--and that other parts of our business were also vulnerable to the economic downturn. So we determined as the year began to find significant cost savings to offset those likely revenue declines. With your active participation that's exactly what we have done.

On the revenue side of the ledger we have seen some successes--our newspapers have done quite well in almost all areas but particularly in the public notice arena; our Canadian conference group has done extremely well; and our US legal events group has experienced good success during the early part of the year. But those pluses have been offset to a large degree by the expected weakness in magazine advertising, particularly from law firms; in our book group which has seen softness in sales of both new books and updates; and in our real estate group, which is suffering along with the rest of the commercial real estate industry. We expect all of those sales challenges to continue for the remainder of the year.

Our real success as a group has come from the expense savings program we launched in February. Virtually every expense area we track is under budget as we have become much more prudent in our spending decisions. I had set a target for us of finding $6 million in savings compared with our budgeted expenses, and we are on track to meet that goal.

Our Cost Savings Committee continues to meet in order to review, line-by-line, our spending policies and where we can make changes which will save us money without impacting the quality of our products and services. That group is currently investigating a number of areas, including company policies regarding cell phone usage, printing costs for marketing/promotion materials, bulk mailing, air travel, and internet usage charges for those who work from home. Many of these are ideas which originally came from the staff.

Although not included in the North American Group's financial reports, I also want to note that the Interactive Marketing team has done well through tight cost control and creative approaches to their highly competitive marketplace.

Our preliminary look at the next three months shows continued challenges on the revenue side of the equation. Law firms have been tightening their belts, and we are clearly feeling the pressure from slowdowns in advertising, hiring and product purchases. We think that situation will ease by the middle of 2010--but our crystal ball is as cloudy as anyone else's, so we'll need to be very careful as we plan for the future.

Speaking of the future, while in London I also reconfirmed the company's commitment to our IT spending plans for the balance of the year. We have ambitious plans for new web tools and new products, and I'm excited that we're moving forward to turn those dreams into reality. Those projects include enhanced access control and content tagging, two critical aspects of our new product planning for the coming year. We're also moving ahead with a redesign of the ClickZ and Search Engine Watch sites, which will be the first on our side of the Atlantic to be built on the new V9 content management system platform.

Lastly, for those wondering about the refinancing of the company's debt obligations, there's not much new to report. Those discussions primarily relate to the UK Group's debt (which is separate from the North American Group's borrowings) and have no impact on our day-to-day operations. I hope this will all be resolved in the next month or two. For us, a more sensible capital structure would make it easier to pursue selected acquisitions which could have an extremely positive impact on our business in future years. So I'm anxious to see it all resolved as soon as possible.

Finally, on a personal note, it was nice following President and Mrs.Obama to London, since they left behind a favorable impression of where the US is headed. No one I met seemed to mind that Mrs.Obama had put her arm around the Queen.

Posted by Bill Pollak at 1:47 PM | Permalink | Comments (0)

This morning we announced in both New York and Washington our plan to merge the National Law Journal and Legal Times. David Brown, who has done an outstanding job as editor/publisher of LT, will return to NY to become the Editor-in-Chief of the NLJ, building on his prior experiences as an editor at both The Recorder and The American Lawyer.

By way of background, this is one of those projects which has been talked about for many years but, for one reason or another, we could never implement. Of all of our publications, the NLJ and Legal Times were the closest we had to internal competitors when ALM was put together in 1997. Both were founded in the late 1970's (at around the same time that The American Lawyer was launched). And for many years prior to 1997 the respective owners--Steve Brill for LT and Jimmy Finkelstein for the NLJ--battled for primacy in the national weekly legal news market. I will never forget my first meeting in 1998 as a newcomer to the company with the editors of those publications--my pep talk about all of us now working for the same team did not go over very well. Luckily for me, things got better in the following years.

For the last ten years we have worked hard to define each newspaper's turf--with LT focusing on inside-the-beltway coverage and the NLJ more attuned to the mid-size firm marketplace generally, and litigation specifically, across the country. Both produced outstanding journalism and, when the economy was good, acceptable profit margins. Steve Fromm and his predecessor at the NLJ, Rex Bossert, deserve a great deal of credit for helping the NLJ to understand its audience and develop a publication that truly met their needs.

Why, after all these years, have we decided that now is the time to merge these two newspapers? Two reasons. First of all, the fall-off in the economy and particularly the dramatic decline in recruitment advertising has had a devastating impact on Legal Times. Maintaining LT as a stand-alone, self-supporting newspaper would have required significant cost reduction and would have almost certainly had an impact on the quality of our journalism. That possibility was intolerable to us and so we went looking for a solution that would allow us to maintain our journalistic ambitions in DC but supported by a different business model.

The second reason for merging now is that the legal story out of DC has changed. More and more, that DC legal story--particularly as it relates to the major law firms, courts and legislative branch--is really a national story. Yes, readers inside-the-beltway may be interested in goings on in the Justice Department, but so are readers in California and Florida. Enhancing its Washington coverage will benefit the NLJ's readers and make that a significantly better newspaper.

Rather than quietly develop a full-blown plan and then announce it as a fait accompli, we decided to let the staff of both newspapers know today about the decision to merge, and then work together with them to develop the plan. Our intention is to launch the newly merged NLJ/Legal Times in early May. Between now and then, David and the NLJ's publisher, Steve Lincoln, will work with the staff of both newspapers to make the decisions about how many people will be needed in DC, NY and elsewhere, what it will take to merge the websites, and how the different news and business functions will be handled. We intend to maintain the Legal Times brand name both within the new NLJ and as the banner under which our local conferences and roundtables will be held.

I'm looking forward to taking these two wonderful newspapers and turning them into a single publication with more journalistic strength than either had before, supported by a more stable business model.

Here's the link to the press release we put out this morning: http://tr.im/hqni

Posted by Bill Pollak at 10:52 AM | Permalink | Comments (0)

I have received a lot of comments and private emails from Incisive staff all around North America concerning last week's post about ways in which we might reduce our costs.  Thank you!  The ideas have been terrific, but even better has been your involvement in the process.  Don't stop!

Just so you know what the process will be going forward, I'll be using a series of meetings this week and next to go through the lists so we can determine which things to do now and which to table.  Some ideas are easier to implement than others, and we'll need to sort those things out as well.  But my hope is that by the first week in March I'll be able to present to you those actions which we will be taking in order to lower our expenses.

If you didn't get around to responding to last week's post--either in the comment area or via email to me--IT'S NOT TOO LATE!  I'm sure you have ideas, both about the list of proposed reductions that I shared in that earlier post and about other places where we could save money.  Now would be a good time to share those.

And for those who worry that I am being too focused on our costs rather than our revenues, let's be clear that I would also love to hear ideas for new products you think we should investigate--particularly quick wins that would help us right now. 

Posted by Bill Pollak at 9:26 AM | Permalink | Comments (3)

I've been receiving a steady stream of cost-savings ideas from people all over the company, plus a list developed by our department heads. I thought I would share some of those with you, in part because I want everyone to have a voice in what we do, and in part because we are all in this together. Saving isn't just my responsibility or that of our executive team--we all have a stake in working our way through the current economic downturn.

While I was visiting our Miami office last week I was asked if and when I intend to announce more layoffs. In fact, that's precisely what I'm trying to avoid--and I hope you are all with me on that. We should all be trying to find ways to save money so we can protect jobs. As I told our Board of Directors yesterday, we are past the point where we can downsize without risking harm to our basic business. No promises here--I can't tell what the economy has in store for us in the coming months, or how we will need to react to it. But clearly by working together we can find other ways to reduce our costs than through having fewer people on our staff. I'm guessing that you agree.

Here are some of the cost-cutting ideas which are being reviewed:

1. Reduce our office space around the country by downsizing to smaller/cheaper space and more actively promoting work-from-home options.
2. Eliminate the purchase of paper or styrofoam coffee cups, on the theory that everyone was given an Incisive coffee mug over the summer. Saves money and better for the environment.
3. In addition to the coffee cups, stop providing free coffee and milk in our offices.
4. Renegotiate our overnight delivery contracts and, if necessary, switch to another carrier.
5. Eliminate most business travel, conference attendance, etc. unless explicitly tied to sales activities. Make more use of webex or videoconferencing as a substitute for travel. And use a travel service for all reservations and ticketing where travel is unavoidable.
6. Cut back on the number of staff members with company provided cell phones and blackberries.
7. Reduce the purchase of office supplies, ration paper, cut back on color copying, and promote scanning of documents rather than overnight delivery.
8. Move all offices to VOIP for phone service (NY already implemented).
9. Make sure lights are off on weekends.
10. Cut out car service use.
11. Cut out company paid subscriptions for all newspapers and magazines, particularly general news publications.
12. Renew domain names for only one year instead of two.
13. Cut back on association memberships, both locally and nationally.
14. Reduce frequency of our monthly print publications and do more of our publishing electronically.
15. Suspend BPA audits on selected publications.

The following items are more explicitly aimed at reducing payroll and benefits costs without eliminating jobs.

1. Require all staff members to take 5 unpaid leave days in addition to earned paid vacation and holidays. (Various options for how to implement--could be five summer Fridays, could be the week between Christmas and New Years, could be some other combination of days).
2. Introduce a 3 month unpaid sabbatical option for those employees wishing to travel, study, work on a book or do something else with a longer block of time.
3. Pay freeze--no staff raises on July 1st.
4. Suspend the 401-K company match.
5. The current company/employee split for health care premiums is 70/30 (the company pays 70% of the premium, employees pay 30%). Change to 65/35 or 60/40.
6. Eliminate the Tuition Reimbursement Plan and cutback on Management Training.
7. Reduce the number of paid holidays and personal days.

Remember, those are just ideas. No decisions made yet, so plenty of time for you to share your thoughts on how you would prioritize that list. Your thoughts on what those priorities should be will be very important as we figure out what to do.

And if you have additional ideas--SPEAK UP. I'd love to add more to these lists, to give us more ways to save and more options to explore. So write your ideas in the comments area below, or send me an email, or stop me in the hall. After all, we're all in this together.

Posted by Bill Pollak at 11:38 AM | Permalink | Comments (19)

A number of people have jumped to the conclusion that there must be some connection between Incisive UK's renegotiation of their debt terms, and our recent staff reduction and expense savings initiatives. The truth is that there is no connection. We need to get our expenses down because all signs point to reduced revenues this year--and it remains critical that we maintain our solid profitability so that we can invest in our future needs while satisfying the requirements of those who have invested in us.

Let's put some numbers against that. Last year, Incisive North America's expenses totalled around $147 million. Given expected declines in several of our revenue lines, our expense target in 2009 is about $141 million. That means that in order to stick with the plan as presented to and approved by our Board of Directors, we need to reduce our spending this year by around $6 million compared to what we spent last year.

Now, some of that expense reduction will come about because of the slowdown in our business. That is, if we have fewer ads in our publications, the number of pages we'll print will be reduced and that will save us on some production costs. Or if we cut back on the number of conferences we put on, that will reduce our hotel costs. But those kinds of "variable" cost savings will only account for a small portion of the savings we need to achieve. The rest has to come from the actions we take to cut our expenses--in other words, we need to actively manage our costs and not just wait for them to take care of themselves. And that's what we did in the month of January. At this point we think we have cut enough expense to achieve the $141 million budget target.

Getting our expenses down to the budgeted level is fine, but only represents part of the equation. Revenues are the other half, and if they fall short of budget we need to make up that shortfall as well with further expense savings. That's the question we're grappling with right now--will our revenues meet the budgeted amount, or is there a risk that we will fall below the revenue budget?

There's an old saying worth remembering right now. "Hope for the Best but Plan for the Worst". We're hoping that all of our revenue lines come in the way we said they would in the budget--wouldn't that be nice? But we're drawing up our plans assuming that the direction of the economy remains very uncertain and so it is possible that we will fall short of the plan. That's why we are continuing to look for ways to cut our expenses, so that we can end up below the $141 million level.

I have received a lot of great ideas from around the company for ways in which we might save money. We are looking at all of them. Some are quite small, some are quite large, all are very important. There are now some 880 employees at Incisive North America, and all have a stake in seeing this company survive and thrive. I'll be sharing those ideas with you, both so that you can see upfront the kinds of things we are considering and because I'd like to hear your opinions about them, particularly those which will have an impact on each of us as staff members. If you have an idea to share for something which would save us money, please go ahead and share it with me either below as a Comment or via email if you prefer.

Posted by Bill Pollak at 9:24 AM | Permalink | Comments (0)

I'm sure by now most of you have seen Tim Weller's note about Incisive's UK business and the renegotiation of its bank debt. A couple of people have asked me what I think the implications are for our North American business. The quick answer is that there are few if any implications for us. Our North American businesses remain profitable--less so than we would like, but certainly enough to pay the interest on the North American debt plus make the kinds of investments we need to make in new technology, for instance. The renegotiation to which Tim's note referred involves only the UK businesses, not us. And given the state of the UK economy, I suspect many media companies over there are already or will be facing similar renegotiations with their banks for the same reason that we are--the downturn has been unexpectedly severe, and commitments made two years ago in a different environment no longer match current realities.

At this point, we can be optimistic that Incisive and its lenders and investors will resolve their issues speedily, and that we in North America will continue to do what we have always done. That means focusing on our customers--readers, users, conference attendees, advertisers and sponsors--and making sure that they receive the quality of content and service which they expect from us. Anything else is just a distraction and we certainly don't need that right now.

Posted by Bill Pollak at 5:34 PM | Permalink | Comments (0)

I've been reviewing how the first three weeks of 2009 have been going financially across our businesses. I thought I would share with you what I know so far.

We had assumed coming into the year that '09 would be substantially weaker than '08 (which, in turn, finished out about 4% below '07 on the revenue line). And so we set our budgets for '09 at what we thought was a very conservative level, assuming that this will be a difficult year for the US economy. It took us something like 7 rounds of budgeting--one lower than the next--to finally get a budget that made sense. (My thanks to all those in our financial area and our controllers/business managers around the country who kept having to redo their numbers).

Looking at the month of January as well as advertising bookings for the next several months, we can see some hopeful signs but also a few lingering challenges. Overall, we are off to an even slower start than we had assumed. On the hopeful side of the equation:

1. Display and business-to-business advertising in our legal newspapers, magazines and online has started off well, with areas like technology and the legal publishers showing continued interest in reaching our audience via our publications and websites.

2. Public Notice advertising, particularly in our Florida and NY newspapers, has continued to build on the growth we saw in 2008.

3. Books--both nationally through Law Journal Press and regionally through the expanded New Jersey and Connecticut book publishing operations--continue to show strength in terms of both new books and updates to existing ones.

4. Sponsorship and Exhibition revenues for our Events businesses in the US and Canada have started out well, including next week's LegalTech in NY and the SES London exhibition scheduled for mid-February.

On the other hand, here are the risk areas which will make achieving our '09 budget an ongoing challenge:

1. The Real Estate group continues to feel the pain of the industry it covers, with all indications that the troubles in the commercial real estate sector will get worse before they get better.

2. While our Events business has seen success in selling sponsors and exhibitors, we have seen a slowdown on the paid attendance side. Many law firms and businesses are cutting back on travel, or cutting down the numbers of staff who can attend any given conference. We count on paid attendance to cover a substantial part of our Event revenue budget.

3. Law Firm advertising, particularly in our national magazines, has started the year very slowly. Many firms are reducing expenses across the board and putting advertising/marketing plans on hold as they sort out the new business environment.

4. While we will likely achieve our short-term subscription revenue goals, there is clearly a move by some firms to cut back on the numbers of our publications which they receive. New order sales have slowed down, and we need to keep a close eye on those trends.

Even if you are not directly involved in the budgeting process, you know that we have been tightening our expenses and reviewing all of our business processes. We will need to continue doing so. Remember that we are not just in a ferocious recession, but also experiencing rapid changes in the way in which news and information will be produced and delivered. Even our most successful businesses will need to be constantly reviewed to meet the evolving needs of the markets we serve.

For those in revenue-generating areas---keep at it. There are still many opportunities for us to succeed in this market, as canny marketers understand the need to expand their business development activities. We can help them do so, whether it's a law firm looking for new clients, a commercial property owner with excess space to fill, or a search engine product marketer looking to promote the newest software tool.

Posted by Bill Pollak at 9:51 AM | Permalink | Comments (0)

This week has been an incredible roller coaster ride. I started it with attendance at an American Business Media conference in Chicago, where I heard an incredibly smart and provocative presentation by the consultants Booz & Co (more on that in a future post). I also participated in a panel where I managed to get a few laughs and some heads nodding, my usual goals at these things. And, in turn, I heard some good ideas and gained some new insights from others which I could bring back to the office. Not a bad start to the week.

But then I got a look at our current forecast for the balance of 2008. As many of you know, we ask our division heads, publishers and business managers to put forecasts together every month, giving us a view on how they see the year shaping up. Usually by the time we get to the October forecast (submitted in mid-October), we have a pretty good notion about how the year will end. Not this time. The November forecast shows a considerably more pessimistic view, based on current trends in classified, display and law firm advertising, conference attendee registrations, online revenues and even some of our product sales areas. Whereas in past forecasts our primary problems were in some key markets--particularly commercial real estate and legal help wanted advertising--this time virtually every area took a significant hit. Ouch.

Reminds me of the maps CNN was showing last weekend of the California wild fires. At first there was just one large but manageable blaze. But then, with the wind swirling around, embers started to fly and suddenly there were new fires popping up all over the place.

Denial, Anger, Bargaining, Depression and Acceptance. Those of you who took psychology courses in college know that those are the five stages that people go through when dealing with illness or grief. And they also represent the feelings people experience when going through profound business change--moving from a familar world to one which is new, different and filled with many unkowns. For us it's not just the changes brought about by a sudden decline in the economy, but also those that are the result of the increasingly rapid transition we are going through from a print-based media world to a digital one.

I can tell from some of the notes I've received from Incisive staff that we have a number of people who are still in the Denial stage, not quite willing to admit that the troubles in the economy plus the structural changes in the media world will impact our business. Sorry to inform you--we are being impacted and our job isn't to hide from the facts but to deal with them.

I can also tell that some folks are well into the Anger stage, I guess figuring that everything would be fine with the economy or this business if not for the people in charge. Believe me, I think there's plenty of blame to be spread around among the bankers and government folks for trashing the country's financial system. But with regard to Incisive, I think we have played our hand extremely well, and have a staff of amazingly talented, experienced and hardworking professionals to see us through this downturn. Not one of us enjoys cutting costs, downsizing staff or making whatever hard and unpleasant decisions the circumstances warrant. We would all much rather build our business, come up with and implement new ideas, install and take advantage of new technology, and generally have fun while doing it. Unfortunately, that's not what these times call for.

We need to move as quickly as we can to Acceptance of the new reality, and figuring how our businesses can thrive under permanently changed circumstances. I think Incisive's businesses will, in fact, do very well in the new media environment, and every day we are taking steps to ensure that success. But getting from here to there is going to take the full engagement of everyone on staff, and no doubt there will be some difficult decisions to take along the way. Use this blog, or direct notes to me, to make sure that you understand the nature of those changes, ask the questions that you have about what we are doing and why, and to share your thoughts on how best to proceed.

Posted by Bill Pollak at 8:12 AM | Permalink | Comments (1)

This week I spent a few days at Incisive's headquarters in London, and attended our monthly board meeting. Whatever you may think is the state of the US economy, it looks like London is in at least as bad shape. The banks over there have succumbed to the same problems as we've seen here--too many poor performing loans, government bailouts, not enough credit being extended. And lots of concern about what 2009 may bring.

Not surprisingly, our board has urged Incisive management on both sides of the Atlantic to approach the coming year with great caution. Because we are all uncertain about what will happen with our revenues, we're being advised to be even more careful about our expenses.
That explains why our budget submission is as tight as it is--as close to a "status quo" spending plan as we could create while still finding ways to invest in new products and technology for the future.

And I think that's the good news here. Even while we ride out the economic storms, we still need to be investing in the products and services which will carry us through the next cycle. That includes building new websites--with supporting technology for access control, registration, ecommerce, content tagging, video and the rest--so that we can more aggressively build up our digital revenues. It includes our investment in substantive law products--both print and digital--which can be sold directly to users. And business information products that meet the data needs of our clients. So "status quo" for the budget won't mean standing still--there will be plenty of new projects to sink our teeth into, and lots of ways to excite our customers.

Posted by Bill Pollak at 4:10 PM | Permalink | Comments (1)

A few weeks ago I reported on our financial results through the end of August. A look at our results through the end of September shows a continued slowdown in several important revenue areas, reflecting both the general slowdown in the economy and, perhaps, the psychological downturn caused by Wall Street's turbulence.

Overall, our total revenues for the nine months ending September 30th are now 10.1% behind budget, a bit worse than we saw last month. All of the trends which we saw for the first eight months of the year remain in force. As before, the Legal Notice and Book businesses both remain above budget (+8.5% and +6.0%, respectively), while other revenue areas struggle.

Display/B2B advertising weakened a little bit during the month to -21.8% vs. budget, with the commercial real estate sector continuing its slide.

Classified advertising is now -31.2% below budget, as law firms hold back on hiring.

Law firm advertising overall is down 11.6% against budget, mostly coming in the legal newspaper group as firms continue to pull back on running professional announcements.

Seminars/Tradeshows are now down 21.4% against budget, despite continued strong performance in our legal conferences and Insight's conferences in Canada. This revenue line is primarily impacted by our decision in the spring to shut down the SRI conference group.

In total, our Ebitda for the nine months ended September 30th fell 17.3% below budget, but still only 2% behind last year. Obviously not the result we wanted, but better than other media companies are seeing in a challenging economy. Our focus over the last five years on building our subscription businesses and product sales generally has provided the protection we hoped it would from a severe decline in advertising. We intend to continue to develop those kinds of businesses, focusing on our high quality content and ability to market and distribute products within the markets we serve.

We're still working on our 2009 budgets, so too soon for me to report on our goals for next year. I've been very impressed with the detailed knowledge and creativity I have seen in the budget discussions--lots of new ideas both for growing new revenues and finding innovative ways to reduce our costs. We'll continue to invest in new technology and new product development--we can't afford to stop moving forward even if the economy decides to take a breather. When the current economic downturn ends, we want to make sure that Incisive is positioned for growth.

Thanks for staying focused. Keep sending in your ideas.

Posted by Bill Pollak at 2:52 PM | Permalink | Comments (0)

Having spent the last week reviewing our 2009 budgets, here are some observations that I thought you might find helpful.

1. All of our business leaders seems to recognize that next year will be a challenge, and are keeping their revenue growth goals at a very modest level. Unlike past years, where I have found myself trying to convince people to set higher goals, this year I find myself concerned about whether the goals being set are too high given the state of the economy and its uncertain impact on the markets we serve.

2. Keeping revenue growth goals more modest means keeping expenses very tight so we can protect our bottom-line. And since some cost increases are largely out of our control, eg. benefits costs, we need to be tighter about those costs we do control. So we're looking at our traditional ways of doing business, from how many magazine copies we print and mail, to how we market our subscription publications.

3. We will continue our strategy of investing in and expanding businesses where revenues come from subscribers/users rather than advertisers. Not that I have anything against advertising, which will remain very important to us, but subscriber revenues provide a more stable foundation on which to build the company, particularly during more turbulent economic times. So we'll continue to develop paid websites, new books, business information services, practice centers, competitive research, webinars and other products where the revenue streams come primarily from those who use the information.

4. One area we absolutely cannot skimp on is the development of new content. Monthly and weekly publications will need more original content to keep their websites fresh on a daily basis, if not more often. And our practice centers, court pages and other substantive offerings will need appropriately sophisticated and complete content to justify the prices we'll want to charge those who subscribe to them. I think that means our editors will be increasingly challenged to develop new content sources--contributors, freelancers, expert columnists and user-generated. And we'll need to constantly review our standards for editing--what content needs thorough editing and what can go from writer to reader with minimal intervention.

5. Pricing issues are becoming more acute in the company. Figuring out how much to charge for a newspaper or magazine subscription, or what the rate card for traditional advertising should be, is pretty straight-forward. But how much to charge for access to a database that comes as an add-on to a web subsciption to one of our newspaper sites--well, that's pretty tricky. Or how much a librarian will really pay for a research study or an electronic version of a book--also tricky. Or a combination sale to an advertiser that consists of a webinar sponsorship, an advertising program on law.com, and some print advertising. So we'll be spending more time in 2009 listening to our customers and trying to figure out how they value our products and what that might say about how much we can charge for them.

We're not done yet with the 2009 budget, so I'll let you know if I have any further observations that I think might be worth sharing.

Posted by Bill Pollak at 6:19 PM | Permalink | Comments (0)

In my very first blog posting about Transparency, I noted that one of my goals with this blog is to share our financial results so everyone on the staff has a clearer picture of how we are doing. As I do this, I’ll be comparing our results to our budget. Although some might prefer comparisons to last year, or to an updated forecast, I think keeping track of where we are against budget is still the most important measure of how we are doing. Our budget represents a commitment we’ve made to our investors. It’s our way of saying, “if you invest in our business here are the results that we expect to achieve”. Because we need our investors to continue investing in us—in new technology, for instance—we must carefully monitor how well we are doing in achieving our past commitments. And when we fall short, it is important that we understand why and develop plans for getting back on track.

This has certainly been a challenging year. Our budgets were set at the end of 2007, before we could see the full impact of the recession in the Real Estate industry, for instance, or how the market for legal recruitment advertising might be impacted. So while we actually reduced our budget in several areas just before locking in the 2008 targets, we clearly did not fully account for the economic difficulties in some of our businesses. On the other hand, we also did not fully predict how the foreclosure crisis would lead to record public notice listings in our Florida, Atlanta and, to a lesser extent, Philadelphia newspapers.

In reporting the numbers below, please note that I am only reporting results for the old “ALM Media”, excluding the Incisive Divisions which are still part of the UK budgets. So these figures do not include the Interactive Marketing Division (SES, ClickZ and Search Engine Watch). I’ll try to find a way to incorporate those results in the future.

For the eight months which ended on August 31st, our consolidated revenues were running 9.4% behind budget. With the exception of public notice revenues (up 8.3%) and books (up 5.6%), every other revenue line we track was down against budget. Here are the major line items:

• Combined Display and B2B advertising was down 21.4% vs. budget, reflecting the dramatic advertising slowdown in the Real Estate division as well as cutbacks among the Legal Division’s display and B2B advertisers.

• Classified advertising revenues are down 30.8% vs. budget, reflecting the slowdown in attorney help wanted advertising in our newspaper group.

• Law Firm advertising is 11.0% under budget, primarily due to softness in the newspapers as law firms cut back on their professional announcements.

• Seminar/Tradeshow revenues are down 19.0%, reflecting in large part our shutdown and reorganization of the SRI conference group this past Spring and, to a lesser extent, the challenges our Canadian business conferences have faced this year because of weakness in the Financial sector.

Bad as that may sound, when compared to last year our revenues are only off 2%. That’s a pretty mild impact so far in the current economic downturn, far less of a year-to-year decline than we experienced during the 2001-2002 recession.

With such big declines in our major revenue areas compared to our budget, it should not be surprising that through the end of August our EBITDA was 16% below our budget. (For those not familiar with the term, EBITDA means “earnings before interest, taxes, depreciation and amortization”. It is a way of looking at the cash flow that comes from our on-going operations, without including our financing costs (interest), taxes or non-cash accounting adjustments (depreciation and amortization). It basically tells us “here’s how much cash is available from the business after we pay all of our regular expenses in order to pay the interest on our debt, any taxes which may be due, and to set aside money to replace over time the property, plant and equipment which is sitting on our balance sheet”).

Put another way, while our North American businesses continue to be profitable, we are delivering lower bottom-line results than our investors had expected. The reasons are quite clear, and primarily spring from the state of the economy and its impact on our businesses. Our response to that challenge has been to reduce our costs, in some places dramatically, while continuing to invest in areas which we still believe show great promise for the future. Those include our online and data businesses, the research business, and custom publishing.

As we are now putting together our budget for 2009, I would expect that we will keep our revenue growth expectations for next year very modest, and look to protect our profitability by continuing to be careful with our costs. Several prominent economists are now predicting at least a 12 month recession, and we need to plan accordingly, knowing that while some of our lines of business may come back quicker, others may take longer to revive.

Meanwhile, the year is not yet over, and we have a lot of big projects on schedule for the last few months of 2008. Our bookings for the Legal Division’s Magazine group look strong for the next few months, and we have a number of Custom Publishing directories due to publish before year-end which could make a big difference in our results. Book publishing has been a strength for the company this year, and a great deal of our book sales traditionally occur in the fourth quarter.

So I’m optimistic that we can reduce those negative comparisons to our 2008 revenue and Ebitda budgets. With that said, we cannot succeed without you- the staff at Incisive Media. The innovation, teamwork, and focus of our staff in the coming months will be critical. As we move into the fourth quarter of 2008 and prepare for 2009 I need for each of you to:

• Innovate – Turn your ideas for growth into action. Reach out to your management and share ways that your brand, your team or our business overall can grow.

• Work smarter – Identify process improvements that would increase productivity and reduce redundancy.

• Negotiate better – Make sure that all vendor contracts are reviewed and that we get optimal terms for our business.

• Eliminate waste - Within your own department work on ways to reduce unnecessary spending.

As always, whether in this forum or through your local work group, I invite you to share your thoughts on how we can continue to close the gap and come closer to meeting our budget in the coming months.

Posted by Bill Pollak at 8:32 AM | Permalink | Comments (5)

This has been a confusing and nervous-making week in the financial markets. Trying to figure out what it all means, and particularly what it all means in the markets we serve, is a difficult task. One of law.com's bloggers--Bruce MacEwen who writes the Adam Smith Esq. blog--just put up a fascinating analysis about what's happening on Wall Street, how it may effect the law firm community, and what the law firms should be doing. I like his sixth point--"ramp up your competitive efforts". True for the law firms and true for us.

Here's a link to Bruce's blog:

http://www.bmacewen.com/blog/

Posted by Bill Pollak at 1:42 PM | Permalink | Comments (0)

I was in London last week to attend the Incisive board meeting. Thought it might be helpful if I share how our cousins in the UK are doing.

As we're seeing in the US, the economic news is a bit gloomy in London, with the financial sector suffering in much the same way that ours is, particularly in the mortgage arena. Not surprisingly, Incisive's mortgage publications and events have taken a hit from that downturn, and it's fair to say that they don't yet see the light at the end of that particular tunnel. Recruitment advertising across many sectors is also hurting, as financial services firms, law firms and others tighten their belts and cut back on hiring. That decline in recruitment advertising--which we are seeing across all of our US legal publications as well--is likely to continue well into 2009.

Other parts of Incisive's UK business are holding their own and, in some places, doing quite well. The Risk business, in particular, seems to be weathering the storm, which may say something about the ability of sophisticated investors to make money in any kind of market. And online revenues are growing at double digit rates, as the company invests in upgrading websites and sales capabilities. So, too, there is a lot of good news out of Hong Kong; it sounded like there's real interest in investing further in building up our Asian businesses.

Offsetting these revenue declines in London has been a real effort to control costs. Tim Weller describes the management in London as "mean", by which he means "cheap" rather than "angry". We might say that they are penny-pinchers, looking for any way they can to cut costs without impacting their products. And, like us, they have tightened up on filling open positions and continue to look for ways to ride out the current storm.

It is worth remembering that, like all storms, this one will pass. For some of our businesses that turnaround may begin in 2009, while for others it will take a bit longer. But many of us have been through these kinds of economic downturns in the past, and we know that we will get through this one as well. The trick is to maintain a focus on our core--what makes us unique and successful as a business. And it is critical that we make the investments today that will make us even more successful when the inevitable turnaround comes our way.

Posted by Bill Pollak at 4:36 PM | Permalink | Comments (1)