February 2001
Is there still a place for entrepreneurs in our industry?
As international conglomerates and integrated B2B media companies expand their market share, entrepreneurs must
adapt to hold their ground.
By Michael J. Flynn & Linda Kephart Flynn Is
Like most entrepreneurs, Ellen Glew founded her company, EGI Exhibitions Inc., in 1993, with an idea — an idea for a show about fixing up old homes. She had a hunch that a show for the housing restoration industry would be a success, but the industry veteran also did her homework. With only one small not-for-profit show to compete with in the marketplace, she conducted a feasibility study that revealed historic preservation was about to boom.
That year, she launched the Restoration & Renovation show. Her hunch proved correct.
Of the $220 billion spent in the commercial and institutional real estate markets, 55.5 percent is spent on the rehabilitation of existing buildings. By 2010, Restoration will represent 80 percent of the construction market. What started out as a small show geared toward single-family housing restoration has grown into two annual shows and conferences focused on residential and commercial buildings, including exteriors, interiors, landscapes and streetscapes, as well as historically inspired new construction.
“When we started putting the show together, I knew intuitively there was a market, but it was like jumping off a cliff,” says Glew, now Managing Director of Restore Media, a company that recently purchased the shows. “If you have a hot idea, you’ve done your homework and you have the stick-to-itiveness, you can still make it happen.”
Glew comes from the same entrepreneurial mold as those who launched the show industry in the United States more than a century ago. In the same way, the talents and skills she possesses have held the event business together as it’s grown and matured. Increasingly, however, show professionals wonder whether entrepreneurs, like Glew, will continue to have a place in the industry.
Is the show product changing so dramatically that entrepreneurs will face too many barriers? Is the industry destined to be controlled by bottom-line oriented corporate giants?
The answer to these questions, say industry experts and observers, is that Glew and her fellow entrepreneurs are not likely to be swept behind the pipe and drape any time soon. While show business is obviously in a state of flux, the industry needs entrepreneurs as never before — for their creativity and willingness to embrace risk, their intimate understanding of target markets and the new growth they provide, and, yes, even to serve up fresh fodder for those corporate acquisitions. But entrepreneurs will have to change the way they operate, and they’ll face tougher challenges at every turn.
Shifting climate
Show business has long prided itself on its entrepreneurial spirit. “When I first got in back in the ’80s,” Glew recalls, “I used to describe it as an industry where the cowboys still reigned. It used to be a lot more freewheeling.”
As smaller companies expanded and large corporations decided to produce or acquire events, greater structure entered the picture. Since the mid-1990s, publishers that had long partnered with show organizers began to view expositions as a way to smooth out the financial valleys of their magazine operations. And in the last several years significant financial backers have put up billions to buy out integrated media companies with well-developed show components.
“The strongest trend we’ll see in 2001 will be continued integration of media at all levels,” says Grant Draper, Director of The Jordan, Edmiston Group (JE), a New-York-based consulting firm. “We certainly saw it play out in 2000, and the future will be more of the same.”
The bottom line is that by acquiring expositions and magazines, the integrated media companies and private equity buyers can quickly build scale and grow earnings.
Integrated B2B media companies with total gross revenue of more than $25 million reported that their 1999 average revenue share came 57 percent from trade publications, 32 percent from expositions and 11 percent from other sources, according to “B2B Media: A Converging Marketplace,” a study conducted by JE and Tradeshow Week in February 2000. Those companies also reported an increase in their exposition operating profit margins between 1997 and 1999, from 27 percent to 35 percent.
“The fastest-growing component of the integrated media companies’ business is the trade show,” says Gordon Hughes, President and
CEO of American Business Media (ABM), a 230-member organization that changed its name last May from American Business Press. “Our members are the Reeds, Advanstars, the Pentons and the VNUs, and our name change reflects what’s happening in the industry.”
Ripple effect
The fact that the bigger players will dominate certain “market clusters” is inescapable. Already, say some observers, the media conglomerates are filling voids that once would have been the smaller entrepreneur’s turf — but most of that activity focuses on highly specific markets, such as the IT industry.
“The large companies’ acquisition pattern is that they’re buying sectors and trying to create additional clout in those areas,” says Francis Friedman, President of the New York-based marketing consultancy Time & Place Strategies, Inc. “They’re focusing their attention on where they already have relationships and standing. It’s a much more pragmatic approach than we’ve seen in show business in the past, and it will leave other areas open to entrepreneurs.”
Equal opportunity
Despite the synergistic and financial muscle that integrated media companies hope to flex, plenty of entrepreneurial opportunity remains for the pure-play show manager who understands how the industry is changing.
For one thing, most integrated media businesses are still struggling to effectively combine their offerings. “It’s not easy to truly integrate the products,” says ABM’s Hughes. “It’s also very difficult for ad agencies to figure out trade shows, and we’re trying to understand how to sell it all as one package.”
The buyers also have been slow to jump on the integrated media wagon. “One-third are asking for an integrated approach, one-third don’t know what they want and are trying to decide if it actually saves them money, and another one-third are probably still trying to make sense of it all and don’t have a clue,” Hughes says.
Boutique offering
“An entrepreneur, much like a specialty store, always has an opportunity to better serve his attendees and exhibitors,” Chuck Schwartz maintains. Schwartz, with more than 25 years of industry experience, has been an entrepreneur, sold his show company to and worked for a large corporation and, since launching his new production company, ConvExx, last August, has returned to more entrepreneurial pursuits. “The large company depends solely on its size and the depth of its marketing effort, but that only brings people to the show. You still have to deliver, not only on the show floor but throughout the entire experience, from the hotel choices to what people do in the city while they’re there.”
Success comes from the total show experience, not just through high-dollar marketing. Large or small, a show producer will have to provide the complete package. With the exception of the advertising and promotional advantage, entrepreneurs can still get space and show services at a competitive price because suppliers of both don’t seem to be favoring the larger players at this point.
Pure-play producers remain on fairly equal footing with larger competitors, despite the disparity in their financial resources. Most venues, for example, maintain their integrity when it comes to setting one price for their space no matter who wants to use it, Schwartz says. Similarly, the service contracting business remains extremely competitive, which means that a contractor aligned with a larger company can be replaced if it drags its feet for the entrepreneur.
Media buys, of course, have been and will remain a challenge for smaller players. The integrated media companies sport an obvious advantage if they control the industry publication and Web site that promote the industry’s show. But certain niche publications will remain independent, and technology should enable entrepreneurial promoters to direct market as never before.
Launch action
Many observers also fear that the integrated media companies — with their huge financial resources, bargaining power regarding show dates and space, and control of their own niche publications — will hold the upper hand when it comes to launching all new shows. This effect, however, should be felt more strongly in individual sectors rather than across the industry.
In January, Cleveland, OH-based Penton Media Inc., for instance, announced plans to launch 25 new trade shows and 35 new products in all by the end of 2001. But many of those shows will be “incubated” in the company’s existing 107 shows and conferences. Similarly, the mega-show/media company Advanstar Communications plans to launch 10 new stand-alone events. In both cases, these products will be related to existing business.
“I haven’t seen any of the large integrated media companies that are very good at all at launching new events,” says David Korse, President and CEO of Imark Communications, Natick, MA, a pure-play show manager producing 90 high-tech events a year. “If the entrepreneur quits producing new shows, then the industry will dry up and die within 10 years. It’s the people who are very close to a particular industry who are good at coming up with something new.”
While obtaining sufficient financing for acquisitions has always proven an imposing challenge, funding for launches should remain accessible for qualified entrepreneurs.
“It’s much less risky to clone the show in another area than to start something new,” says Korse. “The launch situation won’t change dramatically as long as the bigger companies can keep acquiring new events rather than starting them. You let the failures fail and acquire the successful small guys.”
Inside jobs
Entrepreneurship may not be reserved for the lone rangers out there. Almost every large company now uses some version of the phrase “Our divisions must be run moreentrepreneurially.”
The integrated media companies, most of which have already absorbed pure-play show producers in the first place, will strive to hold onto the creativity, drive and originality that their founders brought to the table.
“We’ll see more ‘intra-preneurs,’ who spend corporate money instead of their own, just as the ad agencies, accounting firms and law practices have already experienced,” says Friedman. “We’ll also see seasoned money backing seasoned professionals, many of whom come from entrepreneurial backgrounds. The key will be whether corporate management will let them operate without too many corporate restrictions.”
That’s exactly what Restore Media’s investors have in mind for Glew. “Ellen knows this industry and what it takes to produce successful shows in it,” saysPete Miller, President. “We just want to provide the additional resources for her to do that and capitalize by adding publication and Internet components to help connect the dots in our fragmented market.”
Whether such strategies work will depend on the corporations, their management and the entrepreneurs involved. It rarely will be an easy task, however, say those who have stood on both sides of the fence.
“Big companies always say they want what you have to offer, but once you’re there you have to fit into their system — your wings are clipped,” says Schwartz. “They want your creativity and energy, but they won’t allow it.”
Many pure-play show managers, by nature, would flee from the responsibility of having to answer to public investors or private-equity fund managers who fail to understand that a new show could take three or four years to produce a profit.
Instead, those show professionals would rather take their chances against the larger competitors and be free to jump when an opportunity surfaces. “It’s safe to say that at this point most pure-play companies can move faster than the integrated media companies,” says Hughes at ABM. “The smaller you are, the more tactical you can be, while the B2B media companies will do more analysis and look at ways to extend their brands.”
Overseas expansion
Quickness, though, won’t necessarily equal reach. Unless an entrepreneur specifically targets international shows, it will be difficult to expand beyond the domestic market. The largest multimedia companies already have operations abroad, and they view the overseas market as the natural way to generate profits while extending sector penetration.
“If you don’t have enough clout with your own show to begin with, it will be very difficult for a small U.S. entrepreneur to keep up internationally,” says Friedman. “You not only need the vision, but the staff capability to run things domestically while you’re doing the groundwork. And that groundwork itself can be much different in another country.”
Association turf
The Center for Exhibition Industry Research now estimates that more than 12,000 shows are produced in the United States each year. Not-for-profit associations own approximately half of those, although that market share decreases at a rate of one percentage point each year as associations outsource or sell their events to for-profit show management companies, according to the B2B media study.
“The one unknown in the industry is the association wild card,” says Draper. “That really changes the makeup and dynamic of the industry. That’s a huge advantage for independent owners because most likely your major competition is on the association side, not just one of the integrated media giants.”
Corporate development specialists and investment bankers are already making the rounds of the largest association shows, but those transactions also will be available to the service-oriented entrepreneur who can work well with a board of directors and partner with an association’s other media suppliers. Most likely, the industry will experience both approaches.
Whether it’s aligning with an association, slipping into corporate logo-wear or remaining adamantly independent, the show industry’s entrepreneurs will remain a driving and thriving source as the business evolves. Glew, for instance, has new backers for her Restoration & Renovation events, and she will obviously find herself reporting to them in ways she hasn’t had to in the past. But, she says, it’s unlikely that the structure will change who she is and how she operates.
“I need the ability to control and to ‘own’ the things I do,” she says. “People like me need to run their own universe and shape their world in it. There will always be a place for people like that — or they’ll make that place for themselves as they go.”
Entrepreneurial writers and editors Michael and Linda Kephart Flynn live in Kansas City, MO.
The show and event industry is a more challenging arena than ever. Business veterans and analysts suggest the following tips for entrepreneurs:
1. Get even closer to your market, and listen to what it really needs. Focus on what your target audience wants to buy instead of what you have to sell. If they want it blue, paint it blue.
2. Study new technology and align yourself with it. It’s no longer an option to say “I’m not good with the computer” or “I don’t have time to understand the Internet.”
3. Remain open to a variety of voices. Entrepreneurs aren’t put off by ponytails and Birkenstocks, if the wearers have the inside scoop on the latest technology.
4. Protect your interests, whether it’s
your intellectual property or your show’s trademarks.
5. Be proactive not reactive in responding to your target market’s changes and needs.
6. Take time, occasionally, to recharge so you can maintain your energy, persistence and perseverance in the face of bigger and better financed competitors.
7. Partner with other entrepreneurs, particularly those focused on complementary media, who are as committed to your shared market. If those connections become a struggle of egos or vision, move on to more productive alliances.
8. Anticipate change. Change can occur in your market, your show, in the technology that affects your market, in your personnel and every other aspect of your business. Your ability to foresee those fluctuations and to respond quickly provide an edge over competition large or small.
9. Improve your product through your people. Despite your need for control and decision making, you’ll only go so far without a good team. Hire strong employees, then share your entrepreneurial vision and habits with them so you all
can prosper.
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