F+W Media Chairman & CEO David Nussbaum
Rebuilding the Media Company of the Future
DECEMBER 13, 2012

F+W Publications was a paper-driven company in 2008. It derived about 35% of its revenue from print magazines and most of the rest from printed books.

F+W Media is a completely different company in 2012. In addition to publishing 650 books a year as well as more than 45 magazines, the company now has 4,200 ebooks, more than 20 e-commerce sites, some 20 conferences, ebook subscription sites, online education and streaming video sites, and myriad other offerings.

The company’s current chairman & CEO, David Nussbaum, is largely credited with the transition. In late 2008, he led a reorganization of the company into business units focused around niche communities of interest: design; writing; art; gardening; crafts; and, of course, the business of digital books (F+W Media owns and operates Digital Book World, the publisher of this ebook)—just to name a few. Today, F+W Media is one of the only major book publishers thought to have a significant direct connection with consumers and a direct-to-consumer sales business (F+W sells its entire portfolio through its e-commerce stores).

Nussbaum became chairman & CEO of F+W Media in 2008. He had been in an advisory role with private-equity firm ABRY Partners which acquired F+W in 2005 for $500 million; ABRY’s ownership stake in the firm was reduced in 2010 after a debt restructuring that left Nussbaum and other management with a larger ownership stake in the company. Prior to his time at ABRY, Nussbaum was CEO of Penton Media where he was credited for leading a turnaround at the troubled business-to-business magazine publisher that resulted in a profitable exit for its shareholders, including ABRY Partners, when it was acquired by private-equity firm Wasserstein & Co. in 2007. Before becoming CEO, Nussbaum spent much of his career at Penton in various leadership roles.

We spoke with Nussbaum about coming to book publishing from the magazine industry, transitioning from a publishing company to a media company and taking risks that pay off.

F+W Media went through quite a transition after you took over. Tell us about what that was like.

When I got here, the business was completely paper-driven. We published physical books and we published a lot of magazines and that was by far our dominant revenue source and dominant psychology. There were a few things that were happening that led us to take a different path. Right around then, the first Kindle shipped. Secondly, a few months beforehand Google books launched, and though it wasn’t yet a real revenue driver, it was an important factor. No. 3, it became more and more clear the Web was going vertical and it was very clear that there was a trend coming that physical was going to stop growing and possibly start to decline a bit.

So what did you decide to do about it?

We made the decision to do a few things. First is we reorganized the company. The company essentially had four separate divisions: books, magazines, interactive (Web), and a relatively small events divisions. What was interesting was you could have community-focused plans in four different divisions. So, one of the first major moves was to throw all the cards up in the air and have it come down and form community divisions. All the art community and crafts community people were in the same enterprise. What that did was start getting the groups thinking about the content in a different way. We started to take the content and deploy it in many different ways, different outlets and repurposing it and reusing it and taking it to different devices and different markets.

Secondly, although the ebook thing was really early days, we decided we would spend what at that time was a considerable amount of money to digitize all of our books—the back-list at that time was about 4,000 and it cost us in excess in seven figures to do it. We didn’t at that time have an understanding of how we’d get paid back but we knew it had to happen. I would guess we were one of the first to aggressively digitize illustrated books. Within a year and a half, we had digitized about 3,500 books.

That strikes me as incredibly risky. Looking back now it’s obvious that it was probably a good decision but then it must not have been a sure thing.

First of all, my background coming from Penton Media, which is really not in the book business, was that clearly the digital was the future, but even if you couldn’t build a really solid “P&L” [shorthand for “profits and losses” or balance sheet], you’d have to reorient your company in that way—you’d have to find a way to monetize it. Having seen the same thing work at Penton, in my gut I knew it was the right thing to do. And even though we couldn’t necessarily build a P&L, we knew e-readers were going to be successful and that having digital content we could use in many ways was going to be successful.

I think my big advantage is that I spent the decade before I came to F+W in the digital media and technology business. I was running technology shows like Internet World, so I felt pretty good about the fact that I saw how the digital trends were changing b-to-b [the business-to-business magazine industry] and how it was changing several marketing businesses but it had not yet reached the book business—but it was coming.

That must have been a tense time.

We had revenue on our existing physical products, so we saw where that was heading to a great degree and it was very clear that was not going to be a growth business. We had to do something to make our business a growth business. It became clear that if we could take a piece of content that we had digitized and deploy it as an ebook and if we could take that same digital file and make several more products, that would minimize our risk because we’d have three or four different ways to make money from that file.

So, it was risky, but it was riskier to do nothing and just continue to churn out more books and more physical magazines.

That must have been a large undertaking, one that required a different mindset at the company, more staff and new kinds of staff.

In my first town hall, I said to the company, ‘I want you to forget about being a publishing company because we’re now a media company.’ I brought in digital people to help, too. We invested heavily in technology. We digitized all the products. We built the digital team. We moved from that interactive division to having a digital media team investing in digital products.

Media businesses are all about the people. And, in a transition, it’s the people who are going to change the way they do business or change altogether.

People play the biggest role. At the end of the day, technology is a commodity and you pay for that commodity one price and as it becomes more of a commodity you pay another price. As I said, it cost seven figures in 2008 [to digitize our books] but now it would cost a quarter of that.

We saw a broad perspective. We were going to bring in people with digital skills and also give the opportunity for people here to learn digital. Many of them learned it but some of them said they didn’t think it was what they did, what they should be doing and they ultimately had to leave.

We also hired people that had more of a b-to-b media experience rather than a book publishing experience. B-to-b media went through a digital transition in the early part of the decade. They saw how print magazines were distributed by either digital magazines or Web only companies so they had been through those wars and had seen how the Web and digital does dramatically change the content business.

Third, we had a commitment from our board to spend some real money on technology and staff.

And, finally, we had a strategy, so once you had the strategy in place you can organize your team and investments and plan around that strategy.

How do you think book publishers in general are doing with the digital transition?

Book publishers have one very specific advantage when it comes to the transition to digital: In the book business, unlike in the newspaper and magazine business, people pay and have always paid for content. In the newspaper and magazine business it’s advertising supported. In those models, once things started to break down in the distribution model and people began to see that there’s a lot of free material out there that they can substitute for a newspaper, and advertisers began to learn that if you were going to advertise on the Web, you’ll get much better feedback and information, that left those models bruised and battered.

But in the book business, people are still very accustomed to and willing to pay for content. In the old days, they may have gone into a bookstore and paid $29.99 . . . and now you’ll pay $9.99, but you’re still paying.

Book companies have been pretty good on the whole in finding and supporting great content that’s worth people’s money. If you provide information that people find valuable enough to spend their money on, that’s something you can build on. That’s what book publishing companies have done very well. At the end of the day, whether you read your physical book or on the Kindle, it’s basically the same thing. Working from there, book publishers have an advantage over other media types.

There is also an incredible passion in the book business for books and it’s amazing to see in most of the people I’ve encountered in the book business their overwhelming passion for books that you just don’t see in other media markets.

One thing F+W has become known for is selling direct to consumers.

This is where the historic core of the company plays into it. Among the strongest businesses at F+W for many years was the book club business. This company was very good at identifying consumers and picking content for them and selling them that content. That was a great advantage that we had. Another great advantage that we had was that in all our markets we also publish magazines and what comes along with the magazine is the circulation list of people that are very happy to pay for their magazines because they’re passionate about their hobbies.

So, we had some built-in expertise in selling direct to the consumer and more importantly we had a database. So we went to that database and figured out how to sell them things online.

[Our direct sales] would help us with sales at Amazon and Barnes & Noble, too, because we would get direct feedback from our consumers on what they wanted.

Good timing, too, because the number of places people discover and buy books in the physical world is shrinking.

In 2008, it was clear that Borders wasn’t going to be around forever. [At the time, Borders was F+W’s second-largest customer.] We knew we had to continue to develop all sorts of channels to reach the consumer.

Aside from Borders and books, F+W now sells all sorts of stuff through its e-commerce stores.

We learned how to sell our consumers a lot of things outside the book: attending a conference, online video, digital shorts and physical bundles with digital content, etc. So we were able to build stores unlike straight publishers that were more than just selling books. It’s hard to compete selling just books when that’s what Amazon is really good at. You have to succeed at selling all sorts of things that go beyond the book, otherwise you’re just competing with Amazon and that’s not easy.

When it comes to the transition to ebooks, immersive reading books—that is, novels, works of non-fiction—have made a strong transition. Illustrated books, however, have lagged behind. What do you think is the digital future of illustrated books?

The first Kindle was black and white, so the initial training for consumers was that digital devices were great to read text and that’s what you sold. And also, if you want to read a novel, reading it on a digital device or a book is almost exactly the same experience on an e-reader or a book.

If I want to buy an F+W book on painting landscapes, digital could look pretty on a device, but probably would not look as attractive as it does print. You’d be using that book to help you paint, so you can prop it up while you paint; it’s dog eared because you use it a lot; it becomes a part of your passion, your hobby. Digital doesn’t translate that way.

As the technology continues to evolve, the illustrated book—you just have to look at the Kindle Fire, the iPad, the Google Nexus 7—to see that illustrated is evolving very handsomely. The files are better, the pictures are more attractive. You don’t have the issues that earlier illustrated digital titles had. The market is coming, but more slowly. We’ve had decent success and I’ve been surprised at how much we’ve sold our illustrated titles, but still a lower percentage than text.

What do you think about publishing companies branding themselves more directly to consumers?

I’m all for it. I think it’s a great thing. It’s something we’ve done for a very long time here. Our consumer-facing brands are really powerful and I think it’s very important that the Random Houses of the world build some consumer identity or else they could be commoditized. That’s the reason they’re doing it. If someone buys a book on Amazon, they have no idea who they’re buying it from—HarperCollins or Random House—they’re buying it from Amazon. It’s hard but it’s a smart move for them [to build their brands]. But it could also be smart for the Amazons of the world to build more consumer brands to leverage. Also, it encourages more people to read—it’s a good thing for the whole publishing ecosystem.

One of the things that we do is that we try and brand all of our products within any community with their own brand. The brand is on the book, on the magazine, on the live event, on the online event, on the training module, on the video. So you begin to recognize that North Light, or Interweave or Writer’s Digest produces great stuff for that particular passion.

What are you reading and on what platform?

I tend to read lots of different things. I read on the iPad but I take books from both the iBookstore and the Kindle store. Right now on the Kindle I am just completing No Easy Day [by Mark Owen, Penguin]. And in the iBookstore I’m reading The Last Lion: Winston Spencer Churchill: Defender of the Realm, 1940–1965 by William Manchester [Hachette].