How has the Hearst Business Media division evolved since its inception?
Richard Malloch: Today, our group is a technology leader providing information, insights, and solutions to professionals around the world in finance, healthcare, transportation and more. Hearst Director and Former COO Gil Maurer brought me into Hearst in 1991 when I joined the Hearst Books/Business Publishing Group. For the remainder of that decade, I worked for Gordon Jones, head of that group, and later Victor Ganzi, who succeeded him, before he became COO and eventually CEO of Hearst. In August 1999, we established Hearst Business Media. I was charged with transforming the business following the sale of the book company. At that time, Business Media was a largely print and advertising based business.
We repositioned the group and focused on building a subscription and a licensing fee business model. As we formed the group, one of our first acquisitions under the Hearst Business Media banner was Zynx Health in 2004. For most of the first decade of the millennium, Zynx was our fastest growing acquisition. We followed with other acquisitions in healthcare, automotive and finance.
Rich Malloch serves as the president of Hearst Business Media.
Our early successes included MOTOR Information Services, which started as a magazine by our founder, William Randolph Hearst; National Auto Research (Black Book), which we acquired as part of the portfolio of assets divested by Cox Media; and First Databank, purchased by Hearst Executive Vice Chairman and Former CEO Frank Bennack for $80,000 to support a pricing information requirement for American Druggist magazine. Since 2008 we have had the opportunity to invest nearly $5 billion against this investment strategy.
During that time, we have seen extraordinary growth and we are now the fastest growing division within Hearst. Our business is nearly 100 percent digital and virtually all our revenue is derived from subscription and licensing fees. Our customers view our information and solutions as essential to their businesses and our renewal rates are in the mid-90 percent range. We pride ourselves in fostering an environment of continuous innovation and 30 percent of our annual revenue growth is coming from products at our businesses that did not even exist three years ago. The team has accomplished a lot, especially in the past several years, but that merely sets the stage as we are focused on building on our strengths to further accelerate our growth.
Of course, we cannot do what we are doing without the strong support from senior management and the Hearst Board. I have the deepest appreciation for the wisdom and guidance of Frank Bennack and for the friendship and support of Hearst President and CEO Steve Swartz. Along with the Board, CFO Mitch Scherzer and the finance team have provided us with great resources and encouragement. Another cornerstone of the group’s success is the teamwork and talent of my management team–Steve Hobbs’ deal making experience, Greg Dorn in Hearst Health and all our operating unit presidents that help us identify acquisition opportunities and work on due diligence. I’m surrounded by terrific people, and I truly feel like I have the greatest job in the world.
Can you talk about Hearst’s growth in healthcare? How do Hearst Health companies work together to help both patients and health care providers?
Malloch: Hearst has been operating in the healthcare information industry for more than three decades. Our healthcare companies are all industry leaders who pioneered the markets in their respective areas. They complement each other in their shared mission of putting vital information into the hands of everyone who touches a person’s health journey. Last year we introduced the Hearst Health brand to encompass all our healthcare properties: FDB (First Databank), Zynx Health, MCG, Homecare Homebase, and our international offerings, which include Map of Medicine. We also created Hearst Health Ventures and the Hearst Health Innovation Lab, which help to fund and develop revolutionary solutions to healthcare’s biggest problems.
I am very proud to say that Hearst Health has a truly profound impact on healthcare in the U.S. as the network is positioned to guide care across a person’s health journey, including the transitions between settings. When a patient enters the hospital, MCG guides the appropriateness of an admission and automates approvals from the health insurance company and FDB reconciles the patient’s medications. During the hospital stay, MCG defines the benchmarks for optimal care and recovery each day, Zynx provides instructions for bedside interventions, as well as secure text messaging for the care team, and FDB guides drug decisions and transactions. Leaving the hospital, MCG helps clinicians understand where the patient should go next, such as rehabilitation, outpatient, or home care, and FDB reconciles medications again. In the home care and hospice settings, Homecare Homebase gives the field clinicians instructions and documentation capabilities synced to the cloud, so that care is high-quality and without interruption or delays.
Our ultimate goal is to help healthcare professionals around the globe deliver optimal care to patients through access to our world-renowned guidance, and thus improve health outcomes.
How do you see the healthcare industry progressing over the next decade?
Malloch: If you look at the demographic trends in the U.S., projections show that by 2030 about one-fifth of the population will be over the age of 65. This trend will benefit Hearst Health as an organization as older people naturally have a more frequent need of healthcare services for chronic conditions. Healthcare is a huge part of the U.S. economy—currently it is more than 17 percent of our GDP. Nearly everyone agrees that the health system in America needs dramatic improvements in terms of improving efficiency, managing expenses and preventing wastefulness. We are working to innovate products and deliver solutions to mitigate these problems and set new standards of excellence in healthcare.
Outside of the U.S., particularly in rapidly-developing parts of the world, economies that have been so focused on creating GDP growth have now started to also focus on creating life expectancy, so we are seeing significant demands for our healthcare products in areas such as the Middle East.
As you mentioned, the company has long been involved with the automotive industry. What are our current automotive businesses and how are they evolving?
Malloch: Today, our automotive companies—Black Book, MOTOR and Veretech—are the premier suppliers of automotive data, delivering timely information to our customers in customized formats when and where they need it. All three companies continue to evolve and grow leveraging the latest technology to introduce new tools to help our customers run their businesses more efficiently and profitably. In the past year alone, we have had great new successes, including MOTOR’s Selectline, a mobile, cloud-based, workflow repair shop solution; Black Book Digital, already a leading mobile tool for automotive professionals; and Veretech’s mobile web site version of the Black Book Trade Appraisal application.
Can you talk about Hearst’s partnership with Fitch? How has the partnership grown over the years?
Malloch: We are excited about our evolving partnership with Fitch and the tremendous new opportunities for growth. Hearst first invested in the company in 2006, and our financial stake has been growing steadily over the years. As you know, last month we announced that our equity interest will increase to 80 percent and we expect this to be finalized this quarter following regulatory approvals. The credit rating, financial information and risk management services that Fitch delivers around the world are absolutely critical in today’s global economy. I am looking forward to working even more closely with CEO Paul Taylor, his senior management team, and our Fimalac partners to continue to build on Fitch’s many strengths and accelerate growth further.
What are Hearst Business Media’s plans to increase its presence internationally?
Malloch: Our group is one of the most global within Hearst. Through Fitch alone, we operate offices in more than 30 countries. In the healthcare area, about 15 percent of our revenue comes from outside the U.S. We see more demand for healthcare products around the world. One of the most exciting places we are growing the Hearst Health reach right now is the Gulf States in the Middle East, and we have also won significant new business in Australia and New Zealand. We have great automotive and trucking businesses but we do not yet have an international footprint in the auto space, and that is something we want to do. We actually placed a bid on an international automotive business last year, but were unsuccessful. We are currently evaluating businesses and continue to look for more opportunities. We are keen to become even more global and I have charged my team to actively seek out interesting international opportunities across all our businesses to increase our global presence.
What is the next big thing for Business Media?
Malloch: There are many big things on the horizon. We are coming off a very successful year and are building for more growth. Our group has just created the internal Data Science Center of Excellence for information extraction, data mining and predictive modeling. Its work will enhance the value we bring to our customers, create new product innovations and strengthen our competitive advantage across the board. I am very excited about how we can capitalize on new opportunities in evolving global markets to create more growth at Fitch. Our automotive group is making its mark and leading on the mobile front and has exciting new products that will be introduced. The Hearst Health network continues to expand and we are making strategic investments in companies and products revolutionizing healthcare. The Business Media team is inspired every day because our products help to solve pressing problems in the world. We are doing well by doing good.
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