Thomson Corporation, one of the giants in the content industry, traces its roots back to the 1930s to humble beginnings as a small-town Canadian newspaper company. By the 1960s, Thomson had grown into a multinational corporation that was involved in newspapers, television stations, travel, and oil ex- ploration. In the early 1980s, Thomson began to focus on subscription-based publishing, which it saw as a more stable revenue producer than the newspaper business. Throughout the 90s and over the last several years, Thomson has continued to purchase specialty-publishing companies in legal, academic, financial, and other niche markets. Over the years, the content delivery method has shifted from print, to CD-ROM, to the Internet, and more recently to integrated solutions that help customers make better use of information.
Dave Shaffer, currently the chief executive officer for Thomson Financial, has worn many hats at The Thomson Corporation. He joined Thomson in April 1998 as president and chief executive officer of Thomson Corporation Publishing International. Later he became chief operating officer of The Thomson Corporation and most recently was president and chief executive officer of Thomson Learning. He has more than 15 years of publishing industry experience including stints as chairman of the board and chief executive officer of Jostens Learning Corporation and president of the Dun & Bradstreet Official Airline Guide (OAG).
Under Shaffer's leadership, the company recently announced a deal with Merrill Lynch that sends a clear message to the econtent industry: There's money to be made with the right content, audience, and delivery formula. Thomson Financial and Merrill Lynch have teamed up to build a platform that combines market data and financial planning tools from Thomson (with third-party CRM) into a single platform. The deal is reported to have a total worth of a billion dollars over five years, a pretty impressive figure any time, but especially in today's economic climate. We spoke to Shaffer about the electronic content industry and he offers his views on the current state of the industry.
RM: Thomson made a decision in the early 1980s to begin the process of divesting itself of traditional publishing outlets such as newspapers and focus on subscription-based pricing. Why do you think the company decided to change direction that early?
DS: The Thomson family and the executive management team who were onboard at that time were very forward-thinking. They saw that subscription-based revenue streams were going to be more predictable and lucrative over the long run, that if you did a good job of publishing, that if you published must-have information, then renewal rates on subscription-based businesses are very high, and you're not constantly trying to recreate a high percentage of your revenue.
RM: Thomson Corporation over the years has been very busy purchasing different companies. What was the strategy behind buying all of these niche information companies?
DS: In the 80s and early 90s, we bought over 150 companies, and then tried to make sure during that period of time that we were buying content that was really important to the markets that we were serving. The evolution of our information publishing business has been first to acquire the closest thing we could define as must-have information, and then moving that content gradually into different forms of distribution and then ultimately moving the content into an integrated solution, which includes software tools and software applications.
RM: A lot of companies thought that the Internet was the death knell of publishing instead of an opportunity. How did Thomson approach the Internet?
DS: I think the best move we made was to understand very early that the Internet was our friend, not our foe. Many people thought that the Internet was going to cannibalize the distribution of content, and that content players were no longer going to be king, but we believed that the Internet was a channel for distribution, and today we gain more than 1 billion dollars of our revenue through Internet distribution of our information.
RM: How can publishers protect themselves against piracy in the marketplace when information is so widely available on the Internet?
DS: In the only market that we have where we sell to college students, we're very, very diligent about trying to copy-protect the information that we put out electronically, but when we sell to a professional market, we do not find much piracy. If I sell an electronic database to Merrill Lynch, they're not going to copy that database and give it to other people. That doesn't happen very often; and I don't think it happens in a manner that undermines our business model.