The news out today that RMG Networks plans to divest its fitness club and coffee shop networks in order to concentrate its efforts on its transportation-related networks is not, as some may view it, antithetical to the consolidation motif that is quite popular in the industry today. In fact, when the moves are complete, it will add an overarching concept of focus to consolidation. It seems logical that providing a common thread of theme, demographic or venue to potential advertisers makes it much easier to sell effectively. It also makes content development, acquisition and deployment more efficient and effective. It may offer operational and technology efficiencies as well.
That RMG is rumored to have been unsuccessful in an attempt to raise a war chest of cash to do acquisitions, and has now gone in the opposite direction is not a failure. Instead, it is a reality check and a reset from the previous shotgun/footprint strategy outlined last year. Since the company is largely owned and controlled by a couple of venture firms, it speaks to a changing mindset at the boardroom level. Instead of continuing to make opportunistic buys of disparate network properties, it appears to signal a retrenching around the best properties: ones that happen to center on transportation. By undergoing the retrenchment, it opens the door to future acquisitions that would actually fit the new focus of the company. There are numerous examples of retail conglomerates that lost their focus and regained it by resetting strategy around core properties. My favorite is Genesco, an old line shoe company (Genesco is shorthand for General Shoe Company, its previous name) that at one time owned the Bonwit Teller department store, numerous specialty apparel manufacturers and retailers, and a soccer equipment business, among others. A retrenchment around footwear allowed them to hone their skills as specialty retailers with multiple tight demographic targets, and eventually create and acquire new concepts that leverage their strengths. Once close to bankruptcy, they are prospering as never before. The guts to divest, and the patience to develop the retail teams that complement their manufacturing legacy has paid off. Perhaps that is the goal of RMG. The next step will be the rebuilding of infrastructure and organization around the new focus. With any level of success, you can expect them to be back on a growth path, perhaps through acquisition, with a much more attractive story to tell potential investors.
So what happens to the networks being divested? A good guess is that the fitness property will end up in the hands of a new owner who already has a presence in that vertical. That type of buyer may be challenged by the need to consolidate technology platforms, but that cost would likely be built into any buy offer. The net effect would be further consolidation in the fitness vertical, and similar ability to gain efficiencies for the new owner. Of course, the eventual buyer may also be someone not currently in the space who wants to establish themselves and use RMG’s network as a springboard for growth. Time will tell. As for the coffee shop network, now known as the New York Times.com Today Network, we can only hope that a sale will result in a new name, and perhaps some more thought around screen placement for starters. My own guess is that the bidding for that network won’t be quite as spirited, and for good reasons. There is not a list of potential buyers that comes to mind, as there is for the fitness network.
The most successful networks out there have something in common. Think about the healthiest and highest growth DOOH network companies. Focus is the underlying theme. RMG’s moves indicate that their Board has come to the same conclusion, and how they got there matters less than getting there. Like a plant or a tree, a little pruning often results in more robust growth and better health. Look for focus and operational efficiency to be the drivers of continued consolidation in all aspects of the industry going forward.
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