PW: Ryder Plots Reader's Digest's Next Move

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Ryder Plots Reader's Digest's Next Move
Jim Milliot -- 8/14/00

Ryder: More changes
to come.

Since taking over as chairman of Reader's Digest in May 1998, Thomas O. Ryder has put the company through a massive overhaul designed to reverse the decline in RD's bottom line. The restructuring has been so successful that RD will hit its operating-profit target of $250 million one year ahead of schedule when results for the fiscal year ended June 30, 2000, are released later this week. But while the rate of change at RD has slowed, Ryder made it clear in an interview with PW that more changes are coming. "If you're not restructuring some unit somewhere in the world, you're asleep," Ryder said. The pace of reorganization at RD could quicken again, depending on what course of action Ryder decides to follow.
Although he wouldn't comment on rumors that the company is in merger discussions with Bertelsmann, Ryder would not rule out the possible sale of the company. "As the chairman, I serve three constituencies--customers, employees and shareholders. Balancing what is in the best interest of those groups is my life," Ryder said. Other options under consideration are a more aggressive acquisition policy by RD itself and joint ventures. Ryder acknowledged that he has considered forming a joint venture with another company to share back-office and other functions. "You need to leverage your infrastructure where you can. I'm a big believer in partnerships," Ryder said.

Whatever path Ryder chooses to take, the goal is to build on what RD's restructuring efforts have accomplished to date--selling more copies of fewer products. That philosophy has worked well across the company's various book operations, helping to give the book group a significant boost in profits and bringing revenues back over the $1 billion level. RD's general books division is still capable of delivering extraordinary sales on the books it publishes. Its Foods That Harm, Foods That Heal has sold more than five million copies since its release, and the division had a big hit last year with How to Do Anything on a Computer. One of Ryder's favorite product lines is Select Editions. "It's a great product that we need to find more customers for," Ryder said, adding that the company will likely add new areas to the series, such as romance.

RD is also preparing to do what Ryder termed "micropublishing" for highly defined, narrow-interest markets that he expects will buy between 50,000 to 100,000 copies of a title. A book about arthritis is due out this fall. Ryder is also bullish on the children's market, particularly its Reader's Digest Young Families direct-mail operation, which the chairman would like to expand, as well as the Books Are Fun distribution business that Ryder acquired last September. RD is testing the Books Are Fun concept in Latin America, and a decision about opening a full-time operation there is expected soon. Ryder is downsizing the children's retail operation, much like he did on the adult side two years ago. Thirty-three adult titles were sold through trade outlets in the last fiscal year, down from 83.

RD's restructuring program has not overlooked the Internet. The company has approximately 30 Web sites through which it promotes and sells its products, and the company is digitizing all new titles. While Web sales have grown faster than expected, RD's strategy, at least for the near term, is to use the Internet "to extend what we already do and to enrich our services and print products," Ryder said. He acknowledged that RD "started slowly on the Net (investing about $50 million), and has slowed down." Ryder plans to continue to invest in new Internet initiatives and joint ventures, but is examining any new efforts "extremely carefully." Furthermore, the company currently has no e-book strategy. "We'll develop one when we see how the market develops," Ryder said. "I don't mind being an old-line provider of information," Ryder said, quickly adding that when the time is right, RD "will be a leading content provider on the Web. No ifs, ands or buts."

Ryder also d s not apologize for RD's demographics, which skew older. "The fastest-growing part of the population are those 50 and over," he observed. Reader's Digest brand recognition is another asset that Ryder intends to exploit at a time when information is being delivered by little-known startups.

As part of its diversification program, RD will continue to add such products as vitamins and financial services, he said, but noted that books will continue to play a major role in RD's future. He estimated that the company will sell 45 million books in 2001 and predicted that in 2004 the greatest part of RD's projected $5 billion in sales will come from its current core operations of books, magazines, video and music products. "I'm a publisher," Ryder stated.
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