Sector

ServicesPublishing

Background

Matt Reustle is the CEO of Colossus. We cover the 100 year-old case study roots of Harvard Business Publishing, how the business is evolving with technology, and why it's a brand worth investigating.Business BuildingMedia

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Date

November 16, 2022

Episode Number

84

Harvard Business Publishing Business Breakdown

Background / Overview

Harvard Business Publishing (HBP) is the media arm of Harvard Business School, a not-for-profit entity founded in the early 1990s, with its origins tracing back to 1922 when the first edition of the Harvard Business Review (HBR) was published. Initially rooted in academic publishing, HBP has evolved into a sophisticated media business that leverages the Harvard brand to deliver business insights through case studies, subscriptions (print and digital), and books. Headquartered in Boston, Massachusetts, HBP operates as a single-member LLC under the dean of Harvard Business School, generating significant revenue for its parent institution. The business employs an estimated 300–400 full-time equivalents (FTEs), focusing on content creation, distribution, and digital infrastructure. HBP’s story is one of a slow-building compounder, transitioning from a niche academic publisher to a global media player with a unique business model centered on high-value, timeless content.

Ownership / Fundraising / Recent Valuation

As a not-for-profit entity wholly owned by Harvard Business School, HBP does not engage in traditional fundraising or private equity transactions. It rolls up into the business school’s financials, which report nearly $1 billion in annual revenue, with HBP contributing 30–40% ($270 million in 2022). No specific enterprise value (EV) or valuation multiples are disclosed, as HBP is not a standalone entity subject to market transactions. Its financial structure benefits from tax exemptions on subscription revenues, classified as academic materials, enhancing its cash flow generation. The lack of public financial disclosures adds to the business’s mystique, but its profitability suggests a high implied valuation if it were a standalone entity.

Key Products / Services / Value Proposition

HBP operates three primary product lines, each leveraging the Harvard brand and its intellectual property (IP) library of 30,000 case studies:

1. Case Studies:
• Description: Detailed analyses of real-world business scenarios, primarily used in business school curricula and corporate training. Each study is 10–20 pages, focusing on specific managerial challenges.
• Volume: 15 million case studies sold in 2022.
• Price: Approximately $8.95 per study for individual purchases, with bulk pricing for institutions.
• Revenue/EBITDA: Estimated $80–100 million in revenue, with high contribution margins due to low variable costs (content creation is incentivized by academic tenure rather than direct payments).
• Value Proposition: Provides actionable, practitioner-based insights with unparalleled brand credibility, used by 4,000 business schools and corporations globally.
2. Subscriptions (Harvard Business Review):
• Description: Includes print and digital subscriptions to HBR, offering articles, blogs, videos, and e-learning content derived from case studies.
• Volume: Approximately 350,000 subscribers in 2022.
• Price: Minimum $100 per subscriber annually.
• Revenue/EBITDA: ~$130 million (including advertising), with strong margins due to low churn (under 30%) and tax-exempt subscription revenue.
• Value Proposition: Delivers timeless, high-quality content to managers and executives, with a focus on accessibility via digital platforms (14 million LinkedIn followers, 6 million on Twitter).
3. Books:
• Description: Management and leadership books repurposed from case studies, sold in bookstores and airports.
• Volume: Historically 1–2 million books sold annually.
• Price: Varies, typically $20–$30 per book.
• Revenue/EBITDA: ~10–20% of total revenue ($27–54 million), with high margins due to low production costs.
• Value Proposition: Portable, branded content for professionals seeking credible, digestible business insights.

Segments and Revenue Model

HBP’s three segments—case studies, subscriptions, and books—are economically separable but interconnected, with case studies serving as the “atomic unit” fueling all revenue streams. The revenue model is a blend of:

• Unit Sales (Case Studies): High-margin, pay-per-use model with strong pricing power ($8.95 per study, no discounts or reviews, reflecting brand trust).
• Recurring Subscriptions (HBR): Annual subscriptions (~$100+) supplemented by advertising, targeting managers and executives with low churn due to corporate expense accounts.
• Product Sales (Books): One-time purchases with evergreen content, leveraging case studies for minimal incremental content creation costs.

Each segment benefits from the Harvard brand, which ensures pricing power and customer loyalty across diverse channels (universities, corporations, individual professionals).

Splits and Mix

Revenue Mix (2022, Estimated):

• Case Studies: $80–100 million (30–37%)
• Subscriptions (HBR, including e-learning and advertising): $130 million (48%)
• Books: $27–54 million (10–20%)
• International Revenue: ~40% (up from 30% in 2010), driven by digital distribution.

EBITDA Mix:

Specific EBITDA splits are unavailable, but case studies and subscriptions likely contribute disproportionately due to high gross margins (low variable costs) and operating leverage from fixed costs (e.g., digital infrastructure, editorial staff).

Channel Mix:

• Direct-to-Institution (Case Studies): Sold to 4,000 business schools, with sticky demand due to entrenched curricula.
• Direct-to-Consumer (Subscriptions): Digital subscriptions dominate, with print declining but still significant.
• Retail (Books): Sold through bookstores, airports, and online platforms.

Customer Mix:

• Academic: Business school students and professors (case studies).
• Corporate: Managers and executives (subscriptions, e-learning, some case studies).
• Individual Professionals: Ambitious learners (subscriptions, books).

Geo Mix:

• North America: ~60% of revenue, reflecting strong U.S. academic and corporate demand.
• International: 40%, with growth in Asia and Europe via digital channels.

Historical Mix Shifts:

• Shift from print to digital subscriptions since the late 2000s, with digital now dominant.
• International revenue growth from 30% to 40% (2010–2022), driven by e-learning and social media.
• Case study supply diversification: 80% from non-Harvard authors, enhancing scalability.

KPIs

• Revenue Growth: From $90 million (early 2000s) to $270 million (2022), a 6% CAGR, robust for a media business amidst print declines.
• Subscriber Churn: Under 30% (HBR), significantly lower than peers like Forbes (50% churn historically).
• Case Study Sales: 15 million units in 2022, reflecting steady demand.
• Social Media Engagement: 14 million LinkedIn followers, 6 million Twitter followers, indicating strong digital reach.
• International Revenue: 40% of total, up from 30% in 2010, signaling global expansion.

No clear acceleration or deceleration is evident, as growth has been steady but not explosive, aligning with the business’s focus on quality over rapid scale.

Headline Financials

Long-Term Financial Trends:

• Revenue: Grew from sub-$100 million (early 2000s) to $270 million (2022), driven by digital subscriptions and international expansion.
• EBITDA Margin: Likely expanded due to operating leverage (fixed costs like editorial and IT scale with revenue) and tax exemptions.
• FCF: High cash conversion, with minimal capex (IT investments) and stable NWC (no significant inventory or receivables cycles).

Value Chain Position

HBP operates midstream in the business education value chain, between content creation (upstream, by professors) and consumption (downstream, by students, managers, and corporations). Its primary activities include:

• Content Development: Curating and editing case studies, articles, and books.
• Distribution: Digital platforms (HBR.org, LinkedIn, e-learning modules), institutional sales (to business schools), and retail (books).
• Marketing: Leveraging the Harvard brand and social media for global reach.

HBP’s go-to-market (GTM) strategy emphasizes brand-driven pull demand, with minimal direct sales efforts due to the Harvard logo’s inherent credibility. Its competitive advantage lies in its IP library and brand, which create a moat around high-margin content distribution. The business is not vertically integrated (e.g., it does not own printing presses or academic institutions), focusing instead on content aggregation and monetization.

Customers and Suppliers

Customers:

• Business Schools (4,000 globally): Purchase case studies for curricula, with sticky demand due to entrenched teaching methods.
• Corporations: Subscribe to HBR and e-learning for executive training, often expensing costs via corporate cards.
• Individual Professionals: Purchase subscriptions and books for career development.

Suppliers:

• Professors/Authors: Supply 80% of case studies from non-Harvard institutions, incentivized by tenure and prestige rather than direct payments.
• Harvard Faculty: Contribute 20% of case studies, reinforcing brand quality.
• Freelance Contributors: Provide articles and digital content, often for exposure rather than high compensation.

HBP’s supplier power is low, as authors prioritize distribution and prestige over financial gain, enabling high margins.

Pricing

HBP’s pricing reflects its brand-driven pricing power:

• Case Studies: $8.95 per unit, with no reviews or discounts, signaling confidence in quality.
• Subscriptions: ~$100+ annually, with low churn due to corporate expense accounts and perceived value.
• Books: $20–30, competitive with mainstream business literature but premium due to branding.

Pricing is driven by:

• Brand & Reputation: The Harvard logo commands a premium, with customers perceiving high quality.
• Mission-Criticality: Case studies are essential for business school curricula, and HBR is a trusted resource for managers.
• Corporate Expense Accounts: Reduces price sensitivity, especially for subscriptions and case studies.
• Low Price Elasticity: Customers (e.g., universities, corporations) are willing to pay for branded, reliable content.

Contract structures are short-term (e.g., annual subscriptions, per-use case studies), providing flexibility but also recurring revenue stability due to low churn.

Bottoms-Up Drivers

Revenue Model & Drivers

HBP generates revenue through three models:

1. Unit Sales (Case Studies):
• Price: $8.95 per study, with bulk pricing for institutions.
• Volume: 15 million units in 2022, driven by 4,000 business schools and corporate training programs.
• Drivers: Brand credibility, sticky academic demand, and corporate adoption. Volume growth is organic, with no significant M&A.
• Mix Impact: High-margin segment, contributing 30–37% of revenue.
2. Recurring Subscriptions (HBR):
• Price: ~$100+ annually, plus advertising revenue (CPM-based, targeting affluent readers).
• Volume: 350,000 subscribers, with under 30% churn.
• Drivers: Digital shift, social media engagement (14 million LinkedIn followers), and corporate expense accounts. International growth (40% of revenue) is a key driver.
• Mix Impact: Largest segment (48% of revenue), with strong margins due to tax exemptions.
3. Product Sales (Books):
• Price: $20–30 per book.
• Volume: 1–2 million units historically, stable but less dynamic.
• Drivers: Repurposed case study content, retail distribution (airports, bookstores), and brand appeal.
• Mix Impact: Smaller segment (10–20%), but high-margin due to low production costs.

Absolute Revenue and Mix:

• Absolute Revenue: $270 million (2022), with a 6% CAGR since the early 2000s.
• Product Mix: Case studies and subscriptions dominate, with books as a supplementary stream.
• Geo Mix: 40% international, reflecting digital scalability.
• Customer Mix: Balanced between academic (case studies) and corporate/individual (subscriptions, books).
• Organic Growth: Primary driver, with no significant M&A or FX impact.

Cost Structure & Drivers

HBP’s cost structure is characterized by high fixed costs and low variable costs, enabling operating leverage:

• Fixed Costs (~60–70% of Total):
• Editorial and IT Infrastructure: ~$70 million (publishing and printing expenses), covering content curation, digital platforms, and e-learning systems.
• Faculty Research: ~$100–120 million (partially allocated to HBP), supporting case study development.
• Drivers: Investments in digital transformation (late 2000s) and brand maintenance. Fixed costs scale with revenue, enhancing margins.
• Variable Costs (~30–40% of Total):
• Content Creation: Minimal, as authors are incentivized by tenure/prestige, not direct payments.
• Distribution: Low, with digital channels (HBR.org, social media) reducing reliance on physical printing.
• Drivers: Limited exposure to inflation (e.g., labor, materials), as content supply is non-monetary.
• Contribution Margin: High for case studies and subscriptions (near 80–90%), as variable costs are minimal.
• Gross Profit Margin: ~60–70%, reflecting low COGS (content repurposing, digital delivery).
• EBITDA Margin: ~37% ($100 million on $270 million revenue), driven by operating leverage and tax exemptions.

FCF Drivers

• Net Income: Not explicitly reported, but implied EBITDA of $100 million suggests strong profitability post-tax and interest.
• Capex: Low (~$5–10 million annually, 2–4% of revenue), primarily for IT and e-learning infrastructure. No significant maintenance or growth capex cycles.
• NWC: Minimal, with no large inventory or receivables cycles (digital delivery, short cash conversion cycle).
• FCF: ~$80–90 million (30–33% margin), reflecting high cash conversion due to low capex and stable NWC.

Capital Deployment

• Organic Growth: Primary focus, with investments in digital platforms and e-learning.
• M&A: None reported, as HBP relies on internal IP and brand strength.
• Capital Intensity: Low, with no heavy manufacturing or physical assets, enabling high FCF margins.

Market, Competitive Landscape, Strategy

Market Size and Growth

• Market: Business education content (case studies, management publications, e-learning), segmented by academia, corporate training, and individual learning.
• Size: Estimated $10–15 billion globally, with case studies ($5–7 billion) as key subsegments.
• Growth: ~4–6% annually, driven by digital adoption, international expansion, and corporate training demand.
• Volume Growth: Steady, tied to business school enrollment and corporate learning budgets.
• Price Growth: Moderate, with premium pricing sustained by brand-driven demand.

Market Structure

• Competitors: The Economist ($300 million revenue), Forbes ($200–250 million), New York Times ($2 billion). HBP’s $270 million positions it among mid-tier media players.
• Structure: Fragmented, with HBP holding a niche monopoly in case studies (no direct competitor matches its 30,000-study library).
• MES (Minimum Efficient Scale): High for case studies, requiring a large IP library and brand credibility, deterring new entrants.
• Traits: Regulation (tax exemptions), macro factors (education trends), and digital disruption shape dynamics.

Competitive Positioning

HBP occupies a premium niche, targeting high-value customers (managers, academics) with timeless, branded content. Its matrix positioning:

• Price: Premium (e.g., $8.95 case studies, $100+ subscriptions).
• Target Market: Upper-echelon managers, business schools, ambitious professionals.

Risk of disintermediation is low, as HBP’s brand and IP library create a moat. Smaller players (e.g., podcasts like Acquired) pose minimal threat due to scale and credibility gaps.

Market Share & Relative Growth

• Market Share: Dominant in case studies (5–10% of management publications).
• Relative Growth: 6% CAGR matches or slightly exceeds market growth, driven by digital and international expansion.

Competitive Forces (Hamilton’s 7 Powers Analysis)

1. Economies of Scale: High fixed costs (editorial, IT) and low variable costs create operating leverage, with a large IP library deterring competitors.
2. Network Effects: Limited, but academic adoption (4,000 business schools) creates stickiness in curricula.
3. Branding: Harvard’s logo is a core differentiator, commanding premium pricing and trust.
4. Counter-Positioning: HBP’s focus on timeless, practitioner-based content contrasts with news-driven competitors, aligning with customer needs for depth.
5. Cornered Resource: 30,000 case studies and the Harvard brand are unique assets, unmatched by competitors.
6. Process Power: Efficient content repurposing (case studies to articles, books) maximizes margins.
7. Switching Costs: High for academic customers, as case studies are embedded in curricula, reducing churn.

Strategic Logic

• Capex Cycle: Defensive investments in digital infrastructure (late 2000s) to maintain competitiveness, with no major offensive bets.
• MES: Achieved through a large IP library and brand, with no diseconomies of scale (HBP remains nimble).
• Vertical Integration: Limited, focusing on content aggregation rather than owning upstream (content creation) or downstream (education delivery).
• Horizontal Expansion: E-learning and international markets (40% of revenue) are key growth levers.
• M&A: Not pursued, as organic growth via IP and brand suffices.

Risks

• Educational System Disruption: Declining business school enrollment or professor compensation could reduce case study demand and supply.
• Digital Competition: Podcasts (e.g., Acquired) and online courses may erode HBP’s niche, though its brand moat mitigates this.
• Brand Dilution: Over-reliance on non-Harvard content (80% of case studies) risks quality perception.

Lessons for Operators and Investors

• Timeless Content Endures: Complex, high-quality content (e.g., case studies) creates lasting value, unlike commoditized, timely content.
• Brand as a Moat: A strong brand can command pricing power and customer loyalty, even in fragmented markets.
• Low Supplier Power Enhances Margins: Incentivizing content creation through non-monetary means (e.g., prestige) reduces costs.
• Digital Transformation Unlocks Growth: Investments in e-learning and social media expanded HBP’s reach and revenue.
• Operating Leverage Drives Profitability: High fixed costs, scaled with revenue, yield strong margins in media businesses.

HBP’s business model exemplifies how a niche, brand-driven media company can achieve high margins and steady growth by leveraging unique supply-demand dynamics and timeless IP.

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