Editor’s Note: This is the debut of Media People, a periodic Q&A with executives, editors, publishers and creative forces in the media sector.
WWD: How is the media landscape changing?
David Carey: It feels like every media category is being disrupted right now. It’s actually very exciting, whether it’s television, digital, print…everything is going through an accelerating rate of change. And that is driven both by consumer adoption of technology — most people expect for our free Web products that 80 percent of the traffic will be mobile — and then also that it will be driven by entrepreneurial companies that want to put pressure every day on the big, shiny skyscraper companies. We like that kind of tumult. I think it plays to our strengths here at Hearst.
This story first appeared in the July 18, 2014 issue of WWD. Subscribe Today.
WWD: Some in the industry worry that technology could degrade the core values of journalism. For instance, native advertising was very controversial when it was introduced in mainstream publications. What is your opinion of that tension?
D.C.: I think they are not perhaps appreciative of how much time is spent on the Internet with other media forms where the discussion of how content and commerce mix is not wrapped up with these sometimes excessive emotions that often can be in the magazine business. You take a normal person’s day; they might be driving and listening to a talk radio station where the on-air talent will do the voiceover for the commercial. Now, they differentiate in some ways, they play background music, then they might watch the Stanley Cup finals where you saw the “Lexus Halftime Report.” Or you are watching all of the messaging that surrounded the World Cup, or you watch the Yankees game and you see the “AT&T Call to the Bullpen,” or you watch prime-time TV and you’ll see how the stars of a particular show will star in commercials at the same time. Readers of magazines don’t read these products in a monastery. They have consumed all sorts of other media surrounding their magazine consumption, so I think readers get it. I think that what is happening with digital — first with the pure play — is that they are putting good pressure on us in how to rethink how we are running our print products. I really like that piece of it. A key part of my job is to run very hard against the outdated orthodoxies that stand in the way of growing our business.
WWD: How does Hearst decide what to invest in?
D.C.: There’s no shortage of opportunities for us both with things we do on our own and with partners. We are going to re-platform all of our businesses, and that speaks to the need in digital…you have to be pretty ruthless in going for the efficiencies of the business. It’s hard to make money in digital and so the people who win will have common global platforms. That’s true with Google and Twitter and Facebook — when an engineer in Menlo Park makes a change that impacts their entire global ecosystem. We and other traditional media companies have historically added so much complexity to domestic operations, to international businesses. We will, over time, it will take us about a year, a year-and-a-half to implement, will have a single global platform. For us, that’s going to be enormously important to be able to make sure that we can keep the entire network on the technological cutting edge, but also put more and more resources into content creation. For our monthly magazines, all of our brands on the digital side need to be news vehicles at the same time. We’ve done this successfully with Cosmo and Elle and Esquire and others. We need to publish 50 to 100 pieces of content a day to be relevant to what people are thinking about and talking about today.
WWD: As Hearst goes on the offensive digitally, how do you think that will impact the blogosphere?
D.C.: The blogosphere had it kind of right in that they were posting constantly. They were trying to capture what was in the ether at a given time. Most of our magazines were a little flat-footed. We were publishing too much of the content that works brilliantly in our magazines, longer-form, art-directed, those things that are genius for the print medium. But in a world where people are consuming their content while standing in line at Whole Foods on their phone, it wasn’t quite in line with what consumers were wanting. I think the opportunity for us, and it has been demonstrated clearly with Cosmo, is that once we create faster-paced, breezier focused news content, the fact that it comes under these respected brand names like Cosmo is a huge leg up versus the blogs, which had good content but unknown names. How they beat us was in content relevancy and now that we are going to match and exceed that under names like Cosmo and Elle, I think we should zip by them. As you’ll see in the case of Cosmo, the audience went from about 10 million to 30 million in about a year, and that really was just shifting the content strategy.
WWD: Can you talk about the reporting structure of the digital versus print teams? Digital editors report to Troy Young, while print editors report to their magazine’s editor in chief. How did you come to that decision and is that a model for the future at Hearst?
D.C.: For us and for others, we are all counting on much greater levels of profitability from digital. Digital is a high-growth profit area against print, which will be slower growth. You have to be very efficient in how you run your digital businesses to make a full profit. We are moving away from the past efforts of looking for the synergies between print and digital. We are looking for the synergies within the digital group.
WWD: This includes the internal syndication of your digital newsroom — meaning content is shared between publications?
D.C.: Yes. Some days, up to 20 percent of our content will be syndicated internally across our own network and it’s working great. The print editor [at Cosmopolitan] is Joanna [Coles], who spends a great deal of time with the digital team, but as they kind of move toward the target of producing 100 pieces of content per day, it’s an awful lot to ask of Joanna to be involved in the guts of that. Joanna is very much involved to make sure the brand is right, the expression. I don’t know how much sleep she gets already to oversee a newsroom at the same time.
WWD: How does this translate the business?
D.C.: Today our new print magazines and our digital businesses are 30 percent of our profits of the U.S. company. So, almost a third of profits come from businesses that either did not exist five years ago or were losing money five years ago.
WWD: For fashion magazines, print advertising is still where a lot of the money is made. Are you seeing advertising revenue in that space start to shift to digital?
D.C.: For the fashion and beauty magazines here and around the world, the advertisers understand and strongly support the storytelling they do through their creative in print. The nature of what they do to romance accessories, dresses, shoes and watches works great for print. Fashion companies are clearly becoming stronger at storytelling online, but it’s not coming at the expense of print. The beauty advertisers…many of them are going beyond the banner ads and are looking for that storytelling quality [online] that they have done so successfully in print for years. In other sectors like automotive, you have a substitution, you see print go down and digital go up.
WWD: Is fashion the exception?
D.C.: Fashion is perhaps the exception. The print piece has been so successful in growing.
WWD: Many magazines are launching conferences as a way to create another revenue stream. Is there a danger of oversaturation?
D.C.: There have been a lot of conferences announced, but not a lot have been executed yet. The good ones will stick around. You have to be good at executing these things because consumers will make time for things that matter. This is true for business conferences. I don’t think we’re anywhere near the saturation point, but I do think the one thing that is true is that these brands are famous brands. The renown they have is multiples of the actual media business. Brands like Esquire and Cosmo are famous brands. These are not billion-dollar revenue businesses. They do not exist in the magazine business, but these are billion-dollar [businesses] in terms of the value of the brands. What we work hard to do is to find opportunities between this huge consumer awareness and the actual underlying size of the business.
WWD: Video also seems to be the thing today, especially with advertisers. Readers, on the other hand, seem less interested in it. What’s your take?
D.C.: Across the broader ecosystem, sometimes there’s too much pushing into the market and not enough pulling. I think everyone is in the experimental period around video. I think for big companies like ours, we’ve learned a lot. At first we approached video thinking it needs a very slick production quality. But if you actually see what consumers watch, especially through YouTube, they are not the heavily produced pieces that have all of the polish of a legacy business. These are things that feel more natural, more authentic, more modern. I think we’ve learned a lot with what we’ve done with [our partnership with] Awesomess (TV). The perspective from big companies like ours is TV quality, but if you actually look at what is consumed the most you’ll find it’s more viral, edgier, rawer and more natural.
WWD: Talk about Hearst’s strategy to work in joint-venture relationships.
D.C.: We have really tight financial metrics around our businesses. We look to invest in the first year. We like to break even in the second year. We like to recoup our investment in the third year. That rigor has served us well. That’s why we’ve been so passionate in creating new magazines. There’s a high likelihood that we are going to test a new print product this fall. The fact that we work with many different partners allows us to bring new product to market.
WWD: Your most recent magazines have been spun off from popular television shows or networks. Is that a model you expect to continue?
D.C.: What you’ll see in the future is that our partners will extend into established digital brands. We’ve had some discussions with others about creating new print products. Our team is really skilled about taking these brands that exist, in this case it has been in television, and creating winning print products that are not just a replica of their shows, but highly original. We’ve done this repeatedly. Hearst is very partnership-focused. More than half of the revenues from the corporation come from businesses that we own with someone else. In the magazine company, we have so many joint ventures that I can’t count them all on my fingers and toes. When two companies partner together…the odds of success go up.
WWD: Do you foresee more magazine closures?
D.C.: I think that’s fine. Along with the creation of more new products, the big company should not be afraid to shut down products that frankly might have had a productive life but are now done. There’s nothing wrong with that. I think there’s been too much sensitivity to closures. Every business has to go through that sense of reinvention. It’s a decision you don’t take lightly, but there’s nothing wrong with shuttering a magazine and shifting those resources and creating a new product. That’s a very natural process and there seems to be a lot of drama around that in the magazine business, and frankly there should not be.
WWD: As Hearst expands its digital presence and brand extensions, will there ever be a time where the print product becomes less important?
D.C.: No. By no means is that true. We are very focused on growth. If we want to achieve very strong levels of profitability, we need print to grow and digital will grow even faster. Our corporate position is unbound. We are deeply committed to our magazine business, but we want to create a host of other businesses.
WWD: Let’s talk native advertising. I see you have the August issue of Marie Claire. (The issue includes a denim cover wrap with a zipper that opens to reveal an inside ad unit by Guess).
D.C.: Isn’t this fun? [He unzips the cover to reveal the newsstand cover]. This is for subscribers and trade. We’ve done a lot of great things. A lot of these are Michael Clinton’s ideas. They surely test our production department in execution.
WWD: Are native ads acceptable for consumer magazines or can they work for news publications as well? What did you think of Time’s Verizon ad on the barcode that was on its May cover? Did it work?
D.C.: I thought the debate around Verizon on the cover was ridiculous. I think that if a magazine wants to put an ad on the cover — as long as it is clearly marked as an ad — that’s 100 percent their decision, no one else’s.
WWD: Does it change if it’s a newspaper?
D.C.: I think people get it. It has to be done in an elegant way, but I think there should be ads on covers, on the front page of The New York Times, the wrap you get in Women’s Wear. Consumers are very used to seeing commercial and content being blended together. This is where digital is leading print to rethink old orthodoxies and to ultimately toss aside the ones that no longer make sense.
WWD: Aside from your publications, what do you read these days?
D.C.: I’m bathed in media, unfortunately, way too much. I get so many magazines to my home. I subscribe to our own and probably 25 other magazines. I hold a special place in my heart for The New Yorker, where I spent many years of my career. I’m in and out of every media form. I don’t really watch television. The only show I really watch is Jon Stewart. That frees up a lot of my time for reading magazines and sending e-mails.
WWD: What do you think about the pure plays? The Atlantic has Quartz. Would Hearst ever veer in that direction?
D.C.: Absolutely. What we are doing with this new technology platform with our Web sites is to allow us to create new products much faster. If you were to ask us a few months ago if we would create a Quartz-like product or any new pure play, it would be somewhat arduous for us. The goal is that we can create new products in 60 days. We will get to the point that we will create far more digital products. We are putting the finishing touches on a global digital asset management product. All of our content produced by all of our magazines around the world will be in one repository, easily searchable with clear rights. We think this is going to fuel a lot of new product creation. This is all the intersection of the new publishing platform and the arrival of our new global dam that will arrive basically at the same time. This is our 2015 initiative that we have been working on for the better part of 18 months.
WWD: Why hasn’t e-commerce worked for magazines?
D.C.: We have a big business in Japan called Elle Shops Japan. We continue to experiment in the U.S., but I think e-commerce will become somewhat easier once our free Web sites have much larger scale. I think for us and for others, as our audience goes into the tens of millions, e-commerce will become a more viable business.
WWD: You have consolidated the publishing side among certain magazines, for instance, the design group, which includes Elle Décor, House Beautiful and Veranda, has the same publishing team. Would you ever do that with the fashion magazines?
D.C.: There are no plans in the fashion category right now. We’re going to continue to play with different structures. The goal for this is that our best people get to contribute more broadly. This comes back to this notion that a brand needs to have a mono publisher and a mono editor in chief. I think we’ll look back at that and it will be seen as a quaint, old-fashioned notion.
WWD: What is Hearst’s biggest challenge for the magazine group in the future?
D.C.: For us we need to have as much exposure as we can in the future. We need a combination of more product — both print and digital — and at the same time, when we can find efficiencies in the organization, we have to go for it. It’s a combination of engineering the company for growth while looking within the existing business practices to see what makes sense and what no longer makes sense. We aren’t afraid of tossing out the ones that are no longer relevant.