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Layoffs. Closures. Budget cuts. Reorganizations. Like many other American businesses, it’s the worst of times for magazine publishers. The question is: Can they bounce back — and how?
A perfect storm of sectoral pressures (rising paper and printing costs, plateauing circulation across most titles) and the broader economy’s woes have swallowed profits and revenues across magazines. Most ad categories, from pharmaceutical to automotive to retail and apparel, pulled back across print throughout 2008. The larger fashion titles, including Vogue, Glamour, Vanity Fair, In Style and Cosmopolitan, suffered steep ad page declines, while some smaller niche magazines were forced to close.
For example, Men’s Vogue’s shrinking to a biannual special from a 10-times-a-year stand-alone title “had nothing to do with [anything] other than the market,” said Tom Florio, senior vice president and publishing director of Vogue Group. “When you have AIG in trouble and General Motors at a 65-year low, you can imagine how a new men’s magazine” could suffer. “It’s like having the perfect boat to win the World Cup, and when we got it out just far enough off the land, the tsunami hit. That doesn’t mean the boat wasn’t fast or the engineering wasn’t right; the conditions changed dramatically.”
The reaction of most publishers has been to cut costs, make layoffs, and close unprofitable titles. Cosmogirl, Cottage Living, Radar and O at Home all have been shut this fall while other titles have been scaled back, leaving hundreds of magazine employees out of work.
Still, there remains optimism. “Print is more important than ever,” said David Lauren, Polo Ralph Lauren Co.’s senior vice president of advertising, marketing and corporate communications, at Thursday’s WWD Media Summit in New York, a sentiment expressed equally strongly by Hearst Magazines president Cathie Black. The current situation is hardly a total implosion of the magazine industry, executives and observers insist.
“What’s happening is more of a market correction: too much product in the pipeline and not enough eyeballs or advertising dollars to sustain,” said George Janson, managing partner and director of print for media agency Mediaedge:cia.
But for the titles that survive, there are key questions — how to get through the downturn being the foremost. After that, others include: What model works in this recession? And, finally, to what will readers respond, both now and after the recession is over?
Besides cutting costs and folding magazines, publishers are fine-tuning their strategies to ride out the economy’s troubles, which are expected to loom at least through next year. They’re running their businesses like any other consumer product looking to grow sales in tough times — communicating their value to consumers and advertisers seeking more bang for their buck.
“One of the things you’re going to see is the consumer buying fewer things but better things,” said Florio. “Customer service is very important. Clearly, the value proposition has to be there, but once you get out of a commodity-type of product, and you look at where we spend time in the fashion and luxury retailers, there’s a perceived product benefit, of quality, customer service and selling a dream.”
Magazines are aiming to tap into those same values. Michael Clinton, Hearst Magazines executive vice president, chief marketing officer and publishing director, said, “The value on entertainment and reading time that a magazine brings is fantastic. With people spending less money on a $4 cup of Starbucks, you can have a two-hour experience with an entertainment product at the same price. With consumers looking for value, that’s something we should communicate to them.”
In terms of pitching magazines to advertisers, Clinton believes titles should point out their virtues as a connective medium with readers: “Magazine circulation is holding steady and magazine readership is up. When you think about television viewership, they cannot boast that.”
According to Mediamark Research Inc., the number of magazine readers has increased to 190 million this year from 166 million in 1994, but the percentage of people who consume magazines has decreased to 84.8 percent from 88.3 percent because the U.S. population has increased in that time.
But that’s the industry as a whole — individual titles still have to stand out from their competition. The pitch to advertisers will need to convey the power and stability of a magazine’s brand. Bill Wackermann, senior vice president and publishing director of Glamour and the Condé Nast Bridal Media group, likened advertising in Glamour to investing in the most “secure, FDIC-insured” bank. “The analogy we’re using is, think about investing your dollars. Where can I go to find the most stable environment? You’ve got to think of the magazine industry in the same way. If I’m investing my money, instead of panicking and saying the sky is falling, I would say, ‘What brands have weathered tough times?’”
Magazines also will have to prove their power to influence sales. Advertisers are paying more attention to the return on investment from a well-executed media buy with a magazine, whether it’s the retail sales driven by a magazine ad or fashion credit, brand exposure from an event, or product sold through an online partnership.
“Our clients tell us The Wall Streets Journal sells lots of watches and cars,” said Michael Rooney, chief revenue officer of the financial paper, which is expanding further into print with the launch of glossy luxury magazine WSJ. “We have the information and the data. We can tell certain car manufacturers how many units we move a year.”
Steve Stoute, the founder of Translation Consultation & Brand Imaging, who was inducted into the Advertising Hall of Achievement of the American Advertising Federation last week, said he’s focused on online properties and media brands that have integration online, where “you can count clicks, and you can move product. You get data capture, a less expensive way to market a consumer and a profitable way to sell.”
For luxury brands, online also is becoming a bigger priority.
“As companies cut back on advertising, the overall budgets might be lower than last year, but they’re willing to experiment more with online, with search optimization and marketing,” said Milton Pedraza, chief executive officer of the Luxury Institute, a marketing research firm that focuses on the luxury market. He said that, although brands used to believe that advertising in print was necessary “to validate to consumers that they made a good purchase, that mentality is changing.” Companies believe they “need to bone up on how to motivate awareness and purchase. I need to see my media generate revenue for me, not just awareness.”
Aside from focusing on accountable media, high-end brands also are focusing more on accountable consumers — their core, affluent audiences most likely to buy product. Brenda Saget Darling, vice president and publisher of fortysomething women’s magazine More, is seeing an increase in business from luxury brands targeting an older, cash-rich consumer.
“Most [brands] had focused on their aspirational customer, and now they can’t afford to do that anymore,” she said. “Now,” — along with a recent redesign of the magazine — “we’re a far more attractive place in the market. They want to talk to the women who have the money to spend.”
At a time where “more for your money” is the new world order, marketers also are looking increasingly at environments that provide the maximum exposure for their products in as many outlets as possible. It’s been repeated that advertisers are seeking multiplatform solutions, but in tough times, clients are looking to such multifaceted media brands more than ever. Publishers need to bring creative advertising packages to their clients that touch every outlet where the brand has a presence — radio, magazine, television or mobile.
“The best magazine publishers will have a connection with their clients where they are solutions oriented,” said Wenda Harris Millard, co-ceo and president of media of Martha Stewart Living Omnimedia Inc. “If you look at yourself as a seller of ad pages, you’re not going to have as many opportunities in the marketplace.”
She pointed to a recent example of her company working with Mars Inc. to promote personalized M&M’s that include an image of a person’s face. The brand bought ads that included ideas for craft projects using the M&M’s in the magazine, on the Web site and on MSLO’s television program, “The Martha Stewart Show.” But Mars got even more exposure when Martha Stewart herself toured the M&M’s factory on a Halloween-themed show.
“As we look to 2009, we’ll continue to emphasize what we like to call our ‘Omni-ness.’ We’re able to present them with an engaged consumer, a reader, a viewer, a listener or a shopper,” said Millard.
At the WWD summit Thursday, Millard added that Mars literally wanted to know how many bags of M&M’s the promotion sold. “I’m sorry, that’s the world we’re in now.…We are being held to higher and higher levels of accountability. This is a different world and we need to step up to it.”
To offer such extensive packages, it’s important publishers develop well-trafficked, user-friendly Web sites; large consumer events, or even additional spin-offs from the magazine to reach more consumers “where they live, thrive and buy,” said Steve Yanovsky, a consultant at media agency Mindshare. These offshoots of the flagship also can create additional revenue streams, offsetting ad page losses in the core titles.
Last year, Rolling Stone, which shrank the trim size of the magazine in October, partly to save on printing and paper costs, began licensing its covers for posters and T-shirts, and both have become additional cash streams. Wenner Media chief marketing officer Gary Armstrong said a poster of the Jonas Brothers sold 480,000 copies at around $10 apiece. Aside from additional revenue, the posters have another benefit.
“Really who’s buying that is a 12- to 16-year-old girl — a future Rolling Stone reader,” Armstrong said. “The smart brands are doing what they can to reach new audiences.”
But developing new businesses doesn’t mean abandoning print offshoots. Us Weekly is spinning off 450,000 copies of Us Style next April, a fashion quarterly that will expand on Us Weekly’s coverage of Hollywood fashion trends — and hopefully the magazine’s roster of fashion and beauty advertisers. Rodale already is making significant sums from “old media” extensions: Men’s Health in December will spin out its second edition of Men’s Heath Living, after the first one made “six-figure ad revenue” and sold 50 percent of its 375,000 newsstand copies last year. This year’s issue will cost a dollar more, at $5.99, and will have a 475,000 print run.
However, Men’s Health’s most recognizable spin-offs have been its books, the latest being nutrition guide “Eat This, Not That!” The book, published in December 2007, since has spawned two offshoots, “Eat This, Not That! for Kids” and soon-to-come “Eat This, Not That! Supermarket Survival Guide.”
The guides take “core Men’s Health material and put it in a format that’s irresistible to browse,” said David Zinczenko, Rodale senior vice president, editor in chief of Men’s Health and editorial director of Women’s Heath and Best Life. “And it helps with a fundamental dilemma in, how can I choose foods that are good for my health?”
Zinczenko also said the 1.8 million-circulation Men’s Health is looking at other ways to repackage content, including downloadable PDFs. But of any new venture, he said: “We don’t rush into things that can’t turn into a stand-alone business. Books are attractive because we have figured out that you can pull things from the magazine. A great cover line or column could become a book.”
The “Eat This, Not That!” books, published by Rodale, have sold almost a million copies at $20 a pop, a substantial boost to Rodale’s bottom line. “If you’re not paying advances and you’re doing it in-house, you could launch a franchise this way for $150,000 and suddenly the book in a year is throwing off more profit than a typical magazine,” Zinczenko said. “And, like a magazine, books are not easily copied.”
But how will the industry attract more attention from a consumer who spends most of his or her time online, and whose main form of communication is a text message or an e-mail, with discourse barely longer than a sentence? How will magazines survive among Facebook, MySpace and Hulu? In short, the entire magazine industry needs to reinvent itself. The question is, how?
For starters, publishers must spend money. “Magazines must put out amazing content for their readers. That takes money,” said Brenda White, senior vice president/publishing activation director for media agency Starcom USA. “I would hate to see in light of cost cutting that the content suffers. When we see that, consumers won’t follow anymore.”
That includes a magazine’s Web site, which functions as a real-time companion to monthly titles and a source for generating subscriptions. Some media observers were puzzled by the decision to scale back portfolio.com, an offering that helps keep Condé Nast Portfolio’s monthly magazine competitive with financial news leaders Yahoo Finance, CNNMoney and wsj.com. In September, the month where Wall Street’s collapse made daily front-page news, Nielsen Online reported that portfolio.com gathered fewer than 2 million unique visitors a month, compared with Yahoo Finance’s 24 million and cnnmoney.com’s 10 million. David Carey, a Condé Nast’s group president who oversees Portfolio, Wired and the Golf magazines, argued that the company is still investing in portfolio.com, but operating more efficiently under a different business model. Portfolio.com now will operate with fewer full-time staffers, trimming significant overhead costs. The site will have fewer daily updates, but more content from outside sources including other Condé Nast magazines.
Nevertheless, while some have seen sizeable ad sales gains on their Web sites — Sports Illustrated now earns 18 percent of its revenue from online — few publishers have figured out how to make a sizeable business online. At the end of the day, magazines’ Web sites still generate a fraction of the revenues of the September issues of Vogue, In Style or W.
Tapping into sites such as Facebook and MySpace can be used to create interest and buzz, but should be approached strategically.
“It becomes important for publishers to continue to spend time and money to determine what does work on the new digital platforms,” said media consultant Larry Kramer, who has worked with media companies including Condé Nast Publications (parent of WWD) and founded CBS Marketwatch. “What do people want out of your categories on the Internet? The answers will be very different for different types of magazines.
“In the case of fashion, it may be video, enhanced search characteristics for photos and video, so fashionistas can more easily research style and design,” he said. “In sports, it may mean more creative use of data to run fantasy games and more interactivity, rather than more background articles which may be better suited to print. Business or investment publications may need much more personalization on the Web because investors are uberconcerned about the stocks they own, not just the overall market, and print can’t personalize in real time.”
Publishers also need to reevaluate circulation and distribution. Playboy this year cut its rate base to 2.6 million from 3 million, and Bauer Publishing said it would cut the rate bases on celebrity weekly titles In Touch and Life & Style, which sell most of their issues on newsstands. In Touch now will have an 800,000 rate base — down from 1 million — and Life & Style will reduce to 400,000 from 550,000 as sales for both titles have fallen dramatically in the last year.
More rate base cuts are to come, said buyers. “It would be a good idea for magazines to reevaluate their current circulation levels and bring them down to more natural levels,” said Robin Steinberg, Mediavest’s senior vice president and director of print investment and activation. While this might eat into page rates for magazine ads, it also helps to manage printing and distribution costs more efficiently.
Another move to consider: scaling back publishing schedules. Witness Portfolio’s move to a 10-times from 12-times annual schedule, U.S. News & World Report’s change to a monthly publication from biweekly and Playboy saying it will combine its July and August issues into one. PC Magazine announced a more drastic change — moving to an all-digital format next year, after reducing its frequency from 25 issues to 12 this year.
Some also believe subscription prices should increase. Samir Husni, aka “Mr. Magazine” and chair of the journalism department at the University of Mississippi, said magazines should go back to the model “where [they] depended on circulation for revenue and advertising for gravy. If you’re willing to give Newsweek for $10 [a year], don’t sell it for $5 on the newsstand and complain that your newsstand is down.” He pointed to the success of The Economist (average subscription price, $98 — and few discounts) and People ($101). There’s also the piecemeal model — Maghound.com allows readers to sample several magazines for a few month at a time for a flat price.
These tough times also provide an opportunity to assess some of the often-expensive means of acquiring new subscribers. Magazines no longer need to rely as much on high-priced direct mail, with subscriptions coming in through their Web sites, and some titles have experimented with reaching an audience wherever it might find it. Real Simple, for example, has been aggressive with its retail partnerships with Pottery Barn and The Container Store. Contests and in-store workshops get out the brand and reach possible readers with attractive subscription offers — and can yield new advertising.
Some also believe that Time Inc.’s paring of 600 staffers, Hearst Magazines’ companywide layoffs and Condé Nast’s shrinking by 5 percent of its employees signal a trend of publishing companies making do with smaller staffs. “The reason why you’re seeing this is all the fat that was in the walls of these companies is now being extracted, and it’s getting more lean,” said one media agency executive.
No matter what happens next year, publishers see this as a ripe time for reinvention. Pointing to the economic contractions of 1991 and 2001, Hearst’s Clinton said: “I see this as one of the cyclical downturns as we’ve seen in the past, and it gives us a moment to make moves, to consolidate, to right size, to do innovative new things, to be bold and test new ideas.”
And even if the industry’s pains continue through next year, magazines won’t go the way of the 8-track tape. “There’s something about that magic of discovery when you open a book, especially [in] fashion, when you see that new dress of the season — I don’t see that going away,” said Mediaedge:cia’s Janson.