Most Recent Articles In Financial
Latest Financial Articles
- French Clothing Sales Show Resilience
- U.S. Markets Up Even as Rate Hikes Remain in the Future
- European Stock Markets Gain Ground
More Articles By
There are a lot of changes ahead in the publishing world in the fourth quarter.
Reeling from an unprecedented downturn in advertising revenue, declining newsstand sales and growing competition from the Internet, magazine publishers are reshaping for the new era — and are expected to unveil their strategies in the coming months as they prep their businesses for 2010.
This story first appeared in the October 6, 2009 issue of WWD. Subscribe Today.
On Monday, Condé Nast revealed plans to close Gourmet, Cookie, Modern Bride and Elegant Bride magazines, with the loss of about 180 jobs, after the firm hired consultants McKinsey & Co. to evaluate its business and find ways to increase profitability across its magazines and Web sites.
“We asked [McKinsey & Co.] to focus on properties that have the greatest opportunity to improve contribution” to the company, said Charles Townsend, chief executive officer of Condé Nast. “I would say this: As it relates to these four, McKinsey provided us with a confirmation that these properties weren’t going to be profitable.”
The changes come as the industry has lost a quarter of its ad page revenue in 2009 during the crippling recession, and follow closures and budget cuts throughout the sector, including Blender, Domino, Country Home, Condé Nast Portfolio and Best Life. Media research firm ZenithOptimedia predicts ad spend will drop 15 percent in 2009 versus 2007, to $49 billion.
Townsend stressed Condé Nast wouldn’t close any more titles. “This is it on magazine closures,” he insisted. “I have very viable businesses in the portfolio now.”
That said, further reductions lie ahead as magazines are being asked to cut up to 25 percent of their costs for their 2010 budgets, which are due in 10 days. These cuts are expected to include everything from staffing to car service, freelance budgets to photographer rates to frequency changes at several magazines. Multiple sources also said further closures could happen next year as up to a half-dozen titles are being monitored closely to see if they can undergo a turnaround within the first half of 2010.
“As decisions are made, we will make nuanced changes in the remaining properties,” Townsend said. As he explained in his memo to employees Monday morning: “The review has led us to a number of decisions designed to navigate the company through the economic downturn and to position us to take advantage of coming opportunities.”
But Condé Nast is not alone in finding ways to right-size its business as publishers from Hearst Magazines to Time Inc. to Rodale make adjustments. McGraw-Hill is looking to sell its flagship title BusinessWeek, with the latest speculation a buyer of the weekly business magazine would retain the name and Web site, but operate with a smaller staff. Meanwhile, speculation has resurfaced about Hachette Filipacchi Media U.S. shopping Elle, with the Paris-based publisher said to be looking for a licensing deal with either Hearst or Time Inc. Hachette in the U.S. continues to deny it is looking to get rid of the title.
And the rumor mill has long been churning that Time Warner might sell its magazine properties at Time Inc., though ceo Jeff Bewkes firmly denied Time Inc. was for sale at an Atlantic magazine forum last week in Washington, D.C. “The magazine business has plenty of expansion in it,” Bewkes said Friday. “You do have to think carefully about how celebrity magazines like People, and news magazines like Time and [sports publications] like Sports Illustrated are going to evolve as they move, and add not just print versions but Internet-based versions.”
What’s clear is that publishers can no longer rely on the traditional print advertising model alone to see them through to profits. “All of that is indicative of the realignment that’s occurring in the magazine industry, [as well as] the whole media industry. It’s inevitable because of the economy, but accelerating because of Internet,” said Reed Phillips, managing partner of DeSilva+Phillips. “Some companies are saying we don’t know how to make some of these traditional media businesses work in the digital future.”
When advertising was plentiful, publishers discounted their subscriptions to help boost rate base guarantees. But as advertising has fragmented, and in some cases disappeared entirely, companies haven’t found a way to boost their income on the circulation side. Being squeezed on both sides means publishers can’t afford to absorb steep losses while they figure out how to profit from a devoted readership.
Even Colman Andrews, a contributing editor at Gourmet, recognized the bind publishers have put themselves in. “You don’t kill a heritage brand because you have a bad year. But this whole affair raises another point: The cut-rate-subscription, make-your-bucks-from-advertising model for magazines just doesn’t work anymore, and shouldn’t,” he posted on his Twitter account.
And it’s not only print advertising that’s hurting. According to a new report from PricewaterhouseCoopers and the Interactive Advertising Bureau, Internet ad revenues overall were down 5.3 percent during the first half, to $10.9 billion. Search and display ads represent the largest percentage of the overall interactive ad spend, with both categories up slightly versus last year. Digital video also rose 38 percent during the first half. Not only is the future of print in adapting to new models, be it digitally or beyond, but it also will be about finding several revenue streams from their content to offset losses from advertising, and rethinking the old — and sometimes cost inefficient — processes for producing magazines. Time Inc. and Condé Nast, for example, are in talks to build a digital storefront for magazines to be launched next year, according to recent press reports.
Townsend told WWD (which is owned by Condé Nast) Monday that the goal of the closures and cutbacks was to attain “short-term financial health, and support the investments that we believe will be more strategic over time in growing this company.
“We know that we have to be more than simply a magazine publisher. We will be ramping our strategic digital investments, but at the same time we’re growing the magazine business because we can, both in breadth and in profitability,” he said. While Modern Bride and Elegant Bride have folded, Brides, for example, is ramping up publication to monthly from bimonthly.
The closure of Cookie, Elegant Bride and Modern Bride seemed to support the idea Condé Nast is closing money-losing or smaller circulation titles that didn’t have the scale or advertising dollars of its core titles such as Vogue, Vanity Fair, Glamour or The New Yorker. Cookie launched in 2005 and was published eight times a year, and Modern Bride, which Condé Nast acquired in 2002 from Primedia for $52 million, published quarterly.
Gourmet was one of the company’s oldest magazines. The title was founded in 1940 and acquired by Condé Nast in 1982, and editor in chief Ruth Reichl is a celebrity in the food world through her editorship, television appearances and books. But Gourmet was also one of the magazines hit hardest by the recession since it courts high-end automotive, travel and luxury goods in addition to their endemic advertising. Through October, ad pages declined 43 percent, to 429 ad pages, according to Media Industry Newsletter, as the magazine has slipped into the red. In 2006, the title brought in more than 1,300 ad pages.
Sister publication Bon Appétit hasn’t fared much better, as it has carried 459 ad pages through October, or 32 percent fewer than the same period a year ago. But its more-accessible editorial, including recipes for lamb burgers and cover images of short ribs, and younger readership make the magazine open to a wider mix of advertisers, from Oscar Meyer to Cadillac. Bon Appétit, with a 1.4 million circulation, generated more circulation revenue than Gourmet, with 970,000. And Bon Appétit was more economical to produce than Gourmet, given the defunct title’s luxe photography and roster of notable contributors and photographers.
Most of the 180 employees across the four titles will be leaving the company, with most expected to vacate their offices by the end of the week. They include Modern Bride and Elegant Bride editor in chief Antonia Van Der Meer and Cookie editor in chief Pilar Guzmán. Cookie publisher Carolyn Kremins was shifted to Brides as publisher, replacing Alison Matz, who is leaving the company. Kremins will report to Bill Wackermann, senior vice president, publishing director, who oversees the bridal group. The company is also said to be looking for a position for Gourmet publisher Nancy Berger Cardone, which could be part of what insiders speculate could be a reshuffling of several publishers within the company in the next few weeks.
Reichl, who is in the middle of a book tour to promote the latest Gourmet cookbook, is also expected to depart, but her status remains unconfirmed. She said on Twitter, “Thank you all SO much for this outpouring of support. It means a lot. Sorry not to be posting now, but I’m packing. We’re all stunned, sad.”
Gourmet’s November issue will be its last, and its new television series “Gourmet’s Adventures With Ruth,” which features Reichl traveling the world to visit cooking schools with celebrities, will air as scheduled beginning Oct. 17 on PBS. American Airlines is the sole sponsor of the program, and spent a reported $2 million to purchase 30-second spots during the episodes, ad pages in Gourmet, on the show’s Web site and sponsorship of the Gourmet Institute weekend-long consumer event (which was canceled on Monday). Cookie’s November issue will also be its last, while Modern Bride’s October/November issue and Elegant Bride’s fall edition will be their last.