Stephen Lacy is chairman and chief executive officer of Meredith Corp. He was appointed ceo in 2006 and became chairman four years later. The executive joined Meredith in 1998 as vice president and chief financial officer before getting promoted to president of its publishing group and, in 2004, president and chief operating officer.
Effective Oct. 29, Lacy will serve as chairman of the board of MPA-The Association of Magazine Media.
This story first appeared in the October 17, 2014 issue of WWD. Subscribe Today.
Here, Lacy talks about Meredith’s new licensing deal with Martha Stewart Living Omnimedia, digital media, falling ad revenues and more.
WWD: Meredith just acquired the rights to Martha Stewart Living and Martha Stewart Weddings for 10 years. How did that deal come about?
Stephen Lacy: I just have a long-standing philosophy that, when a leader comes into one of our peer businesses, I just reach out. When Dan Dietz, the new ceo, came on board at Martha, he and I had a get-acquainted meeting, just over a year ago. It was just a matter of, is there anything we can do to capitalize on our collective strength that would be good for both sets of our shareholders? They have, as a brand, such an amazingly loyal consumer audience. Their content creation is at a very high-quality level. There was a desire to make sure that all of that remained, but it’s very difficult for any stand-alone media brand, regardless of platform.
What we would bring is our ability to cross-market her [Martha Stewart’s] products with our other circulation activities. Of course, there are operational efficiencies due to our scale. What we like is that we have not historically been in the weddings business. It’s an expansion opportunity for us. They have a very significant video library that we will be able to access and market.
WWD: Will there be layoffs?
S.L.: There are a number of her sales and marketing folks that are coming to Meredith as employees, but the back-office activities, if you will, those are all performed in [our headquarters] in Des Moines. Generally speaking, those sorts of folks don’t want to uproot their whole lives to move there for that.
WWD: How many of the staff will move over from MSLO?
S.L.: Thirty-some people — something like that.
WWD: How many will be cut?
S.L.: I don’t really know about that. That’s really on her side, not ours.
WWD: Is licensing content something we can expect going forward? Or is it something that could lead to Meredith buying the magazines?
S.L.: I think this is certainly a concept that we would explore. It depends where the opportunity is. Martha is a multi-platform brand with great content, but it needs to be monetized better. She hasn’t expressed any interest in selling the business, [and] that was never part of this dialogue. That’s obviously her choice, at some point — she’s the majority shareholder — but that was never part of the discussion, to date.
WWD: Talk about the evolution of Meredith and how you are integrating digital.
S.L.: I love to talk about the digital piece because that was my very first job here back in 1998, when we really didn’t know what we were doing. The Internet was whatever. If I had been speaking to you 24 month ago, I think I would have said, “We’re really focused on our Millennial customer, crudely described as the daughters of Baby [Boomer] women. We’re pretty sure she’s going to consume in digital what she consumed in print.” That was the thesis. I think what we’re beginning to see is that she wants content and she wants it on every platform, depending on the platform. The best example of that is our acquisition of All Recipes. It is the largest digital food site in the world. It really doubled our scale. Now, along with the 100 million unduplicated women we serve every month, [we get] 60 million unique visitors every month. All Recipes doubled that scale — it’s about half [of the total]. At the same time, we were trying aggressively to move all of our business to tablet over some period of time. The bottom line is, we find now that [the] customer is willing to pay a little more for tablet in addition to print, but she still wants print.
WWD: How do you monetize digital?
S.L.: In the case of All Recipes, 40 percent of all traffic comes from a mobile device. Half of that time, she’s standing in a supermarket, selecting the ingredients, and you can imagine how anxious our advertisers are to be that close to the bottom of the purchase fund. At this point, we would describe ourselves as pretty platform-agnostic, as long as we can aggregate a large enough consumer audience [so] that we can have a meaningful advertising play. We have that in print, and we now have it in digital, as well.
WWD: What about print?
S.L.: In print, there are two streams of revenue: Circulation in print [is one stream of revenue], and we use our digital properties to sell subscriptions to our print magazines as a second stream of revenue.
WWD: How is that growing? Is one starting to overtake the other?
S.L.: Like a rocket ship. What’s growing to be really clear is that we would no longer solicit you through direct mail. You would be on the All Recipes site, and we would ask, “Would you like to receive the All Recipes magazine?” Today, with about two-thirds of our new subscribers, we’re interacting digitally with [them] to sell the subscription, and most of those subscriptions are sold with a credit card with an automatic renewal function. It’s a really healthy circulation model, and it would be exactly the same story you’d get if you were talking to Hearst or Condé Nast — all the places except those creating time-sensitive information, more like a newspaper or a weekly.
WWD: How does that model change for a newsweekly or newspaper?
S.L.: Because those brands are so strong, the model morphs to a “paid for subscription” with a lot of video content. I think, for a strong brand, that world persists, just over some period of time in a different format.
WWD: Let’s talk about Ladies’ Home Journal, which you reduced to four from 10 issues a year, laid off its New York staff and moved it to Meredith’s Des Moines headquarters. The circulation was pretty healthy — almost 3.3 million. What prompted that decision?
S.L.: It was totally an advertising-based decision because the consumer was, in fact, very strong and very loyal. For most magazines, about 60 percent of the revenue is advertising, and 40 percent comes from the consumer. Because of the median age of the Ladies’ Home Journal subscriber, advertising became more and more difficult to sell. Our decision was that we would lean in more aggressively and take a lot of that investment and put it in All Recipes. We felt that because of the very young age of that audience and the very robust nature of that community — it is sort of the original social-media site — that we should lean into that and lean away from working so hard to sell advertising in Ladies’ Home Journal.
WWD: When you look at LHJ’s magazine competitors — Redbook comes to mind — is there more market share up for grabs?
S.L.: LHJ is still on the newsstand because the consumer wants it — it just won’t have as much advertising. I think there’s the common belief that, if something goes away, those advertising dollars go somewhere else — that’s not really the case. It’s not really a zero-sum game. Those dollars — some of those you can go after, [but] most of them go away.
WWD: And the LHJ audience likely would not use digital but just buy online or subscribe?
S.L.: There’s a digital audience but not a large one—it was not enough that it would have mattered to our [digital] vision [for the company].
WWD: Were you surprised at all by the outcry when the LHJ news broke?
S.L.: There was a lot of news, and I think that’s always the case when you’re dealing with what can be viewed as an iconic brand. We’re very transparent with our employees, and we try to be [transparent] when we speak to the Street. We’ve been at this for 112 years, and a lot of things we were doing 112 years ago, we are not doing [now]. Our responsibility is to create a vibrant portfolio of businesses that makes our shareholders want to invest in Meredith. We try to make those decisions without a lot of emotion, but, as you can imagine, there was a lot of dialogue here before we made that decision.
WWD: This has been a difficult year for print companies — thus far, even Meredith’s advertising revenue has declined. Can you address the economic outlook?
S.L.: We don’t have a great horizon into early calendar ’15 advertising, and a lot of that is because we are in the fourth calendar quarter, and all those [ad] budgets are really being set. You would know if something was a total disaster, but it’s really tough for our sales leaders to give a prediction. But the second half of calendar ’14 has been better than the first half was, primarily because digital got off to a very, very slow start. It is much stronger now. I think that slow start caught us all off guard because we [had] been up in the mid-teens in the third and fourth quarter of ’13. Now, it’s back there again. Our circulation and television revenues are really good. Print ad pages continue to be challenged. On the television side, I think we’re going to be OK in political [ads], but it also started off slow. It’s picking up. Our belief is that those trends persist, and we need to be smart about the portfolio and do things that position us in the strongest light. So, having the ability to add some TV stations [and] the ability to pick up a magazine property — that allows us to add more volume. So, we can go to our advertisers with bulk and then really [lean] into our digital businesses, because they are very strong right now.
WWD: There’s a trend for media companies to split their magazine business from their broadcast business. Would Meredith do that?
S.L.: We’ve had a lot of discussion about that. We have a lot of advisers trying to help us look at that. So many of our competitors have done that. When we were in our discussions with Time Inc., we were going to separate broadcasting so that we would have a really large pure play in print and not confuse the Street. But just separating the two for the sake of that, actually, for us, right now, has reverse synergies — meaning, we’d have to add costs because we do a lot of things together. We have one legal department, one HR operation, one financial system for both businesses. So, if it was step one of a two-step transaction like Time Inc., then absolutely. We’re kind of agnostic about that, but we don’t want to do something where we make less money than we do right now.
WWD: Is it hard to be a public media company during such a volatile time?
S.L.: I think when you are in a public-company environment, you are required to do two things when you are the leader: First of all, make decisions that you really believe are the right things for the shareholders, regardless of whether it impacts you in a particular quarter or not. We have had the ability to do that without a lot of challenge. The second thing that’s important is to be totally and completely honest about what you’re doing — [don’t] write a press release that’s all smoked up and causes people to question what you are doing. I believe whether I’m talking to the Meredith family, to my board, to the shareholders [or] to you, I’m going to tell [everybody] the same story. It might not always be good, but it’s always going to be the truth — because then you don’t have to remember what you said.