MAGAZINES FACE HARSH REALITIES

Byline: Lisa Lockwood

NEW YORK — They didn’t sugarcoat it.
Executives from Oprah Winfrey and Martha Stewart to Jack Welch and Steven T. Florio, speaking at the American Magazine Conference here this week, widely acknowledged that the magazine business was having a rough time — with soft newsstand sales, spiraling postal rates and dwindling ad pages — even before Sept. 11, and that some titles were poised for a fall, if not total extinction. And from the look of things, they say, it’s not going to get better any time soon.
A total of $800 million in advertising was canceled in four days following the terrorist attacks, said John S. Suhler, president and co-chief executive of Veronis Suhler, the investment bank. “Eighty percent of economists believe we’re in a recession in the third quarter. Obviously, airlines, tourism and insurance [industries] are struggling after the attacks,” he said.
Fed chairman Alan Greenspan, however, hasn’t labeled the country as in a recession, since it takes two quarters of negative results to make it official.
Should a recession be declared in late January or early February, however, Suhler believes it will be short-lived. He predicts ad growth will be hit, single-copy sales will go down, and special interest titles will perform better than general interest books. But, he thinks it’s possible to start seeing positive results by the middle of next year.
In recent weeks, advertisers have cut budgets, pulled ads and have booked much later, causing hardships for magazines, especially those with long lead times. Consequently, publishing executives said they’re experiencing some of the most difficult times ever. They say they’re taking steps to control costs, reduce head counts, and in some cases, close or sell off titles.
“Business sucks,” admitted Steven T. Florio, president and chief executive officer of Conde Nast Publications. “This is the worst marketplace in which to sell magazines, both to the consumer and the advertiser, since World War II.” But Florio said he’s trying to turn this environment into “an opportunity.”
“For once at Conde Nast, we’ve implemented cost controls. We looked at company cars, travel and entertainment and the number of comp copies we hand out. We made some organizational changes,” he said. “We’ve had individual conversations about every single title. Is it viable editorially? Will it ever make money when the market turns around?” If he gets negative responses, he said, the company shuts down the magazine. “That happened with Mademoiselle. It was a sad day. But to drive the bottom line, that’s what you have to do,” he said.
Jack Kliger, president and chief executive officer of Hachette Filipacchi Magazines, said he is evaluating head count and looking at other revenue streams.
“We’ve become too dependent on advertising revenues. We should look at the issues we’re facing on the newsstand. We need to become better consumer marketers,” he said. He noted that Elle merchandise, including sportswear, accessories and footwear, drums up annual sales of $500 million around the world.
Tom Rogers, chairman and chief executive officer of Primedia Inc., said that in terms of the business environment, it’s widely recognized that brand advertising and business-to-business advertising aren’t in good shape. But he said the guts of his business — dedicated enthusiast publications — are doing quite well. Although his company is heavily in debt — $2 billion — he said he doesn’t plan to sell off core assets, such as New York, Chicago or Seventeen magazines, but is looking to sell a handful of properties to pay down the debt.
Martha Stewart, chairman and chief executive officer of Martha Stewart Living Omnimedia Inc., believes she’s well positioned to withstand these tough economic times. She said her company’s key enterprises — publishing, which includes the magazine, radio and TV show; the Internet, and merchandise — revolve around core content areas that she believes are always important but may even be moreso now. These include gardening, entertaining and cooking, weddings, brides, babies and kids. She said her Web site is being relaunched this week, and she’s been spending a lot of money on it, much to the chagrin of Wall Street. “It’s a new and vigorous site,” she said.
As a leadership guru and author of the new book, “Jack: Straight from the Gut,” Jack Welch, former chairman and chief executive of General Electric Co., offered some predictions and advice to the magazine crowd.
“The magazine industry will consolidate,” he said. “There are plenty of magazines and there will be a consolidation. It will be a more cost efficient industry. There will be some fallout, but then there will be some stronger magazines.” He said companies that believe there is a future for magazines will be able to “pick up things for pennies.”
Several editors spoke about how the recent events were impacting journalism and their publications. Tom Wallace, editor in chief of Conde Nast Traveler, remained optimistic that things would return to normal. “It better go back to normal. It’s definitely bad for business, since advertising is off.”
Stephen B. Shepard, editor in chief of Business Week, said that after five boom years, the magazine began suffering earlier this year. What worries him is that circulation, newsstand and subscriptions are all up, “but advertisers don’t want to be in this environment.” Hardcore business advertisers, such as IBM, are pulling out because they don’t want to be in a package with so much negative news.
“I think at some point advertisers will come back,” predicted Jim Kelly, managing editor at Time, adding that he doesn’t worry about overplaying the terrorist story, which gets about 40 pages of coverage in Time a week. “I worry about if we get the story. The best thing we have going for us is our credibility. It’s the biggest story since World War II.”
Tina Brown, chairman and editor in chief of Talk Magazine, spoke about the power of personal stories in magazine journalism, especially during these times.
Brown said she commissioned Chelsea Clinton to write a first-person account of her feelings about the terrorist attacks for the December-January issue. “We’d never heard her voice. I’d been intrigued with her. Now, she has been brimming with things to say. She came into talk to us. We were amazed at how sensitive and smart and wise she was.” Brown called her story “a triumph.”
“Chelsea was completely free of spin. She has a real writer’s voice with simplicity and clarity and that’s enormously appealing,” added Brown.
Finally, Winfrey spoke about her passion for magazines.
“Connection is my great asset,” said Winfrey, who wears many hats, including editorial director of O, the Oprah Magazine. “We don’t sell magazines. What we sell is connection. Connection to the world, to ideas and to what can be.”
“People are searching for direction, solace and guidance and trying to define what matters to them. What happened on Sept. 11 shook a lot of people’s beliefs. They’re looking for words, direction, vision, guidance and clarity. We in this room have the opportunity to offer that to them.”

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