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America's Oldest e-newsletter est.1993
Hindsight is a wonderful thing but foresight is better, especially when it comes to saving life, or some pain!
William Blake
Dateline: Charlottesville Va
In This Issue
Saving Printed Consumer Magazines in the Social Media Era
It’s Significance and Challenges
By: Baird Davis

Author’s note: Months ago, I compiled the 2 nd half 2019 audit bureau circulation data by title and by publishing company, as I’ve done for the last 20 years. The results were troubling, but I hesitated to report my findings, believing it would not add anything to the conversation.

But a recent piece describing the covid-19 inspired difficulties at The Atlantic (profitable publisher with a well-financed owner, multi-billionaire Ms. Powell Jobs) caught my attention. Their loss of advertising, the dampening of their live event business and commensurate staff reductions brought home to me the fragility of the entire audited (larger circulation) consumer magazine business.

It illuminated, again, for me the significance of print in the industry’s economic equation and inadvertently the seeming lack of industry effort to address their inherent problems. This piece is dedicated to helping encourage a more cohesive industry effort to address those difficulties.  

The Good Times – Spoiled By Google and Facebook
The consumer magazine business has been struggling, to one degree or another, for nearly two decades to overcome what today might be euphemistically called the technology flu. Google and Facebook have monopolized its readers and advertisers, leaving the core of the business (primarily their print products) in very precarious condition.

The second half of 2019 audit bureau reports reveal the extent of the difficulties. The audited consumer magazine industry experienced its steepest ever year over year declines in - paid/verified circulation, newsstand sales and number of audited titles.
-          Titles - declined from 222 to 190 – down 14%.
-          Paid/Verified Circ – declined from 166k to 146k – down 12%
-          Newsstand Sales – Units declined from 84k to 68k - down 19%
                                   Revenue declined $398k to $327k – down 16%

The numbers tell the disheartening story and effectively mark the end of a tumultuous 20-year period of immense change in the consumer magazine business.

Comparing Industry Data Over the Last 20-Year Period
In this note we’ll review and compare key circulation data from the critical 20-year period (1999 and 2019) as a means of providing perspective concerning the huge changes roiling the industry.
The Peak Year - 1999
Below is a list of the 20 leading audited publishers, ranked by paid circulation, in the 2 nd half of 1999.
The industry at the turn of the century, reached its peak in audited paid circulation (320 million) and audited titles (664). Time, Inc, Meredith, Hearst and Conde Nast were at the top of the publisher food chain with a combined audited circulation market share of about 30%. There was, however, vigorous inter-industry competition - seven other publishers with paid circulation of 9.5 million or more and twenty publishers with paid circulation of 2.8 million or greater. Single copy sales reached their peak a few years later, but still single copy circ represented a substantial 22% (5% today) of the industry’s paid circulation. Advertising was strong and nearing its zenith.

Those of us there at the time knew that the consumer magazine business was a very cool place to work. It was fun, challenging and ripe with opportunity.

However, it was not until The Great Recession of 2008 that the industry’s underlying difficulties were fully exposed. It was shown to be inadequately prepared for technological change, many publications were “over-circulated” and its properties overvalued.
For years prior to 2000 publishers had been slowly, often indiscriminately, increasing circulation levels by nefarious means (i.e. extensive use of “non-revenue” subscriptions), as a way of justifying steep advertising pricing. By the year 2000 the value of print media companies had reached record levels – Ziff Davis was sold to Softbank for a head scratching $1.4 billion in 1994 and Emap (UK) paid an astonishing $1.2 billion for Peterson Publishing Company in ’98. In addition to Emap three other foreign companies made significant investments in the burgeoning American consumer magazine market – Gruner & Jahr, Hachette and Bauer. In the year 2000 they accounted for 15% of the industry’s paid audited circulation. By 2005 all but Bauer had exited the American magazine market.

And then in 2010 Apple introduced their iPhone, spreading the social media pathogen, and permanently altering the consumer magazine business forever.

         Fast Forward to the Year 2019
Americans are now spending two and a half hours per day on social media and 14 minutes with magazines.
In the last twenty years the consumer magazine business has been dramatically changed. It’s no longer defined by its famed 3-legged stool structure – circulation, advertising and editorial. The structural chess board has been reconfigured to include – design and operation of multi-platform destinations, intricate home page construction, allowance for expanded digital experiences, production of copious amounts of video and the demands of expanded event operations. Its management and employees are being asked to multi-task as never before. In this frenetic environment something had to give and often it has meant less attention, and rewards, paid to old fashioned print skills.

This piece will not specifically address the effect of the industry’s newer digital responsibilities. Rather it will concentrate on the effect of diminishing attention being given to print related skills and how this, in turn, has increased the industry’s vulnerably.

The data in the chart below helps highlight its effect.
Sustaining Print – A Host of Thorny Issues
The consumer magazine business is, of course, infinitely more complex than it was twenty years ago. But paradoxically, it remains a business still financially tethered to the performance of its print products. These considerations include:

The Effect of Massive Consolidation - The business is in the throes of a massive consolidation. Time, Inc mysteriously vanished and Conde Nast has receded. The business is now completely dominated by two publishers - Meredith and Hearst – accompanied by a supporting cast of publishers with myriad shortcomings.

The effects of consolidation are profound. Scale is a critical ingredient for success in this business. However, there are only three publishers – Conde Nast, Trusted Brands, American Media - with anywhere near the comparable scale of Meredith and Hearst. Unfortunately, however, those companies (see “financial difficulties” below) are burdened by various financial shortcomings.

The reconfigured industry, outside of the top six publishers, is now populated by sixty or so publishers that have only one or two audited publications. It’s going to be increasingly difficult for those single-shot publishers to compete. They’ll be restrained in their hiring practices, in developing and sustaining their digital capabilities and in negotiating favorable rates with industry suppliers. They will be more prone to using extreme measures of supporting circ levels and discounting advertising.

The industry has never been more lopsided. Consolidation has dramatically exposed its unbalanced nature and vulnerabilities.
Financial Difficulties In the Upper Ranks – Meredith and Hearst appear to be financially secure. Although Meredith is still carrying a good amount of debt as a result of their Time, Inc acquisition. For the publishers just below the two leaders, the financial conditions are not as secure. Conde Nast has acknowledged large losses, divested three titles and laid off many employees in the last year. Trusted Brands’ financial condition has improved, but they are only four or five years removed from bankruptcy and are currently owned by Ripplewood Holdings a private equity firm that will probably be looking to sell or take the company public in the future.

American Media, the 5 th leading circulation leader, appears to be in particularly precarious financial condition. They are plagued by heavy debt, bad publicity, poor newsstand sales conditions and some questionable circ practices related to their extensive use of digital circ. They are owned by Chatham Asset Management, a leveraged equity firm that also owns the industry’s major wholesaler (American News) and leading national distributor (TNG). It’s an uncomfortable publisher/supplier alliance with the potential to have a detrimental industry effect.

Having one’s financial ammunition dry is likely to be a crucial survival factor, particularly in trying to traverse the covid-19 effect.
Newbies - Eight of the new-to-the-business owners could be characterized as naïve newcomers to the magazine game. Four of them have recently been acquired by media companies – Sports Illustrated (by Authentic Brands - subcontracted the publishing to Maven), Golf Digest and TEN (by Discover, Inc. at two different divisions of the company). Even National Geographic has a new parent, Disney via an acquisition from News Corp. The other four newcomers have been acquired by billionaire angels – Time Magazine (Mark Benioff founder/CEO Salesforce), Golf Magazine (Howard Milstein founder/CEO Emigrant Bank), Essence (Richelieu Dennis – founder/owner of a personal care company) and Fortune (C. Jiaravanon, a Thai businessman).

The preponderance of new- to-the-business owners has precipitated the loss of critical institutional muscle memory and expanded the number of publishers that are scale deficient.

Foreign Owners – Foreign owners have, at best, a mixed record of success in the American magazine business. The Economist (not a top 20 circulation level publisher) has done well. Bauer and Bonnier, are survivors, but currently they seem less dedicated to the market, both having reduced their American magazine footprint in recent years. Dennis, a UK company owned by a private equity firm, publisher of The Week, optimistically increased their commitment to this market with their recent acquisition of Kiplinger’s Personal Finance. The foreign contingent now also includes the aforementioned Thai ownership of Fortune.

Foreign owners tend to be iconoclastic, not as actively involved in industry issues and exhibit less staying power in chaotic market conditions.
A Few More Billionaires - Two other top 20 publishers are owned by billionaires. Outdoor Sportsman Group, with 15 niche titles, is a division of Sports Entertainment Company owned by Stan Kroenke (also owner of the Los Angeles Rams). Mansueto Ventures owned by Morningstar, Inc. founder Joe Mansueto. The industry’s billionaire club also includes two others whose publications are not in the top 20 - Michael Bloomberg (Bloomberg Business Week) and previously mentioned Ms. Powell Jobs (The Atlantic).

The financial security provided by wealthy owners is welcome, but it’s often accompanied by less industry commitment. However, they do hold the potential for investment resources if they’re needed to rescue struggling publishers and/or critical industry suppliers.

Human Capital – In the past the consumer magazine business has been rewarded by the excellent quality and dedication of its workers and management talent. However, in a shrinking multi-tasking work environment these advantages have been deluded.

I’ll quote Bill Ziff here – “The company’s most important resources ride up and down our elevators every day”. Publishers may have greater difficulty attracting that valuable elevator cargo in today’s market.

 Decaying Industry Support System – There are some serious cracks in the industry’s support wall, the conglomeration of suppliers that are absolutely critical to the success of the consumer magazine business. It includes; a profit-challenged printer universe, a group of paper makers intent on controlling prices, an under-capitalized group of subscription fulfillment suppliers, the under siege U.S Post Office, a shrinking group of reliable subscription agencies, a diminished group of informed buyers at advertising agencies, audited bureaus with thinned ranks, a timid industry organization (Association of Magazine Media) and a rapidly deteriorating newsstand distribution system.

The industry’s future capability to sustain print as viable element in the publishing equation is being seriously jeopardized by a weak supplier support system.
Rescuing the Consumer Magazine Business
I’ve transmitted industry warning signals in the past – see my October 27 th 2015 Folio article – “Assessing the State of the Consumer Magazine Print Business”. That was over four years ago. But the stuff I discussed then has, as they say, started to really hit the fan.

The consumer magazine business is turning into a monolithic beast - two giants accompanied by a subservient cast of bit players. It has allowed its print management skills to atrophy. Its beset by financial difficulties throughout its ranks. It has a crumbling supplier support system. It’s populated by inexperienced billionaires. It’s an industry that’s particularly vulnerable to the ravages of covid- 19.

At this juncture the industry can’t be saved by street demonstrations from its bit players. Rescue efforts must originate at the top, where Meredith and Hearst now reside. They chose to play the long game and by many measures it appears as if they’ve won. But victory carries with it a set of real responsibilities. They must now step forward and assume those responsibilities.
The situation is this – Holding these two mega-publishers accountable will not be easy even though they have a lot to lose if the consumer magazine ecosystem is diminished. It’s clearly in their own self-interest, whether they know it or not, to make sure that it doesn’t happen. The industry, however, is now too lopsided to leave the rescue effort to natural market forces. Plus there’s probably real doubt in the publishing community that Meredith and Hearst would act in a fully industry-centric manner.

Suggested Next Steps
The need for action, accelerated by the covid-19 pandemic, has reached the urgent level. Here’s what I suggest. Establish what might be called – The Committee to Liberate Consumer Magazines. It would initially have a 6-month term and be headed by a full-time facilitator, paid for by Meredith and Hearst. It would meet (virtually) once a month with a set objective of defining and prioritizing the things that would enable a broad spectrum of publishers to survive in the current market conditions. The committee would include a management representative from both Meredith and Hearst and a regular rotating rooster of 8 or 10 others selected from a representative cross section of publishers. It would also include one or two well regarded industry representatives (i.e. Samir Husni, Bosacks) that would assist in selecting the facilitator, committee representatives and setting the agenda for guiding the discussion.

Let’s all hope that Meredith and Hearst step up and do the right thing and help liberate the beleaguered consumer magazine business.
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