The New Shape of the Magazine Industry

President’s Letter

As we move toward fall and start to look at 2012 ad budgets, no one in the magazine business will say that the transformation of our industry is complete. Crystal balls aside, history and understanding why and how things happen is always the best guide for moving forward. That’s why I called Baird Davis for this edition of Ads & Ideas. Baird’s background is in circulation analysis and through this lens, he is able to connect some dots that many people overlook.

Although many readers here are with associations, Baird’s perspective and opinions on the momentous changes that have occurred in the consumer magazine publishing business in this last decade are important, interesting and enlightening. I first met Baird Davis when we each spoke at a conference on the future of magazines at the University of Mississippi and later, when we participated in a webinar together for the Canadian Magazine Association. Here, Baird shares some insights that apply to all publishers. 

Jim Elliott: Why do you say the “40-year golden era” for consumer magazines ended in 2000?

Baird Davis: Prior to that, advertising was robust, circulation levels were high, an ad-centric publishing philosophy prevailed, and the valuation of magazine companies was reaching a record high. But two events occurred in 1996 without much concern from publishers: the loss of “stampsheet” and sweepstakes subscription orders (from Publishers Clearing House and American Family Publishers), which altered subscription circ practices by forcing circulators to annually substitute over 20 million of these orders with subscriptions by other methods. The other event was  wholesaler consolidation, which broke up wholesale geographic monopolies. This permanently altered newsstand channel operations, weakened the surviving wholesalers, and accelerated the sales decline.

JGE: And this all happened by the year 2000?

BD: Yes, and then the tech bubble burst, resulting in a major reduction in tech magazine advertising. This should have been a wake-up call for the magazine business, but it only mildly stemmed publisher enthusiasm for an ad-centric approach that supported precariously high circ levels.

JGE: And at this time, the agency structure changed.  

BD: Yes, super advertising buying agencies (Starcom, ZenithOptimedia, Carat) were intent on strengthening their bargaining position by more accurately defining a publication’s degree of reader “engagement.” They started using new analytical tools that forced publishers to provide greater audit bureau statement transparency which. in turn, precipitated significant audit bureau rule changes.

JGE: And by 2004, we were dealing with online revenue streams and companies like Google. 

BD: Search services forever changed the media and advertising landscape. And two years later, by 2006, Facebook expanded and soon publishers realized it, too, would have a profound impact on their business. 

JGE: It’s ironic that the expansion of search and social media services, which provided new opportunities for publishers to reach and acquire readers, became at the same time a serious advertising competitor and a strong rival in the battle for consumer attention. And now we have smartphones and iPads.

BD: Yes, 2007 and the iPhone triggered the start of a legitimate tablet platform for delivering magazine, newspaper and book content. These alternative media platforms, buoyed by thousands of new apps, proved enticing for consumers, and posed both a threat and an opportunity for publishers. 

JGE: And then the consumer magazine business had the ultimate wake-up call. 

BD: The financial bust of 2008 created an abyss from which the industry has not fully recovered. It precipitated an advertising revenue decline of 25% in 2009 and was a prime catalyst in driving the largest decline in circulation and newsstand sales in the history of the magazine business. 

JGE: How has all of this manifested itself in circulation trends over the past 10 years? 

BD: Paid circulation levels have declined by nearly 20% overall, and the number of publishing companies and magazines has declined. Newsstand unit sales are down nearly 40%, and revenue is off 22% in the last decade. Consequently, we now have fewer magazines, only 441 audited titles, down from 628. The “Big 4” publishers—Time Inc., Meredith, Hearst, and Condé Nast—now control nearly 50% of all audited consumer magazine circulation. 

JGE: Has there been a gender shift in magazine readership?

BD: Yes, first our demand for a 24/7 news cycle has helped support the incredible rise of the weekly newsstand celebrity titles which, in turn, stunted the newsstand sales of some traditional women’s titles. However, women-oriented publications have been much stronger than men’s.  More than 15 women’s titles launched in the last ten years are still being published with reported circ of more than 200k, including Women’s Health, Food Network, Lucky, In Touch, OK!, Life & Style, People StyleWatch, All You and Every Day with Rachael Ray.  Conversely, there have been NO male-oriented titles launched during this same period that are currently being published with similar paid circ levels. Today, male-oriented publications account for only about 20% of total audited circulation, down from about 26% a decade ago.

JGE: So the men aren’t buying at the newsstand?

BD: Only Men’s Health, among the top ten male titles, increased newsstand revenue during this 10 year period. Three of the top ten men’s titles no longer exist (Stuff, FHM, Official Playstation Magazine) and the other remaining best-selling male titles from this period lost 40% or more of their revenue during this period. Although it’s changing, men have been more active consumers of digital media than women.

JGE: How has the cover price affected sales?

BD: The average cover price rose 29% over the years. But the newsstand continues to be plagued by inefficient operations as a result of the wholesaler consolidation that began 15 years ago. A deep distrust exists between wholesalers and national distributors that has enabled retailers to dictate channel terms and placed the three remaining wholesaler organizations in fragile economic condition. The delicate channel balance between retailers, publishers, wholesalers and national distributors needed to achieve efficient operations has lost its equilibrium. The newsstand channel is in desperate need of reform.

JGE: So what do you see changing?

BD: The advertising collapse of 2009 has promulgated a management-philosophy shift from the ad-centric method to one that highlights the consumer. Many publishers have changed management, citing a need to meet the demands of a business altered by digital products and services. And now, a year into the new consumer-centric era, publishers are beginning to grasp the enormity of the task ahead of them. Economically delivering content over multiple platforms and doing battle with a new set of competitors for advertising and consumer attention is an excruciating experience. It involves breaking down old paradigms, making decisions where there is no adequate experience, and reinventing organizational and staffing plans. It means reinventing company culture because of the need for more cooperative inter-departmental relationships. 

JGE: So you’re saying the consumer magazine industry has grown smaller, with a concentration of power from the “Big 4.” Our product preference is skewing more female, and the business has grown progressively more technical and complex. The competition with other media for advertising and reader attention has grown exponentially, and advertising sales remain sluggish. And finally, circulation “quality” has been compromised, with too-high circulation levels, and sub-standard newsstand channel operations. Did I get it all?

 BD: It’s a wicked witch’s brew. 

JGE: So how do we survive in this new multi-tasking, bifurcated consumer magazine environment?

BD: I came up with 10 simple suggestions:  

1. Get better at the basics (edit, advertising, circ): This is old school, but necessary for funding new digital initiatives.

2. Keep organization structure flat: It promotes more effective inter-departmental communication and cooperation, which is needed in a more multi-faceted work environment.

3. Staffing: Add additional staff and retain existing employees with new media and database skills. Experience is good, but internet and web 2.0 savvy is crucial to success.

 4. Analytic mindset: Adopt a more analytical management process (less ad-centric) to economically maximize opportunities to reach an increasingly elusive customer base.

 5. Invest in database development: Analytics must be supported by strong database capabilities. It’s costly, but necessary.

 6. App development: A robust app development capability will be necessary for effectively delivering digital content and services. Like databases, it’s costly, but necessary.

 7. Help reform the newsstand channel: Publishers must get involved or accept the consequences of an even smaller newsstand market.

 8. Improve “circ quality”: Changing the subscription-source mix is critical for building the strong customer relationships needed to support a consumer-centric strategy.

 9. Know your customers: Everyone in the organization should be highly focused on the customer (something publishers have largely neglected in the past).

10. Do it today: Success will only accrue to those that can rapidly adapt to the severely altered market circumstances.

Baird Davis’ career in magazine publishing stretches back more than 40 years. It includes positions with Time, Inc. and for 25 years with Ziff Davis Publishing Company, where he was Senior Vice President Circulation.  For the last 13 years he has been a magazine circulation consultant and a Contributing Editor to Audience Development. His career has been devoted primarily to magazine circulation and the support of its current practitioners.