Sales and marketing people seldom let the mask slip. So, magazine industry people can keep up the smiles and pretend that the iPad or some other piece of magic is coming to their rescue. Or that they are in such control of their loyal readers that the return to former glories is but an innovation-click away. Even the current macro-economic trials convince some publishers that their woes are at least partly cyclical.
They are wrong. Magazines are in deep trouble.
Look at the stricken UK market, where specialist publisher Future Plc has just lost its latest chiefs ahead of continuing pain for its shrinking magazines business. That sparky company’s recurring woes are a reminder that even narrowcast specialist magazine content is not immune from the pressures of readers and advertisers who are more picky and price-conscious than ever.
The UK market is a good proxy for magazines everywhere because of its dependance on news stand sales (as opposed to posted subscriptions in the US, for example). So we get to see the awful news faster. The last set of magazine circulation figures show just how widely the contagion spreads:
- IPC Media’s venerable Woman and Woman’s Own, both down by 10% year-on-year
- Once hot men’s weeklies Zoo and Nuts down 32% and 23% respectively
- EMAP’s faded stars Heat and Closer down 22% and 13%
- Marie Claire down 10%
That is but a sample of the bad circulation news. But there is more still, in the falling advertising market (static at the very best in the UK for 2011) where magazines’ share is plunging sharply. They may be heading for half of the adspend share the sector once enjoyed.
These stats are just the latest in up to five years of declining circulations – and increased promotional spending (and two-for-one offers etc) to help limit the perceived damage – and reassure advertisers. Company profits tell the whole story. The top five UK magazine publishers now together earn the profit made by the largest (IPC) just a few years ago, all by itself. And the recent purchase of BBC Magazines made private equity firm Exponent feel pretty good because it was a fraction of the price most would have paid just a few years ago. So, the position is clear. Or is it?
Look for the logical results of this shocking decline and you might be surprised. During the past two years, the only significant magazine closure has been Hearst’s She, which was axed immediately after the acquisition of Elle and Red as part of the $651m Hachette purchase. The timing was neat but the closure might actually have been justified any time during the previous few years. But, forget for a moment the corporate motivation for preserving loss-making magazines. Why is the UK magazine business (and its so-similar Australian counterpart) much sicker than than, for example, the US industry?
- UK publishers have prided themselves on having large groups of paying readers. But, even in the good old days, few monthly magazines would have been profitable without advertising (weeklies are different but their copy sales have been falling even faster). Readers were seldom prepared to pay ‘enough’: Viability depended on the state of the ad market, almost as much as it did for advertising-only media like television.
- The publishers have (mostly) been hooked on news stand sales which (when sales were growing or stable) was a quick-reacting, good cash-flow model. In fact, it has always been a relatively expensive system and one which (unlike posted subscriptions) gives publishers no future-proofed relationship with their readers.
- The ‘profit-driven’ advertising revenue has frequently been secured only by boosting circulations among marginal readers. Thus, ad revenue has been hit by the consistent decline in copy sales. Hence, the current desperate newsstand picture of hundreds of titles in polybags containing ‘free’ magazines, books and cover mounted gifts.
- Advertisers now have many other choices. While core readers may still be relatively loyal to their magazines (whether digitally or in hard copy), this combination of pressures ensures unremitting losses for many publishers.
So, the model is broken. What can be done?
Big brands can make it
Nobody should predict the end of magazines or magazine-style content on the web, tablet, or TV or whatever. I think we might also bet on the longevity of brands as diverse as Cosmopolitan, Vogue, Good Housekeeping and Country Life. But it is easy to predict that the sector will never again be as large, even as it is today. There will – once reality bites – be many fewer magazine brands. Perhaps, also, there will be a large handful of hungry new operators to exploit the still-large pool of magazine-centric readers/ users.
The largest and very best-managed brands may be err fine – after a bumpy few years of choosing their digital routes. And you have to assume that privately-owned, well-funded companies like Hearst and Bauer (who have so recently pumped hundreds of millions into magazine deals) are committed to securing the future for their best brands.
Nobody doubts that the future of these magazine-centric businesses lies strongly in digital applications, of course. But beware the ultra-early ‘Eureka’ calls, as last week with Apple’s launch of its Newstand app. Publishers need to find sustained digital audiences for their products – and ways of generating profit from them. No small task at a time when the brands are suffering from revenue and readership shortfall in their traditional, printed form.
You would expect the ultimate digital winners to be visually and functionally much less like their printed predecessors than many of the current players, so there is a way to go yet in the whole print-to-digital race.
The new winners
Beyond the digitalisation of the leading brands, some of the “new” magazine winners may be:
1. Free, well-distributed magazines (and online content) that can cultivate deep reader loyalties – and un-jumpy advertisers who know exactly what they are buying. Put your money on Mike Soutar’s Short List and Stylist brilliant free weeklies. Must be many more to come.
2. Magazines for which readers are prepared to pay a viable price and which can, therefore, be super-profitable through advertising, whatever the state of the tide. Witness, The Week and The Economist. Such consumer-versions of business information publications/ services must also have further to go, as will US-style online newsletters.
3. New-wave retail-driven magazines (and online services) that derive profits exclusively from product sales to readers. These ‘mediatail’ publications and services may be like the well-established online-only Net a Porter and ASOS, or retailer-created brands which, arguably, could pose a more substantial threat to traditional magazine publishers than anything else. Traditional retailers will soon enough realise that their online traffic (and sales) will be enhanced by the addition of crafted editorial content, especially if they start to recruit star-name magazine editors. Mediatailing will become a major online market for media companies and retailers alike.
‘Separate to survive’
Traditional magazine publishers themselves are, of course, well enough placed to exploit these opportunities and even to work closely with retailers to lead the ‘mediatailing’ revolution to come. But, like those elderly daily newspapers trying to come to terms with their own nightmares, they would have to separate the new-wave activity from the legacy businesses – or find creative catalysts anyway to spur the development of new product that might never fully compensate for the once-mighty publications they will replace.
Otherwise the medium-term financial sacrifices involved in such ‘cannibalisation’ risk scaring magazine publishers to death. Which might risk bringing them back to praying for a return of the sunshine. As if…