Brand Extensions for City and Regional
by Matt Kinsman
An exclusive Folio: survey of city and regional magazines conducted last summer revealed a dynamic category that is getting more crowded by the minute. However, despite the increased competition, fewer than one quarter of respondents said they had launched a spin-off title or brand extension.
While the city and regional category has been one of the few bright spots in print media, there is a tremendous glut of competitors emerging in smaller and secondary markets as well as larger areas, including newspaper publishers looking for a way to boost sagging revenues. For future growth, city and regional publishers need to connect their audience to their advertisers with as many touchpoints as possible. "The good lesson to learn from city and regionals is that unless you're in a market that's exploding, it's hard to sustain growth in the core product," says Chris Schulz, publisher and COO of OCR Magazines, itself a spin-off of newspaper publisher Freedom Communications. "Resources can be limited and it can be hard or not even affordable to develop circulation. We need to look at other readers and pools of advertisers in order to fuel expansion."
And if it's every publishers' dream to build a franchise they can eventually sell for a huge return, solid brand extensions can raise the value of the entire property. "Brand extensions are extremely important for a city and regional publication," says Kim Mac Leod, president of Regional Media Advisors, a firm specializing in strategic assessments and mergers and acquisitions for regional magazines. Mac Leod cites one city and regional publisher that possessed two primary titles in two contiguous markets that was looking for a buyer. In addition to its core magazines, the publisher had developed a series of six home-related ancillary publications through a relationship with a local home builder's association. "Both core magazines were very strong and both were profitable but what really boosted the interest of the buyer was not just those two markets but all of these ancillary publications," says Mac Leod. "Because the ancillary publications had a slightly higher margin than the main magazines;as they often do;that extra EBITDA translated into a higher price. That publisher probably got an additional 1.5 points on their multiples than they would have if they just had the two core titles."
Find a Niche The most successful city and regional publishers tend to be the ones that have created a strong brand, then extended that brand through ancillary publications that are a subset of content that would normally be covered in a smaller way in the magazine. According to the Folio: City and Regional Magazine Survey, 20 percent of publishers that had launched a spin-off targeted the shelter market, while 15 percent launched luxury and lifestyle publications. In 2006, 417, a magazine that covers the region in Southern Missouri with that area code, expected to generate approximately $2 million from special issues with topics ranging from bridal to real estate.
"The leverage a regional magazine has is increased exponentially when they can increase the dollars in their ad community," says Mac Leod. "The more brand extensions a regional magazine can do, the deeper they can entrench themselves in that marketplace and the more compelled the advertisers will be to advertise in that magazine."
Look to opportunities within your existing product. "I think city and regional publishers learned early on that you have a core product, then you have brand extensions that might be standalone products but they were started within special sections," says Schulz. "Things like, ?The Bridal Issue,' the ?Summer Fun Issue,' ?Best Lawyers.' Topics where there's traction to spin off into separate publications."
And while online is becoming more essential, print still remains the best touchpoint for most city and regionals. "Right now we've made custom publishing a priority over Web," says Elizabeth Tucker, publisher of Alive, a lifestyle magazine for St. Louis. "We're interested in doing more to create a community online with blogs and forums but we're not quite ready for that yet." This year, Alive published 35,000 copies of a beauty guide packaged with its core magazine, plus an overrun of 10,000 copies mailed to cosmetic surgeons. The publisher has also created a "To Do" guide and is launching a spin-off called City Living, geared toward loft developments in trendy areas of St. Louis.
Diversify?and Diversify Newspaper publisher Freedom Communications originally launched a magazine business with national distribution, partnering with publishers such as Bill Curtis. In 2000, the company changed strategies, focusing on titles targeting the ultra-wealthy Orange County market. Today, OCR Magazines offers a stable that includes 70,000-circ. Orange County Homes, and generates around $10 million in annual revenue.
OCR is now creating a specialty-media division to further diversify its product lineup. The company has launched 50,000-circ. Coast Kids, targeting affluent families. In the past year, OCR launched an alternative weekly for young professionals called Squeeze OC and acquired Preferred Destinations, a tourist magazine, distributed at 80 hotels, the company's first outreach to upscale visitors. And while Freedom originally dabbled in national magazines and then went local, OCR is looking to revive that national strategy. "We've had a very limited geographic strategy of going very deep into a market," says Schulz. "Now we're contemplating expanding beyond the walls of Orange County."
While Schulz credits the brand extensions with helping take OCR from zero dollars to over $10 million in revenue in a few years, he warns other publishers not to overextend themselves. "Where it makes sense, we've used existing resources," says Schulz. OCR salespeople have a primary title but can also sell across the portfolio, and even the newspaper staff can sell into some of the magazines. "Seventy-five percent of our advertisers in specialty media do not advertise in the newspapers," says Schulz. "If you're just trying to create it as a portfolio, it becomes unfocused. It's certainly a challenge from the sales side when you have one person used to selling one product to get them well-educated on four or five or six different products."
Beyond the Page Going "beyond the printed page" has almost become a cliche for the consumer and b-to-b categories, but it's a strategy that's starting to gain ground among city and regional publishers as well. "The good ones realize that if they really want to serve the reader and advertisers, they need a strong online community for subscriptions, search, and for advertising," says Mac Leod.
According the Folio: City and Regional Magazine Survey, e-media revenue averaged less than a percentage point in 2005, up slightly from 2003. However, some publishers are acting on the opportunity online, and they anticipate that it will position them well for the future. DLG Media Holdings, which publishes Philadelphia Style and DC Style, expects to make "a couple hundred thousand dollars" in online revenue in 2006, according to CEO Dana Spain-Smith. "For 2007, we came up with a budget and then it cut in half," she says. "If we make that half, we'll pay for all the Web stuff we've done for the last three years twice over. The bottom line is, we will have a 200 percent profit margin online. The money is there. Will it replace print? Not yet. But in 2008, 2009, it will be a strong contender."
DLG currently offers podcasts, daily blogs and a Web-enabled video player that provides a behind-the-scenes glimpse at photo shoots and other events. In early 2007, DLG will debut a Webisode channel that features experts talking about certain topics, such as fashion or dining. In the spring, the company plans to start doing Webinars, and offer advertisers product placement rather than straight brand sponsorship, according to Spain-Smith. DLG is also looking into providing PDA and mobile content. "More national advertisers are starting to look at us because of the Web," she adds.
For DLG, Web sites offer wider packages for advertisers and instantaneous feedback for readers. It's also cheaper than print;assuming you don't get fleeced by Web design firms that don't know publishing. "There's lower overhead once the modules are built," says Spain-Smith. "Web sites are self sufficient, self-sustaining, profitable, and they help you pay for the next big thing coming down the pike."
Down East, serving Maine and published by Down East Enterprise Inc., is also bumping up its online presence. "In the past, our Web site was very typical of a lot of magazines;we basically shoveled our print content onto the site," says John Viehman, director of marketing. "We want to become more of a destination/portal site and downeast.com should be top of mind with people who want information on the state of Maine."
Viehman also sees online as way to shift Down East from more fickle ancillary channels. "We had an extensive gift business and a warehouse full of stuff that's now obsolete," says Viehman. "We're trying to get out of the gift business and back into the information business."
Several regional publishers are looking to real estate to be the early adopters online. "We should be aggregators for real estate;we're not designed to sell it but we'll do the first cull of tire kickers for realtors," says Viehman.
DLG built a real estate module for its DC site where viewers can look at properties. It is now bringing that model to its Philadelphia sites. It's an appealing package as realtors deal with a housing slide and find themselves with a lot of inventory but less money for marketing. "They need more cost-effective ways to market their properties because they can't keep putting dollars into print, especially print that's a month or two old," says Spain-Smith. "This may cost them $1,000 a month instead of $5,000 a month."
Down East is still developing its online revenue model, although Viehman has a definite preference for a CPM model. "We're trying to get away from ?time on site notions' that don't make sense," he says. "Why give someone a block of time on your Web site? As much as it does illustrate the power of the medium, you're holding yourself responsible for the creative. Years ago, magazines did per-inquiry advertising;it was one of those deals where you did it but didn't really want to. That's how I feel about pay-per-click;I'll do it but I'm not excited about it."
Down East anticipates between $75,000 and $150,000 in online revenue next year. "We're not coming out of the starting gate with a Web site paying for itself, we're all past that illusion," says Viehman. "It's going to take a good six months to get the kinks worked out. There are certain categories that are already there with the Web, and others that don't quite get it yet. Markets like real estate and lodging and hospitality want everything you can throw their way."
Go Live Live events are an extension that many city and regionals already do. The next step is to monetize those events. "Regional publishers have done events for years, such as food and wine parties and home shows," says Mac Leod. "The smart publishers look at events as self-sustaining."
Twice per year, DLG hosts a charity event called Dinner with Style, which brings together 35 of the region's best chefs to cook for attendees. "It's like wrangling cats to get the chefs together but it's sold out months in advance," says Spain-Smith. "It's a great way to give back and keep us fresh in our advertisers' minds. Does it make money? No, but it gets us in the right hands, in front of the right people."
Woodbury, a magazine targeting the exclusive North Shore of Long Island, hosts several charity fundraisers, including the Woodbury Disco Ball, which draws more than 1,000 attendees. "It's wonderful for the brand but if I'm going to put the name of the magazine behind something, I want it to do something for other people," says publisher Jennifer Polansky.
DLG is making money on its "Best of" party series, which draws over 2,600 people. The party sells sponsorships in which advertisers;such as Trump Casino;can rent out a room and create a theme and the money goes to charity. Sponsorships start at $7,000 and go up from there. "We throw a $250,000 party, and it only costs us $10,000," says Spain-Smith. "It allows us a buzz factor that's unbelievable."
Limited Resources Creating ancillary products can be a challenge, particularly for smaller city and regional titles with limited resources and staffing. Arizona Highways, a near perennial winner of the International Regional Magazine Association's Magazine of the Year award, found itself hampered by its own business model when it came to diversification. As a state-owned magazine that does not carry advertising, building brand extensions is not only essential, it's a multi-million dollar business for Arizona Highways, according to publisher Win Holden. "It's the cornerstone of our entire business," he says.
Although Arizona Highways is state-owned, it is not state funded, and receives backing from an enterprise-fund. That can limit the magazine's options. "We have to be much more entrepreneurial," says Holden. "Some say ?entrepreneurial' and ?state-funded' are oxymorons but we've found ways to be resourceful."
When Arizona Highways wanted to do brand licensing with certain partners;such as travel and tour operators, and airport gift shops;it discovered a prohibition against a private enterprise profiting from a state asset. "That shut down our licensing expectations until we were able to meet with like-minded legislators who understood this was not profiteering scheme, it was a brand extension and revenue build for the magazine in order to build our funding and keep us away from legislature appropriations," says Holden.
Further legislation led to the opening of Arizona Highways gift shops at Sky Harbor Airport. "We don't have to operate it, we partner with a firm that does a large volume of gift shop business," says Holden. "They carry our products and promote the magazine and aren't burdened with the state personnel restrictions that we are. They do what they do best;run gift shops;and we put our products in the sweet spot of the most heavily traveled airport in the Southwest."
The most important aspect of creating a regional spin-off is making sure the product fits your audience. Arizona Highways has a Web site (which serves to market its book and photography products) and has also teamed with digital magazine vendor Zinio to offer a digital version of the magazine. While the Zinio model;which requires a proprietary download to view;has fallen out of favor with some consumer and b-to-b magazine publishers for its lack of Internet capability, that's exactly why it appeals to Arizona Highways. "I realize an older demographic is actually the fastest growing audience online but our audience is not that big on the Internet," says Holden. "We're walking before we run. People have said, ?Gee, you're moving so slowly, you're not able to take advantage of some of these opportunities.' There may be something to that, but in the state environment, and the conservative business environment we operate in, that's not all bad."
Managing Costs, And Staff Successful brand extensions require the support of an already thinly-stretched staff. DLG manages its online extensions with editors who feel it is their platform, and one that is just as important as print. "Our editors wanted the Web as an additional outlet and it didn't cost us anything," says Spain Smith. DLG's dining editor Joy Manning started The Joy of Dining, a weekly blog. "We find our demographic is very hungry for that information, it fits into their lifestyle, and the editors are jazzed that people are reading that content." Spain Smith advises other publishers that going online can be cost-effective. "It doesn't have to cost a fortune," she adds. "Publishers shy away from really investigating how they get on the Web when they see these big numbers, usually from third-party design firms. It doesn't have to be that way."
Down East is hiring new staff for its online ventures but beyond that, Viehman says, the cost is minimal. "Right now we're advertising for three new online positions, which for a city and regional magazine, is not insignificant," he adds. "But these days, we're on the fourth or fifth wave of technology, and as a result your risk is way down. Now you're looking at a situation where you don't have to invest a quarter-of-a-million dollars in software any more, it's just in the qualified people you can hire."
"We're blessed with staff that understands brand extensions," adds Holden. "The ultimate example of multi-tasking is our marketing sales director, who handles the magazines as well as brand extensions, and is in tune for all sorts of cross-over opportunities."