NEW YORK—A hundred or so publishing executives gathered at the Yale Club here yesterday for the Fulfillment Management Association’s annual luncheon. The panel, moderated by FOLIO: executive editor Matt Kinsman, was focused on the future of the magazine publishing industry, and how two consumer publishers—Hearst and Atlantic Media—are weathering the current media storm.
“The assumption is that we are bumping along the bottom, but that it won’t get substantially worse,” said Hearst Magazines executive vice president and general manager John Loughlin. He doubts that this ad comeback will be like the snapback
following the dot.com bust or 9/11. “Personally, I think this will be a
long, slow recovery, as too much inventory chasing too few ad dollars
will ultimately change the revenue equation and cost structure for
However, Hearst’s inverse marketing proposition—hooking
readers with online content, and then having them seek out the brand—is “a totally different consumer experience,” he said. In 2008, the company sold 2.1 million net paid print subscriptions through Web-based marketing, and expects to sell 2.3 to 2.5 million in 2009, making Web-driven subscriptions the largest component of Hearst’s direct-to-publisher business mix. "Ninety percent of these new subscribers had no prior transaction history with the magazine," Loughlin said.
Atlantic Media’s tactic was to start from square one. “We ripped up our plans and rethought everything," said president Justin Smith, "starting with positioning of our brands and shifting aggressively and quickly to non-advertising streams, gaining more profit from the consumer, and making a huge move to digital."
Smith said the Atlantic has been pushing integrated marketing, an area which they’d neglected in the past. After five years of hosting the annual Aspen Ideas Festival, for instance, the magazine will finally leverage the event’s content in print (and its Web site) through the upcoming “The Ideas Issue.” “Now we can go to advertisers with a new way to [reach] the consumer,” he said.
At the recent IdeAliance Primex conference, Loughlin said “hope is not a strategy.” What is a strategy for Hearst, he said at the FMA panel, has been analyzing editorial headcount (spurred by international tracking, which found U.K. titles 40 percent to 60 percent more efficient in terms of operations) and reducing steps in production—from story assignments to pre-press facilities—from 13 to six, creating “fewer errors, a better design, and staff who are more engaged." Smith also recalled conversations with Felix Dennis comparing the size of the mastheads between British and American magazines.
Hearst has also spent the past six months working to shorten the time between ad close and on-sale dates from 47 days (“which in today’s world is an eternity,” Loughlin said) to 33, or something closer to a weekly. This way, he said, Hearst can capture late breaking ad dollars and prove that magazines can be competitive in the advertising market.
“Ultimately, driving efficiency reduces headcount,” Loughlin said, “but we’re honest about it.”
Added Smith: “We’ve been feeding off of excessive advertising revenues for years, and now it’s over. It’s time to get back to bare-knuckles publishing and create great products with fewer resources.”
Looking Ahead to E-Readers
With Hearst’s development of a magazine e-reader and the success of Amazon’s Kindle, the platform was, not surprisingly, at the center of the discussion. “I am of the view that magazines have a bright future, but it’s only as bright as we are willing to be flexible about our distribution platform,” said Smith. After reading that Amazon anticipates its Kindle to generate upwards of $300 million in revenue this year and $70 million in profit, growing to $1.6 billion in revenue and at least $400 million by 2012, Smith said he expects a rapid move to the e-reader platform. “Frankly, I am hopeful that this could be the panacea that we are all looking for.”
Loughlin, however, wasn’t so sure. “I don’t necessarily think the e-reader is the consumer bullet, but it will definitely help. We’ll begin to see advertising on e-readers. I’m bullish, but it will take some time to establish specs and standards.” One thing he is sure of: database investment. “If content is king, consumer data is queen,” he said.
Smith, like many, said he has his doubts about the print model, but added that the Atlantic has a major advantage in that its low frequency, long-form content is best consumed in print. “In five to 10 years, we’ll look back and realize these were the murky years—offering content for free and having no real business model. The long term trend is that print publishing is declining, and the short term reality is that the Web is not making up for it."
In response, Loughlin said: “The only thing that’s declining are ad pages, not publishing.”