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Hearst EVP: 'Hope is Not a Strategy'

John Loughlin says company must 'streamline, redefine the making of magazines.'



Tony Silber By Tony Silber
02/04/2009

CLEARWATER, Florida—Magazines are a “lean-back” experience, unlike other forms of traditional media, and are holding their own better in ad sales and circulation than other media, Hearst Magazines EVP and general manager John Loughlin told a meeting of magazine production executives here Tuesday.

Loughlin was the keynote at Primex 2009, IdeAlliance’s annual event for print-media production executives and their suppliers.

But even with the industry’s strengths, Loughlin said, the old pattern of growing sales and circulation, interrupted by economic downturns, may no longer hold. “It’s different because we’re living in a fundamentally changed world, one where technology has become so powerful and inexpensive that consumers and advertisers now have almost unlimited, on-demand, always-on choice,” he said.

Low or No Growth, High Costs

Hearst, Loughlin said, is responding by building its business based on the following assumptions:

•    Low or no growth. “While we hope ad and circ revenue will rebound, we’re working on the assumption that magazines are mature businesses and will see only low growth, or no growth over the mid-term horizon.”
•    Enhanced production values. “Magazines need to leverage their ‘magazine-ness’—the design of their pages, the quality of their paper, and their physicality, their authority, the impact of their ideas.”
•    The need to retain talent. “Keeping smart, talented people is critically important to the future. And adding new skills and perspectives from disciplines traditionally outside of print will become prerequisites for evolution and growth.”
•    High costs of paper and postal. “We assume for structural reasons that paper costs over time will stay relatively high and we’ll see constant increases in the cost of delivery.”
•    Newsstand erosion. “The newsstand is an important channel for publishers, but it’s one that’s beset by seemingly intractable problems. Unit sales have been declining annually on a virtually uninterrupted negative slope since the seventies and I see nothing on the horizon that suggests that course will reverse itself.”
•    Migration to lower-cost digital. “If there is a bright spot, it is that we are finding a huge new universe of consumers willing to buy magazines and techniques that are much more cost-effective.”
•    Evaluation of circ levels and ratebases. “Virtually all consumer magazine publishers are constantly engaged in the evaluation and optimal circulation levels and ratebases."

These assumptions are well and good, Loughlin said, but hope is not a strategy. So Hearst is focusing on five action items, including: streamlining and redefining the making of magazines; lowering the cost base; embracing both print and digital; changing the perception that magazines are “old media” in the process of fading away; and finally, being prepared for what comes next.

Act Like Weeklies


He suggested that monthlies need to act like weeklies, increasing the time for sales by three weeks and making editorial more timely and relevant. In lowering the cost base, he cited Hearst’s success in generating online subscriptions to its magazines. In 2008, he said, the company generated 2.2 million subscriptions online, making it the top circulation source. “And the cost is one-fourth to one-tenth of a mail-driven subscription.”

In the strategy for embracing both print and online, Loughlin noted that Hearst has had great success with a growing network of non-magazine-branded Web sites, which in turn drive massive traffic back to the magazine sites. And those sites are helping build a huge e-mail address database that has grown from 3 million to 25 million in 2008. “We feel that each e-mail address is worth 80 cents to our business,” he said.

Tony Silber By Tony Silber
02/04/2009







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