In a Fractionalized Industry, Resiliency and Optimism Prevail
An exclusive survey of CEOs reveals expectations for growth, including for print, and a focus on adaptation.
Folio: fielded a 13-question survey to a list of magazine-media industry CEOs and c-suite titles from its database in June and July. The survey closed on July 15th, and generated 68 completed responses.
Sixty-three percent of magazine-media CEOs in an exclusive Folio: survey indicate that they anticipate revenue growth in 2016, and more than a quarter of all respondents expect double-digit growth this year.
That’s a healthy amount of projected growth indeed for an industry undergoing disruptive change, and it reflects a resiliency that other print-media based industries have not shown.
On the other hand, 22 percent of respondents indicated that they project themselves to be flat and nearly 15 percent acknowledged they expect a decline in year-over-year revenues.
The 14-question survey, fielded in June and July, was intended to establish and present an empirical baseline that shows what senior magazine-media executives are thinking about as they lead their companies into the second half of 2016 and plan for 2017.
About the Respondents
Our findings were fascinating. And our respondents came from all sectors of the business. B2B was most represented, with 52.9 percent or respondents saying they are in that sector. Consumer media represented 36.8 percent of respondents, with this group split among mass consumer, specialty consumer, and city and regional media. The remaining 10.3 percent of respondents were from the association sector, which includes both B2B and consumer, but tends to skew toward B2B.
In terms of company size, half of our respondents reported revenue between $1 million and $10 million, with 39 percent reporting revenue of greater than $10 million. Of those reporting revenue of more than $10 million, 16.4 percent said they’re between $10 million and $25 million. Another 7.5 percent said they’re between $25 million and $50 million, and another 14 percent were larger than that.
Ten percent of respondents reported revenue of less than $1 million, so for this particular survey, the respondent base skews small. Smaller media companies, admittedly, sometimes see the world in different ways than their larger counterparts. This can be true in B2B and regional media in particular, where print assets remain a primary revenue driver.
More than 60 percent of respondents indicated that they employ between 11 and 100 people, a number that’s consistent with the revenue size of the respondent companies. Twenty-two percent said that they have fewer than 10 employees, while 17.6 percent said they have more than 100 employees.
Both sets of data—company size in revenue and company size in employees—are good indications of the characteristics of the magazine industry circa 2016, where tiny entrepreneurial shops coexist with well-established and growing enterprises, and also with corporate giants, like Time Inc., UBM, Meredith, and others. This says something important, something that’s overlooked in much of the macro narrative about the state of the magazine industry: Despite a decade or more of pressure from search, social media, and digital-only newcomers, the industry remains to a significant degree unconsolidated and fractionalized. It remains a place where entrepreneurs start small businesses and where—should that entrepreneur so choose—she could serve a market and make a living for herself and her staff, with, say, $1.5 million in revenue. That may not attract breathless media coverage, or multiple rounds of venture capital, or private equity firms looking for the next big investment, but it is a characteristic that suggests notable resilience for this industry.
Resilience will be needed. The market is changing and it is not likely to change back. Our CEO respondents recognize that. Asked to name their biggest threat, they didn’t say competitive magazines, or declining ad budgets, or consolidating markets. More than one-third (35 percent) said their readers are the key, and their biggest threat is the changing media-consumption patterns of those readers. Also mentioned were digital disruption and the loss of audience and revenue to social media. And when you think about it, all three of those reasons are interrelated. The one is both the cause and effect of the others.
New competition was cited by less than 17 percent of respondents—although social media might be their real competition, and they simply don’t see it that way yet.
Are You Expecting Growth?
Given this profile, it’s logical to ask the next question: Are you bullish? Do you expect your business to grow? And as noted, 63 percent of respondents said yes, and a quarter of them expect double-digit growth.
Then the survey asked two follow-up questions: What will be the most important growth driver for your company, and second, what are the fastest-growing areas of the business? In the case of the first question, our respondents split among three revenue streams: Print (26.9 percent), events (20.9 percent), and digital advertising (32.8 percent). Marketing services and subscriptions, each at 9 percent, plus ecommerce, rounded out the revenue sources. Two things stand out. One is that expectations for print growth remain strong. This is almost certainly true more for the smaller players, especially in regional media, than for the industry as a whole. The other thing is that despite all the concerns about viewability, fraud, and poor engagement, digital advertising, at least in the eyes of these respondents, remains an important area of growth.
Marketing services, on the other hand, where many B2B companies are seeing their most significant growth in products like co-sponsored surveys, webinars, white papers and special email blasts, came in at less than 10 percent in terms of being a major growth driver.
“I am surprised to see that this sample of CEOs still have 61 percent of revenue coming from print,” says Don Pazour, CEO of Access Intelligence, Folio:’s parent company. “I tend to think this is some of the smaller publishers. Most large B2B publishers have seen print declining steadily at higher rates than this survey shows.”
The second growth-and-revenue-stream related question—what are the fastest growth areas for your company?—did not quite sync with the responses to the first question on important growth drivers. Here, digital media, events, and content marketing ranked as the top three for most respondents, and print advertising and database–related revenue streams ranked as slow-growth areas. “Even more surprising to me is the view that 27 percent see print as driving growth in 2016 versus 21 percent for events,” Pazour adds.
How Media Companies Have Changed: A Five-Year Look
We also asked companies to tell us how their revenue streams have changed in the last five years. The results are striking. Respondent companies reported that, five years ago, print represented more than 75 percent of their total revenue, with events, digital advertising, and marketing services all hovering around 10 percent, give or take. For this year, our survey respondents are saying that print will decline to just short of 62 percent of total revenue, with digital advertising increasing to 22 percent and events increasing to about 14 percent. Marketing services actually declined by a percentage point from 2011. This by itself is an interesting development. It may be that companies are finding that demand for marketing services isn’t as great as it was. After all, it is true that webinars, white papers, eblasts, online microsites, and more existed five years ago and earlier. Or, it may be that the scalability of marketing services is proving to be a challenge, as sales, production, and content-creation staffs struggle to produce advertiser-sponsored material.
Most likely, though, is that respondents are seeing major growth in native advertising, and are classifying it in their digital-advertising revenue streams. “Print, while important, has become a smaller percentage of the revenue pie,” says Stephen Davis, president of SRDS. The clear drivers of revenue growth are events and digital media.”
Interestingly, Eric Zinczenko, CEO of Bonnier Corp., sees it differently. “We are approaching 2017 with the reality that we can expect little to no growth coming from traditional media activities, and incremental growth in digital,” he says. “The focus for growth across our portfolio will come from licensing, syndicating our content, launching new events, and continuing the custom work we are executing for our strong endemic client base.”
New Focus on Databases as an Asset?
The magazine industry has long discussed database marketing. In recent years, it has come around to the concept of a unified database, encompassing print subscribers, digital subscribers, event and webinar registrants, and other sources. That’s still a work in progress, in all sectors, and often-expensive tech “solutions” don’t translate into actual increases in sales volume or audience engagement.
Regardless, the business is changing, faster than ever, and media companies have no choice but to adapt, considering that advertisers now have their own sophisticated databases, and when they don’t, they’re asking for “account-based marketing”—where the media company identifies specific targets for them and communicates not with a mass audience, but only those defined targets. This change is so dramatic that the old media industry model—aggregating an audience and selling that audience to advertisers—has given way to a new model. In the new model, you aggregate the audience, develop insights into that audience, and sell those insights to advertisers.
So it’s not surprising, then, to find that among our CEO respondents, 71.2 percent say that database development and data management will play a significant role in creating and monetizing new products. It does make you ask, too, what the other respondents—nearly 30 percent of the total—are doing with databases. Perhaps they’re so small that they simply work with spreadsheets. “Publishers are making investments in audience infrastructure to better harmonize and activate their data,” says SRDS’s Davis. “A unified database will allow faster growth as it will allow publishers to better spot niche audiences that may be underserved, and also show marketers the behaviorial and demographic makeup of their audience.”
As important as the rise of databases has been, the need for media to engage audiences remains a critical part. “The model that excludes the need for B2B publishers—where marketers have their own SEO/SEM campaigns, their own content-marketing capabilities, their own social media activations and so on, has its limitations,” Access Intelligence’s Pazour notes. “Publishers still have the engaged audience, trusted brands, and credible content in the markets they serve. The key is pivoting to use these assets in a way that has a simple and effective interface to advertisers’ systems.”
Access Intelligence, he adds, leverages audience insights primarily to monetize the audience through event registrations, and also for providing access to audiences for sponsors and exhibitors. “Our model beyond events derives revenue from exhibitor/advertisers by leveraging our audience insight, brand, and content creation capabilities,” Pazour says. “But it is events first for us. And for events, it is audience/registration first.”
You learn a lot about how companies see themselves and their opportunities by looking at what they’re buying, so another area of inquiry for our CEO respondents was their investment priorities. It turns out that the top two technology priorities, by far, were database development and web development. Just short of 50 percent of our set of CEO respondents said these are their top two priorities. Content management, marketing automation, app development, programmatic advertising, and digital magazines were also listed as priorities. Web development, admittedly, is a broad area, but that 50 percent of respondents see it as an area of focus tells us a great deal about where company leadership is spending its time and energy. “Our investment plan going forward is to continually refine our tech stack,” says Bonnier’s Zinczenko. “We already employ data management tools, we have our own proprietary CMS platform, we have complex avertising tech and we have other automation partners helping us. Our focus now shifts to company-wide employee adoption of these automation tools so that we can realize the true potential that these tech solutions offer.
And we asked our respondents to tell us about their cost structures. Not surprisingly, content creation and editorial was the single largest area of cost for most respondents, with sales the second largest.
Finally, we asked a broader question about investments as well, seeking to identify perceived strategic needs beyond technology. Respondents indicated three primary areas of concern:
Hiring new skillsets. More than 27 percent of respondents said they need to bring employees in who have different skills, including data scientists, web developers, advertising ops personnel, and more.
Investing in data management tools.
Creating a new event.
In identifying these priorities, our CEO respondents indicated the need to transform business models to respond to market changes, and the three areas—new skills, data management and events—dovetail pretty well with the revenue projections and growth areas identified in other questions. Bonnier’s Zinczenko’s priorities dovetail with the broader survey results. “We are targeting investment in three key areas: hiring expertise in growth areas supporting our strategic plan; adding solutions to improve workflow and processes enterprise wide; and potential acquisitions around events and other activities.”