Contrary to popular belief the sky is not falling on the consumer magazines business. It might not be all peaches and cream, but industry performance markers have fallen into a symmetrical pattern that describes a permanently smaller industry, one that is now properly sized and prepared to meet the competitive media challenges of a new era.
Market Bellwethers Converge
A strange thing happened to the consumer magazine busidness near the end of 2009. The three major market bellwether performance indicators (circulation levels, newsstand sales, advertising sales), which had been sending mixed signals in recent years, simultaneously aligned.
Circulation Levels: In the year 2000 the circulation of audited consumer magazines peaked at 312 million. At first the circ level declines were gradual. But in the last few years the decreases have become much more acute. By the end of 2009 the circulation of audited consumer magazines had plunged to 251 million, a drop of 22 percent.
Newsstand Sales: Newsstand unit sales have been steadily declining for decades, but revenue remained stable, at about $3.2 billion, for the 8 year period prior to 2008. But in the last two years industry newsstand revenue of audited consumer magazines fell to an annual level of approximately $2.7 billion—off about 16 percent.
Advertising Sales: Advertising revenue of audited consumer magazines also declined, by just over 20 percent in the last two years.
I’ve used PIB data for this calculation. Although PIB revenue can’t be taken at face value, the year over year percentage change data is a useful measuring tool. Additionally it should be noted that PIB does not report on all audited consumer magazines, but it remains a reasonably representative industry sample because the 188 continuously audited consumer magazine titles reported by PIB in 2009 accounted for 81 percent of the circ of all audited consumer magazines.
The chart below (in 000s) compares 2008 and 2009 PIB advertising revenue for all the continuously* audited consumer magazines, including the “Big 4”—Time, Inc. Conde Nast, Meredith and Hearst.
(* “Continuously”refers to publications that reported advertising sales to PIB in all four quarters of both 2008 and 2009. It excludes 21 titles that discontinued publishing and/or did not report ad sales in all four quarters of 2009. By excluding non-continuing PIB publications from this analysis it provides a more representative (less skewed) picture of the industry’s true advertising sales performance.)
In 2008 PIB revenue for continuously audited consumer titles fell an estimated 8 percent and in 2009 it dropped 13.8 percent. In the last two years the decline of PIB ad revenue for audited consumer magazines has been approximately 21 percent.
The pace of the advertising decline was slower to manifest itself, but by the end of 2009 its descent (21 percent) fell right in line with industry circulation level and newsstand revenue decrease rates.
Touching Bottom: Defining New Industry Parameters
The simultaneous convergence of the three major bellwether indicators, along with signs of a modest advertising recovery in 2010, flattening newsstand sales and the success of a major new publication (Food Network), provide persuasive evidence that the consumer magazine industry is no longer searching for the bottom. The industry appears to have weighed anchor on a smaller business—whose parameters are 20-25 percent smaller—but one that’s ironically, perhaps, more vibrant than the bloated environment they have vacated.
New Directions for Consumer Magazines
As a result of its bruising descent the industry is battle scarred and less arrogant. But it’s also leaner, wiser, a more effective consumer and audience development marketer, less advertising-centric and better prepared to cope with the demands of new media and the startling advances in technology.
These developments have conspired to change the consumer magazine publishing business in significant and subtle ways.
Industry Consolidation: The ravages of the last two recessionary years have not fully worked their way out of the system. This means that further industry consolidation can be expected.
Influence of the “Big 4”: These four supersized companies control (end of 2009) 56 percent of consumer magazine advertising revenue (60 percent in the 4th quarter of 2009). Their circulation, newsstand and advertising dominance is likely to increase in the future. Because of their scale, strong product lines and abundant human and financial resources they are well advantaged to successfully transition to a publishing model that is less advertising driven. Still to be determined, however, is how responsibly they’ll act to protect the industry’s open business environment and shared resources (i.e. the newsstand channel).
The Big Get Bigger, The Small Get Squeezed: The business climate has become increasingly unfriendly for smaller publishers. They’ve enjoyed somewhat of a free ride in the past, but now they’re being squeezed harder than ever by most magazine service providers—postal, fulfillment, national distributor, printing/paper and banking. Their operating expenses are rising and at the same time it’s become more difficult for them to attract the skilled personnel necessary to provide the array of new consumer marketing services and information demanded by advertisers. Judging from advertising sales the last two years and the record number of small magazine closures it appears as if smaller titles (especially those that are male oriented) are increasingly vulnerable when competing with alternative electronic media sources for both readers and advertisers. Finally at the newsstand retailers are looking to reduce the number of “underperforming" titles, which will definitely restrict the future newsstand distribution of smaller titles.
Publication Preference Change: The prospect of publication preference changes will probably be most dramatically illustrated by the growing divide between female and male oriented titles. Female publications generate two times more advertising revenue and circulation than male publications. In 2009 female oriented publications further distanced themselves. It’s estimated that the advertising revenue of the 69 continuing PIB male oriented titles declined 21 percent, while the PIB advertising revenue of female oriented titles declined at a much lower—11 percent—rate.
In the women’s field the best advertising performance was reserved for those titles whose advertising featured products/services for the home, including food and health. The often disparaged traditional women’s titles (BH&G, Good Housekeeping, Family Circle, Woman’s Day, Ladies Home Journal, Redbook) were the only significant sized consumer magazine category that was able to post positive advertising results in 2009—advertising revenue up 4.4 percent. The advertising shift toward “for the home” publications will probably be accompanied by a commensurate change in reader product preferences.
For most male categories the news was universally grim. Advertising revenue declines of 20 percent or more were the norm. There were 25 continuously audited consumer titles that registered PIB ad sales gains in 2009, but only two (Muscle & Fitness, Flex) were male oriented.
Ascendancy of Consumer Marketing: The advertising decline of the last two years has muffled the appeal of the advertising-centric management approach that pervaded most consumer magazine publishing companies for the last two decades—so much for conventional wisdom. Publishers now recognize that to more effectively compete with new media sources they must demonstrate greater consumer awareness. This has precipitated renewed emphasis on developing strong consumer and audience development marketing skills. This is a major change; one publishers are just now coming to grips with.
The consumer magazine business of the future will be; smaller, more “Big 4” dominant, increasingly women focused, less kind to smaller publishers, multimedia sensitive and more consumer oriented.
After nearly a decade of trial and error, the industry now appears ready to confidently face the future. Nobody has articulated the essence of this remarkable change better than Mr. Charles Townsend in his recent address at the MPA/PBAA Retail Conference. And who better than the head of Conde Nast, a company that has, arguably, been the most chastened by the advertising turndown, to verbalize this dramatic change. Mr. Townsend spoke of the death of the advertising-centric publishing philosophy and the renewed emphasis on the consumer. Most importantly Mr. Townsend, using the iPad as metaphor, spoke of publishers finally getting beyond their fear of electronic media. He suggested that new technology, like the iPad, should be embraced, rather than feared by publishers. He described it as a means of attracting new readers, with very few adverse ramifications.
My calculations, observations and beliefs confirm that Mr. Townsend probably has it right. The stars and the bellwethers have aligned and I believe history will show that 2010 marks the start of a new, and exhilarating, era for the consumer magazine business.