The New Rules

Folio: The Magazine for Magazine Management, Nov 1, 2003

Byline: Susan Thea Posnock with Sarah Wyatt

Four years ago, when Bob Carrigan left the magazine business for the Internet, it was a different place. Magazines of all kinds were swelling with advertising. Salaries were rising. Staffs were expanding - and so were the ambitions of magazine publishers.

While he was gone, magazine publishing got whacked by the recession and after years of cuts, many magazine companies have lowered their sights. Carrigan's line of work, technology trades, was particularly hard hit. On the casualty list: Upside, The Industry Standard, Internet World, Interactive Week, and Red Herring.

Carrigan, who returned to International Data Group as CEO and publisher of Computerworld in April, says he is acutely aware that it's no longer business as usual. He fully expects a turnaround in tech advertising but has no illusions that this recovery - like those from past slumps - will bring a tide of ad dollars back to the old high-water mark

This downturn, which some publishers have called the worst ad recession in magazine history, has forced the industry to come to grips with some long-term issues - including its continuing loss of share to other advertising media. "The magazine industry has just learned a very important lesson," says Michael Neiss, executive vice president and managing media director, Lowe Worldwide. "They're not an island in this new media world. They have to be even more aggressive." Neiss, whose clients include Johnson & Johnson and Unilever, says that marketers of print products need to do a better job at competing with electronic media: "They have to get into these client companies and really begin to build a case for why their medium is important."

Overall, the recession has accelerated and deepened trends that emerged before advertising cratered in 2000. In both b-to-bs and consumer mags, for example, ancillary products, such as events, conferences, Web sites, and research were taking on greater importance. During the downturn, many magazines scrambled to provide these marketing "extras" as a way to cement relationships and get whatever ad pages were available.

Now these goodies are the ante to get into the game - and an increasingly significant way to generate revenue. "Ancillary is no longer ancillary; it is core to our business," Carrigan says. "The recession pushed magazines into other areas. If we hit another tough period in spending, we'll be much better diversified going into it.

On the consumer side, the stresses of the recession have laid bare the long-festering problems that result from the endless quest for more (if not better) subscribers to bolster rate bases. Ad buyers who raised questions about quality of circ before the ad recession are now demanding better audiences for their messages. "Advertisers correctly won't be paying for unsubstantiated circulation," says Ed McCarrick, publisher of Time. From Reader's Digest to The Atlantic Monthly, major publishers have hacked away at circ files to cut costs and deliver a more promising group of potential customers. Convincing advertisers that magazines deliver an engaged, high-quality audience - and getting readers to prove that by paying more - will be critical to helping mags regain ground lost to television, radio, and other nonprint media (see commentary, p. 34).

Across the industry, a lasting legacy of this slump is likely to be leaner publishing organizations. Magazine companies cut back staffing to levels many execs had not thought possible. But even when the ads come back, these lean structures will likely remain in place. Mark Ford, president of Time4 Media, says his company's slim structure (especially compared to parent Time Inc.) is the way American businesses - not just publishers - will operate going forward. "There is a lot of eye-opening going on," he says. "I just don't see it coming back. It's once bitten, twice shy, and nobody wants to go through this again. Publishing companies are going to be very hesitant to re-staff and get ahead of themselves."

Finally, because of financial strains, the relative positions of various publishers has changed: In general, the strong have grown stronger, the marginal players have disappeared, and the damaged properties are looking to be kick-started in the hands of new owners (see "The Hunters," p. 36).

Here, then a look at how the recession has changed the business.

B-TO-B'S "IN DANGER OF BECOMING DINOSAURS?"

Nowhere are the long-lasting effects of the recession more obvious than in the business-to-business sector. "It's been a much more severe recession for b-to-b," says Joel Novak, managing director at Berkery, Noyes. "In 2001 and 2002, the b-to-b sector lost one-third of its advertising, compared to maybe 12 percent for consumer publications."

That raises concern about the overall health of the industry as it digs out of the slump. Richard Mead, managing director of The Jordan, Edmiston Group, says it is a mistake for b-to-b publishers to assume there will be a return to normalcy whenever corporations start spending again. To prosper in coming years, publishers must build multiple connections between sellers and buyers - magazines, trade shows, Webinars, etc. "You can't rely on advertising in your print product for 90 percent of your revenue," Mead says. "Unless publishers challenge that notion, the industry is in danger of becoming a dinosaur."