Oad Ahead onsumer Magazines

Folio: The Magazine for Magazine Management, Oct, 2000

MAJOR CHALLENGES, AND TALK ABOUT IN RESPONSE.

PARADOXICALLY, CONSUMER-MAGAZINE PUBLISHING IS AS healthy as it has ever been, while at the same time facing challenges more fundamental to the success of the medium than ever before. The rise of the Internet as competitor and complement, the transformation of circulation economics, and the challenge of attracting and keeping good people are all top-of-mind for consumer-magazine publishers. So is the imperative to maintain costs as they aggressively build out their brands. And so is the need to re-educate audit bureaus and ad agencies alike on new forms of reader acquisition.

All these things and more were on minds of six CEO-level executives who met with FOLIO: recently to discuss the outlook for consumer magazines.

ASSESSING THE TOP TRENDS AND CHALLENGES

Tony Silber: What are the top issues facing your companies over the next couple of years?

Barbara Litrell: One of the things is the definition of what our company actually is. A while ago we stopped calling ourselves a magazine company or even a communications company. We really look at it now as an information company. I think we're all challenged by recognizing that we can take a magazine and repurpose it--through networking and associations, through live events and, of course, increasingly online.

Silber: What's your ideal revenue split between print and online, say, three years out?

Litrell: We see the online b-to-b side as being an enormously high-revenue-producing area. So if I said 30 percent offline and 70 percent online, it would probably be at least where we're looking.

Silber: Stephen, what are the top issues facing your company?

Stephen Colvin: For us the challenge is consolidating the company, in one aspect, and making sure that we sustain the momentum we've had with the company's growth.

Silber: Jason? Objectives, priorities, challenges?

Jason E. Klein: The biggest challenge that we face, and I know a lot of companies do, is circulation. It's a fundamentally different environment. But as far as real opportunities go, we've gotten a lot of our growth in the past years by consolidating our position through brand extensions and by launching or buying new magazines.

Silber: Rhoda?

Rhoda Karpatkin: The Consumers Union philosophy is to get our publications of various sorts out there where people need the information--primarily where there are advertising media that try to persuade them to buy. We launched a Web site a few years ago that has been successful since the launch. It's a subscription-only, user-pays model. We have well over 400,000 subscribers. We're very focused now on building our Web capacity and helping consumers there. We think that's where our future lies. We think there's also a future in print for us, although it's hard to say for how many years.

Silber: Randy, top objectives and priorities?

Randy Jones: Well, clearly, for us as a smaller, entrepreneurial company, you have to pick very carefully where you're going to spend your time and focus. So for the last six months to a year we have focused on creating a vertical portal for the rich. The top 5 percent of the demographic pyramid.

On the print side, the big challenge is if you are a small company and you get a 15 percent postage increase, that's a big hit. The other challenge is how do you keep your top talent?

A. Douglas Peabody: I would state emphatically that the major trend affecting the magazine-publishing business today is technology. Technology has driven disintermediation at the newsstand, among other things. The enormous consolidation in the wholesaler industry is going to keep the marginal magazines off the racks eventually. So if you have a good brand, you know your business is going to get better, not worse.

With respect to our core franchise, which is 18- to-35-year-old men and women focused on health, fitness, well-being and beauty, we have a very solid franchise. However, we believe that we need to take better advantage of the available technology to protect the franchise. We are changing the structure of our organization and our incentive programs to attract people who have the mindset and capabilities to address the challenges presented by technology.

TURMOIL ON THE NEWSSTAND

Klein: Doug, you talked about some of the issues in the dislocation of the industry. But I think one of the biggest threats that we face as a business is what's happened in our channels. The channels have gotten so much power over us that they're beginning to dictate the terms of our business. And you can see it across the board-- you see it in the wholesalers, you see it in the loss of some agents, and in the decline of some. You also see it in the emergence of new agents with a whole different model for dealing with publishers.

Peabody: True if you're on the margin. Not true if you're providing a valuable service to your readers.

Klein: But still, this is not an industry where you've got 20 percent of the Players controlling 80 percent of the volume. The newsstand is a different story. It's not a growing pie. The notion of actually selling more magazines to consumers is really not a driving force anymore in any of what's happening.