Before you venture abroad: what you need to know about international markets

Folio: The Magazine for Magazine Management, Oct 1, 1992 by Lee B. Hall

* Personal finance. Despite the flop of a Reader's Digest French family finance magazine, every family in the world needs help managing its money--which some smart publisher is sure to address multinationally and profitably.

* Fashion. Although this field is French-led at the international high end, Vogue is prospecting to add a Japanese edition to its stable of European editions. No one needs to be reminded of the global success of Elle.

* Pictorial journalism. This is an area not only for markets with low literacy rates--as Life found out with its test of a special in Germany.

* Health. Although socialized medicine holds sway in most industrialized world markets, it hasn't proved to be the panacea once envisioned. American health practices are widely admired, and have already been represented aborad by, for example, a French edition of Rodale's Prevention magazine.

* Computers. The worldwide success of IDG's computer magazines can be a model for smaller publishers in this field.

* Engineering and construction. As McGraw-Hill has learned, this is an ever-growing international magazine market for U.S.-based publishers.

Structuring the deal

If you think you have a property to market abroad and have determined which foreign market you would like to enter, your next step is to think about the structure of the deal.

Forget publishing through a wholly owned subsidiary. Unless you are a rich international multimedia publisher (Hearst, Conde Nast, The Reader's Digest), taking this route is like climbing Mont Blanc in sandals. First- (or second-) time international publishers simply don't have the experience in foreign markets to operate wholly-owned subsidiaries.

Instead, consider the following options for setting up your European venture: Licensing is the least complex method of taking your title abroad. If you're cash-strapped, a successful license can provide a steady income with little outlay on your part. On the other hand, the failure of one licensed edition can kill the world market for your title. The Hearst Corporation, Playboy and Penthouse have shown how profitable licensing can be--if it includes close editorial cooperation with the licensee.

If you like bells and whistles, legally speaking, you might consider the newer option of a convertible license. This allows you to switch a traditional licensing agreement into a joint venture for potentially greater profits for the originating publisher.

If you have spare capital to put to work, consider going directly to a joint venture. This route is the fastest way of acquiring international publishing experience, since you'll not only have an investment in the foreign edition of your magazine, but will share in its management.

Because the eventual goal of almost all U.S.-based international publishers should be the creation of wholly owned subsidiaries, joint ventures offer the best first step. The main hazard is the American publisher putting his role in the JV on automatic pilot and neglecting to offer editorial guidance and advertising support. Major U.S. publishers, such as Time Warner, are experimenting with this structure, which is combined with a license. Hearst and the French publishers of Marie-Claire and Elle are joint-venturing their way around the world as well.