What we learned from the recession: or should have

Folio: The Magazine for Magazine Management, Feb 1, 1993 by Reed Phillips

Ask magazine publishers what lessons they learned from the recession - by most measures more severe than any in recent memory - and you are sure to bear impassioned responses. During the three-year course of this recession, most publishers completely reassessed the way they do business. Before the downturn, operational weaknesses were masked by the economic boom of the early and mid-eighties. Then the recession thundered in, uprooting everything in its path and permanently changing the publishing landscape.

At the Jordan, Edmiston Group, Inc, we had the opportunity to see firsthand how many publishers changed tactics and strategies. We believe that the companies that used the recession as a spur to trim their operating costs and focus their corporate strategies are now prepared to emerge as stronger businesses. In addition, the publishers who come to better appreciate the importance of the reader are more aligned with the direction the industry is moving.

Are you ready to face the nineties? Have you done everything you con to strengthen your company's operations in anticipation of a rebound? Use the checklist of successful recession management tactics on this and the following page to see what you learned from hard times.

1 REDUCE COSTS

During the recession, publishers found themselves scrutinizing expenses and operating procedures that had gone unquestioned below. Michael Golden, senior vice president of The New York Times Co. Women's Magazines, notes that "a recession makes you very attentive to cost structure."

Of course, not all costs are created equal. Too often, publishers choose the easiest and least painful cuts first and delay making the more difficult ones. For example, staff reductions and rate base cuts are two of the most uncomfortable options, and are often done last for that reason. A better approach is to prioritize based on what is least likely to diminish editorial quality.

Renegotiate contracts with key vendors. During the recession, many publishers achieved significant savings by renegotiating contracts for printing, paper, fulfillment and office space. At the Jordan, Edmiston Group, Inc., we helped one client company save $1 million annually from its paper supplier. Another publisher we know lowered its printing costs by 17 percent - even though the reductions achieved by most publishers were in the 5 percent to 10 percent range. The trick here is to obtain the largest savings without disincentivising your supplier or lowering the quality of your supplies.

Lower your rate base. Once the recession was in full swing and advertising pages had declined sharply, many publishers found themselves with inflated rate bases that were too expensive to maintain. Lowering rate base proved to be one of the best decisions a publisher could make because it produced immediate savings without necessarily requiring an equivalent cut in ad rates.

Consolidate staff and centralize functions. For publishers with more than one magazine, consolidating departments proved to be a good idea. Prime candidates are the administration, production, circulation, advertising research and promotion departments. Golden of the New York Times Co. magazines says, "We have been very strict about increasing head count and are constantly looking for ways to consolidate staff."

Switch from staff ad salespeople to reps. At KC Publishing, which publishes Workbasket, Flower & Garden and Workbench, owner John Prebich converted from a sales staff to reps. By making the switch, Prebich saved on payroll taxes, medical/health insurance, T&E expenses and office rent.

Convert to desktop Publishing. The National Geographic Society converted from an Atex system to Mac-based desktop publishing for National Geograph Traveler and World, and is saving $200,000 annually. Clearly, this is a win-win decision: Money is saved and productivity is increased.

Re-examine healthcare programs. In 1991, Lang Communications switched from a traditional insurer to a managed-care provider. Sandy Sarhatt, Lang's executive vice president, operations, estimates that this change has saved her company more than $1 million over the past two years. When the change was made, she sent a five-page memo to each employee that explained the rationale for the switch.

Reduce paper weight and grade. Most publishers at some point have assessed the cost savings of reducing paper weight or grade. Last year, the newsweeklies went that route and switched to lighter stock, thereby lowering their paper costs and producing a lighter magazine - which in turn saved on postal costs. While this decision looks good to the financial guys, there were several weeks when the newsweeklies were as thin as comic books - which must have alarmed and distressed readers.

Tighten up book sizes. When ad pages decline, most publishers reduce their editorial pages also. Typically, a predetermined ad:edit ratio tells them how many edit pages to cut in response to fewer ad pages. During the recession, many publishers re-evaluated their ad:edit ratios and decided to lower the proportion of editorial pages. Although this move is attractive to budget-cutters, it should be treated as a last resort, since it compromises the value delivered to readers.