Fair economic picture won't boost magazines; publishers will have to adjust to slow growth, says economist

Folio: The Magazine for Magazine Management, April, 1989 by Diane Cyr

Fair economic picture won't boost magazines

San Juan, Puerto Rico--The rest of this year promises slow but steady growth for the economy--particularly on the manufacturing side--but don't expect more than a so-so year for magazine advertising, says John J. McDevitt, corporate economist for 3M Corporation.

Overall, manufacturing output grew about 5.5 percent last year, and will slow to a still-respectable 3.9 percent this year, McDevitt told business publishers at the winter meeting of the Association of Area Business Publishers. But a recession isn't in sight, he says, "because we're now an export-oriented economy." Fully half of last year's productivity growth, he claims, is due to exports; and that picture will continue to brighten as the dollar declines abroad and as consumer spending grows faster overseas than here.

But the stronger growth in industry won't automatically translate to an equivalent growth in print ad expenditures, he warns. "As manufacturing growth remains high, so will advertising," he says, "but the share of advertising in print will decline from about 52 percent to 50 percent."

One reason, he says, is that industry is keeping a wary eye on the possible changes in ad deductibility. "If (Congress) allows 80 percent of the costs to be deducted (instead of 100 percent), obviously, there may be changes in total advertising expenditure and the composition of spending." That, he says, could translate into more point-of-purchase spending and sponsorships, as well as growth in other nonprint promotions. And, he says, although no law changes are expected this year, "certainly by 1990 there will probably be some changes in deductibility, and 80 percent seems to be an interesting number to look at."

As for this year, however, publishers should look for ad sales opportunities in the second half, due to an expected industry slowdown during the later months. "If industries don't meet their sales forecasts," he says, "they'll be increasing ad dollars to shake loose consumer spending in the secind half."

Overall, McDevitt notes, the printing and publishing industry will grow faster this year than the Gross National Product--about 3.75 percent, close to the same rate expected for manufacturing. But the fastest growth will be among books and greeting cards; periodicals are expected to grow only 2.75 percent.

"Certainly, slower (overall economic) growth in '89 will mean slower spending for advertising," says McDevitt. "But if you take a look at short-term growth--over the next five years--periodicals should be moving at the same level of industrial production, close to 3 percent."

In addition, he says, magazines will still grow faster than the GNP, which McDevitt expects to rise 2.5 percent this year. Trade and technical titles, in particular, are fueling growth by exporting themselves overseas, he notes. "The U.S. has become a major source of leading-edge technology, and if individuals (abroad) want to maintain knowledge of technology, they will get it through U.S. publications."

In all, he says, "there's no boom either. but there's no boom either. Growth will be about 2.5 percent for the U.S., 3 percent outside the U.S. We will all have to learn to manage businesses in a slow-growth economy."

To keep growing, he adds, publishers will need a "constant interjection of new periodical, to reflect the within a periodical, to reflect the changing needs of their audiences. Magazines should be looking for new needs of their readerd and finding new applications for existing sections."