The competition that isn't - Point of View

Folio: The Magazine for Magazine Management, March 1, 1993 by Carol Fogarty Roscoe

Editor's note: More than ever nonpublishing industries seem to want to publish magazines. With the rise of custom publishing, marketers in all fields view a magazine as a valuable marketing vehicle, designed to promote the marketers' products, provide added value to the customer and create a sense of community. Should magazine publishers fear this encroachment? Perhaps not, argues financial consultant Carol Fogarty Roscoe.

Conventional wisdom tells us that the information age is here. Not only are there more ways for consumers to get the information they want and need, but industries not usually associated with the dissemination of information are getting into the act--witness the magazines being published by IBM, Beyond Computing and Profit, in part about products that IBM used to advertise in computer magazines.

Magazines are beset--facing competition not only from their traditional magazine competitors, but from new media and from media buyers more and more likely to look favorably on forms of advertising other than magazines. And now other industries are showing signs of wanting to get into the magazine publishing business.

Are these industries a serious threat? Probably not. Publishers now dominate the information industry and probably will for the foreseeable future, even though other industries will continue to make to inroads as they see niche opportunities to earn revenues. The reason publishers can relax has to do with the nature of information itself.

Playing the information game

Information falls into three general categories in terms of function. To explain this concept, I'll use the industry I know best: banking and financial services.

* Information as an enabler: This is information that allows an industry or company to conduct its core business more effectively, or to improve the economics of selling its products, either by reducing costs or increasing sales. This information is used to support the sale of its services or to provide customers with data about their business--e.g., in banking, account balances, rates, and so on. Fidelity Investments carries this one step further by including an investment newsletter, published by Standard & Poor's, with its monthly statements.

* Information as a secondary revenue source: When an industry or company earns revenue as a byproduct of another business, this is a secondary revenue source. TRW does this by selling credit reports to consumers. Banks do this by selling information based on their primary businesses to other companies--for example, demographic data on account holders or targeted mailing lists. (But this can get sticky. When Citibank tried to market data on individual customers, consumers went into an uproar about privacy issues.)

* Information as a primary revenue source: This is an area magazine publishers know well, since they "sell" information for a profit as a stand-alone business. For their "customers," their readers, the information itself is of value--as entertainment, for learning, or as a utility.

Although banks and other industries are information on the enabler and secondary levels, few are prepared to develop primary, stand-alone information businesses that would compete directly with publishers. To become a more serious threat to magazine publishers, these industries would have to focus on selling information as a primary product, instead of using information to enable sales of core products, or as secondary revenue streams.

It is unlikely that the financial services industry would undertake such a project in the near future, and I'm willing to speculate that the same is true for many other industries as well. Any company determined to do this would have to make major investments and learn a whole new set of skills. Banks and publishers do totally different things. Basically, banks act as financial intermediaries, borrowing money from one source and lending it to another, or they provide related services such as safekeeping stock certificates, for which they collect a fee. Publishers find readers and advertisers, work with writers, editors and artists to put a magazine together, and then print and distribute millions of copies every week or month.

While publishers have been doing this all along, it's new territory for banks and other industries. The information game on this level is relatively new for banks, which do not have the core skills to develop a primary information business. What makes a banker successful (or any executive in almost any other industry) does not qualify him to be a publisher.

To compete with publishers on their own ground, other industries would have to continuously create information that customers are willing to pay for, develop a sufficiently wide readership to attract advertising support, then print and distribute mass copies profitably. This is a far cry from finding a person who needs to borrow money to buy a car, or selling a person several hundred shares of a blue-chip stock.

In recent years, most financial services companies have chosen to focus on their core customers and what they do best. Even American Express, publisher of Travel & Leisure, is under pressure to focus resources on its core business to improve performance. It is unlikely that the company would venture to expand its publishing activities much beyond anything not related to its travel or charge card businesses.