Be all that you can be: leverage your franchise

Folio: The Magazine for Magazine Management, June 1, 1991 by Barbara Love, Arthur Rosenfield

How to build on your magazine's readership and information base to develop new revenue from ancillary activities

Are you in the business of publishing magazines, or are you in the business of providing information? Savvy magazine people will say the latter. But if you can count on one hand the number of non-magazine ventures that generate revenue, you may be missing opportunities. Because of greatly reduced ad dollars at many publishing companies, executives are turning their attention to other products and services that generate revenues.

Business magazine publishing companies currently derive 15.1 percent of their revenue from non-magazine products, according to 167 executives responding to a survey on ancillary ventures conducted by FOLIO: and the Business Development Group, with the assistance of Raskin Research Associates. These companies expect to derive 17.6 percent from such activities in 1991, and 23 percent five years from now.

Small publishers expect these activities to contribute an even greater share of revenue than do their larger counterparts.

Right now, seven out of 10 business magazine publishers are developing their magazines' inherent potential to derive revenue from ancillary activities. What's new is the growing understanding that such products can't be treated as stepchildren or afterthoughts. This attitude is understood now to be an inhibitor to becoming all that one can be in specialized business communications. Building on the loyal readership of your magazine to create new revenue and profit centers is getting more top management attention.

From defensive to offensive

Almost everyone who's gotten into other businesses initially views them as "ancillary." Publishers have traditionally looked at ancillary activities from a defensive posture. They have developed them because pages were down or they feared other magazines or outside companies would get into those businesses first. The ancillary products or services were not part of the overall strategic planning.

Since these ventures were viewed as "add on" activities, publishers used the existing circulation and sales departments to staff them, wanting to avoid devoting resources to them.

But the companies that have been most successful at developing revenue from a variety of products see them as integral parts of their businesses. They evaluate these parts of their businesses as stand-alones.

As Tom Thompson, senior vice president of Phillips Publishing, says, "It's hard to tell what is ancillary and what isn't." He publishes 56 newsletters, eight directories and five magazines. "The newsletters are not more or less important than the magazines. We are a provider of services," he explains.

Another mindset

Publishers who have been successful launching products and services other than magazines talk another language. They do not think of themselves exclusively as magazine publishers, but as "information providers," "multi-media companies" or "full-service information firms."

Extending franchises is very much a part of the corporate strategy, says John Babcock Jr., president of the BPI Publishing Group, which produces 60 products, including magazines, books, book clubs, directories-even posters and an entertainment news wire. "We make every effort to think of ourselves as information providers and communicators. It may have been that a magazine created the franchise, but given the rapid pace of technology, there are many different ways we are going to have to provide information in the future. If you think about your business this way, as we do-and it's not easy-extending your product line is a core strategy," Babcock notes.

Phillips Publishing simply does not understand the term "ancillary" in regard to its many ventures. "We consider ourselves an information service company that surrounds the marketplace. When you start thinking of yourself this way, instead of as a magazine publisher, you see that nothing is ancillary. This strategy has been successful for us; the company as a whole now generates $60 million in revenue," says Thompson.

Publishers realize there are many ways other than ink on paper to deliver information, to add value to it, to educate, to bring buyers and sellers together-and it takes a broader definition of our business than "magazine publishing" to recognize those different opportunities.

Changing culture and structure

The ability to develop new products and services around your magazine depends largely on how individuals perceive their jobs, the study shows. More and more, publishers are in charge of not just magazines, but profit centers.

Publishers like Babcock and Thompson indicate that it takes different kinds of skills to produce non-magazine products such as newsletters, directories and seminars. This could result in different job qualifications. And it requires those employees to view their roles in terms of fulfilling customer needs, and not as something secondary to the company's primary product, magazines.

Many magazine publishing companies have seen the wisdom of "clustering" to take advantage of ad sales networks, according to the survey. But clusters built around markets-rather than products and services-are also helping to foster new activities. For example, instead of having a magazine division, a book division and a seminar division, a publisher might have a metals division, an electronics division, or a restaurant division-with each division having its own magazines, books and seminars.