Magazines immune to staggering economy

Weekly Corporate Growth Report, Feb 12, 2001 by Rock, Justin

The overall pain of the slowing economy has been felt by nearly all markets. One exception, is the magazine industry. At least for now.

Due to the fact that magazine publishers complete production nearly six weeks before publications date, the results for the first three months of this year are already in. These numbers reflect the spending decisions made in November 2000 to January 2001.

Conde Nast Publications Inc., the parent of Vogue and a variety of other glossy magazines, stated that advertising pages were up 2 to 3 percent, while revenue rose even more than that. Hearst Corp., who publishes Town & Country and Harper's Bazaar, posted magazine revenue also above expectations.

Magazine performance has been anything but spectacular compared to last year's advertising revenue growth which was pushing 13 percent in the first quarter, but pubfishers were expecting much worse.

"Three months ago all we heard was bad news," says Jack Kliger, chief executive of Hachette. "this is not as bad as I thought it would be."

Monthly magazines are holding their own partly because their fashion and luxury-goods advertisers tend to be relatively immune to economic fluctuations. These advertisers aren't panicking. At most, they are just moving away from the most expensive and extravagant ads.

Of course, some of the advertisers in monthly magazines are using the slowing economy as an excuse to increase spending on advertising to shore up their position in the market. L'Oreal SA's United States consumerproducts division, which is one of the largest beauty and cosmetics advertisers, boosted its advertising spending on magazines by 75 percent in the first quarter of 2001.

Some magazines are suffering along with the economy, publications that rely on technology advertising in particular. Red Herring has had two rounds of layoffs and Industry Standard recently cut 7 percent of it work force.

Even the three main weekly magazines have been hurt as major advertising dollars from dot-coms, United States auto makers and tobacco companies have reduced advertising. Time, Newsweek and U.S. News & World Report all saw advertising revenue fall dramatically in December of 2000, partly because of the previous years' frenzy of advertising spending by dot-com companies.

In 2000, many magazines introduced larger that usual ad-rate increases to compensate for the higher cost of paper and postage. The publishers have been able to pass the increases on to advertisers without having to discount very much. The rise in both ad pages and revenue for the top performing titles suggests that this may be the case. What's more, the larger publishing companies have the resources to put together ambitious advertising campaigns which help them to weather any economic downturn.

For the rest of 2001, publishers are trying to regain some optimism, particularly for the second half of the year. Micheal Clinton, the executive vice president at Hearst Corp., says that after a sluggish start, marketers have "realized they have to do business and are spending."

By Justin Rock

Editor-in-Chief