Condé Nast’s Dolce Vita

The publishing empire's low-budget approach is booming overseas. Is this the future for the U.S.?

Luca Dini, the editor in chief of Italian Vanity Fair, faces difficulties his peers in the U.S. would welcome. The Milan-based magazine has grown so much since launching as a newsweekly nearly 10 years ago that it’s hard to imagine it getting any fatter, with one of last September’s issues bulging to a record 408 pages.

The secret to its success? An upscale combination of high-gloss celebrity and serious reportage, one that embraces stars while tweaking the powers that be. On one startling cover in 2004, a very pregnant, angry-looking Monica Bellucci posed naked to protest a Vatican-supported law against donor sperm. (The same year, the sex symbol played Mary Magdalene in the film The Passion of the Christ.) More recently, one of former Italian Prime Minister Silvio Berlusconi’s daughters made a rare attack on her father’s scandalous behavior in an interview that grabbed world attention. Lately, the mix has ranged from royals playing polo to the Egyptian uprising.

“We were the first to give actors and stars the treatment that really respected the essence of Vanity Fair U.S.,” says Dini. “For the first time, they were being portrayed in a way that was more flattering and noble, which started a virtuous circle. And they work with us to give us more in return.”

The returns have been notable for this stand-out in Condé Nast’s booming international empire. Despite a sluggish economy and publishing market, circulation rose 3.3 percent last year to 275,000—among the largest in a country with 61 million people. While weekly magazine advertising declined 15 percent in Italy, Italian Vanity Fair chalked up a 5 percent increase to 6,025 ad pages, far more than any U.S. magazine.

On its home turf in America, Condé Nast has shut a handful of titles over the last few years and recently ordered publishers to cut expenses by 10 percent. But the closely held company’s business is strong in Western Europe and growing fast in emerging markets, including India, Russia and China.

The man behind that success is Jonathan Newhouse, 60, a first cousin of family patriarch and parent company Advance Publications chairman Si Newhouse. Under Jonathan’s leadership, the number of overseas titles has nearly quadrupled from fewer than 30 in 1995 to 122 in 24 markets, along with 79 websites. The international division accounts for nearly half of Condé Nast’s total revenue. While its U.S. magazines have been cautious about brand extensions, Newhouse is opening Vogue– and GQ-branded cafés in Asia, the Middle East and Latin America. And this winter, the company will open the Condé Nast College of Fashion & Design in London.

Newhouse rarely speaks to the press, and Condé Nast would not make him or other top execs available for this story. But his decisions are closely watched, as he is seen as an heir apparent at the 27,500-employee Advance, which took in an estimated $6.55 billion in revenue in 2011, according to Forbes.

True, the company known for upscale brands has benefitted from an expanding global luxury market, but industry watchers say Newhouse has also excelled at timing launches, giving editors the freedom to adapt to their local markets and taking a long view in positioning the company for continued growth. “Jonathan travels, he gets out there and he’s seen,” says Chris Llewellyn, president and CEO of FIPP, the worldwide magazine media association. “It’s execution led from the top.”

Some moves were riskier than others. When Condé Nast launched Russian Vogue in 1998, nine years after the Soviet Union’s breakup, global financial instability threatened the country’s already-fragile economy. That year, the ruble collapsed.

Still, the company forged ahead, and today Russian Vogue claims to be the country’s best-read fashion title, with a distribution of 150,000, while the Vogue Café is an elegant hot spot. Three years later, GQ launched, mixing style, fashion and intellectual columns in the Russian literary tradition. In 2007, the trendy GQ Café opened, becoming a popular hangout.

The international outposts maintain close relations with British headquarters, according to insiders. Michael Idov, a former New York magazine contributing editor who became Russian GQ’s editor six months ago, says he’s travelled frequently to Condé Nast International’s offices in London, while international president Nicholas Coleridge and editorial director Anna Harvey regularly visit the Moscow businesses. When Newhouse interviewed him for the job, Idov got a sense of the importance of Russia for the international side when Newhouse rattled off the names of all Idov’s predecessors. “Russian names are not easy to remember,” Idov says. “And considering there are [19] GQs in the world, it immediately showed me GQ Russia is not going to be some sort of backwater assignment. It’s very close to Jonathan and Condé Nast International’s heart.”

In Britain, Condé Nast again defied skeptics in 2001 by entering the risky women’s magazine market with Glamour. Executives at rival Hearst Magazines, which publishes the long-dominant Cosmopolitan, derided the newcomer, with its compact, pocketbook size, as a “pygmy” and “little armadillo” it would squash. A year later, Glamour was outselling its sexed-up rival with a more emotional, realistic approach. “Cosmo had been the market leader forever and then Glamour comes along,” says Llewellyn. “Now they’re neck and neck.” And while British GQ failed to match the circulation of rivals Maxim or Men’s Health, it outperformed both in advertising sales.

Newhouse maintains quality by frequently visiting Condé Nast’s magazine outposts. “What they do particularly well is take the essences of their brands and make sure they’re right for the market,” says Vanessa Clifford, head of press for Mindshare in London.

However, mistakes have been made. Hoping to replicate its Italian success, Condé Nast, at great cost and with much fanfare, launched a weekly version of Vanity Fair in Germany in 2007. But the Deutschland edition failed to gain traction and closed two years later. At the time, Newhouse blamed the economic downturn, but critics said the celebrity gossip weekly that hit it big in la dolce vita Italy didn’t go over well with staid German readers. “It all comes down to the market peculiarities,” says John Cabell, president of Cue Ball, a consulting firm specializing in overseas magazine licensing. “Vanity Fair has a lot of je ne sais quoi. It’s an art form to edit.”

A magazine model radically different from that in the U.S. has helped Condé Nast International thrive. Here, magazines largely depend on advertising, while pumping up circulation with heavily discounted subscriptions. Overseas, advertising plays a smaller part, an ad page in a European glossy costing about one-tenth of its U.S. counterpart. International editions, meanwhile, make most of their money from pricier newsstand copies. (American GQ charges $5 on newsstands here compared to $6.25 in the U.K.) Meanwhile, publishers overseas share less revenue with retailers and distributors. Also, though U.S. titles are majority subscription, the reverse is true abroad, where most circulation comes from newsstand sales.

Above photo: Alfred Maskeroni

In addition, international magazines hold down costs with leaner staffs and adapted content from titles in other markets, especially while getting established. So comparatively small overseas titles can have higher profit margins with less revenue than in the U.S.

“Magazines are far more profitable around the world—I’ve seen magazines that are making 40 percent on the margin,” Cabell says. By contrast, a 20 percent profit margin in the U.S. is considered hugely successful.

Glamour South Africa is an example of the shoestring approach. The magazine launched in 2004 when South Africa was newly democratized, a decade after the end of apartheid. Glamour’s tone seemed fit for a new generation of young South African women who were optimistic about the country’s future, aspirational and fashion-minded in a nation long cut off from the rest of the world. “This is the generation that is sufficiently empowered to love shoes,” says Pnina Fenster, the editor in chief.

While their New York counterparts are famous for being whisked around in black Town Cars, Glamour South Africa operates out of a nondescript office building in Cape Town. With some 15 editorial staffers, the magazine gets 40 percent of fashion and 20 percent of beauty content from other publications. A recent issue, for example, got its Rachel McAdams cover story from U.S. Glamour, a feature on love lessons from Glamour U.K. and Patrick Demarchelier’s photos of Gisele Bündchen from Vogue.

Lunches tend to be brown-bag affairs. “In my dreams we would all be going out to fancy lunches,” Fenster says. “We’re very cost-conscious.” That didn’t sit so well with interns who’ve come and gone over the years. “Some were very disappointed,” the editor says. “They thought there would be orchids everywhere, that they would be wearing Prada every day.”

The low-cost approach of the overseas titles suddenly takes on heightened importance in the U.S., where Condé Nast’s magazine operations are struggling under the weight of high costs and huge circulations that are increasingly difficult to sustain in a weakened ad market. And Advance’s onetime-cash-cow newspapers are tanking, making it harder to ignore softened magazine performance. Condé Nast is trying to wean dependence on advertising by charging readers more and expanding into branded products such as Bon Appétit housewares and Teen Vogue bedding, as well as digital editions. But those efforts are slow to bear fruit. Two years since the iPad’s launch, for example, digital editions contribute only 1.7 percent to U.S. magazine circulation overall.

For now, Condé Nast’s U.S. brands have little to no involvement with the international side. When a title here changes its logo or design, overseas counterparts may follow suit, or not. And most advertising is sold on a local basis. Yet it’s possible to imagine a future with Jonathan Newhouse at the helm, running Condé Nast as a global company, bringing greater coordination to editorial and advertising decisions. One can already see the future pointing in that direction. While global ad buys are still unusual, publishers are hearing more demand for such deals as brands try to reach global consumers while reducing advertising expenses with one-stop shopping. “There’s a hunger to do pan-title sales, including in the U.S.,” says Iain Jacob, president of dynamic markets for Starcom MediaVest Group in the U.K.

Once, international publishing meant physically transporting magazines overseas. That was the case with Vogue, which launched a British edition in 1916 because World War I submarine warfare made shipping nearly impossible. Today, of course, technology allows instant digital transport across borders. But the speed and quantity of sharing digital apps and magazine editions has added a new wrinkle. In the English-speaking world, at least, a digital product launch in one market can cause brand confusion in another. Meanwhile, one magazine’s digital edition may cannibalize sales of a local print version in another country—an unimaginable scenario when most magazine licensing agreements were hammered out. (Why buy Vogue Australia for $9 when the American tablet version can be had for half the price?) Centralizing digital launches, then, could help safeguard local print magazine circulations.

American publishing execs might rightly be wary of such a future. A U.S. magazine bought as part of a global ad buy could end up shouldering a disproportionate amount of the discount that advertisers are known to expect in large deals overseas. And the church-state wall between business and editorial is known to be more porous in foreign markets.

Stateside, publishing execs don’t seem worried that the shoestring model will fully take hold, given the importance of their titles in feeding the global empire. As one Condé Nast exec in the U.S. points out: “Many of these brands are built off the U.S. edition.” But friction is growing as overseas editions roll out what some American Nasties consider subpar brand extensions—“crappy apps” that cause “consumer confusion.”

As Si Newhouse, 84, fades from the scene, speculation continues to grow about the eventual leadership transition in the company. His New York-bred, Yale-educated cousin Jonathan has put down deep roots in London since moving there in 1994. (He holds dual American-British citizenship.) But in a 2005 interview, he didn’t rule out someday returning to New York, where he still has a home in Greenwich Village.

Whether or not Newhouse returns to the U.S. may not matter. The industry here appears headed toward the overseas model anyway, slashing staffs and curbing perks.

When it comes to a leaner approach here, some ask: What’s the problem? “I see magazines now that are as good as they’ve ever been—and they’re doing it with generally less staff,” Llewellyn says.

Italian Vanity Fair, with an editorial staff of 54—two-thirds the size of the U.S. edition—regularly produces 300-page issues each week. “It’s too much, even for a weekly, because it makes the magazine last a lot longer than a week,” Dini says. “But I’m not complaining. I hope we have a fall with a lot of really fat issues.”