Last year the magazine industry got its first intoxicating whiff of an economic recovery. Publishers Information Bureau figures show a 1.6% increase in consumer magazine ad pages and an 8.3% increase in ad revenues after two years of decline. Many titles--mostly in service-oriented categories such as health, personal finance and parenting-- broke out of the pack with gains of 20% and more. At the same time, some of the industry's strongest players strengthened their hands while weaker ones checked or folded. Time Inc. and Hachette Magazines, among other billion-dollar publishers, cut deals that clearly position them for future growth; rival glamor houses Conde Nast and Hearst opened their checkbooks to lure top editorial and photographic talent to their titles. Meanwhile, Knapp Communications had to put its two high-profile books, Architectural Digest and Ban Appetit, up for sale, while American Express essentially abandoned any hope of being a publishing powerhouse when it formed a joint venture with Time.
Although 1993 promises economic vitality, years of ratecard negotiations have taken their toll. Faced with declining ad revenues, publishers made staffs leaner and meaner, invaded other media in search of cross-selling opportunities and emphasized circulation profits. But the tug of war on prices could be the recession's most enduring legacy. "I'm not so sure we can get away from negotiations," concedes Reginald K. Brack Jr., chairman and ceo of Time Inc. and a past chairman of the Magazine Publishers Association. "It's hard to put the genie back in the bottle, and that's worrisome."
For publishers who hope to push through ad rate hikes after years of holding the line, they will find little give. "A lot of magazines had a good year in '92 and feel that's a reason to raise rates," cautions Weinblatt. "We should build on what we've learned. We should keep going and not just jack up prices as if it's the 1980s again."
Publishers will continue to bolster the bottom line with circulation muscle--raising subscription and newsstand prices, trimming the rate base where necessary and pursuing strategies, such as selective binding of editorial features, that enhance reader loyalty. Dan Capell, editor of Capell's Circulation Report, expects 30-40% of consumer titles to increase their circulation prices in 1993, about double what the number has been in recent years.
In addition, media buyers will look more closely at a magazine's relationship with its readers, going beyond total audience and CPM to probe things like how a publisher solicits and retains subscribers and how much time a reader spends with an issue. "The pendulum is swinging back from gross boxcar numbers," says Charlie Rutman, media manager at Backer Spielvogel Bates/Worldwide. "Must-read equals must-buy."
Not surprisingly, most of the hot titles last year were those with a reader-service cast. Kiplinger's Personal Finance saw its ad pages swell 21% and circulation grow in spite of newsstand and subscription price hikes. KPF publisher Knight Kiplinger boasts that his readers spend several hours with each issue, save back copies, and consult them again two or three more times. "High pass-along readership is not a sign of serious use or editorial involvement," he argues. "Our readers are looking for actionable information--tell me something I don't know that can improve my life--and advertisers benefit from a reader's inclination to act." Proof that Kiplinger may be onto something is that the personal finance category welcomed new entries in 1992. SmartMoney, a joint venture between Dow Jones and Hearst, and Fidelity Investment's Worth have brought a lifestyle approach to an otherwise sober subject, and both are showing good results in trial runs.
The recession also convinced publishers that cross-media deals can be a valuable ticket to growth. "We're moving to be a consumer marketing company," says Francis Pandolfi, president and ceo of Times Mirror Magazines. "We know promotion budgets are increasing, and we want to be in a position to show advertisers ways to spend more." With several new hires who are marketers--not sales reps--Times Mirror has been pushing cable TV, custom publishing and newspaper buys in concert with its magazine pages. Similar cross-media efforts are well under way at Meredith Corp., Hearst and The New York Times Co., among others.
As for Time Inc., it completed a two-year process of retooling its ad sales force. The moves included the June promotion of Don Logan to president and chief operating officer, which further boosted the drive to sell Time's 27 titles as a group and together with other Time Warner ventures. "Not everybody loves it inside or outside the company," admits Brack, "but after 12-18 months of hand-wringing, things have settled in."
The trend by publishers to sell along functional lines has yet to convince all agency executives. "Magazines still have to come to grips with what they are and what they want to be," says Backer's Rutman. "They've had a difficult time demonstrating what can add value and what just adds things."
These suspicions are even more pronounced when considering the merchandising craze, such as mall tours, contests, fashion shows, giveaways and other niceties that aren't always relevant to reader needs and advertiser objectives. "Invariably the sales rep shows up with five pages of what the magazine can do, tosses them out, and sees if the advertiser wants one," says Janice Clements, director of media and marketing services at McCabe and Company. "Every media buyer is looking for added value, but most magazines come in with off-the-shelf, generic ideas."
Indicative of how sore publishers are after years of elbowing over rates, they complain that merchandising has become a way for advertisers to squeeze out extras from those who refuse to give price breaks. One small publisher has even taken to opening his books to show advertisers that his profit margins are not extravagant. "I ask them not to judge us by how many extras they get," says Doug Edgell, president of Edgell Enterprises. "I can't keep taking more out of my bottom line, and they've seen that I'm right."
And what about those price increases--will they finally stick? Yes, says Brack, who is looking at rate hikes of about 4%, but not for all of Time Inc.'s titles. Pandolfi says Times Minor will be asking for 6% more and will probably end up at 3-4%. Jumps of 7-9% are what set off Saatchi's Weinblatt.
"I haven't had time to sound out publishers on these numbers," he explains, "but they're going to be difficult to justify. I don't see the incentive to pay them. We have finite budgets and our own pressures to provide more value. If I can't sell these increases to my clients, the money won't go to the magazines."
Is that a negotiating tactic?
Copyright Adweek L.P. (1993)