Ups And Downs

W hile publishers in the years ahead can expect a few white caps, industry analysts have charted a course that should be mostly smooth sailing. Consumer magazines have suffered the longest—and arguably the hardest—among the major media since the advertising recession began in 2000. The recovery of magazine advertising, traditionally a beat behind TV and other electronic media, has been a long, drawn-out ordeal that only this year shows promising signs.

“The last couple of months [in 2004] are looking up a bit,” says Andy Bucholtz, managing director of Veronis Suhler Stevenson. “Consumer magazines will be doing better in the latter part of this upturn compared to other media.”

Slowly but surely magazine spending is rising and spurring the development of new titles, thanks to gains this year in apparel and accessories, toiletries and cosmetics, travel and home furnishings.

Overall, spending in magazines from 2003 to 2008 will grow at a compounded annual rate of 3.7 percent to $25.4 billion, according to Veronis’ Communications Industry Report. In 2005, total magazine spending will climb 3.3 percent to $22.5 billion. The growth is a marked improvement over an earlier forecast that predicted magazine spending over a five-year period ending in 2007would rise just 0.8 percent.

Other industry analysts note that magazine growth will be slow and steady. PricewaterhouseCoopers predicts publishing revenues will jump 3.5 percent to $33.8 billion and 3.8 percent compounded annually for the four years ending in 2008. Meanwhile, Zenith Media has projected that spending in 2005 will rise 6 percent versus the year prior. Given the optimism, publishers are launching a slew of new magazines in 2004, including Condé Nast’s Cargo, Hearst Magazines’ Shop Etc., Fairchild Publications’ Vitals, Time Inc.’s Life and Cottage Living, Ziff Davis Media’s Sync and Bauer Publishing’s Life & Style Weekly.

The challenge for these new titles will be growing circulation (and advertising) while readers’ attention is increasingly diverted to the Web, TV, gaming and DVDs. “Magazines are still a vital medium, but their role in people’s lives is changing,” says Lee Doyle, Mediaedge: cia managing partner and director of client services. “Certain information is more quickly available through other sources.”

Keeping readers is proving to be just as hard as finding new ones. For several years, publishers have been unable to rely on sweepstakes, and no other subscription source has emerged as the leading driver of attracting new readership. Across the board, magazine subscriptions are expected to fall 1.8 percent in 2004 and 1.4 percent in 2005, reports Veronis. Over the next five years, per-issue unit circ will fall 1.0 percent. In addition to lowering the costs of attaining and retaining readers, publishers have resorted to trimming rate bases. Once considered a red flag, the move has been applauded by media buyers in search of quality readers. Almost an entire category—the overcrowded teen segment—has slashed rate base, including Hearst Magazines’ Seventeen, G+J USA Publishing’s YM and Time Inc.’s Teen People.

Meanwhile, the newsstand, which has long been a headache for publishers, may start giving them migraines. Single-copy sales have been in decline for some time, but the growing number of consumers shopping at wholesale club and warehouse stores as opposed to grocery stores has derailed impulse buying. Compounding the problem are supermarkets that are beginning to install self-checkout stands. Per-issue unit newsstand sales will fall 2.6 percent in 2004 and 1.7 percent in 2005, according to Veronis.

But publishers are hardly giving up. They continue to seek new distribution methods. The latest example is Time Inc., which struck an exclusive deal with Wal-Mart to carry its new women’s service title, All You, this fall. Moreover, certain magazine categories have touched a nerve with readers, specifically celebrity weeklies such as Bauer Publishing’s In Touch, Time Inc.’s People and Wenner Media’s Us Weekly. The Wenner title saw its paid circulation grow 17.4 percent to 1.35 million in this year’s first half, according to ABC. Newsstand sales soared 47.3 percent to 745,887. “I believe in the newsstand,” says Kent Brownridge, Wenner Media senior vp and general manager, who singles out the success of celebrity and shopping magazines.

Despite declines in circulation, price hikes will drive small increases in circulation spending. Veronis reports expenditures in 2005 will rise 0.5 percent to $10.1 billion and increase at a compound annual rate of 0.6 percent.

As circulation continues to pose many challenges, advertising has become an even more critical part of the publishing pie. According to Veronis, advertising in 2005 will comprise 55 percent of magazine expenditures, up from 53.7 percent in 2004, By 2008, advertising will rise to 59.5 percent versus 51.5 percent 10 years earlier.

Ads will grow 5.8 percent to $12.3 billion and hit 5.8 percent by 2008, growing at a compound annual rate of 6.2 percent over five years ending 2008. That’s a substantial increase from the prior five-year period, which saw a 1.3-percent gain.

Lisa Granatstein is the general editor of Mediaweek and writes the weekly magazine section.