In this instalment of her now six-monthly round-up of key US publishing trends, Karlene Lukovitz sees an industry struggling to close the revenue gap but one demonstrating unprecedented levels of innovation.
Enjoying a Trump bump…
It may be the most challenging of times for the consumer magazine business, but it’s also the best in at least one sense: the scale and pace of innovation have never been more robust. So, while I feel obliged to note some of the less-than-upbeat recent developments in the industry here in the US, I’ll use much of this update to highlight new initiatives, digital and otherwise.
Trump bump vs mainstream malaise
As noted here and elsewhere in recent months, one upside of political and social turmoil has been that magazines providing solid, thoughtful news analysis and reporting have seen a surge in paid print and digital paid circulation, as well as digital audience growth. Some – notably The Nation and The Economist – are using the current momentum from the so-called “Trump bump” to advance existing, longer-term strategies focused on expanding the paid consumer revenue stream. The beauty, of course, is that a strong, engaged reader base also enhances advertising prospects.
Unfortunately, the public’s heightened engagement with the critical issues of the day isn’t much of a panacea for the all-too-familiar challenges facing most mainstream US magazine brands and their owners. Namely, their long over-reliance on print advertising coming back to bite them, as brands and media buyers continue to move advertising dollars from traditional media to Facebook and Google; their need to maintain marginal print and digital subscriptions for advertising rate base purposes, as the once-profitable newsstand channel continues to dwindle (in part due to publishers’ own neglect); and the difficulty of adequately monetising digital advertising and partnerships with social media platforms.
PwC’s latest media and entertainment industry forecast estimates the total value of US consumer magazine advertising at $16.6 billion this year, with an essentially flat outlook through 2021 ($16.7 billion). With projected compound annual growth rates (CAGRs) of 13.1% and -9.7% for digital and print advertising, respectively, between 2016 and 2021, digital gains will just barely outpace print losses. The continuing dilemma: digital advertising’s lower rates and profit margins compared to print. The pattern is basically the same for consumer-generated magazine revenue. In total, US magazine revenues are projected to rise from $30.2 billion in 2016 to $30.5 billion in 2021, a CAGR of just 0.2%.
“It’s increasingly clear that publishers are going to need multiple revenue streams to survive, since digital advertising alone will not be enough to sustain them,” summed up PwC. “This requirement is seeing them move into areas like video, events and paid-for products” and focusing on “engaging target customer segments in the most compelling way possible, via whatever format and channel those consumers prefer in their context at the time”.
The fallout from the intensifying financial squeeze is becoming increasingly obvious, as both high-profile privately held and public magazine publishers lay off staff, and restructure and sell (or attempt to sell) well-established brands and assets – both to shore up their finances and to fund investments in digital ventures and other new revenue streams.
As I write, venerable family-held Rodale is in the process of considering bids for the entire company or some brands. Wenner Media has followed its sale of 49% of Rolling Stone to Singapore-based music tech company BandLab Technologies with sales of both Us Weekly and Men’s Journal to National Enquirer publisher American Media Inc. (AMI is somehow funding these acquisitions despite its own heavy debt load – about $300 million as of last September, according to the New York Post.) Meanwhile, Bonnier USA, which owned some 40 enthusiast titles in 2007, now lists 24 on its site, after recently shuttering 80-year-old Popular Photography as well as American Photo. In August, Bonnier also laid off its consumer marketing staff and outsourced those functions.
“Americans are expected to spend 81 minutes a day watching digital video in
Video: the current hotspot
For larger publishers, in particular, video is the focus of intensive development now – although not without its own risks and limitations.
“Americans are expected to spend 81 minutes a day watching digital video in 2019, up from 61 minutes in 2015, according to projections by research firm eMarketer… The question is whether those trends will sustain the growing number of outlets flooding social networks with video clips,” particularly given consumers’ growing irritation with video ads and new options for avoiding them, Bloomberg Technology’s Gerry Smith recently observed.
Online publishers of all stripes are “throwing their hats into a ring that’s unproven,” asserted eMarketer analyst Paul Verna. But many publishers, points out Smith, “have little choice. Facebook Inc and Google are vacuuming up the lion’s share of digital ad dollars,” and developing options like paid subscriptions or e-commerce takes time, whereas video provides a quick infusion of revenue. Advertisers “are willing to pay more to have their messages in videos because they think it’s harder for people to ignore them” than banner ads. Plus, “Facebook, YouTube and Snap Inc want publishers to make videos for their platforms so they can woo advertisers away from television,” and publishers “can’t ignore them because they rely heavily on social networks for their audience”.
Of course, magazine media have assets that other online publishers lack: high-profile, trusted brands that excel at generating content valued by their audiences.
“Condé has enhanced the visibility and discoverability of its content through Google AMP.”
Condé consolidates audiences; pumps up video
Like Time Inc and others before it, over the past year, Condé Nast has consolidated editorial and other functions and restructured management. (As I write, another restructuring is reported to be imminent.) The objective: enabling audience aggregation and demographic and behavioural targeting to enhance advertising and sponsored content deals across existing and new brands. Becoming “data-centric and audience-focused” across the portfolio will yield sufficient scale to “get a seat at the big table for those really deep strategic, enterprise-level partnerships” with targeted top customers in fashion, tech and other key Condé categories, Jim Norton, Condé’s new chief business officer and president of revenue, told WWD.
Condé’s “investment phase” commenced in February of this year, with the acquisition of social data and marketing platform CitizenNet, which uses predictive behavioural targeting through machine learning and artificial intelligence to help advertisers target new audience segments. Those capabilities have now been integrated into Condé’s Spire – a data offering launched in 2016 that combines its own consumer behavioural data with 1010data’s consumer purchasing data to optimise personalised campaigns in real time. Heady stuff.
In April, the company launched Condé Nast Pharma, a marketing division offering advertisers solutions by health condition and “insight into prescription lift and campaign effectiveness, using a predictive model that merges behavioural data from Spire with HIPAA-compliant medical data.” Plus, access to expanded health and wellness editorial content across brands.
March saw two acquisitions – experiential marketing agency Pop2Life, and event hospitality and ticketing platform Ribyt – meant to enhance execution of customised events for clients and expand events for Condé’s own brands.
Condé Nast Entertainment announced a company-wide video initiative, starting with the revival or extension of existing series from its 22 brands (including Vogue’s “73 Questions,” Glamour’s “Perfect Match” and GQ’s “The Resistance With Keith Olbermann”), as well as a host of new documentary and entertainment series, some scripted.
Condé, along with other magazine media companies, is also jumping into Facebook Watch (its first efforts include a virtual reality dating show), and partnerships with Snapchat’s Discover platform.
On the search front, Condé has enhanced the visibility and discoverability of its content through Google AMP, which enables it to be included in Google’s Top News Carousel.
In June, the publisher threw in the towel on running a standalone e-commerce site, selling Style.com (in which it reportedly had invested $100 million) to Farfetch. However, the two now say that they’re planning a new long-term commerce and content venture.
Time Inc CEO Rich BattistaTime Inc also pushing on all fronts
In August, Time Inc CEO Rich Battista sought to take the edge off less-than-stellar second quarter results by announcing the company’s intention to cut another $400 million in costs over the next eighteen months. Having decided to take the full company off the block for now, Time Inc, which has been working with McKinsey to try to accelerate its transformation to a multimedia company, has now put Coastal Living, Sunset, Golf, and Essence – and reportedly, its Florida-based fulfilment bureau – up for sale.
Like Condé Nast – and for that matter, Hearst, Meredith and pretty much the entire mainstream magazine media world – Time Inc is making strategic data and tech investments to amplify its brands’ online and social media audiences, while also developing a host of other new revenue channels. “We plan to use a portion of these savings to invest in our future in key growth areas including native and branded content, video, data and targeting, paid products and services, and brand extensions,” Battista said. “With this program, we expect to realise significant cost savings and reinvest in our future…”
In Q2, Time Inc’s total revenues were down 10%. Ad revenue was down 12% – including a dip of 2% in digital revenue, "primarily due to a major customer undergoing an agency review, partially offset by an increase in sales of native and branded content advertising, programmatic sales and video." Circulation revenue was also down 12%, including declines of 11% and 20% in subscription and newsstand revenue, respectively. However, other revenues – particularly content licensing and book publishing, which is mostly newsstand “bookazines,” were up 6%.
On the video front, Time Inc plans to produce some 40 hours of TV programming this year to be licensed to twelve broadcast, cable and digital networks, versus just five hours of programming in 2014, reported Reuters. The company is also launching a streaming cooking-competition show on Facebook Watch, and has deals to distribute its longer-form TV programming via streaming services including Netflix and DirecTV Now, as well as traditional broadcasters like PBS and the Oprah Winfrey Network, the news service reported.
In all, Time Inc “has about 75 TV and long-form projects in development, including a sports documentary and a feature-length documentary,” according to its head of programming, Ian Orefice. The company is leveraging its magazine content assets, and its in-house studio, to make video cost-efficient. For instance, a documentary on Princess Diana’s life – which was among the top 25 most-viewed shows during the week it aired on ABC in August – was produced in part “by pulling content from People magazine’s archive of photos, magazine spreads and videos”.
With its planned cost savings and expected revenue gains from video and the other new revenue streams, Time Inc sees “a path to a minimum range of $500 million to $600 million of adjusted OIBDA [operating income before depreciation and amortisation] within the next three to four years,” said Battista. However, one analyst expressed the scepticism that is keeping Time Inc’s team pushing faster and harder with every passing quarter: “I don’t see financial daylight until 2019 or 2020; it’s a long way out,” Huber Research Partners’ Douglas Arthur told Reuters.
“The continuing dilemma: digital advertising’s lower rates and profit margins compared to print.”