Covid accelerated the demise of crucial newspapers covering suburban and rural communities, as well as the absorption of nearly all of the venerable metro papers and their websites by venal players (see Alden Global Capital) bent on bleeding them dry.
Meanwhile, independent small- to mid-size magazine publishers – I’m not talking digital-native or digital-only publishers here – are now a nearly extinct breed. Sadly, the pandemic-driven surge in hobbies, cooking and all things nesting-related, as well as broader willingness to pay for professionally produced information both online and in print, wasn’t sufficient to save many special interest and regional titles that were living close to the margins. Suspended local businesses and suddenly unemployed consumers were in no position to support local media with advertising and subscriptions.
But despite a 19.8% drop in US print magazine ad spend last year, per GroupM, the big players have so far lived to fight another day. It certainly helped that some of their titles’ circulations and web traffic benefitted from their deep-pocketed ability to take advantage of that upswing in demand for some categories of editorial content.
Still, according to WWD, while twenty titles published by Meredith, Hearst and Condé Nast saw their overall audiences, as measured by AAM, increase through 2020’s third quarter, fifteen were flat or experienced declines. And Meredith – the largest of the three and the only publicly reporting one – saw its print subscription revenue decline 9.4% in the quarter ending in December 2020, although its largely bookazine-based newsstand sales actually rose 7%.
In other words, modest print circulation lifts alone would not have been enough to keep these ships afloat if this crisis had hit ten or perhaps even five years ago, before these companies had made progress in reducing their heavy dependence on print advertising revenue. As we well know, publishers began cutting underperforming products, reducing print teams and diversifying their businesses years ago, compelled by the onset of annual high-single- to double-digit declines in print advertising.
So, when the plague descended, the additional cutbacks were significant – and devastating for staff and freelancers left jobless in a comatose economy – but still less severe than they might have been in pre-digital mode. Meredith cut about 50 magazine staff out of 180 overall, Condé Nast laid off about 100 and furloughed another 100, and both cut pay temporarily (restoring it later).
The pandemic’s impact has made the race to generate new revenue more critical than ever.
Of the big three, Hearst Magazines made the most frequency cuts on titles. But it managed to keep its promise of no pandemic-related layoffs for over a year. (The 59 layoffs at O The Oprah Magazine in February were due to a Winfrey-driven switch to mainly digital.) Then came May, and the news that Hearst was compressing its magazine operating groups down from seven to four, and offering buyouts to all 600 sales and marketing staff in hopes of getting enough volunteers to meet a (not revealed) headcount reduction target. Plus, a shocking one in five staff in its UK operations, according to Press Gazette. “While the magazine division is strong, the pandemic has accelerated trends in consumer behaviour and media consumption,” explained new division president Debi Chirichella. “We need to further transform our sales and marketing to better serve advertisers and to invest in growth areas.”
In other words, despite the progress realised through the big publishers’ years of investments in data-driven digital advertising offerings and a continually expanding array of distribution channels and brand extensions, the pandemic’s impact has made the race to generate new revenue more critical than ever. While the expected rebounds in most key advertising categories this year will help, media prognosticators say we’re still looking at a return to annual US ad-spend declines at the less drastic, pre-pandemic levels. GroupM and the Winterberry Group respectively project 8.3% and 9.6% dips for this year.
In other words, tough as it is, Hearst Magazines’ reorganisation is a rational response to the pandemic-accelerated decline in print advertising – and more evidence of Hearst Corp’s proactive approach to morphing as necessary. Like its parent company, which has continued its long, deliberate diversification across media channels including cable TV, satellite radio and business-to-business, as well as select non-media growth sectors, the magazine division normally focuses on finding innovative ways to grow rather than resorting to knee-jerk layoffs and other cost cutting. For example, based on how rapidly it has expanded, its aggressive membership strategy – upping the physical quality and editorial content of its print magazines and pairing them with special events and privileges offered in progressively more expensive membership tiers – seems to be succeeding.
“For several years, our strategy has been to expand our business model by focusing on new delivery platforms – going deeper into digital, social and video, and exploring and developing new revenue streams anchored by our brands,” Chirichella said prior to the reorg announcement. “Print remains an important component of our strategy. Our print editions differentiate us from digital-native competitors and remain the flagships of the brands. We’re deepening our relationships with our growing audiences, then taking those connections and monetising them in new ways.”
Our print editions differentiate us from digital-native competitors and remain the flagships of the brands.Debi Chirichella
Meanwhile, Meredith marked a milestone during the quarter ended December 31. For the first time, digital advertising revenue at its National Media Group (magazines) surpassed print ad revenue. Digital rose 22% year-over-year, as print dropped 19%. Meredith also credited growth in NMG’s ecommerce initiatives and licensing business as contributing to its positive results: Total company revenues rose 11%, earnings from continuing operations more than doubled, and adjusted EBITDA leapt 57%. Not bad for a pandemic – or for a company that saw its normally stable performance take a major hit in 2019.
The not-so-great news: As I write this, Meredith’s earnings report for Q1 2021 (its fiscal Q3) – the first to reflect the pandemic’s devastating effects on advertising, in particular – has just come out, showing total NMG revenues down 8% in the quarter and 9.5% for the first nine months. Still, cost cutting and gains in some revenue streams left the overall company up 1% in revenues year-to-date, and with net earnings of $270 million, versus a loss of $240.5 million in the previous year’s comparable period.
Further – in a major vote of confidence for magazine brands’ future – it’s just been announced that Meredith has sold its seventeen local TV stations to Gray Television for $2.7 billion to focus on growing the magazine group, which will be spun off as its own publicly traded company. The strategic leap is designed to advance the streamlined company’s priorities of “reducing net debt, improving financial flexibility, allocating capital to fast-growing digital and consumer opportunities, and providing returns to shareholders,” said Meredith chairman / CEO Tom Harty.
NMG’s new president, Catherine Levene, has formed a formal strategic development team dedicated to creating such revenue streams. Some of the moves in play at the company, by the way, are successful reinventions of struggling legacy cornerstones like the newsstand. Meredith’s thriving bookazine business – which includes producing them for other brands, as well as its own – is now offering advertising cover wraps (brand logo still visible) through its MNI marketing business, positioned as a “hyper-contextually targeted ad platform.” (Who knew cover wraps were so high-tech?) In 2020, Meredith produced 330 bookazine issues that sold 18 million copies at retail and grossed over $235 million.
In 2020, Meredith produced 330 bookazine issues that sold 18 million copies at retail and grossed over $235 million.
As for Condé Nast, President Roger Lynch has said that print advertising now accounts for under half of the company’s revenue, and recently told the Financial Times that the company should break even in 2022 and reach double-digit operating profit margins by 2024. The actual results of its global reorganisation / consolidation and Lynch’s plan to boost investment in video, events and other digital and entertainment offerings (print doesn’t seem to be a priority) over the next four years remain to be seen. But I see that as of April, it was already resulting in editorial and other staff cuts in the UK at some of Condé’s biggest brands.
Thanks to Google’s phase-out of cookies and other new identity-related targeting challenges, the hottest new revenue channels in 2021 will revolve around publishers’ coveted first-party data. Forbes, Bloomberg and Penske Media Corp, in addition to Condé Nast and Meredith, are among those that now have first-party data “studios” or solutions that can generate consumer insights for use for their own product / service launches, or by advertisers and companies looking to license the data. Hearst Magazines’ CDS Global arm has a new cross-site, single-sign-in identity resolution system designed to build first party data for its own brands and, it hopes, attract new clients.
While first-party data investments would seem a solid bet, some other new high-profile initiatives are a whole lot riskier.
The hottest new revenue channels in 2021 will revolve around publishers’ coveted first-party data.
By now, you’ve no doubt read about NFTs or non-fungible tokens: a cryptocurrency subset that is a unit of data stored on a digital ledger or blockchain that certifies that a digital asset is unique in substance and value, and therefore not interchangeable. Don’t be impressed: That definition, lifted from a tech site, makes only the foggiest sense to me. The bottom line is that NFTs can be used to represent items like photos, videos, audio and other types of digital files in a way that’s valuable because they’re one-of-a-kind.
In recent months, Forbes, the New York Times, Quartz and Time are among the publications that have generated tons of publicity by selling NFTs of cover images or articles. More recently, Time declared that through a partnership with Crypto.com, it will allow users of that platform to buy digital subscriptions to Time with Bitcoin and 31 other cryptocurrencies. Those who make such a purchase will earn up to 10% back on the $49-per-year sub price – and in addition to unlimited access to Time.com content, get access to exclusive events and other perks.
Promotional headline: “Support our journalism. Become a Time HODLer.” Again, I had no idea what that meant when I first saw it. But I now know that HODL is a term based on an in-joke that refers to hanging on to your cryptocurrency even in the face of nerve-racking price swings.
Time is now owned by Salesforce founder / tech multi-billionaire Marc Benioff – which, along with the company’s just-launched business vertical (aptly named Time Business) – helps explain its early adoption of cryptocurrency. Presumably, it will make Time cool and popular in the eyes of cryptocurrency fanatics looking for validation by a big media name and business types who fancy themselves visionaries. NFTs? Somehow, I don’t see them being more than a short-term craze, at least for magazine media.
Of course, there are many very good reasons that I’m not a tech billionaire. But one thing I do know: Experts have demonstrated that the incredible amounts of energy used by the computerised blockchain process needed to “mine” cryptocurrency, including NFTs, has become a deadly serious threat to the world’s environment. So, whatever the payoffs for Benioff, Time and other crypto-evangelists, they aren’t worth the cost to the rest of us.
NFTs? Somehow, I don’t see them being more than a short-term craze, at least for magazine media.
This article was first published in InPublishing magazine. If you would like to be added to the free mailing list, please register here.