2011 may well bring production challenges to magazine publishers, but these need to be seen in the context of recent changes in the publishing industry. Nothing happens in isolation.
Business models for publishers have changed and are continuing to evolve. We have seen the break-up of large, successful publishing giants (eg. Emap). Lately we have witnessed a merry-go-round of exchanging ownership of niche titles. It seems that acquisitions (whether of companies or titles) are going to be with us for some time.
With declining advertising revenues and copy sales, magazine publishers have pursued the holy grail of revenue from “new” media – experimenting with online publishing through websites, ezines and now extending their forays into mobile device applications. Experimentation is necessary: to assess what works, what grows audience and what shows potential for growing revenues. Publishers are seeking the most relevant distribution channel suited to content and audience and experimenting with different revenue models.
Against this background of changing audiences, products, distribution channels and revenue models, print runs and paginations of magazines (in particular the mass market titles) will continue to decline or remain static as traditional printed media vie with new media for consumers’ precious time and attention and advertisers’ budgets. Lower paginations and print runs seem here to stay.
Meanwhile, in a bid to make printed magazines more appealing and to retain readership, publishers have been experimenting with ideas such as AR (augmented reality) and readers designing their own cover. A proliferation of format changes and materials to gain “standout” is unlikely in the forthcoming year, but more “personalisation” ideas are on the cards.
To add to the list of challenges which publishers are facing, the perception remains that producing printed media is more harmful to the environment than publishing online - environmental concerns are an ongoing issue for publishers. They need to be vigilant in defence of their manufacturing processes and distribution methods.
Finally, there are continuing questions around the sustainability of publishers’ associated stakeholder industries of paper and print.
Stakeholders and their challenges
The business models of the stakeholder industries have changed almost beyond recognition.
In the last ten years, the printing industry has undergone a revolution through technological advances and consolidation. This highly capital intensive industry requires profits for reinvestment, but these have proved harder to achieve given market conditions. Excess capacity has led to price wars, lower margins, closures and consolidation. The net result is that magazine publishers now have a much smaller, more vulnerable supply base.
In 2011, price increases for raw materials such as ink will result in further pressure on printers’ margins. In the hope of achieving a better balance of work and capacity – and of being able to increase prices and improve margins – some printers are cleansing their client base of unprofitable work whilst tackling the difficult issue of excess capacity. But set against the changes happening in magazine publishing, will this be enough to make the print supply base more secure?
The paper industry has suffered from excess capacity, unsustainable pricing, and rising prices of raw materials and energy. Losses are well documented. Consolidation has started and will continue; some of the larger global players have diversified into different markets, becoming waste recyclers and energy providers as well as paper manufacturers. Magazine publishers have already seen paper prices increase by double digit percentages in less than twelve months with more to follow. Compared to less than eighteen months’ ago, magazine publishers are already faced with fewer choices of substance and grade yet at increased prices. This is a trend likely to continue.
Fuel prices and taxation changes impact upon all the stakeholder industries, but particularly upon the cost of distribution. With the recent VAT increases, publishers may face cost pressures in this area.
Although difficult market and economic conditions all round would seem to dictate otherwise, there are indications therefore that for publishers, 2011 will bring cost pressures across several areas – not only paper (where price increases are already being mooted for first quarter) but also possibly print and distribution.
What does all this mean for publishers in 2011?
Print and paper price increases, fewer paper grade choices, a vulnerable supply base, more pressure for differentiation / “standout” of product, co-ordinating content for a variety of media, circulation and advertising angst – none of these challenges are new, but together they form a lethal cocktail for magazine publishers in 2011. There are no easy solutions to making it more palatable, but there are remedies which can be considered and applied. Most of these will in fact provide opportunities for improvement to business processes and perhaps margin. Magazine publishers and their suppliers should co-operate more closely on areas such as distribution, supply chain efficiency, lead-times, and demand forecasting.
Facing the tough challenges which 2011 is likely to provide, it is essential that publishers re-examine each and every bit of their supply chain. This means reviewing and challenging their procurement strategy, internal and external processes and dependencies. It also means assessing the resources available and those required in terms of the skills, knowledge and experience of the workforce.
Magazine publishers will have to look objectively and critically at their company, their products and their people and ask themselves, “If we were starting up this company today, would we do things this way?” With this as a starting point, a number of other questions will inevitably follow…
“We have always done it this way” is not an option
Lower paginations and print runs require re-examination of the print processes and materials being used. Publishers need to challenge these (and the assumptions lying behind them) to choose the most timely, cost-effective methods and materials. For example, a mass market weekly printed gravure may in fact now be produced more efficiently and cost-effectively by web offset if the print run has dropped significantly.
Speed to market becomes more important due to required co-ordination with other media – publishers must ask themselves, “Have we enough flexibility in the supply chain?” Time pressures may be greater as advertisers draw together more complex cross-media campaigns – consider if your processes allow for this. Internally, can you make up / down paging decisions easily, go to press later than before?
Other questions arise. Is your supply base sustainable? Have you got the right suppliers in place? Against which criteria were they chosen? Are those still relevant and valid to your business today? Are you with the winners in the consolidation game? If the worst happens and you experience supplier failure or lack of materials supply, do you have people capable of dealing with this sufficiently quickly and professionally?
Review whether your contracts are fit for purpose. Are they for the right term and of the right type (fixed term vs rolling etc)? Do they cover a range of scenarios, such as change of control (on either side)?
Consider the end product – will there be the same range, diversity and availability of materials in 2011? You need to have alternatives planned.
An experienced and knowledgeable production team is essential to this review process. They can for example challenge the proliferation of formats and the range of paper types and substances that may exist in your portfolio (possibly through acquisition or through assumptions made some time ago about product differentiation requirements). Production professionals can also advise on the most cost-effective and timely means of producing the end products. They can offer guidance on controlling costs, reducing waste, measuring and reducing environmental impact.
A more vulnerable supply base and volatile pricing often brings more focus to supplier relationships and how these are managed. As consolidation continues and capacity is less easily available, these relationships – together with supplier loyalty - will become increasingly important.
Reviewing your business with the potential to re-engineer its processes provides an opportunity to think about company and departmental structure. Are the existing structures fit for purpose? Is there a need to bring in external expertise to bolster the skills and knowledge required? Are the teams sufficiently supported with training and resource?
Perhaps the challenges of 2011 will provide the stimulus for the role and responsibilities of production teams to be reviewed and revised if not rewritten. A core skill of production is the co-ordination of a number of disparate tasks to achieve an end result. They “make it happen” against the odds. Planning, scheduling and controlling the simultaneous production of diverse products against reducing deadlines and smaller budgets in the “smartest” way is a brief ideal for them. Who better to review processes, workflows, and influence DAM / content purposing strategy? It is a great opportunity to make a real contribution to company development and future strategy.
Publishing has always been about content. It is the need for its speedier and varied distribution that is driving the changes we are experiencing. Let’s stop obsessing about printed versus digital media in terms of either / or – the consumer does not think of content in that way. Yes, there has been and continues to be some decline in paginations, print runs, and circulations for many titles, but it is gradual – there is time to adapt and change.
In conclusion, 2011 will certainly pose production-related challenges to magazine publishers, not necessarily new. But these challenges also present opportunities to re-engineer businesses, processes and product to gain advantage. Who knows, perhaps these same challenges will even provide the impetus to reconsider the value of “old” media – and review whether the time is ripe to reinvest in it…
