When it comes to the publishing world, Reed is an advisor to media kings, sometimes known as publishers, and is always worth listening to.
1) You once said, "Magazines are based on their profitability and that is how investors must look at it." In the last decade, from an investor's perspective what changes have you noticed about magazines profitability?
Yes, I said valuations of magazines today are based solely on how profitable they are. That is because the magazine industry is now a mature one and is on the cusp of a transition from print to digital. In the past decade, and particularly in the past five years, the profitability of magazines have come down, for the most part. The reasons for the decline are the recession that reduced advertising in many magazines by as much as 30%, the continuing decline in newsstand sales and the ongoing transition from print to digital.
2) It's pretty clear
that steady, recurring publishing revenue streams would be a very
important consideration to an investor. Have you noticed changes in
revenue streams in the publishing world? If so, have you changed your
criteria of where to invest?
The newsstand sales malaise continued in the second half of 2013, prolonging a trend that has now extended over five years.
Second half 2013 newsstand results mirrored first half numbers with units declining by 12% and dollar sales declining by 9.1%. In the first half of 2013, dollar sales were down 9.2% compared to the same period 2012, and unit sales were down 11.4%. The average cover price on an issue sold in the second half increased by nine cents to $4.99, compared to the first half average sales price, again illustrating the negative effect that the lower cover priced celebrity weeklies and the continual positive influence of higher priced specials had on total sales.
second half weekly celebrity title sales declined 14.7% in units and
13.1% in dollars, a little worse than their performance in the first
half, while the non-weekly titles performed slightly better during the
second half. Even though the number of copies distributed in the second
half declined by 6.7% compared to 2012, second half, overall sales
efficiency eroded by nearly two percentage points compared to the same
period last year. Total 2013 newsstand sales declined 11.7% in units
and 9.2% in dollars compared to 2012 numbers.
The perceived reasons for these continual sales declines have been communicated and discussed repeatedly by industry observers over the last five years or so...the economy, the effect of digital and social media on leisure time and as content delivery tools, a heavy emphasis on low price subscriptions offered by major publishers trying to prop up rate bases as newsstand sales decline and the lack of publishers' efforts on promoting newsstand sales as they concentrate on their digital businesses. Individually each of these reasons has had an impact on newsstand sales. Collectively, their effect has been disastrous, and it has created a very fragile distribution channel, with some wholesalers leaving the business and those remaining requiring additional help from publishers just to survive as the only economically feasible means of timely distribution for thousands of titles into more than 100,000 retail outlets. The positive truths about the newsstand business include the facts that magazine sales are a $3 billion business, and we deliver a high profit margin to our customers with little or no effort or investment on their part. Our customers sell over 12 million magazine units each and every week, and their customers continue to show that they are willing to pay good money in a tough economic environment for high quality publications, especially if they can't get those same publications more cheaply through subscriptions.MagNet will provide a deeper dive into the second half and total 2013 newsstand sales numbers in our next Business Insights newsletter.
What is the biggest challenge facing your company right now? How are you planning to address it?
BW - As ever, branded media must surprise and delight their audiences. Simply delivering useful content is not - and never has been - sufficient. So that's the biggest challenge we face today, and was the biggest challenge we faced 15 years ago. It is more critical today because there are many new sources of simple information that's not surprising or delightful.
What do you see as the biggest opportunity for media brands/companies right now?
BW - The social media give us the opportunity to have compelling, real-time conversations with our audiences and we think that's the biggest new opportunity we've seen in some time - an opportunity to deepen the audience relationship in valuable ways.
As a former editor do you think the relationship between the reader and the writer/editor is changing?
BW - It may not be changing enough. I notice a lot of editors still creating magazines that appeal more compellingly to their advertisers than to their audiences. Those editors should be gathering audience data, following the audience's instructions and helping their colleagues convince the advertisers that it's the quality of the audience, not the reach, that's most important to publishers and advertisers alike.
We also have new responsibilities to be present in the social media and available to our readers, on a personal level. That's a big opportunity too many publishers are missing. Media buyers need to be taught not to judge the media brand based on their own prejudices, unless it's a magazine for media buyers. . CLICK HERE FOR THE FULL ARTICLE
It is hard to imagine that any business could lose nearly 40% of it volume over a five year period and continue to function in an acceptable fashion, but that is what has happened to the mass market distribution channel over the five years between 2007 and 2012. The final numbers for 2013 are not complete, but there is absolutely no reason to expect anything better; in fact all the indications are that they may even be worse. On top of that, remember that the financial performance of the channel's wholesaler level had been shaky for more that a decade preceding the abysmal numbers of the most recent six years. Just considering these simple and unchallengeable facts, is it unimaginable that 2014 turns out to be the year that the channel collapses?
Consider how last year ended, and also how the new year is beginning. In November, TNG, the largest wholesaler group, unilaterally imposed a schedule of distribution surcharges, ranging from two cents to eight cents per copy on all but 135 of the thousands of magazine titles it distributes. No publisher was unaffected.
Aggressive competition among the major wholesalers for chain retailers reignited, even in some markets where it had rarely been the norm. No one expects it will make the business more profitable. The two other large wholesaler groups are widely expected to follow the lead of TNG and propose new charges. CLICK HERE FOR THE FULL ARTICLE
Say goodbye to the stigma associated with native advertising. Following The New York Times' official embrace of the once-controversial ad format, J.P. Morgan is predicting that native will take over digital channels in 2014.
"We believe native ads are quickly becoming the de facto ad format on mobile and increasingly moving into desktop," lead analyst Doug Anmuth wrote in J.P. Morgan's annual "Nothing But Net" report, released on Thursday.
It is significant that Anmuth and his colleagues are tying the success of native to mobile, considering that they expect ad dollars devoted to the channel to overtake desktop dollars this year.
As for what makes native ads so special, J.P. Morgan calculates that they deliver a huge bang for the buck. Indeed, according to the securities firm, native ads represented just 5%-to-10% of Facebook's impressions in 2013, but accounted for more than 60% of the company's revenue. FOR THE COMPLETE ARTICLE CLICK HERE
I think our publishing industry is at a crossroad and we have been approaching it for quite some time, at least since 2007 and surely since 2010, with the introduction of the iPad. Perhaps Mary Berner, CEO of the MPA, has it right when she now calls our former publishing houses Magazine Media.
In this day and age how would you define a magazine publisher? We are no longer what we once were, because our readers and, most importantly, our revenue streams are very different. And they, too, are continually becoming something else. What we are becoming is not less relevant, but is much harder to define and even more confusing as we proceed into the near future.
It seems to me we are suffering from a strong identity crisis. Pre-2007 if you were a publisher you were for the most part in the print business, and the bulk of your revenue was derived from print. Now a publisher can be called a publisher just by hosting a web page, sending out a newsletter, or a blog or, of course, a printed magazine.
The concept of magazine media does combine all the available platforms into one descriptive business type. But changing our business identity doesn’t solve the problems of lost revenue and shifting reading patterns of our current and former consumers.Even the understanding that there is a universe of multiple platforms beyond print doesn’t help most publishers. Sure the big guys have plenty of dough to throw at as many substrates as seems prudent, and they do just that. What about the moderate to small publishers? They don’t have the money or the internal infrastructure to be so omnipresent. HERE FOR THE FULL STORY
Assuming that we are all adults here, it is time for a frank and honest conversation about the future of print. Never in the pages of this newsletter have I proposed the death of print, not even its near death. That is not happening and will not happen any time soon. But, my goodness! we do need to collect our thoughts and maintain some sobriety. Both Samir and Mr. Dead Tree have published recent articles about this non-death. Samir calls it, "the amplification of print in a digital age." I can live with that. But in my judgment the exuberance needs to tempered just a bit with the flip side of reality.
Below in a chart produced by Dr. Joe Webb is the problem as I see it. Even with all this exciting "amplification," where is the MONEY? As an industry, printed books, magazines, and newspapers have been non-stop losing revenue year in and year out since 2007. I am fine with all the brouhaha that this title and that title went from the web to print. I am ecstatic that some titles are being revived, and I think it is wonderful that there are new titles each and every year. But the money, that revenue that feeds our children, is diminishing - maybe not for all, but clearly for many and maybe, according to the chart, for most.
I believe there is, in fact, a bottom line somewhere where printed products as an industry will do just fine, but we aren't there yet. I ask you, is this a chart to brag by? If you saw this chart at your Wall Street broker's office, would you buy this stock to secure your family's mortgage? I have stated many times in these pages that aggregated data doesn't reflect single titles and that there are many successes that we can and should brag about as an industry. But those are singular cases and NOT reflective of the industry as a whole. CLICK HERE FOR THE COMPLETE STORY
There is an interesting law of nature that parallels itself in all business environments. The law that "nature abhors a vacuum" is as strong in any revenue producing ecosystem as it is in nature. This "law" is at the heart of many a successful entrepreneur, and it is a strategic advantage often missed by corporate shirts. These nimble entrepreneurs have the ability to see the vacuums that are constantly created in the wake of larger organizations' somewhat lumbering journeys.
I bring this up because there has been a recent plethora of pundit conversations lately about the death of journalism based on the news that the editorial department at Time Inc. will now report to the business department. Indeed this move by Time's new management breaks the time-honored separation of church and state rule that exists in many, if not most, reputable publishing houses.
This separation has such gravity that outgoing editor-in-chief of Time Inc. Martha Nelson sent pieces of the "Pope's Miter" to many Time Inc. editors. The whole miter had previously been passed from the company's outgoing editor-in-chief to the incoming editor-in-chief. The miter, which is traditionally the hat of the pope or other religious figures, symbolized the importance of keeping the editorial content of magazines pure and from being unduly influenced by advertisers' needs, wants and desires. Ms. Nelson, who left Time Inc. so as not to be part of a newly perceived and sullied tradition, sent the following note:
"This fragment comes from the 'Pope's Miter,' which resided in the office of the editor in chief of Time Inc. While the miter was passed on in jest, it symbolized the earnest belief in editorial independence, truth and integrity. Now that responsibility rests in your hands."
The theory is that for the assured integrity of any house of writers, there needs to be a strong separation of the editorial and the business environments, so that the written word is not unduly influenced by the seductive dollar, thus giving editors the freedom to explore and speak the truth on any given subject or company, even an advertiser. CLICK HERE FOR THE FULL ARTICLE
"Protestations aside, native advertising is the rage -- and storied media institutions like The New York Times and The Washington Post are joining in.
"To captain those efforts, both papers sought execs with a Forbes pedigree. Kevin Gentzel, the Post's chief revenue officer, and Meredith Kopit Levien, exec-VP advertising at the Times, learned from Forbes Media's chief product officer, Lewis D'Vorkin, an outspoken proponent and pioneer of native ads.
The great bard got it right, when he said something like an ad by any other name is still an ad. While I'm in a paraphrasing mode, Benjamin Franklin sort of said that, those who are willing to sacrifice their integrity for profit will in the end have neither.
What is the BoSacks FREE newsletter all about?
It is purely a very "personal" and slanted collection of news gathered daily over the Internet, which to me seems relevant and useful about the publishing industry. I do this as a labor of love and to keep myself as up to date as is possible with the ever changing and advancing "Information Distribution Industry" formerly known as "Publishing".
And how much does it cost?
The price for this service is nothing. It is Free. It is just as easy for me to copy three or four of my industry friends as it is to carbon copy the current list of 16,500 publishing professionals.