Re: BoSacks Speaks Out: PULP FICTION? The Candid Conversation about Rate Base
Bob: I have worried for years that if everyone got a handle on their rate base and printed magazines closer to the actual sell through, that us "paper guys" would be out of business even faster than we are seeing. I hope, from my side of the fence, that they continue to do the stupid things they have been doing.
(Submitted by a paper salesperson)
Re: BoSacks Speaks Out: PULP FICTION? The Candid Conversation about Rate Base
Bob, nobody else in the industry could have written that article. Bravo to you for saying out loud what everybody else whispers. We need a better system of accountability without the inherent fraud. Numbers do matter, and we need them, but not the numbers worked out from a time of plenty and no competition. The earth and publishing is no longer flat. We need better systems.
(Submitted by a Print advertising sales person)
Re: BoSacks Speaks Out: PULP FICTION? The Candid Conversation about Rate Base
Bo, I agree completely with your comments and the consensus of industry leaders on rate bases. I think the reason there is so much resistance to moving away from them is that most senior magazine publishing executives with decision making power have grown up with circulation guarantees, rate bases and advertising driven business models. Change is tough, especially when there is risk associated with it.
Maybe publishers can find a way to group together (without collusion) to gradually move to a different business model with less risk. I'm sure that most consumer marketers would be very comfortable and could improve their bottom lines if relieved of the rate base restriction.
(Submitted by an Industry Consultant)CLICK HERE FOR THE COMPLETE ARTICLE
What must the successful business model contain for today and tomorrow?
Is there room here for a Parallel Universe? (Print and electrons)
In a word: compelling content. Okay, that's two words, but you get my point. In the past, as publishers we tended to think in duals: editorial and advertising, print and digital.
However, there is only one mandatory asset for a successful publishing model: content that people want to read (or look at, or watch, or listen to). And for it to be a successful business model, it also must be compelling in a way that brings you back for the next installment.
As for a Parallel Universe, I think there are actually dozens of parallel universes. If we think only in terms of print vs. digital, we're missing the point.
Content is essentially the experience of the consumer. The delivery system can both alter and enhance that experience.
At August Home, we push content through a delivery sieve to get dozens of streams. Magazines, SIP's, books, (the print we're accustomed to) as well as web sites, email, blogs, apps, videos, live events, webcasts, TV shows.
The domain of publishing is vast - because there is not just one big group of consumers. There are many. Hence, many ways to reach them in a way they want to be reached.
At August Home we call it "surrounding our customers with service." It's not one customer, or one group of customers. There are many groups. Our job is to provide content the way each group of customers wants to receive it (each group's preferred delivery system).CLICK HERE FOR THE FULL INTERVIEW
You once wrote about how media is moving increasingly toward a greater technology dependence and you asked, "What's First, Technology or Content?" What is your answer to that question?
Technology is more important. We are inundated with information. There's no way we can absorb it all. There's simply no way to process it. I subscribed to the paper version of the New York Times just to see if I could wean myself off the firehose of Twitter, Slate, HuffPo, FB, YouTube, LinkedIn, Yahoo, New Republic, Politico, CNN, Time, New Yorker, Scientific American, The Atlantic, etc. Etc. Etc. Etc. I wanted to be able to spend a few quiet hours on a Sunday morning reading for leisure's sake. It's very hard. I mean, if I'm in Perth, Australia, and I want the latest news from Dayton, Ohio, I can do it, easily, at the hometown paper, with up-to-the-minute reports. So: Assuming that the content is mostly ALL good, then it's the framework-the technology that enables me to control the deluge-that's more important.
We constantly read about the long-term decline of the consumer magazine market and newsstand sales that have yet to find a bottom. This decline has seen publishers trying to reinvent their products and content delivery systems along with attempting to reinvent their revenue streams. What is your opinion of the current state of affairs?
The current state of affairs is not one of expansion, but decline and adjustment. There are some exceptions but that's the pattern. But great magazine brands that create an affinity with their readers will survive, in print and elsewhere. Print advertising in more sectors than not will not be a main revenue stream in the future. So print brands need to be able to radically reinvent their models-content and business-because Google, Facebook, Amazon, LinkedIn and the other great data-mining companies are doing it for them. I emphasize data mining, because that's what the Facebooks and Googles are, fundamentally. But magazine brands have a distinct advantage in that their customers know them and trust them. For some, that will prove to be a disadvantage, because complacency will kill them. Content delivery is an extraordinary challenge. Print magazines can still be a lot of fun as an experience, but the days of mass-circulation magazines are over. "Mass" is being redefined and we are watching it happen.FOR THE COMPLETE INTERVIEW CLICK HERE
For the last twenty years I have been publicly critical of the process and accountability—or lack thereof—of rate base, yet it never occurred to me to write an article about it. The truth is, I don't recall anyone writing an article about rate base from a positive or negative viewpoint.
From my perspective, rate base is a convoluted tool designed to produce distorted circulation figures. Yes, auditing is an attempt to verify with some precision and prove to the advertisers that a certain number of people may have picked up and read your magazine. But imbedded in this arcane system is a potential for trickery and a temptation to abuse the well-meaning audit results to achieve what amounts to some meaningless readership number.
Since I wanted to express more than just my opinion on this topic, I reached out to industry leaders from all segments of our noble franchise. Most of the people I spoke to in the research for this article focused their observations on the abundant abuse of rate base and its antiquated nature.
I spoke to magazine media pundit and Publishing Executive columnist D. Eadward Tree and started by asking, "What is the problem with rate base?" He says, "I think we should define the problem clearly: Is it circulation audits? Rate base in general? Or inflated rate bases? I don't see a problem with the concept of rate base in general: We make a promise to our advertisers about who will see their ads, then verify that they got their money's worth by having the circulation audited. What gets us into trouble is inflated rate bases, which force publishers to do desperate, stupid things like offering $5 annual subscriptions, using negative-remit agents, and getting into trouble with the Federal Trade Commission." FOR THE COMPLETE ARTICLE CLICK HERE
I enjoyed reading Jim Gilmartin's article, "The Problem Isn't the Things We Don't Know, It's the Things We Know That Ain't So." His point was that marketers often base their decisions on assumptions that aren't supported by facts. What's interesting is that the assertions he made in the article weren't supported by facts either. Not one of his many statements and claims was sourced or documented. Very entertaining stuff, but it's hard to tell which part of the story is complete fabrication: the illogical marketers or the "facts" that prove them wrong. Maybe both! (Submitted by a Publisher and an official BoSacks Cub Reporter)
RE: Putting journalism cart before advertising horse
would disagree with his basic premise that putting the journalism
"cart" before the advertising "horse" is a mistake. What must come first
is the interest of the customer, if a business is to survive. One of
the problems of media is that, for too long, it treated audience as
secondary rubes there to support the ad carnies. His barely-disguised
contempt in mentioning the "minor revenues" of Ezra Klein tells just as
much. If the business can be healthy with low revenue and even lower
cost of production and distribution, what is the problem? Other than not
offering the luxe professional lifestyle that media is "supposed" to
confer? Maybe those who lived and worked sumptuously have much to answer
for regarding the current state of the industry, wasting money and
energy, expecting others to scrape by so that they could continue with
an accustomed lifestyle? (Submitted by a Writer) FOR THE COMPLETE ARTICLE CLICK HERE
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
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.