BoSacks Interview with Gavin Gillas CEO of The Magazine Channel -
Finally the answer to search for the Magazine Media Business - the Pandora for Magazine Content
BoSacks - You are involved in a new format for digital distribution of magazines. What is it and how does it work?
Gavin Gillas - We developed STACKS by starting with the digital-first consumer--the one that whips out her phone while waiting in line, the one who grabs his iPad off the nightstand the first thing in the morning to catch up on the news, the multi-tasker, the person on the go. Our team realized that music, video, and news had all adapted to these consumers, while magazines were still finding their way. STACKS starts that reader out with complete choice over what to read and where to share it. We focused on articles as the core part of the magazine experience. We as consumers buy music by singles, watch movie trailers, listen to soundbites - so our team found an easier way to dive into new magazines. STACKS does a beautiful job of presenting magazine content and recommending related articles and topics. CLICK HERE FOR THE FULL INTERVIEW
BoSacks Speak Out: Sometimes I just have to put the tequila aside and deliver a sobering report to the industry to offset some irrational exuberance. I do this because I love the magazine media industry, and I don't want anyone to misinterpret the facts and true conditions of our industry.
First, we are not dead, dying or otherwise crippled into irrelevance. Print will be around for generations to come and be loved and cherished by many. That being said, whatever you read elsewhere, we are still and continue to be in a position of readjustment and weight loss. We are no longer the dominant player we once were. Sure there are more magazines than ever before, but that notation is irrelevant when you consider the fact that we continue to sell fewer and fewer magazines year in and year out. And revenue, despite many singular and quite excellent print successes, continues to decline in the industry. The pinnacle for magazines based on quantity is long gone and a decade in the past. Click Here for the full Article
BoSacks: Watching our industry in the throes of on-going disruption and observing how some companies react and adapt while others remain static and decline is an invaluable exercise. In defining a roadmap for successful publishing, what are some key attributes you are using as successful information distributor in the 21st century?
Andrew Clurman: Today's operative words at AIM are diversification and proliferation. We are continually finding seams within the verticals we're in of unfilled audience interests and needs. With more ways than ever before at our disposal to serve those interests in the form of print, multi-media, live events, education, and services, the opportunities seem limitless. Building real businesses in areas that may be unfamiliar though adjacent to what we've traditionally done takes a commitment to taking risks and redefining ourselves constantly. Magazine publisher, film producer, email marketer, digital merchandiser, community leader, insurance salesman, adjunct professor, tow truck driver, audience developer, revenue arbitrager, and dock worker, are just a few of the hundreds of job descriptions we have at AIM - few of which existed in our company when we started 10 years ago.
BoSacks: What are some of the new revenue opportunities you hope to take hold of over the next several years?
The fastest growing part of our business has been our events business
that now drives over 50% of AIM's contribution. We are introducing new
events in untapped markets such as the first ever boat show in Panama
City, Panama this summer as well as a number of new Yoga events
throughout North America. Additionally, we also think we can grow our
existing events by enhancing them with digital extensions to allow
greater participation. For example, we conduct fifteen "Log Home
Universities" around the country where couples spend a day learning all
there is to know about designing and building their log home. We've
limited the cities we go to only because our teaching staff can only
travel so many weekends. By creating a distance learning version of
these events we think we can dramatically expand their reach. The
appetite of our audience for in-depth information on horses, boats,
homes, healthy living, and outdoor skills and destinations gives us many
ways to grow. CLICK HERE FOR THE FULL ARTICLE
In September, New York Times media columnist David Carr will convene his first class at the College of Communication, where he is the inauguralAndrew R. Lack Professor, a post dedicated to the exploration of new business models that might support serious journalism in the years ahead. Carr is well-suited for the position, which was created last year by gifts from Bloomberg Media Group chairman Andrew Lack (CFA'68) and from the Sherry and Alan Leventhal Family Foundation. Carr's weekly "Media Equation" column routinely reports on the technologies and business models that are transforming journalism.
BU Today asked Carr and Lack, whose responsibilities have included the pursuit of business models that would sustain Bloomberg Media without support from other business units, to share their thoughts about the future of journalism. Their discussion is moderated by Thomas Fiedler (COM'71), dean of COM and former executive editor of the Miami Herald. The three experts got together in early February in a newsroom at Bloomberg Media. The dialogue below has been excerpted from their conversation. It is not a verbatim transcript. The discussion is available in full in the video above. CLICK HERE FOR THIS AMAZING ARTICLE
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
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.