It has been a very interesting and active week for publishers everywhere. The news of Source Interlink ceasing operation and the release of 6,000 workers is dramatic and traumatic to say the least. To those that track the industry the news of SID closing is not a surprise, but perhaps the speed of the demise was. Time Inc.'s announcement this week combined with the Bauer Publications' decision about three weeks ago to pull out of SID put the final nail in the coffin.
As reported many times in my newsletter and in the New York Times recently, "In the last five years, the retail magazine business has shrunk 50 percent, to less than $3 billion. And while there were hundreds of magazine wholesalers in the 1990s, the industry has consolidated into just a few major players in recent years: Source Interlink, TNG and Hudson News."
This turmoil has no end in sight. The sales we have lost as an industry in the last five years have little likelihood of returning. What we need to do is somewhere finally reach a sales plateau from which we can work on growth as an industry and as individual titles.
For my part there is ongoing and absurd doggerel from some members of our industry that the newsstand is a small part of the publishing business and its fall has little to do with the health of the magazine business. This thinking is part of a larger identity problem we are having and is patently not true, at least not true for most of the magazine industry.
The big guys -- you know who I mean -- don't really need the newsstand and have the bucks and the infrastructure to create and do as they will, and they will survive nicely, at least for a while. I do think their hugeness and current profits blind them from long term generational thinking. A newsstand presence gives a magazine and an entire industry visibility as an industry with the consumer. And conversely a lack of visibility breeds long term irrelevance. But perhaps that's the plan. The demise of an infrastructure not thought be needed by the current giants.
Jill Davison, a Time Inc. spokeswoman, said recently, "The regional markets that Source Interlink served -- Southern California, Chicago, and the Mid-Atlantic States -- might face shortages of popular Time magazines like People and Sports Illustrated for up to 12 weeks."
Disruption in the newsstand field for 3 months at least is lost sales, the kind that will never come back. Humans are creatures of habit. This disruption will no doubt create new non-newsstand habits in some of our old and trusted readers, thereby hastening an already depressed newsstand. Is there another interpretation that I am missing? CLICK HERE FOR THE FULL ARTICLE
Last week, PBS MediaShift ran a piece on how to measure multi-platform success for print magazines, which amounted to three brief interviews with magazine industry insiders. One of them was Samir Husni, well-known as Mr. Magazine and a professor at the University of Mississippi. The article stated:
Husni argues that digital magazines not paired with print publications are worth little, in financial terms. "They have no monetary value. I don't know of a single digital-only magazine since the iPad came out that's making money, that has any source of revenue, if it doesn't have a print counterpart.'"
His statement is so demonstrably false that I quickly tweeted my disagreement, and left it at that.
But I kept thinking about it-and getting angry. Samir Husni is widely considered a thought leader in the magazine industry, and his "counts" of new magazine launches in print or on newsstand are widely reported.
Why do we care about this count in the first place? Who does it matter to, and what does it have to do with the future of the magazine business? Should the health of the magazine industry be evaluated by newsstand or print visibility, in an era of declining newsstand and print sales?
And, ultimately, who thinks it's a good idea to base any aspect of a new magazine's business model on newsstand sales? CLICK HERE FOR THE FULL ARTICLE
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: 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
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.