In the US, consumer spending and GDP growth had slowed to fractions of 1% as of Q2. After August’s events, consumer confidence indexes plummeted to their lowest levels since the 1980 recession. Meaning spending on all but essentials is bound to decline further.
For US consumer magazine-based media (like most businesses here and abroad), projecting the remainder of 2011, never mind how 2012 is likely to play out, has become a crap shoot. But here’s some context for consideration.
Looking at print advertising stats to date, the leading magazines reporting to Publishers Information Bureau (PIB) realised an average 1.3% gain in ad pages for the first half - anaemic, but better than full-year 2010 (-0.1%), 2009 (-26%), 2008 (-12%) or even 2007 (-0.6%). MagazineRadar’s by-company ad page tallies put Bonnier up 12% (to 6,624); Condé up 2% (9,711); Time Inc up 1% (10,670); Hearst down 4% (6,965) - not including its six newly acquired Hachette titles, which were up 5%, to 3,326; and Meredith down 12% (to 4,763). As usual, second half performance should benefit from key September issues; MIN found about half of major fashion / beauty titles logging page gains for those issues.
None of that speaks to per-page revenue yields. Meredith (which has now implemented an ROI guarantee for major print advertisers) saw per-page revenue rise 5% in its fiscal ending in July. PIB’s (inflated, rate card-based) estimates showed first-half 2011 ad revenue up 4% - a bit better than full-year 2010 (+3%) and far better than 2009 (-18%) and 2008 (-8%), but still below 2007’s +6%.
ZenithOptimedia’s 2011 US ad forecast - revised in July, before the latest markets debacle - projected a print magazine ad revenue decline of 1% (and -2% in 2012 and 2013). By August, industry analysts were predicting that advertisers will pull back somewhat on second-half spend in response to the economic turmoil, with print magazines / newspapers likely to be most affected. (Online and mobile advertising are still expected to see robust growth.)
While the impacts on magazine media companies’ overall revenue may be tempered somewhat by increased cross-media advertising offerings, digital advertising has to date been unable to offset print advertising losses.
More important in cushioning the overall blow, consumer “publishers” of all sizes have become extremely aggressive about developing new ventures / partnerships across every imaginable platform. In recent weeks alone, publishers have announced partnerships with TV and video production companies (including a Condé deal with a reality TV producer), talent agencies and others to launch everything from magazine-branded online / new media / video content offerings to films, consumer products and book clubs. There are also growing numbers of synergistic but separate businesses, like Hearst’s iCrossing digital marketing services agency.
Such non-traditional businesses have been proliferating for some time. Tellingly, Meredith’s financial bright spots included record revenue growth in the integrated marketing and brand licensing areas of its magazine / National Media Group, and Time Inc saw (vaguely worded) “content revenues” jump 56% in Q2, along with 1% and 2% gains in advertising and subscription revenue, respectively.
Digital subs
Speaking of subscriptions… sub-based access to iPad and other tablet / e-reader / mobile editions continues to expand rapidly, with Meredith now launching iPad subs for three key brands and Time Inc launching subs for iPad, Nook Color and other platforms across its entire brand portfolio.
Obviously, publishers are convinced that digital subs will enhance circulation’s profitability and help support ad rate bases - and drive up readership numbers for current advertising purposes and with an eye to eventually replacing rate bases with cross-media audience readership metrics. No longer having to break out digital vs print copies in ABC statements is a step in that direction, although leading publishers will provide advertisers with digital metrics.
Differing models will complicate analysing digital’s contributions to publishers’ overall financials, but most digital sub offers also seek to maximise print subscriber retention, as well as draw / retain new digitally-minded subscribers (auto renewal is de rigueur in digital and bundled offers). Time Inc and Condé - but not Hearst - are letting existing print subscribers download sub app editions at no extra cost. Time Inc’s acquisition model is an “all-access” option: Print / digital platforms / online access for a lump sum ($30 per year or $2.99 per month for Time, for example). As of July, Time Inc reported 11 million+ “downloads” of apps across the four titles currently offering them and 600,000 digital single copies sold (no mention of paid digital subs sold).
Condé’s model varies. Wired - which by no coincidence is upping rate base by 25,000 (to 800,000) in January - typifies the model for monthlies. It’s offering a one-year iPad / print sub renewal for $12. New iPad or print subs each go for $19.99; no mention is made of getting print with the iPad, or (at least initially) getting the iPad edition free with print (despite the existing-subscriber free-download option). The New Yorker (47 issues) is pushing one-year all-access subs at $69.99 ($1.50 per issue), vs $59.99 for iPad-only ($1.28 per issue). Condé reported pulling 242,000 digital-edition users within six weeks after launching iPad subs for eight titles - 136,000 free print-subscriber downloads and 106,000 paid downloads (three-quarters of which were subs). Those total downloads represent 1.3% of Condé’s total print circulation (18.6 million).
The overall impacts on the subscription revenue stream will be (somewhat) easier to judge as more audit periods elapse and average price-per-copy and paid unit volume trends become clearer. But publishers obviously are pinning their hopes on (cheap-to-distribute) digital to maintain rate bases more cost effectively, bolster declining per-copy sub profit (and maybe per-sub revenue), and replace plummeting newsstand sales. (Alarmingly, per MagNet, the newsstand dropped 10.9% in units and 8.7% in dollars in 1H 2011 - before the markets went haywire.)
As an eMarketer analyst noted, publishers have “made it very easy for print subscribers to go digital, but at some point, they’ve got to pay the bills. It’ll be interesting to see how [digital] plays out on the revenue side.”
