“Print publishers are just roadkill on the information superhighway.” That provocative soundbite – allegedly made recently by a senior Google executive – actually touches a very raw nerve among many publishers who can feel frozen in the headlights of an accelerating digital juggernaut. Everyone outside the publishing business seems to have a view on the future of so-called “legacy publishers”. Yet what do the publishers themselves think? That is the whole rationale behind Publishing Futures.
This project is what we call “near futures” as it is “near” in two ways. Firstly, it relies on what the people actually working inside the publishing industry are doing and thinking and planning for their own businesses. Secondly, it looks no further into the future than one to two years from now. That is not to dismiss “future scoping” or blue-sky thinking, but it is to put it into perspective – the bright blue sky can be challenging and thought-provoking, but ultimately it is highly speculative and subjective.
The fieldwork for Publishing Futures 2011 took place in December 2010. It provides a snapshot of the magazine industry courtesy of the 101 publishing companies who took part and who shared insights and views from their own live operations, split equally between consumer and B2B companies with a handful of pure-play digital operations added in to offer a slightly different perspective. Customer publishers and newspapers were deliberately streamed out of the 2011 project and will be picked up in their own separate waves of the Publishing Futures project later in the year.
The sample covers over 3,900 information products across print, digital and live channels. It also covers a wide range of company size. In terms of headcount, the smallest company has one staff member and the largest has 1,500 FTEs. Looking at turnover, respondents range from £200,000 annual sales to well over £300m. So, the whole project has a large and wide-ranging sample from major international groups down to small independent publishers.
The full report shows that the detailed picture varies markedly from company to company and from sector to sector, but the following topline results give a sense of the overall direction of the industry…
Turnover trends
Publishers were asked what their current turnover trend looks like. The 2009 survey caught publishers still on the downward track with the average being -1.1%. The latest snapshot is of steady +3.2% growth with the largest proportion (22%) coming in the +6 to +10% range.
The 2011 respondents were then asked to look forward 12 months to predict how they saw their turnover performing in a year’s time. The overall picture is of growth more than doubling.
This improving outlook comes from a mix of (1) sliding publishers bottoming out and turning positive and (2) of accelerating growth among the more buoyant publishers. As with the general economy, the growth is patchy and fragile, but is most definitely there.
Turnover profile
Publishers were asked to provide the profile of their revenue streams, both currently and what they are forecasting for two years out from now. These profiles vary massively from publisher to publisher and from sector to sector, but the topline trend figures give a real sense of what publishers are thinking about the future.
The overall picture is of rapid and fundamental shifts, but not a throwing out of the old business model and starting with a blank sheet of paper.
Own Print Brands
Although declining in their share, these are still the engine room of the publishing business, currently accounting for 64% of total industry revenues.
Own Digital Brands
Behind the significant growth in overall digital revenues, there are some important shifts in emphasis:
* The importance of paid content is predicted to almost double, but will still represent only 21% of total digital revenues in two years’ time.
* Adding ad sales and sponsorship together shows that digital will remain a largely ad-funded model, but sponsorship and advertorials are rapidly assuming a much greater importance in the digital world in comparison to the much slower growth of more traditional advertising.
* Although growing, the rise of ecommerce looks very slow, showing that publishers still do not yet believe that they have really cracked how to sell extension products and services.
Print versus Digital
Print channels in total currently account for 81% of own brand activity and 68% of total industry turnover, falling to 71% and 58% respectively in two years’ time, so losing 10% in two years. The key conclusions are that:
* Print is still massively important and remains the most profitable part of most companies’ operations.
* Print is declining fast, but it is not as fast as many commentators have been predicting.
* The level of digital activity ranges massively. Many publishers, particularly the smaller ones, look as though they are in danger of being left behind – for many, digital still remains a theoretical future opportunity than a present reality.
Customer Publishing
Pure-play customer publishers were not included in this wave of Publishing Futures, so this revenue stream is an add-on activity within paid-for publishers. It is predicted to hold steady overall, but for there to be a fundamental shift out of print and into digital.
Other Extensions
Often under-estimated in the great print vs digital debate, live events are a significant and growing element of many publishers’ activities.
Profit margins
Behind the rising turnover figures, the profit picture is much more mixed, but is still robust given the difficult trading conditions. Overall, margins look to have slipped:
* More companies are in loss than in 2009.
* The margins of the profitable companies have edged down.
* Yet the centre of gravity in terms of profit margin is actually edging up – the largest single profit band segment was the 1-5% range in 2009, while it is now the 11-15% sector.
This apparent contradiction is the result of two factors. Firstly, there are large variations in profitability from company to company and from sector to sector. Secondly, there looks to be an increasing polarisation between the weak and the strong – the strong are getting stronger while the weak are getting weaker.
Yet there is increasing optimism about the future with only 3% foreseeing their margins reducing further over the coming 12 months.
Headcount
The 2009 survey showed that much of the pain of headcount reduction had already taken place by then (April 2009) with the majority of companies (54%) foreseeing a steady workforce over the coming year and with 20% already beginning to staff up cautiously. Now in the latest survey, that 20% has more than doubled to 45% as industry headcount begins to grow once more – the most tangible sign of growing confidence.
The use of outsourcing / subcontracting is increasing slowly.
Digging into the detail
The full report zooms in on each of the following areas in much more detail to show what is driving these topline shifts in revenue and profit, listing key opportunities and threats in each area:
* International activity, which is growing in importance.
* Retail and subscription copy sales, where the balance continues to shift towards subs.
* Marketing budgets, which are beginning to come back.
* Digital and online activity, which is growing, but creating all kinds of issues in terms of the structure of the organisation.
Managing the future
So, if all this is the context to what is happening in the marketplace at the moment, what are publishers actually doing about it in terms of shaping the organisation? The report details three distinct areas:
* Business streamlining – essentially cutting costs.
* Developing existing product and services.
* Developing new products and services.
The relative importance of each area has shifted between the 2009 and 2011 surveys and varies markedly from company to company.
What the future holds
In terms of confidence about the future financial success of their company over the next two years, on a scale of 1 to 10, the average industry score is 7.1, up from the 6.7 seen in the 2009 survey. In addition, 64% claim to be more confident about the future than a year ago.
Yet, behind this confidence there lies a recognition that the underlying business model has already changed significantly with even more change ahead over the next year or so.
Conclusions
The magazine business simply does not look like “roadkill”. Turnover is rising, profits are holding up robustly. Both confidence and marketing budgets are returning and headcount is edging up. And, by the way, print is far from dead.
Yet there are some major caveats behind these positives. The first is that the range of performance from company to company and from sector to sector is becoming bigger – there will undoubtedly be some casualties along the way among those organisations who simply cannot keep pace with the changing business model.
The second is that behind the growing publisher optimism, there are deep concerns about the industry’s ability to juggle so many revenue streams at the same time. That ability is based on company resources, organisational structures and, most importantly, the quality of staff that have the relevant knowledge and skills across a range of online and offline channels.
The irony is that while technology is driving rapid and fundamental change, it actually requires people to manage that change. The old adage about publishing being a “people business” has never been more true than it is now.
