Sunday, April 06, 2008

Panel Exploring the Future of Magazines

Channel Partners Explore Magazines' Future
By Karlene Lukovitz

Will the Internet spell the end of print magazines?

The answer to that oft-posed question is a resounding "no," according to John Loughlin, executive VP and general manager, Hearst Magazines. In fact, to the contrary, the Internet "is in the process of reinvigorating the magazine business," he says.

Loughlin, one of several speakers on a panel exploring the future of magazines that was moderated by Peter Kreisky of The Kreisky Media Consultancy, reported that Hearst sold 1.6 million net paid subscriptions on the Web last year, generating $20 million to $30 million in revenue. These were not "cannibalized" from existing customers, he stressed: Between 80% and 90% of the new subs came from consumers who had no previous history of transactions with Hearst. Loughlin added that he'd seen similar patterns while working at other major publishing companies.

Hearst uses every opportunity to drive traffic to its sites, and promotes buying issues at retail on all of its magazine sites. The Web is particularly powerful for generating new retail and subscription customers because it exposes new prospects to magazine content in a format that avoids the interference of "brand bias," Loughlin said. Young people often perceive an established magazine as being "their father's or mother's magazine," he explained. But when they experience the title's content in the nontraditional format of the Web and like that content, "all of a sudden, it's not my father's brand anymore."

Web aside, Loughlin stressed that consolidation of publishers, retailers and industry suppliers is "painful" and will inevitably continue-but that its upsides are that it will force all parties to strive for constructive change and it's also likely to make change more feasible.

"There are fewer companies, and we may be reaching a point where there are sufficiently few of us to get something done," he said. "We've been talking about moving from a push to a pull system for 20 years. Consolidation may drive us all more quickly to a demand-driven world."

Changes that must be made, he said, include continuing to improve newsstand efficiencies, optimizing magazine mixes at retail, "rationalizing" the number of titles at retail based on consumer demand, eliminating redundancies in field force, back office and data collection and distribution functions, and going to pass-through RDA.

Other panelists' viewpoints on what's ahead for magazines:

* Jamie Carey, VP, newsstand for Barnes & Noble, Inc.-noting that B&N is enjoying the best financial status in its history, in no small part because of the 5,000+ magazines it carries-expressed the hope that publishers will continue to invest in their print platforms, and not lose focus to digital formats.

Carey noted the potential for selling magazine subscriptions at retail. "Subscriptions account for 85% of [circulation], and we could help [publishers] sell them," he said. "It would be great if, five years from now, we were a big subscription source." He added that there is also considerable potential in bookazines and other innovations. "A lot more could be done," he summed up.

* Glen Clark, president of The News Group in North America and executive VP of The Jim Pattison Group, called for "sweeping changes" to simplify and modernize the system, including eliminating all unnecessary costs, partnering to further reduce waste, facilitating industry-wide adoption of SBT, and maximizing sales while optimizing efficiencies. Clark also called for a single discount rate and making RDA a discount off invoice.

He said that professional wholesalers will continue to reinvest in the business through technologies and services, and predicted that by 2012, efficiency levels will reach the 50%+ level, even as sales are enhanced. He sees a "restructured and reenergized" supply chain and a business able to "recapture and extend retail space."

* Rich Jacobsen, president and CEO, Time/Warner Retail Sales & Marketing, stressed magazines' unique engagement with consumers and said it's time for the industry to focus on "leading with our positives, as other leading categories do."

He agreed with a point that's been expressed by Curtis Circulation executives regarding efficiencies: The focus should start with the largest-selling titles, because this is the point of greatest leverage. If the efficiency levels of just the top six selling newsstand titles could be raised to the efficiency level of People Weekly (now at 52.2%), 150 million magazines per year would be taken out of the system, yielding about $32 million in savings for wholesalers and roughly $25 million in marginal net improvement.

Jacobsen noted that the category flourishes most within retailers that are "passionate" about the product, and observed that one of the plusses of Wal-Mart's magazine supply chain sustainability initiative is that it has engaged the retailer with the category and created a feeling of "ownership" toward it.
He also suggested that the industry should explore ways to leverage magazine sales innovations at retail, such as upsells,to reduce its dependency on the Postal Service.

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