Thursday, January 24, 2008
Nowhere To Run: Trickle-Down Theory Impacts Advertising
by Diane Mermigas
Amid the chaos and panic created by Wall Street and the Federal Reserve, ad-dependent companies are scrambling to determine just how impaired their financial lifeline will be in a troubled economy. Three words: trickle-down effect.
The broad-scale tumult is filtering down into the crevices of all media and advertising companies. They are making adjustments in spending as their costs, revenues and credit tighten. They are watching their stocks get hammered, and their ability to leverage assets or do deals is drying up-for now.
The normal retrenchment that comes during an economic downturn is being complicated by several unusual factors that could extend into 2009. Major advertiser categories, such as autos, financial and housing, are undergoing an unprecedented squeeze and will not provide the spending levels that ad-supported media needs. Retailers and packaged-goods marketers are also under pressure. Media itself is undergoing transformative change, moving from passive to interactive; the learning curve will last for years. Unlike recessions past, advertisers continue to shift some of their cautious strategic spending to new interactive platforms, where they can permanently realize more immediate returns.
These economic pressures will spill over into 2009, when there will be no $3 billion artificial boost of cyclical election-year dollars. Advertiser spending on traditional and new interactive marketing will continue to fragment, as will consumer attention. "It is going to be pretty ugly for a while-well into next year," says Lauren Rich Fine, formerly advertising guru at Merrill Lynch and now researcher in residence at Kent State University.
The stop gaps media companies in particular are hoping to fall back on-ramping digital revenues and international sales-will not increase rapidly enough to offset declines in diffused traditional advertiser spending. Most media companies remain vulnerable. Newspapers, outdoor, Internet display and radio have above-average exposure to the most risky advertising categories-including financial, real estate, retail and construction, which collectively account for nearly 10% of total U.S. advertising, according to Bernstein. Media companies are among the largest advertising categories, previously believed to be recession-proof.
Advertising contributes as much as 97% to the revenues of a media company such as Clear Channel Communications, 71% of CBS Corp. revenues, and as little as 22% to Walt Disney Co. Advertising also is a growing revenue component for Internet giants Google and Yahoo. Consumer spending, which may not be bolstered much by the government's proposed $150 billion stimulus package, contributes 55% to Disney's overall revenues and 72% to Time Warner. On the flip side, digital revenues contribute less than 10% of most media company revenues, and only News Corp. and GE (owner of NBC) rely on international markets for half of their income. The level of international growth that media companies seek will not come while foreign markets are being dragged down into U.S. economic jitters.
So, as advertisers go (in every conceivable industry), so go media companies. The economic uncertainty is creating mixed views for 2008, according to speakers at Bear Stearns' recent annual advertising summit. The outlook depends on who and where you are in the medium spectrum, according to Bear Stearns and industry trade groups. The most volatile-newspapers-could decline as little as 1.2%, or more than 7% in the case of a recession. Broadcast TV should top 9%, fed by the Olympics and elections. Cable could be up more than 5.5%, benefiting from audience and ad-dollar shifts from the writers' strike damage at the broadcast networks. Outdoor will be up 6%, and the Internet 22%.
However, all bets are off in 2009, when the economy and advertiser spending could still be under pressure. That prospect is impetus for all media and entertainment concerns to move more of their ad-supported branded content and services online. That is where double-digit growth will continue for years-as marketers move past search and text advertising into new forms of connecting and transacting with key consumers. The science of pitching, selling and buying is in the throes of a sea change that will alter ad spending among media platforms and devices.
There also is incentive for traditional media to alter the way it conducts its revenue-generating business. For instance, backing away from the costly upfront selling ritual and leaning toward a 52-week continuous selling cycle, based on the development and availability of new content, is a move that NBC Universal chief executive Jeff Zucker is initiating. With advertisers looking to solidly justify every dollar they commit, there is incentive for media and measurement companies to further sharpen and qualify their audience metrics.
In a bullish report titled "The Cowboys Dance On and On. . . ," Yankee Group analyst Daniel Taylor recommends that advertisers use these uncertain times to incorporate interactive into mainstream media spending schedules, invest in building and maintaining data interchange, grow online expenditures more than 100% annually, and explore sponsored content and "advertainment."
Media companies should create new marketing segments, take the lead in online privacy, invest in online content, focus on cross-media opportunities and develop social networks. The reason: even as the number of Internet users levels off, Internet advertising will continue to grow at a 24% compounded annual rate to more than $50 billion in 2011, surpassing all forms of broadcast television, cable and radio spending. That's why the Internet cowboys are the only ones dancing.
Wednesday, January 23, 2008
Let's Hear It for Print! Well, Glossy Print Anyway
Maybe, Just Maybe, a Magazine Resurgence Has Arrived. Here Are Four Innovators Who Keep Things Interesting
By Simon Dumenco
"I just got finished with New York magazine's new issue. After I put it down, I leafed back through all of the insightful, well-thought-out stories, beautiful glossy photographs, useful charts, and I thought to myself, 'Wow. F -- k blogs.'" -- Ricky Van Veen at rickyvanveen.com
When I read that recent, random observation on the personal blog of Ricky Van Veen, I thought, Hells yeah. It's worth noting that Van Veen is no grizzled, old-media hack swathed in gauzy nostalgia; he's the 27-year-old editor in chief of CollegeHumor.
The blog backlash has been a long time coming (actually, I guess, it's been ongoing and concurrent with the blog boom, but lately everyone I know seems down on blogs). And, arguably, a moment of glossy resurgence has arrived -- well, OK, if not a resurgence, at least a glimmer of hopefulness. Like Van Veen, I've been feeling deeply appreciative -- and even a little optimistic -- about magazines. To wit:
Speaking of New York magazine, Editor in Chief (and National Magazine Award hog) Adam Moss hardly needs any more praise from the likes of me; instead, I'll heap praise on his New York Look, a twice-yearly fashion-centric spinoff that launched last fall. I'm hardly a fashionable guy, and yet I can't wait for the spring issue. The launch issue was, simply, exhilarating -- gorgeously designed, with stunning photography, perfect pacing and elegant packaging that delivered the essential top line on the contemporary fashion moment. (Full disclosure: I used to be on staff at New York and very occasionally still write for it. I had absolutely nothing to do with the launch of New York Look.)
Fifteen months ago I tentatively praised the newly re-energized Fast Company, a once seemingly doomed Web 1.0-era business magazine that got a new lease on life when Morningstar CEO Joe Mansueto bought it. Since then, new-ish Editor in Chief Robert Safian has been putting out an increasingly smart, compelling, often contrarian take on progressive businesses (not just web companies but all sorts of operations that care deeply about design as marketing). Oh, and beyond print: Snagging celebrity tech blogger Robert Scoble to spearhead the launch of FastCompany.TV in March? Really smart.
One thing you can't take away from magazines: their, well, thingness. In a world of fleeting media delivered as ephemeral electrons, thingness -- tangibility -- matters more than ever. Case in point: New Beauty magazine's clever $25 BeautyBox (rolling out to all Borders stores in 2008), an editor-curated selection of five beauty-product samples packaged with the latest issue of the magazine. I personally couldn't care less about beauty crap, but I love it when a scrappy upstart such as New Beauty actually thinks strategically about what it can do with real-world distribution networks.
Speaking of thingness, one of my all-time favorite magazines, Vice, is free (you can find it in, for lack of a better term, "hip" shops worldwide), but it rewards its paying subscribers with an always-excellent polybagged CD sample of new music (Vice is an all-over-the-map general-interest magazine with an affinity for youth/street culture, to give you an idea of the sort of music it champions). A few years back, when I was editing Colors magazine -- the frequently rude, crude theme-centric magazine created by the late, great Tibor Kalman in 1991, which arguably helped inspire the frequently rude, crude theme-centric Vice (e.g., "the Iraq issue," "the clothes issue") -- I thought I'd never be able to put out a publication as smart/funny/provocative as Vice. I was right. Anyway, some hipster-snobs might argue that Vice is a bit long in the tooth -- it's 12 years old now -- but its just-out second-annual fiction issue (its biggest, most ad-packed issue ever) made me fall in love with it all over again
Tuesday, January 22, 2008
Quebecor World didn't keep with times, experts say
BY Roberto Rocha, Canwest News Service
MONTREAL - For Gaetano DiTrapani, co-president of printer Phipps Dickson and a 30-year printing veteran, the headaches began with the Internet and the environmental movement.
As more people chose the screen over the printed sheet, he said, it also became trendy to reduce paper use. Less demand for paper led to printer overcapacity.
"And the more capacity you have, the more competition you have," DiTrapani said.
And that's when the printing industry went from a fairly predictable business to one requiring constant rethinking and adjustment of operations.
Ask around the printing landscape and the answer is pretty uniform: Quebecor World just wasn't quick enough on its feet to see the changes creeping and respond appropriately.
"They haven't had the focus that, say, Transcontinental Inc. has had," said Sandy Donald, publisher of Graphic Monthly, "Transcontinental built itself up in very specific areas. Quebecor World took over everything in sight.
"They spread themselves too thin."
If there is a mantra in the printing business today, it's "find a niche and be the best at it," an axiom that can be applied to any highly mature industry. Volumes are shrinking along with margins. Many printing customers are expanding through mergers and want to simplify their supplier base, often demanding multiple services from a single printer. This forces printers to provide complete solutions for highly specialized needs.
This was the strategy for Transcontinental, Canada's second largest printer, which is always happy to show off its upward-bound top line.
"You need to offer services today," said Benoit Huard, the printer's chief financial officer. "Clients want one supplier that will service all their needs."
No one can blame Quebecor World for not trying. For the past few years, the company has sold off numerous plants to focus on magazine, catalogue and directory printing. Their sin was being a late mover and a poor allocator of managing talent, Donald said.
While the rest of the industry was busy upgrading presses to modern, versatile digital equipment, Quebecor World became an afterthought as parent company Quebecor Inc. focused on its acquisition of cable maverick Videotron.
"They started replacing their equipment later than their competitors," Donald said. "And Videotron took key management from Quebecor World, which hurt them quite a bit."
Much of the printer's pains came from Europe, where its operations were the weakest. An attempt to sell off that continent's operations to RSDB NV fell apart late last year, denying the company some much-needed capital.
Donald said Quebecor World was partly blind to the market differences between the Old World and New World printing markets.
"The really should have gotten out of Europe two, four years ago," he said. "They didn't think like Europeans do. They sent sent North American people to run European operations. But it's a different world, different culture."
Monday, January 21, 2008
BoSacks Speaks Out: Friends, as upsetting as this news may at first appear, it is not a reason to panic. The presses are running, the paper is rolling and ink is being placed within tolerances of 1/1000th of an inch, as per usual with a rhythm and a predictable schedule.
They have received 1 Billion dollars to create and sustain moderate stability. And all they need for now is the stability to forecast the next few quarters of business cycles. After that I don't know what will happen and neither do you, but I suggest that for today and tomorrow it is business as usual. If your titles were to ship this week, I would expect them to do so. If your titles were scheduled to ship next week, the same holds true. It is a time of transition and change, but not of wholesale upheaval. It's my experience that, under conditions like this, all titles will get out and all publishers will continue to publish. The details of this and the plains of action, lay with the accountants of the world.
As I heard Coach Bill Belichick say last night, "Be smart, stay allert and do your job, and we will get through this just fine . . . "
Now you begin to see, don't you, that distance ain't the thing to judge by, at all; it's the time it takes to go the distance in that counts....It's a matter of proportion, that's what it is; and when you come to gauge a thing's speed by its size, where's your bird and your man and your railroad alongside of a flea?....A flea is just a comet, b'iled down small.
- Tom Sawyer Abroad
January 21, 2008
Dear Quebecor World Customer,
Quebecor World has applied today for court protection in Canada and the United States to conduct restructuring for the long-term interests of the company, its customers, suppliers and employees. As part of this process, Quebecor World has secured
US $1 billion of new financing to continue to provide you and all our customers with reliable, quality services on a business-as-usual basis. Our operations in Europe and Latin American are not included in these filings.
The approval of $1 billion in new financing through Credit Suisse and Morgan Stanley was included in the court applications under Canada's Companies' Creditors Arrangement Act and Chapter 11 of the U.S. Bankruptcy Code. In addition, Quebecor World is seeking the appointment of Ernst & Young Inc. to monitor the company activities in the Canadian proceedings.
Despite the difficult economic conditions in general and in the credit market in particular, Quebecor World continues to have a positive cash flow, expert teams of experienced employees, valuable, performing assets and an impressive roster of customers such as you. In the months ahead we will be reviewing the company's performance and developing ways to make further improvements in all our operations.
The prudent action we have undertaken today and the vote of confidence represented by the $1 billion of new financing means that we will continue to operate on a normal basis as we restructure for the future.
We look forward to maintaining our business relationship with you.
Quebecor World's commitment is to keep customers, suppliers and employees and other stakeholders informed of all significant developments, either directly or through our webpages on the Internet. Please do not hesitate to contact us if you require further information. We will make every effort to respond in a timely fashion.
Thank you in advance for your patience and support as we work to achieve an outcome that serves the best interests of our customers, employees, suppliers and other stakeholders.
Quebecor World seeks bankruptcy protection
Updated Mon. Jan. 21 2008 9:56 AM ET
The Canadian Press
MONTREAL -- Commercial printer Quebecor World Inc. is seeking court protection from bankruptcy in Canada and the United States.
The 28,000-employee Montreal-based company said Monday it is filing under the Companies' Creditors Arrangement Act in Canada and Chapter 11 of the U.S. bankruptcy code.
The company also said it has arranged commitments from Credit Suisse and Morgan Stanley for US$1 billion, subject to court approval, to cover current operating expenses including wages and benefits.
"These steps allow the company to continue operating as a going concern for the benefit of all those affected including our many loyal employees, customers and suppliers,'' stated Quebecor World CEO Jacques Mallette.
"The company has a strong business and valuable assets located throughout the world.''
Mallette blamed its troubles on "industry pressures, particularly in Europe, combined with the inability of the company to raise new capital in the current market environment and the inability to complete the sale of its European operations.''
The court filings follows the failure of a proposed C$400-million rescue financing agreement with Quebecor Inc. and Tricap Partners Ltd., which lapsed Sunday after failing to win consent from Quebecor World's bankers. The banks balked at having their debt placed behind the new financing in the event of a future bankruptcy.
Companies under court bankruptcy protection from creditors typically restructure their operations and financings, with the equity value for existing shareholders generally wiped out.
Quebecor World shares slumped by 20.5 cents to 13 cents in early TSX trading after the announcement, down from a 52-week high of $17.25.
Quebecor Inc. issued a statement stressing that it and its other subsidiaries "are not affected in any way'' by Quebecor World's decision.
It added that it told Quebecor World on Sunday that it must remove "Quebecor'' from its corporate name, "to eliminate any confusion in the public.''
Pierre Karl Peladeau, CEO of Quebecor Inc., stated that "Quebecor and Quebecor Media are both in excellent financial health and the outlooks for the future of the businesses are excellent.''
Quebecor Inc. shares were down $1.50 to $30.70 on a severely negative morning overall on the TSX.
Quebecor World to File for Creditor Protection
- US$1 Billion Financing Secured to Meet all Current Operating Needs
Quebecor World Inc. (TSX: IQW)(NYSE: IQW) today announced that the Board of Directors of the Company has authorized it to file for creditor protection under the Companies' Creditors Arrangement Act (CCAA) in Canada. A number of Quebecor World's U.S. subsidiaries are also covered by the CCAA filing in Canada as well as in the United States under Chapter 11 of the United States Bankruptcy Code. Application under the CCAA will be heard by the Quebec Superior Court on January 21, 2008 and the filing under Chapter 11 of the U.S. Bankruptcy Code will be made in the Southern Judicial District of New York.
Quebecor World's Board of Directors, in a unanimous decision, authorized the Company to take this action as the best alternative for the long-term interests of the Company, its employees, customers, creditors and other stakeholders. Operations outside of North America are not included in these filings.
The Company has also announced that it has entered into financing commitments with Credit Suisse and Morgan Stanley for new financing in the amount of US$1 billion. This financing, which is subject to approval of Courts in both Canada and the United States, will allow the Company to meet all current operating needs, including wages, benefits and other operating expenses.
Jacques Mallette, Quebecor World's President and CEO said: "These steps allow the Company to continue operating as a going concern for the benefit of all those affected including our many loyal employees, customers and suppliers. The Company has a strong business and valuable assets located throughout the world. We believe that the steps we are taking today and the strong vote of confidence given to us by our new finance lenders will ensure that we will be able to protect the value of the business for our stakeholders."
Mr. Mallette added: "Today's filing is the result of industry pressures, particularly in Europe, combined with the inability of the Company to raise new capital in the current market environment and the inability to complete the sale of its European operations. The steps we initiate today will allow the Company to make changes which are necessary to ensure the long-term viability of the Company within a process that ensures fair and equitable treatment for all stakeholders."
The deadline of 9:00 a.m. January 20, 2008, for satisfaction of the conditions precedent to the previously announced CDN$400 million rescue financing agreement with Quebecor Inc. and Tricap Partners Ltd. having passed without such conditions being satisfied results in the agreement relating to the rescue financing being terminated and without effect. The Company recognizes and appreciates the time and effort of Quebecor Inc. and Tricap Partners in connection with the rescue financing.
Forward looking statements
This press release may include "forward-looking statements" that involve risks and uncertainties. All statements other than statements of historical facts included in this press release, including statements regarding the prospects of the industry and prospects, plans, financial position and business strategy of Quebecor World Inc. (the "Company"), may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities legislation and regulations. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "plan," "foresee," "believe" or "continue" or the negatives of these terms or variations of them or similar terminology. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made have on the Company's business. For example, they do not include the effect of dispositions, acquisitions, other business transactions, asset writedowns or other charges announced or occurring after forward-looking statements are made.
Investors and others are cautioned that undue reliance should not be placed on any forward-looking statements. For more information on the risks, uncertainties and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the Company's public filings available at www.sedar.com, www.sec.gov and www.quebecorworld.com. In particular, further details and descriptions of these and other factors are disclosed in the "Risks and Uncertainties related to the Company's business" section of the Company's Management's Discussion and Analysis for the year ended December 31, 2006, and the "Risk Factors" section of the Company's Annual Information Form for the year ended December 31, 2006.
The forward-looking statements in this press release reflect the Company's expectations as of January 21, 2008 and are subject to change after this date. The Company expressly disclaims any obligation or intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by the applicable securities laws.
Sunday, January 20, 2008
BoSacks Speaks Out; Anyone who is surprised by this move needs to stand up and leave the room. Wal-Mart is totally about efficiency and moving product(s). We, on the other hand with our much touted sell through ratios of 30% or less, are anything but efficient. You do the math. The biggest single magazine retailer is lopping off heads. This is just the begining of a new era of refined distribution. Are you ready?
"When science finally locates the center of the universe, some people will be surprised to learn they're not it."
- Bernard Bailey
Why Wal-Mart Cut 1,000 Magazines
Company's green initiative, lagging sales among factors.
Kristina Joukhadar and Dylan Stableford
After months of speculation by wholesalers and publishers, Wal-Mart is moving ahead with cutting close to 1,000 magazines from its shelves, and it appears the company's recent commitment to being "green" is a factor.
Representatives from the Bentonville, Arkansas-based company did not respond to calls and e-mails seeking comment. But according to industry sources with knowledge of Wal-Mart's plans, the company's Sustainability Committee-and its commitment to reducing waste-played a key role in its decision.
According to one Sustainability Committee member, the formula Wal-Mart used to determine the cut list was based on a ranking of magazine titles by sales. Any title that was not in the top half of sales in any Wal-Mart store was cut from the list.
Another source says that of the 1,000 magazines, the number of active titles cut was closer to 800-representing three percent of copies sold by the retailer. Wal-Mart accounts for more than 15 percent of total U.S. magazine retail sales.
According to the New York Post , the cuts affected virtually all of the major consumer magazine publishers. Meredith Publishing, which as recently as December had denied rumors that it was being cut out of Wal-Mart, was hit particularly hard, with Better Homes & Gardens and Ladies Home Journal being shown the door.
Other axed titles include Town & Country, Home and Metropolitan Home (Hachette), Cookie, The New Yorker and W (Conde Nast), the Robb Report (CurtCo Media), The Economist, BusinessWeek (McGraw-Hill), Forbes and Fortune (Time Inc.), as well as a number of niche titles such as Boar Hunter Magazine, Spirituality & Health, Cabin Life and Log Home Living, according to the paper.
The cuts should come as no surprise. As far back as in October of 2006, Anderson News, the largest distributor to Wal-Mart, began telling publishers it intended to cut the draw on some of the magazines it distributes by up to 25 to 30 percent.
At that time, Anderson said it had "analyzed sales performances by title for every individual retail store and calculated the appropriate allocation for each store to support sales and minimize returns." The stated goal was to cut its financial losses by reducing the number of magazines with low unit sales, low efficiencies and/or low cover prices.
According to one industry expert, out of the 4,000 titles on the newsstand today (including annuals and one-shots), wholesalers say they lose money on at least half of those titles.
CLEANING THE RACKS
January 18, 2008 -- RETAIL behemoth Wal-Mart is tossing more than 1,000 magazines from the racks in its stores, sending yet another shock wave through the battered publishing industry.
Most of the magazines are small, and more than a few of the victims are titles that have long since stopped publishing, including Child, Celebrity Living, Elle Girl, Teen People, Suede, Shop Etc., Weekend and FHM. However, virtually no major publisher was spared.
Wal-Mart, which released its official purge list on Jan. 15, is believed to be responsible for generating more than 20 percent of all retail magazine sales in the US.
Wal-Mart had not returned calls by presstime.
The move is likely to hurt new magazines, which take time to nurture and develop a following.
But one magazine executive said it might actually help magazines that made the cut, because it will remove some of the clutter and give the survivors more visibility on the racks inside Wal-Mart's 4,000 stores.
One of the biggest corporate losers appears to be Meredith Publishing.
Its flagship Better Homes & Gardens is out, as is its sister service magazine Ladies Home Journal. Family Circle stays, however.
Fitness, which Meredith picked up from the defunct Gruner + Jahr, is out, though rivals Shape and Self are still in.
Time Inc.'s In Style will remain, though its spin-off title In Style Home is out. The main Sports Illustrated will remain on shelves, but Sports Illustrated for Kids is getting the heave-ho.
Hearst's Town & Country is out, as is Hachette's Home and Metropolitan Home.
Condé Nast lost space on Wal-Mart's racks for upscale parenting magazine Cookie, the urbane and sophisticated The New Yorker and the glitzy oversized W. Self magazine made the cut, but some slower-selling special interest spin-offs got the ax.
Several titles owned by Swedish publishing giant Bonnier, which less than a year ago paid $220 million for 16 Time Inc. titles, are being left behind. Among them: Parenting, Ski, Skiing, Yachting and Salt Water Sportsman.
Wal-Mart also tossed out some of longstanding titles, including foodie mag Saveur and Caribbean Travel & Life. And a number of business titles, including The Economist, BusinessWeek, Forbes and Fortune, are also getting the boot.
Perhaps not unexpectedly, a title aimed at the very wealthy - Robb Report - is losing shelf space.
The retailing giant prides itself on meticulously tracking inventory, but the purge list suggests there were a few glitches.
Several of the magazines on Wal-Mart's hit list were shuttered titles that the chain hadn't sold in months, but none of the wizards at Wal-Mart's Bentonville, Ark., headquarters appear to have deleted the names from their system - a surprising oversight given several titles haven't been around for as long as two years.
Even magazines that one might think fit with Wal- Mart's conservative and working- class image were left out in the cold. Among them: Boar Hunter Magazine, Spirituality & Health, Cabin Life and Log Home Living. Even the Saturday Evening Post is being spurned.