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Published on 4 November 2011by Tony Groom
The Roller-coaster That is Magazine Publishing
The magazine publishing industry has been on a roller coaster ride for many years as
print advertising revenues have plummeted, driven partly by a shift to online
advertising but more recently by the drop in marketing budgets during the ongoing
economic crisis.
There has been a great deal of consolidation within the industry. Many titles have
been sold or discontinued, some publishers have disappeared altogether and others
taken over or been subjected to significant cost cutting.
This year alone, Sky has discontinued all its magazine titles, each of which had a
circulation of £4 million, having previously reduced monthly publication to quarterly.
BBC Worldwide has sold 34 titles to a private equity company. Future UK closed eight
titles in July, citing a decline in revenues particularly in the US, and the UK-based B to
B publisher Schofield closed its US operation completely, allegedly because the US
division’s bank withdrew its finance after pressuring it to refinance its debt.
Publishers have been suffering from a triple whammy, of loss of advertising revenue
due to a shift from print to online and other media, increased costs due to rising
newsprint and ink prices, and at the same trying to service residual debt that was
taken on during the good times. Archant, a UK publisher of regional newspapers as
well as 80 magazines, reported in July, that its profits had sunk by 60% in the first half
of the year, in part because of the rising cost of newsprint but also because of the
loss of advertising revenue.
Yet some publishers remain up beat. London-based B to B publisher Centaur Media
has announced that it will double the size of the business in three years by focusing
on buying up exciting new businesses, paid-for subscription services and events.
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2. Centaur, which owns Perfect Information, The Lawyer and Marketing Week,
restructured into three divisions in June (business information, business publishing and
exhibitions). It says it will double its revenue, the proportion of money it makes from
online media and its operating margins by the end of 2014. It has also outlined plans
to reduce its reliance on advertising and shrink the contribution of printed media
from 43 percent to 16 percent by 2014. This includes closing the print editions of New
Media Age and Design Week, and selling a collection of titles including those in its
logistics and supply chain portfolios.
The question is whether it will succeed. One publishing company we know of that is
currently going through a restructure had been growing over the last two years. It
has a defined circulation B to B market with publications funded by advertising
revenue. However, despite its current profitability it is carrying huge liabilities built up
over two years of loss making while the business was growing. The sad fact of this tale
is that this publishing company was undercapitalised and as a result its suppliers have
funded its growth and they are now exposed as unsecured creditors.
The raises the issue of growing liabilities in an industry where revenue is declining and
supplier costs are rising. The potential for a publishing house to drag a lot of suppliers
down with it is huge. Restructuring such companies is also difficult since cutting
editorial costs has an impact on quality and relevance to readers.
It is clear that the industry is going to need to be much more innovative if it is to
survive and prosper and to “think outside the box”. One obvious tactic, as being
pursued by Centaur, in the example above, is to shift some titles to being online only.
Others are making some online sections accessible by subscription only and
producing special reports and in-depth industry information, again only available to
purchase.
However, there are other, more innovative routes that could be taken, such as
experimenting with outsourcing writing overseas, perhaps to India, where staffing
costs are much lower. The sub editing and page make up could be done overseas,
again where staffing costs are cheaper and the printing can also be done abroad
by the Eastern European printers who have sprung up over the past few years.
Research indicates that the industry does have a future. Readex, which regularly
surveys attitudes among B to B readers recently reported that 74% wished to carry on
using print versions of the titles they read.
While there is plainly life in the B to B publication market because professionals will
always need to keep up to date with their industry’s developments and the activities
of competitors, the print side of the industry is likely to decline. Publishers will need to
be more innovative and change their business model and most likely embrace
alternative media that does not rely on printing and physical distribution.
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K2 Business Rescue
The Emergency Service for Business
Call Tony Groom on 0844 8040 540