Magazines are in freefall

The explosive growth of magazines seems to be over.

Magazine publishing, an industry that outpaced U.S. economic growth by 30 percent last year, is now in freefall.

Time Inc., publisher of People and Sports Illustrated, will cut 6 percent of its 10,200 employees and incur costs of as much as $125 million to restructure, parent Time Warner Inc. said today. Last month, Hearst Corp.’s CosmoGirl folded and the independent Radar shut down. Conde Nast Publications Inc. ordered companywide job cuts and scaled back Men’s Vogue and Portfolio.

The reason is simple enough: print ads are vanishing.

The ad slump that hit newspaper publishers last year has spread. Magazine revenue declined 8.8 percent in the third quarter, after rising 6.1 percent in all of 2007, according to the Magazine Publishers of America. […]

In the U.S. newspaper industry, print ad sales fell 9.4 percent in 2007, according to the Newspaper Association of America. This year, declines accelerated to 16 percent in the second quarter after a 14 percent drop the first. Internet ads aren’t helping to recoup the lost revenue, having dropped in the second quarter. […]

Ad sales have dropped most at publications serving cyclical industries such as cars, fine dining and home repair. Automobile Magazine, Hearst’s Country Home and Conde Nast’s Bon Appetit all saw third-quarter ad pages drop 29 percent, the Magazine Publishers of America said Oct. 14. Third-quarter ad pages fell as much as 29 percent across Conde Nast’s 26 titles, the New York-based MPA said.

It makes perfect sense that a decline in advertising would spell death for magazines, since Neil Postman’s observation about the economics of television also applies to them: advertisers are the customers, magazines are the suppliers, and you are the product.

Your attention is so precious to advertisers that magazine publishers went to great lengths to get their advertisements into your hands. American publishers often sold their magazines at deep discounts to subscribers, selling at a loss but more than making up for it in advertising revenue. Now that ad revenue is disappearing, that business model is about to destroy them.

Most U.S. magazines subsidize subscriptions to lure advertisers, who provide up to 80 percent of revenue at some titles, he said.

European magazines charge subscribers more and have smaller staffs, Husni said. The Economist, based in London, costs $116.79 a year, while subscribers pay an average $42 for New York-based BusinessWeek, according to the two magazines. The Economist has about 100 editorial staffers, to BusinessWeek’s 200, said Paul Rossi, publisher of the Economist’s U.S. edition. […]

Many magazines can’t easily recoup ad dollars from circulation because they’ve trained consumers to expect low prices, said Linda Brennan, BusinessWeek’s vice president for worldwide circulation.

“Do I think magazines could change their price to $120 from $20 overnight? No,” said Brennan, whose publication has raised its average price $2 in the past year. Time Inc.’s Fortune has cut its annual price to $20 in recent years, she said. “They’ll never get it back to $40, let alone $120.”

I was surprised to learn about one particular American magazine that had avoided this trap.

People is one magazine that can charge a premium, Time Inc. spokeswoman Dawn Bridges said. The company’s largest magazine charges $101 a year for subscriptions and rarely gives discounts.

Some are still whistling past the graveyard.

“There’s no disputing magazines have been hit hard, but marketers are still spending a tremendous amount of money,” Fischer said. “Marketers don’t doubt the value of an engaged audience.” […]

The move away from advertising is part of the industry’s life cycle, according to Husni. “Give me something I want, and I’ll pay for it.”

And even among publishers, hope springs eternal.

More than 175 new magazines that publish at least four times annually have opened this year, and the average cover price of startups is twice that of older titles, he said.

The pilot issue of Hearst’s Food Network magazine went on sale last month with a $1.50-per-copy subscription price and 50 ad pages. Portfolio’s first issue last year had 185 ad pages and a 24-issue subscription cost $19.97.

I don’t think that the birth of 175 new magazines in 2008 tells us much, since the crisis didn’t register for most businessmen until mid-September. Let’s see how many of those magazines survive, and how many are born in 2009.

It’s not the financial health of magazines that interests me here, but hints of the death of advertising. What profit will there be in advertising to people who don’t have the money to buy your goods? And without the propaganda engine of advertising to keep it in place and growing, might the consumer economy simply unwind and fade away?

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3 thoughts on “Magazines are in freefall

  1. Thanks for this indepth report. It is certainly indicative of harder economic times at present and in the future. The same thing happened after 9-11. This is all timely as I just received an email letter from an editor I have often worked with in the past (a small historic homes-related shelter magazine). She was giving us the gloomy news that writer’s rates were going way down because ad revenues are down. She sent the same memo around to her photographers. Her words “I understand if you no longer want to work for us…” were rather like a death knell. But, as I do, I’ll take the cut.

  2. PS And Oprah’s quarterly? HOME magazine was just pulled by Hearst. And if an Oprah publication is hurting, well, that isn’t good news at all for magazines. When I used to write for a Hearst launch, the original VICTORIA, back in the early 90s, I was getting $1 a word. Now, nearly 20 years later, I’m lucky to get that anywhere.

    Perhaps the web is the wave of the future for publishing?

  3. Catherine,

    Thanks for the additional information.

    And to the rest of you, since Catherine is likely too modest to mention this, we’ve just added her book The Pantry to our online bookstore. You can find much more information about it on her website.

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