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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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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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Call Tony Groom on 0844 8040 540

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