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Issue for August 2013

Is the Contagion of Failure Striking Publishing?

Posted on Thursday, August 29, 2013 at 11:51 AM

It's said that success begets success. But can failure spread itself too?

By William Dunkerley

Case in point: The Washington Post Company. It acquired Newsweek magazine in 1961. In 2007, it was showing about $30 million in profits. That was just before the Great Recession hit.

For 2008 and 2009, operating losses totaled $13.5 million and $28.1 million respectively. In 2010 it implemented a congenitally-flawed rescue plan that failed spectacularly. (See "Why Newsweek Failed," STRAT for July 2010).

Thereupon, the company sold the magazine. The buyer was 91-year-old Sidney Harman, a retired stereo equipment manufacturer. He had a vision to transform Newsweek into "a thriving operation in print, mobile, and digital worlds." But word has it that he couldn't find any senior editor willing to take on that challenge.

So Newsweek changed hands again, for the second time in three months. The new owner was The Newsweek Daily Beast Company, a new creation. Harman owned 50 percent, IAC (owner of The Daily Beast) owned the other 50 percent. New management proclaimed that the merger created "a powerful global media property for the digital age."

That ended when Newsweek was sold again on August 3, 2013. Months earlier, the seller confided, "I wish I hadn't bought Newsweek, it was a mistake." The new buyer is IBT Media, owner of the International Business Times. "We are 100 percent digital with a track record of successfully growing online media properties," said an official of the acquiring company.

Not Just Newsweek

Interestingly, also in August, the Washington Post Company sold the Washington Post newspaper. Its buyer was Jeff Bezos, founder of Amazon.com. He said that under his leadership, the Post will "continue to follow the truth wherever it leads."

While we wish the new owners of Newsweek and the Washington Post well, it is worth pondering why these WaPoCo publications have been so unsuccessful. Are they doomed to failure? Is there a curse on the publications? Is it contagious?

Actually, there indeed has been a curse. It is the curse of people trying to be a publisher without really knowing how. Their skill level may have been sufficient for success during good economic times, but the combined challenge of the Great Recession and the proliferation of digital content has demanded more than just ordinary skills in order to achieve solid success.

Admitting Inability

When WaPoCo reached its decision in 2010 to sell Newsweek, chairman Donald Graham said, "We do not see a path to continuing profitability under our management." On announcing the decision to sell the Washington Post, he said, "The newspaper business continued to bring up questions to which we have no answers." I believe him on both counts.

What's puzzling is why the company waited so long to sell the newspaper. Its losses were five times higher than Newsweek's. In a statement at WaPoCo's 2009 annual shareholders' meeting, management said, "It is not easy to reshape the economics of a magazine, but it's easier to do that than to reshape the economics of a newspaper." All that being the case, it leaves me wondering why they didn't sell both publications back then and stem the losses. The company was otherwise very profitable by virtue of its subsidiary Kaplan Inc, the educational services company.

Whither Your Publication?

Newsweek now has gone online. The Washington Post is now in the hands of Bezos, an online guy. He's yet to say exactly what he'll be doing with his new acquisition, however. But there's a lot of speculation that a greater online future looms large for the newspaper.

Is that an omen for you? Is simply taking a print publication online the answer for any magazine that's not achieving its profit objectives?

There's actually more to the question than meets the eye. The actual role of magazines in contemporary society is up in the air.

For a long time pundits have been saying that print is dead. Now it is the actual concept of a magazine that is in question. Do today's readers really need or want editors to decide what they should read, package that content together, and disseminate it? Even online content? And if readers don't need editors to do that, where does that leave you?

Reader Preferences in Flux

Google Trends reports that the entire subject of "magazines" is in decline. Of course, that just means that fewer searches are being conducted on that term. It's not a real barometer of the industry. But the downward curve certainly looks ominous. (Note: The time period of this and subsequent graphs is from 2004 to present.)

Figure 1: Google Trends report on the search term "magazines."

But magazine editing follows suit. Fewer searchers are looking for information about magazine editing.

Figure 2: Trend line for "magazine editing."

Note: The graphs only present trend information, not absolute values. So, for example, while the interest in magazines seems to have the same amplitude as that in magazine editing, there actually is an enormous difference. Far more people are searching for "magazines" than "magazine editing."

Is the decline in magazine editing searches attributable to editors and editorial wanna-bes losing interest in print and in search of information about digital editing? Is that where our future lies? Google Trends actually lends some credibility to that hypothesis. The trend line for "digital editing" actually goes up.

Figure 3: Interest in digital editing is trending upward.

But before you open Google on your Web browser and start your own search, consider digital editing as a broad term. It does not necessarily refer to publications' work. Digital editors are needed for sales content posted by online retailers, product information supplied by manufacturers, and a host of other applications. In fact, Google Trends bears that out. A search for "online magazines" shows the cursed downward pattern once again, albeit flatter than the earlier curves.

Figure 4: The "online magazines" term shows a shallow yet downward trajectory.

What Can We Make of the Trends?

What's the story about digital readership? We hear glowing reports about the ascent of digital publishing. One report proclaimed, "Digital readership up more than 80 percent in past year." On the advertising side, another report heralds, "Magazines' iPad editions see 24 percent ad boost in Q1."

So digital is on its way up, no? Yes, it is, but not in such glowing terms as those reports. Notice that they talk in percentages. This means that, just as the graphs above for "magazine" searches and "magazine editing" searches look alike in percent terms, they are not really alike in absolute terms.

Take the "digital readership up more than 80 percent" claim, for instance. That's mighty impressive. But what gets lost in the fine print is that digital readership only accounts for 1.4 percent of all magazine readership! Doesn't that put a different spin on things?

Focusing on Reality

A lot of publishers look at the digital successes of some leading mass market publications and wrongly assume that things will work the same for them. The story is different for special interest consumer, trade, and professional magazines, though. Mass market publications can sell well at the checkout counter in a supermarket. But if you're publishing a magazine for plumbers, you can't expect to use the same point-of-purchase techniques.

The sorry truth is that as important it is to incorporate digital into our future, a lot of caution is needed. There are an abundance of digital equipment manufacturers and people involved in the sales and supply chain who are overstating the current reality about digital publishing. It is very important to do a careful, fact-based analysis of your position and prospects for the future. The fate of The Washington Post Company's publications should stand as a lesson to us all. Beware the failure contagion!

William Dunkerley is principal of William Dunkerley publishing consultants, www.publishinghelp.com.

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Amazon and Condé Nast Join Forces

Posted on Thursday, August 29, 2013 at 11:27 AM

In the news: Condé Nast and Amazon have partnered to create a digital subscription service.

Tapping into the booming smartphone user market, Condé Nast and Amazon have finalized a deal to create a digital subscription renewal service. Users will be able to manage their subscriptions online instead of via direct mail.

The move is significant because Condé Nast is the first magazine publisher to tap into Amazon this way. Will other magazine publishers follow suit? It's certainly a lucrative proposition, given Amazon's customer base of over 200 million. Read more about the partnership and proposed features here.

Also Notable

Native Advertising for Washington Post

Washington Post has decided to enter the native advertising foray. According to AdAge.com's roundup, "The ad units on offer include one the Post calls an 'agenda setter,' wrapped around a portion of the front page and featuring both display advertising and copy resembling editorial content. Another execution sits among true editorial content on the fold inside the paper." Chief revenue officer Kevin Gentzel assures readers that any native advertising content will clearly be marked as such to distinguish it from editorial content. Read more here.

Mobile Publishing vs. Print?

Just how much is mobile publishing cutting into print profit margins? A lot, suggests Greg Hano, CEO of Mag+, and Jonny Kaldor, CEO of Kaldor, in a recent interview with Mr. Magazine. Hano boldly declares, "Apps engage in a way that print and websites cannot." Kaldo goes one step further and says, "I can't see print surviving." Read more highlights from the interview here.

Digital and Print Circulation in 2013

The Professional Publishers Association (PPA) recently created a chart showing magazine circulation figures for January to June 2013. The number show that digital circulation is way up, but the total circulation picture isn't as bright. While magazines are seeing huge gains in digital readership, these increases aren't enough to offset sharp declines in print circulation. Read more here and here.

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