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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