Over drinks in his apartment in NYC, Felix Dennis, Chairman of Dennis Publishing, would brag that he brought Maxim magazine to the States to make a ton of money and leave before anyone became the wiser. For a man who claimed to have spent $100 million on booze and women, this didn’t seem to be such a remarkable claim (he also claimed to have murdered some unlikely chap, but pulled back from that claim). That was a decade ago, but I can imagine the chairman LOL on learning that the magazine he sold to Quadrangle Capital Partners LP in 2007 for $250 million (sale included Blender and Stuff) is reported by Bloomberg to fetch bids of about $20 million. Dennis’ main regret about Maxim was that he didn’t sell it before the lad magazine sector started to lose readers and advertisers.
Launched in 1995, Maxim enjoyed a spectacular rise with a strong assist from its unabashed emphasis on sex, babes and beer, with a little fitness thrown in. I was in the UK at the time, heading the launch of Men’s Health, and while impressed with Maxim’s brash and noisy launch, I knew somehow that health coverage, while less sexy, would win out in the end. On its face, Maxim still looks like a very successful magazine with a paid circulation of 2.5 million. However, an examination of its subscription offers suggests that this is very unprofitable circulation. This, coupled with a precipitous decline in advertising pages, might have sealed Maxim’s fate. The lack of a robust digital strategy didn’t help.
With the advent of digital at scale, magazines at risk seem to have fewer second chances these days and fewer takers. Newsweek’s tablet edition is looking for a buyer, but owner Barry Diller now calls the original purchase a fool’s errand. And he got it for $1 and subscription liabilities. That’s the same price that TV Guide was sold for in 2008. Business Week was sold to Bloomberg in 2009 for between $2-5 million. I should add that at this writing Jay Penske, the auto racer and publisher of Deadline Hollywood, is reported to be driving into the Newsweek interest lane.
For more than a decade, the media business has been arguing whether we are going through a sustained period of disruption or transformation. As usual, it’s in the eye of the beholder. I note MPA, the magazine association and where I used to hang my hat, describes its annual October 2013 conference as a place to examine these “transformational times.” The television executive who complained during the 2008 Olympics that the networks were exchanging “analog dollars for digital dimes” was certainly talking about disruption. With digital revenues for magazines coming in on average at 5% or so of total revenues, we might conclude that that executive was on to something.
By now, there are enough digital markers around to decorate Route 66. When the International Data Group (IDG) announced in 2007 that it had finally crossed the Rubicon, generating as much revenue from digital as from print, that date seemed an important digital marker. IDG has continued nicely down that well-paved, digital highway. When the company announced recently that PC World magazine would be exiting print to focus on its digital edition and web site, there wasn’t much of a fuss. The decision was inevitable because the magazine had lost most of its readership and its reason for existing in that form. And now we have TechCrunch, Endgadget, Ars Technica, ZDNet and other sites that seem to fill any gap left by the closing of the print title.
The link between print and digital editions can be complicated, as Future Publishing discovered with TECH, an iPad magazine for technology enthusiasts. This seemed like a very good idea. I have worked with Future over the years and have enormous respect for the company. And why not? They were early into the computer, technology and gaming space. They had a few stumbles in the States but recovered and seemed quite adept with their digital strategy. They did not cling to print magazines that were no longer performing. In fact, with TECH, they decided to launch an iPad magazine without the benefit of a print legacy. Of course the technology space was already over-populated, but not having a print brand to build upon likely was a contributing factor for the demise of this title. Sometimes you’re damned when you do and damned when you don’t.
We saw a lot of well-earned high-fives when Hearst announced in May that it had sold more than 1 million new, paid digital subscriptions. That number also seems like an important industry marker. I have commented in an earlier post that this focus on new digital customers is really a breath of fresh air and a reasoned bet on the younger and more affluent demographics of a native digital audience.
But at the end of the day, it’s all about the money. Josh Steinberg in Digiday asks whether publishers are still too print-centric in their strategies, at the expense of future options, such as the iPad. He writes that “Many publishers include iPad inventory for free as an extension of print packages. For example, Hearst’s Esquire and Conde Nast’s Wired view print and the iPad as interchangeable products; you can’t advertise in the July edition of Wired’s tablet app unless you advertising in the print magazine.”
Steinberg notes that The Economist sells digital editions separately from print, but charges the same for print and iPad ads. Print revenues are down, but iPad ad revenues are up 67% YOY. The Atlantic’s President Scott Havens argues that “Folks are selling iPad editions as if they are similar products; that’s not good for the industry or those brands.” In a way, this transition to separate iPad magazine editions is likely just a matter of time and scale. Steinberg reports that Esquire, which doesn’t sell iPad-only ad pages, has 65,000 iPad subscribers compared to 800,000 print subscribers. The game would be different if the numbers were reversed.
It’s not entirely clear where the big revenues are to come from if consumer magazines are to reach the point where an appreciable chunk (say 30-40%) of their business is from digital. Presumably, if and when Hearst reaches 10 million new, paid digital consumers, which could represent 25% of the total circulation file, that would be would constitute a memorable digital marker, though it would likely not be reached for a decade or so.
Some publishers, including The Atlantic and Forbes, are placing bets on what is generally called native advertising. In another lifetime, this was called an advertorial, and generations of top editors stood at the bulwarks making sure that there would be no confusion between editorial and advertising content. I was one of those enforcers, lined up on the holy side of the Church vs. State scrum. Yes, the good old days.
Now, content is everywhere. You are content, I am content, and Facebook and Twitter are media companies. Back in the day, though tempers flared, it was relatively easy for consumers to identify ads masquerading as editorial content. Today, not so much. Of course, in the past, the FTC has played a role when editorial and advertising lines have become blurred, but we’re currently facing a little more than the threat from sleazy infomercials. We are becoming inundated with content. And some of this is by design.
Content is no longer just the handiwork of journalists and other pedigree. While some see this trend the way Freud saw the threat of unconscious forces sweeping across Europe—the end of civilization, others see the proliferation of content as a business opportunity. IDG discovered more than a decade ago that their consumers often knew as much or more about technical developments as the paid staff. I think that has become a pervasive truth across many of the top content verticals from cycling to knitting to running. And the big consumer brands are not exempt from gaining this expertise in content. Sears, one of the largest distributors of fitness equipment, also generates a lot of content about fitness. To the list add most of the top twenty consumer brands. Consumer brands call this activity “content marketing.”
I’ve admired the work Forbes, and especially Lewis DVorkin, Chief Product Officer, has done in bringing clarity, muscle and cover to native advertising and figuring out ways that enable “journalists and marketers, each transparently identified and clearly labeled, to publish content side-by-side in a credible news environment.” In providing digital real estate on its site for content producers, including its own journalists, consumer brands, readers and bloggers, Forbes has gone a long way to define and embrace the rich content possibilities of our digital age with its BrandVoice offering. In short, Forbes has created an “ethical framework” for branded content.
But this is not about the romance of content; it’s about business. DVorkin nails the strategic issue with his prediction: “The $10 billion digital advertising business is clearly in for disruption.” He notes that the quarter trillion banner and rectangular ads served up quarterly have become little more than wallpaper to consumers and in the process are driving down advertising CPM.
Forbes’ strategy is to treat content as content, “meaning both editorial and brand content should rise or fall on its merits.” Media companies are getting pretty good at building content frameworks that serve their diverse publishing platforms. They are adding metadata or “structure” to content early in the workflow so it can be more valuable and ubiquitous downstream. That is an essential technical development.
What Forbes is doing is more difficult in the sense that it requires a cultural and imaginative shift, asking publishers to turn structures and historical verities on their head while maintaining that ethical framework around content use.
Native advertising remains a very contentious issue but Forbes has laid down an important digital marker.