Published on 4 November 2011 by Tony Groom
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.
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.