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.

This year alone, Sky has discontinued all its magazine titles, each of which had a circulation of £4 million. 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.

Publishers have been suffering from a triple whammy, of diminished advertising revenue, increased newsprint and ink costs, while simultaneously trying to service residual debt taken on during the good times. 

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 restructured into three divisions in June and says that by 2014 it will double its revenue, the proportion of money it makes from online media and its operating margins. It also plans to reduce its reliance on advertising and shrink the contribution of printed media from 43 percent to 16 percent.

The question is whether it will succeed. We know of one publishing company currently going through a restructure that 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 is that this publishing company was undercapitalised and as a result its suppliers have funded its growth and 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.

Clearly the industry will need to be much more innovative if it is to survive and prosper. One obvious tactic, as illustrated by Centaur, is to shift some titles to being online only.  Others are making some online sections accessible by subscription only and charging for special reports and in-depth industry information. Other innovations could include experimenting with outsourcing writing overseas, outsourcing sub editing and page make up and printing abroad.

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 so there is plainly life in the B to B publication market. Professionals will always need to keep up to date with their industry’s developments and the activities of competitors.

Nevertheless, the print side of the industry is likely to decline. Publishers will need to be more innovative and change their business model, most likely embracing alternative media that does not rely on printing and physical distribution.

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