FIVE QUESTIONS FOR MEREDITH’S STEPHEN LACY

How He’s Addressing Softness at the Newsstand and Lagging Ad Categories

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NEW YORK (AdAge.com) -- Meredith Corp., publisher of Better Homes & Gardens and Ladies’ Home Journal, just formalized succession plans for its executive suite, announcing that Stephen M. Lacy, president-chief operating officer, will become president-CEO on July 1. Mr. Lacy, 51, will take the reins from William T. Kerr, president-CEO since Jan. 1, 1997, who is fast approaching the company’s mandatory retirement age of 65. Mr. Kerr, also the company chairman, will remain a member of the Meredith board and become non-executive chairman. Meredith is not filling the chief operating officer position. MediaWorks checked in with Mr. Lacy this week about which titles are lagging and which ad categories are showing promise for 2006 after two issues.
Photo: Tim Klein
Stephen M. Lacy

MEDIAWORKS: Which Meredith magazines are starting 2006 the fastest, which are lagging and what ad categories are driving those effects?

STEPHEN M. LACY: We’ve formally closed two issues of our magazines and are working on the third. We’re seeing strong performance in shelter and mid-size titles like More, partly offset by weakness in the women’s field. On a category basis, there is strength in home, cosmetic and travel, partially offset by weakness in food, direct response and pharmaceuticals.

MEDIAWORKS: Have you taken initiatives to fight the weakness in categories like food and pharmaceuticals, to capture more revenue even if their advertisers aren’t spending more?

MR. LACY: What we’ve been doing is really working aggressively to pull our assets together in a multiplatform marketing way to position ourselves differently from the competitors. That would include ad pages, but in addition to that our online properties, our custom-marketing database work that we can do for our clients, customized research, event marketing and retail activities and recently added video-on-demand capability. We put those packages together and try to take a disproportionate share of that advertising that’s available.

MEDIAWORKS: The company told investors last week that its magazines’ newsstand results have suffered over the last six months. How so and what’s the fix?

MR. LACY: In our particular case, that newsstand issue primarily relates to our special-interest titles, like Kitchen & Bath Ideas, Outdoor Projects, Garden and Outdoor Living, American Patchwork & Quilting and seasonal things. The vast majority of those titles are sold either one time a year, like the holiday titles, or maybe quarterly, like Kitchen & Bath Ideas, and there is either no subscriber base or it is a very small proportion of the rate base. And on a comparable basis, they have declined on the newsstand.

We have an approach to help them and it’s very, very aggressive because it is important to us. We are expanding our distribution channels -- a good example of that is going to be ability to sell in Costco. We are improving our display to improve our positions at retail. We’re evaluating all our price points because the net objective is to sell more product. We’re working for more aggressive cover lines and cover design.

MEDIAWORKS: Time Inc. and its recent staff cuts present perhaps the most obvious example of a successful publisher fighting tooth and nail to improve profitability. How is Meredith expanding its profit margin?

MR. LACY: There are probably four things I point to. First of all, gains in the advertising business, not only from overall growth in quantity of pages but also in the margins we realized, rates per pages. Then in particular, we have the wonderful growth we’re experiencing in our Internet advertising revenue, which is driven by the strong increase in the traffic and which leads to increases in subscription sales. Then our other publishing businesses -- like our book business, brand licensing and product sales -- are also performing very well. That is now 27% of publishing-group revenue. And then obviously, we benefited from the acquisition of the Gruner & Jahr USA books like Child and Family Circle. That margin growth comes from eliminated redundant costs and aggressive growth in advertising.

MEDIAWORKS: What are you doing to turn around Fitness magazine, another Gruner & Jahr purchase, where ad pages sank 18.9% in 2005?

MR. LACY: Fitness is a magazine that we’re doing a lot of work on in terms of getting it properly positioned in the marketplace. On the sales and marketing side we moved Lauren Buerger from More magazine to be the publisher of Fitness. Lauren has rebuilt the advertising and marketing staff over the last few months. Mike Lafavore, the founding editor in chief of Men's Health, is the creative director over at Fitness.

We’ll be relaunching the magazine from a creative point of view in the May issue. There’s been a lot of work on the creative side and then obviously rebuilding the sales and marketing activity. We think it has great legs as we look out to the future.

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