Magazines Shape Up for Digital Future

As Net Passes Print Ad Revenue, Publishers Get Web Wise

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NEW YORK (Adage.com) -- It's a moment that has been anticipated for a decade, but that makes it no less seminal. This is the year, according to Merrill Lynch, the Internet collects more ad dollars than magazines.
Magazine publishers aren't worried about the Web collecting more ad revenue than their medium.
Magazine publishers aren't worried about the Web collecting more ad revenue than their medium.

Assuming the forecast is correct, magazines will become the first big medium to watch the Web pass by -- unless you count phone books, which are also projected to fall behind in 2006. Yet magazine publishers insist that's not bad news, but rather an opportunity for those among their ranks that have already started the shift to being digital savvy, media-neutral purveyors of content.

Not really significant
"The people who report on media like to think it's really significant," said Nina Link, president-CEO, Magazine Publishers of America, of the tipping point. "I don't. It just says there are more opportunities to reach consumers and make powerful partnerships. The powerful brands and media are going to thrive."

Christopher O'Connor, senior VP-group account director, MPG, said the digital dawn is frightening, in a way, for everybody because it is so complex, and keeping up with technology is so difficult. It's worrisome for ad-page sales in particular, he said: "Irrespective of what category you're looking at, all clients are looking to digital." As money shifts online, publishers have to be there to collect it.

And they are. The Merrill Lynch prediction coincides with an interactive push by magazine companies unrivaled by anything before it, setting up 2006 to be a watershed year in more ways than one.

"The tectonic plates are moving beneath us," said Rob Gregory, group publisher at Dennis Publishing's Maxim. Results may include further declines in newsstand sales, as impulse readers increasingly make the Web their first stop, but smart publishers will see gains in other areas, he said. "There's a term in the Marines called a force multiplier," Mr. Gregory said. "If you're putting print together with digital the right way, that's the result."

For Maxim, which already operates a sprawling digital platform, multiplying print's force meant making its May issue the inaugural "Maxim Mobile" edition. An editor's letter in the issue, which goes on sale April 25, urges readers to consume the issue with cellphones in hand and to enter contests and submit content whenever they see a "Maxim Mobile" icon.

Linking competitors
Another magazine that relies on young men, IDG Entertainment's GamePro, now includes roundups of other outlets' game reviews, something akin to a Web site linking to others' online offerings. "Five years ago we would never have dreamt of including content from other publishers in the magazine," said Dan Orum, publisher-CEO, IDG. "Now we embrace that."

Merrill Lynch analyst Karl Choi said publishers also have to try to bring the strengths that they promote about print-engagement and connections with readers-into digital arenas. "To the extent that user-generated content and social networks are very popular these days, the opportunity for magazine publishers is seeing how they can migrate these relationships online."

In truth, almost everyone is active on almost every digital front. Bauer Publishing's In Touch Weekly has one of the most modest companion sites among magazines, putting it at a disadvantage to Web-friendly rivals Star from American Media Inc. and Us Weekly from Wenner Media. But that reflects Bauer's European business model, under which it collects nearly all its revenue from newsstand sales. Even Bauer has built substantial sites for other magazines, such as teen titles Twist and J-14.

Big publishers
Big publishers are rolling out new Web sites or digital supplements for many titles. Meredith Corp., for example, will introduce a handheld media platform for American Baby in the next few weeks, while Wenner plans a new resource-driven site for Men's Journal this fall. Time Inc. plans to expand its mobile programs, podcasts and blogs to many new titles in coming months.

Rodale, publisher of magazines including Men's Health and Runner's World, already draws online revenue from ads and premium content. CondeNet, the interactive division of Conde Nast Publications, is developing new destination sites like its Style.com. And Hachette Filipacchi Media U.S., which has embraced the Web in a big way, plans a new audio-visual suite on its office's 45th floor.

John P. Loughlin, exec VP-general manager, Hearst Magazines, said he shared Ms. Link's skepticism about the Merrill Lynch forecast and its implications. "The actual tip-over point, and again I would debate whether it's really real or not, is sort of immaterial," he said. "It's not as if publishers have been turnips, unaware that the world has embraced the Web."

That point isn't lost on others. "Maybe by the year 2030 we'll deliver content by holograms that follow you as you walk down the street," said Maxim's Mr. Gregory. "If that's the case, we'll have the best damn holograms in young-guy culture."
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