For Pubs, Going Global Comes With Challenges

Old Distribution Systems, Changing Growth Rates, Digital Dilemmas Among Key Expansion Concerns

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NEW YORK (AdAge.com) -- U.S. publishers looking to grow their print market are increasingly finding themselves in the export business, bringing their brands to big, developing countries where magazines are still growing, and the internet has taken less of a bite out of revenue.

Among the challenges for these publishers? Underdeveloped distribution systems and local customs that don't always jibe with a book's subject matter.

Indonesia will soon see new editions of Time Inc.'s Fortune and InStyle, for example, but Cond� Nast International isn't rushing its fashion glossies into that market. "For a publisher producing fashion magazines, Muslim countries pose potential risks," said Jonathan Newhouse, chairman of Cond� Nast International.

Celebrity, home, lifestyle and sports magazines cross boundaries best, said John E. Puchalla, VP and senior credit officer at Moody's Investors Service. "The pockets of growth depend on the individual titles," he said.

Countries such as India present challenges along with promise. "You would have thought for the size of the market that the business would perhaps be bigger than it is," said Duncan Edwards, president and CEO of Hearst Magazines International and exec VP at Hearst Magazines. "There isn't an effective distribution system in India, which probably holds back the growth. Also cover prices and ad rates are so low that you have to sell a lot of ad pages and a lot of magazines to make any money."

"That said," Mr. Duncan added, "we think it's an important market."

Since 2007, Hearst has started new editions of titles including Cosmopolitan, Harper's Bazaar and Esquire in India, Vietnam, Spain, Australia, Romania, the Philippines and Dubai, and Esquire Middle East was introduced last fall.

"The biggest change really is where in the world our attention is now focused," Mr. Edwards said. "Traditionally the sort of so-called developed world was where attention had been focused, but certainly over the last five years and especially now attention is probably focused more on Asia and the BRIC countries than anywhere else."

Faster growth
The BRIC countries -- Brazil, Russia, India and China -- offer faster growth and less crowded markets, Mr. Duncan said. "These are the countries where the growth rates -- in GDP, in advertising spending, in magazine revenue -- are most encouraging," he said.

Time Inc. views the map the same way. "We're launching in developing markets," said Jim Jacovides, VP-international licensing and development at Time Inc. "Western Europe is not that active in terms of new launches." Since 2006 Time Inc. has licensed new editions of Sports Illustrated and InStyle in China, People and Sports Illustrated in India, Fortune in Korea and InStyle in Thailand. Next up: that entry into Indonesia for Fortune and InStyle.

Of course, Western Europe will remain a center of gravity for years. Time Inc.'s biggest licensed edition is InStyle Germany.

Twenty years ago, 95% of Cond� Nast International's revenue came from five European countries -- the U.K., Germany, France, Italy and Spain. Today those Big Five contribute about 64% of the international revenue stream. Cond� Nast International operates in 24 markets, with Vogue, Self, GQ and Modern Bride in China, where it hopes to introduce a fifth title next year; Vogue and GQ in India, where it plans to add Cond� Nast Traveler this fall; and a desire to expand in Brazil, where Mr. Newhouse feels the company is "underdeveloped." But it's not leaving Western Europe behind; its 2009 launches included one in France, one in Italy and two in the United Kingdom, along with one in Bulgaria and one in China.

Digital issues
Everyone, meanwhile, is working out how they want to handle digital media, an area where lower broadband penetration and less media fragmentation in many countries offers some hope that publishers can achieve a better outcome than they have so far in the U.S.

Some are considering whether to look past traditional websites and make big plays instead for mobile, where penetration is already much higher. "Does it really make sense to invest heavy dollars on the internet when you know your market is more on mobile?" said John Zieser, chief development officer and general counsel at Meredith, which plans an Indonesian edition of More for this fall.

The iPad just might help publishers get around those distribution issues in countries like India. "There is an interesting opportunity with the iPad and that's something we're exploring," said Andy Blau, senior VP and group general manager of the news and sports division at Time Inc. "When you're talking about digital, suddenly the physical issues of delivering issues around the world are much simpler."

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Contributing: Rupal Parekh

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