MAGAZINE FORECAST

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With a yo-yoing Dow Jones index and constant jabber about the uncertainty of how much further the economy can expand, magazine publishers, finishing out what promises to be a very good year, are warily heading into 1999.

At the end of a strong 1997, the magazine industry looked forward with some modesty to 1998 prospects. After all, how could it be expected to top a year when advertising pages reached a new high, increasing 5.2% to 231,370, according to Publishers Information Bureau?

OVER THE TOP

Perhaps the biggest surprise for magazine publishers is that 1998's performance is looking like it will, in fact, top the gangbuster year of 1997. For January through September, ad pages are up 3.6% over last year, to 171,419, according to PIB. Top publishing company executives cite food advertising, technology, and travel as particularly strong this year. Categories exhibiting softness for the major consumer title publishers include automotive and direct-response.

Interviews with the heads of the leading publishing groups, however, reveal a cautious outlook for next year amid fears of an economic recession.

"We've had such monster years the last couple [years] that the growth rate this year will be a bit slower. We're going to have nice gains but not quite as high as in the past few years," says Don Logan, CEO of Time Inc. "Advertisers are fairly bullish about ad plans for next year, although there is a fair amount of uncertainty."

Time Inc. this year saw gains in the food, beauty and fashion, and computer ad categories, but was impacted by soft automotive advertising, especially General Motors Corp.'s pullback because of this summer's labor strike.

LACKLUSTER ENDING

"1998 started out very well, but it's not ending as well as it started," says Gruner & Jahr USA Publishing President-CEO John Heins. "After a couple of years of strong steady growth, the overall economy and stock market has gotten much more volatile, and there is some sensitivity to how long the economic expansion will go on. That is causing some hesitation on the advertiser's part. '99 is very uncertain right now."

GRUNER & JAHR SEES INCREASE

Gruner & Jahr will end 1998 with revenues exceeding 1997's. Mr. Heins attributes that to increased revenues gained as a result of several of its titles, including Fitness, American Homestyle and Gardening, maintaining higher rate bases. He credits Gruner & Jahr's strong ad-page performance this year to solid increases in the food, home products and home furnishings, and beauty categories, the last a developing area for its women's titles. Travel advertising also is strong.

"I'm hard-pressed to find a weak advertising area in 1998," says Conde Nast Publications President-CEO Steven T. Florio. "We are looking forward to a pretty good '99, but we're being cautious about projecting too high."

RECORD YEAR FOR CONDE NAST

Mr. Florio says Conde Nast will have a record year for ad pages and points to travel and luxury goods as two especially strong categories.

Hearst Magazines President Cathleen Black reports her company will end '98 up in both revenue and ad pages. Though she notes,"As we have gone into budget meetings, we are looking into '99 in a cautious way."

Those out on the front lines of selling also are noting a creeping hesitancy. "People were saying that they were `cautiously optimistic.' But now I'm hearing people, especially marketers, say they are just `cautious' going into '99," one publisher at a leading consumer title describes the mood encountered on sales calls.

WHAT ABOUT NEXT YEAR?

Publishers are not universally bearish about the upcoming year. Some expressed more confidence in maintaining what they have gained this year in ad pages and revenue.

"I would say the advertising picture is solid, and that applies across all different kinds of titles. We don't see any sign of any significant fall-off in the foreseeable future," says Meredith Corp. Publishing Group President Christopher M. Little. Categories fueling Meredith titles forward include four developing categories for the midwest publisher of primarily women's titles: financial services, luxury goods, technology and travel.

Wenner Media Senior VP-General Manager Kent Brownridge is expecting to end the year with revenues up 15% over 1997, which he attributes to strong titles benefitting from the economy's performance.

"The economy was outrageous. Even if you have strong titles, which we do, you don't necessarily do well unless all the cylinders are firing. The economy is doing well, so we did well. No matter what anyone tells you, the overall determining factor for what will happen in '99 is the economy . . . The only decision you can make is, if you really think you know what the economy is going to do, then you hunker down and prepare. We aren't doing that."

DTC CATEGORY HELD FAST

Magazine company heads also note direct-to-consumer drug advertising, which many predicted would decrease spending in magazines when TV ads restrictions were loosened earlier this year, did not drop off as expected. Many titles maintained the business they had been running, as most marketers expanded budgets to include TV rather than shift out of print.

"In pharmaceutical ad sales, we did a little better than last year, which is a lot better than we expected to," says Efrem Zimbalist III, president-CEO of Times Mirror Magazines, noting that products targeted to a mass-male audience such as Pfizer's Viagra and Pharmacia & Upjohn's Rogaine "helped push us over the top."

"But there isn't any question the magazine ad revenue from DTC-drug companies would have grown more if TV still wasn't an option," he says.

"In pharmaceutical we took some early losses because of TV, but then pharmaceutical budgets increased, so we didn't suffer as much as we thought we would," echoes John Fennell, chief operating officer for Hachette Filipacchi Magazines.

Rodale Press CEO-president Robert Teufel reports this year's revenue will be up over 1997. "The stars of our show are Men's Health and Prevention," notes Mr. Teufel, adding that both have helped maintain pharmaceutical business this year.

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