STUDY: CUSTOM PUBLISHING NOW A $1 BILLION BUSINESS; FINDING, KEEPING CUSTOMERS DRIVES RAPID INCREASE IN THE CATEGORY

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Custom publishing is a business that generates $1 billion annually in revenue from clients and an additional $700 million from third-party advertisers, according to a survey from Wilkofsky Gruen Associates.

The study, commissioned by Magazine Publishers of America, provides the first official measurement of custom publishing, the industry's fastest-growing segment.

Marketers have turned to publishing houses to tailor-make publications for their core customers. Today, some 40 separate companies offer custom-publishing services, doubling the number of players in the industry since 1990. Just during the past four years, 10 new custom publishers have entered the market.

"I expect this to be a $2 billion industry by 2002," said Simon Kelly, president of Fluent Communications, Seattle, and co-chair of the Custom Publishing Council, adding that the Internet will likely contribute greatly to its future growth.

OFFLINE HELPS ONLINE

"A lot of companies are realizing that offline communication, especially in the form of a magazine, is a great way to drive online behavior. With a customer Web site and a print vehicle, a company can really make [its] communication with its customers interactive."

The $1 billion market size is substantial, but no one company has a majority share. The average custom publisher generates about $5 million in annual revenue; some bring in more than $10 million.

Three distinct types of companies are competing for their share of the $1 billion pie: small, independents that solely produce custom publications, such as Pace Communication, which creates in-flight magazines for Delta Air Lines and US Airways; companies that produce niche magazines and custom publications, such as CurtCo Freedom Group, publisher of Home Office Computing and U S West's Home Office Solutions; and larger companies, primarily in traditional magazine publishing that now also have custom service divisions, such as Time Inc. and Meredith Corp.

Magazines are the dominant medium in the custom-publishing arena, reeling in $655 million of the $1 billion in revenue. Magazines also collected $640 million from third-party advertisers.

Newsletters account for $110 million; brochures for $95 million; and videos, $48 million.

GETTING NEW CUSTOMERS

Companies hire custom publishers for many reasons, the study found. Fifty-seven percent see it as a way to gain new customers, while 52% view it as a way to retain existing customers. About 30% are advertisers that ask a traditional magazine publisher to create a customized product, while 30% of clients say

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