AA: You've been at Conde Nast for almost 11 years. What's changed?
Mr. Townsend: The most obvious difference is the size of the company. Conde Nast is a company of financial substance, a broad portfolio of titles, a complex business and a significantly influential voice in the magazine publishing industry. All three have emerged over the last decade. In terms of culture, we are steadfastly opposed to changing the positive elements of what is generally reflected on to be the unique Conde Nast culture.
AA: Which is?
Mr. Townsend: One of the root characteristics is our ability to focus a group of totally unlike individuals in a common direction. We can tolerate an unlikely group of people, loosely connected but with a common goal. We abhor the thought of an office full of one gray suit after another.
In terms of change in the strategic direction, we have developed a very healthy, balanced focus on profit growth aligned with significant journalism and design. We have adopted the mission to do that profitably.
AA: How profitably?
Mr. Townsend: I can say this: I think the outside-in look properly quantifies our revenue base, and the inside-out statement I would make is that our ability to convert those revenues to operating margin is in keeping with quality public company standards.
AA: For a public magazine company this sounds like 15% to 20% margins.
Mr. Townsend: That might be. Might be. Big companies have big overhead. We target 15%. We do that along with everyone else, of the big companies.
AA: Profit margins at local newspapers are significantly higher than magazines. Have you ever had any concerns that the family might decide to cash out of the magazines to reinvest in more profitable media?
Mr. Townsend: If we had continued along the path of subpar performance, then anyone in my position would have had concerns about the long-term viability of the business. But I think we've proven to the owners that the long-term viability of the magazine publishing entity is an extremely attractive proposition. I honestly don't have any concerns. I regularly see their willingness to allow us to reinvest earnings in organic growth, and I see their willingness to participate opportunistically in acquisitions.
AA: Your predecessor Steve Florio once told Ad Age, "I invented this job. Chuck will make it different, and will probably approach it in a much more administrative way." How do you approach your job?
Mr. Townsend: One of the distinctions with Steve is the breadth of my responsibilities, which include the operating functions associated with the COO's role of the Advance Magazine Group. I spend a reasonable amount of time involved in broader Advance issues-the financial performance of the various divisions, operating decisions associated with the divisions.
As CEO of Conde Nast, I placed more responsibility than Steve did in the hands of our publishers and our marketing and sales organizations, out of necessity and practicality-practicality relating to the fact I am less of a marketing executive than Steve. But also out of what is a good strategic approach to operating a business as large and complex as Conde Nast. The decisions made at Vogue are made by [Publisher] Tom Florio. I don't take responsibility from Tom. I push more responsibility down to the magazines. It's not as much a centrally run organization as it has been.
AA: It's clear what magazines belong at Conde Nast. It's now becoming clear how Fairchild is evolving. What about the Golf Digest Cos.?
Mr. Townsend: It's less how you grow Golf Digest than it is how you grow our position in publishing. Golf Digest affords us the opportunity to build around a very sound management structure, and one particularly experienced in reaching men. We can do that through internal growth, or we can do it we think efficiently through acquisitions. We wouldn't be in the position to participate in the acquisition landscape with men's titles if we didn't have the Golf Digest Cos. Golf Digest supporting three magazines is a difficult proposition, but not an impossible proposition. It's capable of supporting much more publishing activity. It could be special-interest publishing. It could be broader than special interest publishing. It could be category-based publishing.
AA: What does Time Inc.'s Life, the newspaper supplement, mean for Advance's Parade?
Mr. Townsend: I'm loosely quoting my colleague, Walter Anderson. "Publishing a Sunday supplement for 39 million readers is not for the weak of heart." Think of the distribution. Think of the tight closes. Think of $800,000 pages. Think of the competition with other mass media. It takes a publisher of the substance of Time Inc. to even contemplate stepping in. But there is no guarantee that any editorial treatment is going to guarantee success. This is the land of the big boys. This is big time, high-roller publishing economics. If Time Inc. had looked at the category and said, "There's just nothing here," it would have been tough on the category. Between that and the fact that there is a migration from broadcast to other reach media, there's a wonderful opportunity for Parade.
AA: Which brings us to magazines competing with TV.
Mr. Townsend: Cable is the darling of the moment. It's a three-dimensional medium that delivers very much the kinds of audiences that magazines do, but still suffers from the same drawbacks [as broadcast]: You can tune an advertising message out in a second. An advertising message is considered an affront. An advertiser's message in our magazines is considered editorial.
AA: Why haven't magazines better leveraged cable?
Mr. Townsend: That's a source of irritability. It's rather frustrating not to have Bon Appetit and Gourmet on the prominent food cable network. It's sort of frustrating when you own House & Garden, and don't have House & Garden TV in your media mix. But those are retrospective glances.
AA: Conde Nast, especially, isn't known for having leveraged its content well to other media platforms.
Mr. Townsend: We are a very conservative company, and our conservatism has fundamentally served us well.
AA: "Very conservative" isn't necessarily the term that would describe Conde Nast's historic attitude toward budgets and spending.
Mr. Townsend: Maybe the visible management may not have been conservative. But (laughter) you've got to go to the ownership. They are very conservative, intelligent investors building with a strategy, as opposed to building purely opportunistically. Not just throwing money at any opportunity that comes down the pike. For me to criticize that would be misrepresentative of what I believe the value of the conservatism to be, and that is we haven't made many mistakes. We've certainly lost some opportunities, but we haven't made many big, glaring and costly mistakes. Going forward, I don't see a great change in our philosophy.
AA: How do you feel, structurally, about the companies you oversee? There's chatter new management layers may be added.
Mr. Townsend: There's been a lot of talk about Conde Nast developing group publishing. I look with a broader view and say, "perhaps the division approach is a better approach than the group publisher [approach]." Maybe there's a benefit in looking at our existing structure and how we use our management talent to manage the breadth of assets, as opposed to having to take the existing divisions and whack them into subdivisions. We're keeping our options wide open.
AA: Next year, Conde Nast will publish three shopping titles. Are more on the way?
Mr. Townsend: I doubt it. It can't be forced from the top down; it has to be sustainable by consumers. Fashion- and beauty-oriented shopping for women was clearly the most obvious operation. And the Cargo/Vitals opportunity at either end of the spectrum. Domino is going to fit very comfortably into the shelter category. We've taken it from the self to home. There's not another category that is painfully obvious.
AA: Three magazines you'd like to own are?
Mr. Townsend: Business Week.
AA: Then say I have a check for $25 million and say, "Start up a magazine."
Mr. Townsend: (Laughter) First of all, $25 million doesn't begin to prime the pump.
AA: OK. It's four times that.
Mr. Townsend: Make it six times that. If I got a check for six times that, I would start Domino. There's no obvious opportunity that we aren't addressing. I can look retrospectively and say, "Real Simple, I wish we'd thought of that." But I didn't see it at the time. I didn't see it for a long time, but I sure as hell see it now.
AA: Advance's magazines generate much more money from advertising than circulation. Do you consider changing the equation?
Mr. Townsend: The days of phenomenal newsstand profits-the heyday of TV Guide and the Seven Sisters-are somewhat behind us. Today, it's a balance of newsstand distribution with solid subscription circulation economics, and the delivery of a very identifiable, very attractive audience to advertisers. The fact the mix shifted over the last 15 years in favor of advertising dependability was somewhat inevitable. And, I think, largely irreversible. It's nothing to fret about. It's just something to manage.
AA: Things slowed down in the fourth quarter of 2003. How's this year?
Mr. Townsend: This has been the most robust fourth quarter since 2000. The high end is generally strong. Mass is strong. Middle-category positioning has been a little weak. Conde Nast will have a record year, and I'm very satisfied. A record year of revenues from the consumer side, revenues from the advertising side, and in terms of the [profit] margin contribution.
AA: So how long do you stick around?
Mr. Townsend: Well, I don't know. I thoroughly enjoy what I'm doing. I've never had more fun than I'm having working with Si Newhouse. He tells me he intends to stay around for an indefinite period of time, and I've told him that I'd like to stay around, as his partner, for an indefinite period of time. I don't really have a fixed end in sight. I think I'll know when that moment arrives. Or the people for whom I work will know.