Magazines

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The trope of a second-half '02 economic turnaround has passed from wishful marketers' minds to the mouths and pens of Wall Street economists.

But the CEO of the nation's largest magazine company is unsure that his industry has even stopped sinking. "We are optimistic it will bottom out soon," said Don Logan, chairman-CEO of Time Inc., in a mid-December interview. "My prediction is by first quarter we won't have hit bottom yet. I'm hoping by the second quarter, our comparisons [vs. a year ago] begin to be flat again."

Still stinging from a disastrous '01-ad pages were down 10.9% through November, including the year's worst single-month drop of 17.3% for November-top magazine executives eye '02's landscape warily. With good reasons: The ad market remains moribund, and January '02's monthlies are distressingly light. Circulation's well-documented tough times, for both newsstand and subscription, continue as well. The news that NBC will accept liquor advertising under certain conditions represents a threat to what was $290 million worth of magazine ad revenue for 2000. Taylor Nelson Sofres' CMR figures show the liquor category, for January through November of this year, declined 3% compared with 2000. (Most executives express sanguinity about liquor ad pages, though Chip Block, a longtime industry executive and vice chairman of USAPubs, called the development "very dangerous for magazines. It was something we had almost to ourselves.") To top it all off, double-digit postal-rate increases potentially loom. It's no surprise several top executives said magazine closures would accelerate into 2002.

Given that, many executives glom onto any hints of brightening they can find. "We are getting an awful lot of [requests for proposals] given the current environment-substantially more than we expected," said Dan Brewster, president-CEO, Gruner & Jahr USA Publishing. "There's a hint of encouragement rippling through our sales staff. Whether that's well-founded or not, I have no idea."

"It's going to be a difficult year," said Mary Berner, president-CEO of Fairchild Publications, who cited some signs of quickening among her trade titles but conceded, "Luxury is hit hard. When you look at that business, I don't see a rebound soon."

In response to all of this, there's talk of tightened belts in surprisingly stark terms. "I don't think any publisher will tell you there are any sacred cows in terms of cost areas," said Jack Kliger, president-CEO, Hachette Filipacchi Media U.S. "At no time do we want to compromise editorial integrity, but we're taking a look at how many people we need to produce magazines on all levels." Even factoring an '02 turnaround for the economy, Mr. Kliger said he didn't expect magazines' business to show much improvement until '03.

"In a lot of places, we are still too big," said Cathleen Black, president, Hearst Magazines. Ms. Black has spoken in the past about the disparity in staffing sizes between American and European magazines. The economic models for titles domestically and abroad are "hugely different," she conceded, but still she spoke of the need to "be smaller."

"Could there be a group marketing department?" she wondered.

On the revenue-stream side, Mr. Kliger repeated familiar magazine-industry invocation of tough economic times: better consumer marketing, and the potential of content syndication and merchandising. "We haven't thought of that" as an industry, he said. "We've been too busy feeding at the trough of advertising." More intriguingly, Mr. Kliger spoke of going global with ad sales across Hachette's international portfolio.

AOL Time Warner's Time Inc. could be a player in that arena, thanks to its $1 billion-plus acquisition of IPC magazines. With Mr. Logan's gloomy outlook for the first half, Time Inc. will have to do gangbusters business or suffer additional cutbacks in the second half of the year to make good on a promise of double-digit profit growth, Mr. Logan told Ad Age during October's American Magazine Conference.

But Mr. Logan offered no simple solutions to the industry's current woes. "We can't do anything other than trying to go out and sell the value of magazines," he said.

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