Magazine world weighs its worth

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There's something that makes an observer roll his eyes while hearing the sighs the privileged heave while they lunch, in midsummer, at Manhattan's poshest eateries. But as the ad slowdown compounded summer's traditional doldrums, some of the magazine world's biggest names confided, amid gentle tinkling of crystal and fine china, some surprisingly dark sentiments.

One editor, outlining budgetary demands, paused in midsentence, abruptly shot a shocked look at a lunchtime guest and blurted, "I don't know why the [expletive] they hired me."

A top industry executive recounted another round of business woes with a disconcerting merriness. "Maybe," the executive said, grinning over a glass of wine, "it's time to head for the country."

Another editor worked himself up into a near rage while recounting the latest cutbacks. "Damned if I'm ever going to get a penny of it back when the economy rebounds," he fumed, loud enough to make one fear heads were turning toward him.

All of this was before Sept. 11 scrambled everything, simultaneously spiking the demand for some key magazines while further darkening the revenue picture for all.

Throw in the newsstand hassles all publishers face, the demise of cheap subscription sources like American Family Publishers and Publishers Clearing House-as well as looming postal rate hikes (see story on Page S-10)-and one sees how the cost side continues to clamp down. Among this year's victims: Brill's Content, Expedia Travels, Individual Investor, The Industry Standard, Mademoiselle, Maximum Golf, Mode and Working Woman.

The business, nonetheless, remains both an intellectual and glamour center of the media world. And its bulk remains formidable: The circulation of America's top 10 magazines totaled 78.1 million for the first half of the year. Even if ad levels fall off 5% from 2000's industry total reported by Taylor Nelson Sofres' CMR, magazines will still take in $17.5 billion in ad revenue this year.

So what's happening? Do magazines still matter, culturally and commercially, the way they once did? Or are magazines fast becoming the Boston or France of the media world-an enclave of extraordinarily high self-regard utterly out of proportion with how the rest of the world sees it?

"The short answer is yes," says Kurt Andersen, the co-founder of Spy and, who insists on being counted as a fan of both Boston and France. Mr. Andersen cites "cultural balkanization" and the shrinking of magazines' ambitions. "The end of Life was the beginning of the end, you could argue, of large, general-interest magazines. Once magazines are no longer big, they can still be great, but they will inevitably have less and less impact."

Such notions are tricky to examine, because they can prompt nothing more than nostalgia for fuzzily defined days gone by. "Every medium had a golden age," says Gary Hoenig, executive editor at ESPN the Magazine and a former editor of media trade magazines. "The telegraph had a golden age." Life, which perhaps loomed larger over the nation's culture than any other magazine ever did during its mid-20th century zenith-though its circulation peaked at 8.5 million in 1969-did so when it, not TV, was the best medium to bring Americans images from far away.

(As for other key titles from other key times routinely granted totemic status by industry veterans-Esquire during its heyday in the '60s, The New Yorker at various times-well, those golden ages didn't necessarily translate into gold. David Granger, Esquire's current editor in chief, points out his magazine's commercial peak likely came in the 1950s, "when it was much more obsessed with starlets and cleavage" than, say, book-length New Journalism pieces by the likes of Norman Mailer.)

On the advertising side, some ad buyers are just fine with a constellation of niched titles rather than one or two heavy-hitting big names with broad appeal. "The fact no one magazine has perhaps the same effect as a single magazine might have had in the '50s is really not relevant to me. We buy audience," says Gene DeWitt, CEO of Publicis Groupe's Optimedia International, New York. "Products today are designed for specific audiences. So are magazines."

It's also foolhardy to deny the cultural and commercial bang of recent launches as diverse as Maxim, Martha Stewart Living and O, the Oprah Magazine, even if the last two leveraged existing media brand names. All have circulations exceeding 2 million and ad page counts that will exceed 1,000 by yearend. Top performers such as Time Inc.'s People are billion-dollar businesses. And those within the industry-perhaps not surprisingly-strongly object to questions plumbing whether magazines matter.

"You expect me to say no?" Mr. Granger asks. "Unless you believe that any medium can become irrelevant, and unless you believe that there's some total failure of imagination, no medium, much less magazines, can become irrelevant or less powerful."

Well, radio dramatists from the '40s might differ. But in an editors roundtable (see Page S-12), industry veterans including Mr. Granger and Talk's Tina Brown make persuasive and heartfelt cases for the primacy of magazines-now more than ever.

So does Mr. DeWitt. "Magazines are more important today than they've ever been," he says. (Lest he be accused of favoring one medium over another, Mr. DeWitt says that two-thirds of Optimedia's billings are TV.)

Magazines' share of national advertising, according to CMR, ticked upward slightly during the last boom, rising to 17.5% in 2000 from 17.2% in 1997. But new circumstances lead some key ad side observers to simply say they're not buying Mr. DeWitt's thesis-literally.

"When the network, cable and syndicated marketplaces all fall apart"-as they did this year, says Steve Farella, CEO of Havas Advertising's Media Planning North America, New York, "pricing in those media becomes extremely attractive. ... If a client or advertiser thinks [a non-broadcast medium] is secondary, those monies disappear and go into TV.

"Fifteen years ago, this would be an issue for mass products," Mr. Farella says, but a host of tightly niched cable channels-like, say, the Food Network, which just sent one of its stars, Emeril Lagasse, to his own network sitcom-means cable will "siphon off much deeper than before." The last time the TV market slacked off, he adds, came in the early '90s, when these cable networks were in their infancy.

"You can buy TV at the last minute" in such a market, says David Verklin, CEO of Aegis Group's Carat North America, New York, and in even the most coveted places. " `Friends'? Absolutely."

The upshot, predict both Messrs. Farella and Verklin, is magazines will lose ad share in 2001. "I am predicting the next 12 months will be extremely difficult" for magazines, Mr. Verklin says, "even by media standards" in an unprecedentedly tough environment. Carat is forecasting 5% drops in overall ad spending in '01 and `02-the first time that's happened since the Depression.

Other secular shifts deserve attention.

Consider the classic dream of a magazine: the idiosyncratic idea promoted by an idiosyncratic founder who somehow sensed the next great cultural movement when it barely registered elsewhere, and shortly thereafter transmuted that idea into gold. Lila and DeWitt Wallace and Reader's Digest. Henry Luce and Time. Hugh Hefner and Playboy. Jann Wenner and Rolling Stone. More so than any other media form-at least since wild-eyed frontiersmen birthed America's first newspapers centuries ago-the magazine world depended upon such entrepreneurs for the Next Big Thing.

In a time when venture capital is wary, when lenders and big companies demand ever-larger profit margins, is it still possible for a lone individual to do this?

"I would have to say yes," Mr. Wenner contends, but with caveats. "The cost of entry is so high that it's going to discourage it. Most people think they want to start right away with a glossy magazine and a 300,000 rate base in New York City, and it's not possible to raise that much money."

Outside, that is, of the big established companies-which, public and private, are facing ever-increasing bottom-line demands and which may not be the best place for unorthodox entrepreneurs. "I was a 21-year-old college dropout" who launched Rolling Stone, says Mr. Wenner. "I wasn't a [expletive] mogul on Sixth Avenue."

Which he is now. But even Mr. Wenner-whose brashly independent streak still gets him described as an industry "bad boy" at age 55-is now not immune to the lure of corporate life. When asked whether his current deal with Walt Disney Co., which holds a stake in his title Us Weekly, would expand to the rest of Wenner Media, he replies, "It's always possible. It's not imminent. It's not part of the deal. I like 'em plenty."

The pressures on smaller players like Mr. Wenner are exacerbated by an inconvenient fact of magazining: Consumer magazines are the traditional medium with the lowest profit margins-save for the broadcast networks, which, one deal-side executive says, "the smart money left years ago."

Consumer magazines, says Mark Edmiston, managing director of AdMedia Partners, average margins in the 12% to 15% range. Newspapers double this, radio tops newspapers, and local TV stations hit the forties. (Broadcast networks, Mr. Edmiston says, have fallen far from 10% to 15% margins pre-cable: "Now it's hard for them to make money.")

Don't think that fact has gone unnoticed by the banks and media conglomerates controlling the purse strings. Margin pressures on magazines "are one of the big concerns and legitimately so," says Dan Brewster, CEO of Gruner & Jahr USA Publishing. As magazines compete increasingly in a broader media world via consolidation a la AOL Time Warner, that pressure won't lessen.

The current environment equals "a financial structure that has not existed previously," says Jack Berkowitz, director of strategic planning for American Lawyer Media. "I do think something has changed there fundamentally." The notoriously long time it took Time Inc. to get Sports Illustrated to profitability, executives unanimously agree, wouldn't be allowed today. (In his company's defense, Time Inc. Chairman-CEO Don Logan says that "we can get [to profitability] much faster" now, thanks to better research and data.)


Consider, too, what the discredited and dissolved dot-com world wrought-for a few years, anyway.

The Internet "didn't change everything," Mr. Andersen says. (Given his whirlwind tenure at, he knows from the Net not changing everything.) But, he adds, "it did, for many years, create a sort of somewhat irreversible migration of people and capital and creative energy-all those things you need to make magazines happen-over toward the electronic medium."

"Over the long haul," says Mr. Andersen, whose byline still surfaces in magazines as he finishes his next novel, "it's a permanent net loss of the creative obsession and mojo magazines had 10 years ago that they don't have today."

Of course, mojo-infused magazine ventures rose and grew during dot-com days and are still out there, be they Maxim or, on a smaller scale, Fairchild Publications' Jane. Magazines "are still a key part of the culture," says Eric Garland, who co-founded the short-lived Dads, in that they bring together "like-minded individuals in a way that no other medium does." (The best example is Fast Company's Company of Friends groupies-the Dead-heads of the consumer magazine world.)

Magazine dreams die hard. Mr. Berkowitz says he reckons more independent titles are on the newsstands nowadays than ever before; even subtracting a random 15% for the coming shakeout, the volume is impressive. Others point out there's a thriving subculture of new entries with smart takes on culture, from McSweeney's to DoubleTake, picking up cultural slack as the bigger companies are more comfortable piggybacking titles onto existing magazine brands (see related story above).

And white-knuckle times like these help demand. When third-place newsweekly U.S. News & World Report, which for the first half of '01 averaged just over 40,000 in newsstand sales, throws more than a half-million copies of special editions on the newsstands, something's happening.

The problem is the events prompting reader demand make advertisers wary. "Is it the environment you want to be in?" Mr. Verklin asks of coverage of the current crisis. "Clients are a bit concerned."

"The burp of this misty-eyed patriotism may not take hold," counters one newsweekly staffer. But "patriotism is good for magazines. Always has been."

Historic times also whet epochal appetites. "I have a feeling, depending on how things go in the peace movement, or where the political mind of this country goes, there's a huge opening for someone young. Someone who wants to do [a magazine] from their gut," says Graydon Carter, the editor of Vanity Fair who co-founded Spy for a few million bucks in the '80s.

"If I were young, it would be a very exciting time to do it," says Mr. Carter, editor of one of the nation's most highly regarded magazines.

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