Si Newhouse's Focus on Magazines Cost Gourmet Dearly

Conde Nast's Top Dog Eschewed Opportunities Beyond Printed Page

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NEW YORK ( -- Did Gourmet have to die? Maybe; it was losing money amid tough competition and a savage year for all media.

CONDE CASUALTY: The 68-year-old title ceased publication on Oct. 5
CONDE CASUALTY: The 68-year-old title ceased publication on Oct. 5 Credit: Mario Tama
But its owner, Conde Nast, the high church of glossy magazine publishers, has also maintained a steady magazine-rather-than-brand approach over the years that has increased its exposure to the recession and narrowed the range of possible responses. Quickly-changing conditions outside Conde's soaring headquarters are extracting a price for that loyalty -- and Gourmet, the first of the company's crown jewels to fail, probably paid a portion of the cost.

"It's a real center of gravity that vaporized," said Anthony Bourdain, the chef, author and host of "No Reservations" on the Travel Channel. "I understand the bottom line; we all do. But I'm really surprised that Conde Nast would jab itself in the eye like this."

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Why didn't Conde try harder to save Gourmet, perhaps by changing its business model? Maybe it could have hiked the subscription price -- each issue only brought Conde revenue of $1.18, the circulation expert Jack Hanrahan pointed out -- and reduced circulation to become more like Cook's Illustrated, which doesn't accept advertising. That would have gotten around the conflict with Conde sibling Bon Appetit, something the company cited in closing Gourmet.

Conde, which declined to comment for this article, may have modeled such possibilities and decided they wouldn't work, or at least weren't worth the effort. Yet observers feel that the frame for any such analysis is still set by the company chairman, S.I. Newhouse Jr., who remains true to a pair of longtime loves: gorgeous editorial products and ad pages to pay for them. He seems considerably less interested in digital revenue streams, subscription-based models, direct-to-consumer retail or even cross-platform media offerings.

Building the base
Other publishers have reaped millions of dollars through licensing their brands, but Mr. Newhouse wants his employees focused on keeping the magazines great. Higher subscription rates might improve circulation profitability, alternately, but Conde prefers to attract advertisers with big subscriber bases paying not very much.

"What you have to understand is that Si Newhouse is in charge," said a former publisher who worked at Conde for more than 10 years. "He's a very smart and very impressive man, but I'm not sure he has a lot of vision or creative insight that would outweigh his exceptional love, respect and esteem for magazines."

"It'd be one thing if they killed 10 magazines and said, 'We have this amazing vision for the future and we're putting this money behind this," the former publisher added. "But you get the sense that this money goes toward shoring up some of the others."

The company's circulation strategy is common around the industry. But the challenges have spurred some titles to try raising subscription prices in a bid for better circulation returns and a more-defined audience. Conde doesn't seem to be considering that route.

"I'm kind of surprised that they're not talking at all about increasing subscription prices," said an executive at a major marketer that frequently works with Conde. "They're a company talking about luxury, but they're out there giving their subscriptions away, and their revenue model doesn't work any more. You can't ask advertisers to cover the costs. That's why they missed out on the increased spending this year from packaged foods who aren't willing to pay the premium to be in that environment."

Bigger steps
Conde Nast has certainly nibbled at innovation, such as Bon Appetit's cooking schools in Sur La Table stores around the country. There's a Golf Digest credit card. Lucky magazine offers a great shopping app for iPhones. Conde has operated a digital division, too, since 1995. Its magazines increasingly provide impressive creative services for big advertisers.

But the company hasn't taken some potentially transformative steps, such as Meredith Corp.'s building of a direct-marketing division and acquisitions of agencies that specialize in mobile marketing, interactive advertising and social media. "These other companies caught on quicker, being more flexible but also expanding into other media," said the executive at the major marketer. "I think [Conde is] way behind on that."

Conde Nast is in fact morphing into a content company with diverse assets, capabilities and opportunities, according to Robin Steinberg, senior VP and director of print investment and activation at MediaVest Worldwide. "They could do a better job in demonstrating a more-aggressive approach in content vs. pages," she said. "When you act like a magazine company, you're going to be treated like one," she said.

Ms. Steinberg said a new, more vibrant Conde is emerging. But current and former executives said they think Mr. Newhouse's stride is going to remain mostly the same. "He knows magazines and cares about little else in the media world," a former staffer said. "Thus he's let the digital age sprint past him, because he didn't see it as relevant to his art. And despite the terrible business climate, this culture still permeates through the company. So while Si's OK with doing cookbooks and PBS shows, a form of art unto themselves, he's still not interested in creating Vogue sunglasses, which, by the way, would be a big hit."

Merchandising Vogue, of course, is not why Mr. Newhouse, one of the country's richest men, still comes to work every morning. "He likes being in the business of publishing beautiful magazines," another former executive said. "The missed opportunities you see are on purpose."

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