|By the Project for Excellence in Journalism
After five years of buying and selling by the industry’s biggest players, the landscape of magazine ownership is no longer dominated by giant Time Warner.
The field is now more evenly split among three big companies – Time Warner, Advance and Hearst – each with more than $2 billion in annual magazine revenue. No other company has even $1 billion.
As recently as 2002, Time Warner towered over the industry, with annual magazine revenues of roughly $4.8 billion. It was more than double the size of Hearst, with about $2.2 billion. Advance was third at less than $2 billion.
Now, Time Warner finds itself in a virtual tie with Advance – both had roughly $3.6 billion in magazine revenues in 2006. Hearst has climbed slightly above $2 billion.
The moves are due to both a decline at Time Warner, at least in part the result of conscious choices, and growth at Advance and Hearst.
The percentage of revenues Time Warner draws from magazines may fall even more in the coming years. Over the past two years, the company pruned from its portfolio several of its weaker performing magazines aimed at smaller audiences. It focused its future instead on bigger magazines and new Web site audiences.
In 2006, it closed Teen People and Family Circle in the United Kingdom and folded its magazine for teenaged boys, YM, into Teen Vogue. It also announced plans to sell 18 magazines, including Parenting, Popular Science and Field & Stream. In 2007, Time Warner completed that sale – the group of publications went to the Scandinavian company Bonnier for $300 million – and closed two more magazines — Life, which it had reincarnated as a newspaper insert in 2004, and Business 2.0.
The company held onto its largest earners, mass-market magazine brands such as People, Sports Illustrated and Time. Not only do they bring in more print ad dollars, but as CEO Ann Moore sees it, the bigger magazines are also more likely to find financial success online. As ad dollars continue to disappear for print products, the company has hopes that mass-audience Web sites can make up for some of that loss. 1
A different strategy seems to have paid off for Advance, the company that owns a wide range of magazines, including the New Yorker and Vanity Fair, as well as Parade, the lucrative and largest Sunday newspaper supplement. As Time Warner began divesting, Advance added magazines in strategic younger markets and saw its revenues grow. Among the major niche publications added were Modern Bride in 2002 and YM in 2004. The industry-wide slowdown in ads over the past three years has not affected the company, which is seeing some of its better-known publications – such as Vogue and Vanity Fair – thrive.
And even as the business magazine field was suffering, Advance went forward in April 2007 with the high-profile (and, at $100 million, expensive) launch of the business monthly Conde Nast Portfolio.
Advance did have one death in the family. In November 2007 the company announced the closing of venerable House & Garden – for the second time in 106 years – saying the magazine was “no longer a viable business investment for the company.” But there immediately was talk of taking House & Garden’s high-end, high-style approach to interior design to its new Vogue Living, scheduled to make its debut in 2008 after two test issues in 2007.
Hearst, in third place among the magazine companies by revenue, maintained its low profile of recent years. It last launched a new magazine in 2004, Shop Etc. , which folded in 2006. In 2003, it bought Seventeen and launched Town & Country Travel and the now-defunct Lifetime magazine as a joint venture with Disney. Since then, much of the company’s energy has been focused on purchasing online properties, such as handbag.com, ecrush (a youth networking site) and caboodle (a shopping community).
Beyond the big three owners, the magazine field is strikingly different than other media sectors.
Rather than media conglomerates, many of the bigger players are companies that specialize in magazines. Other than Time Warner, the top 10 companies in the sector all derive the largest share of their revenue from magazines. And most of these magazines are aimed at niche audiences with specialized advertisers. After the top three companies, none of the top 25 media conglomerates in the country have substantial magazine holdings.
|Design Your Own Chart|
Source: Ad Age, Chart: Top 25 Magazine Companies
The year was quieter among the owners of the newsweeklies (other than Time). Two transactions stood out: The Washington Post, owner of Newsweek, ended its content relationship with MSNBC. And, Dennis Publishing, owner of The Week, sold off all its holdings except its growing weekly news digest.
Over all, the trend toward smaller owners in magazines is doubly true for news magazines. Other than Time, none of the big three news magazines is owned by a media conglomerate. The other two big players in the market, Newsweek and U.S. News & World Report, are owned by the 28th- and 62nd-largest media companies respectively – the Washington Post Company and Zuckerman Properties. And even in the smaller universe of magazine owners, the Post and Zuckerman are not among the biggest.
The Washington Post Company generates roughly 38% of its revenues from newspapers, 16% from television and 15% from magazines. Much of the magazine revenue comes from Newsweek, but it also owns newsweeklies in Russia and Greece.
After a rough 2006, when revenues fell 4%, the company had a relatively quiet 2007, neither making major purchases nor sales. Instead, the company focused its attention and resources on a redesign of its centerpiece, Newsweek, and plunged more deeply into the Web. Newsweek’s separation from MSNBC also gives it more control over its own Web site content and ads (See Online Chapter ).
The Washington Post Company did see an 11% increase in online revenue in 2007 – up to $27.2 million from $24.5 in the third quarter of 2006. But those numbers lag behind those of its major competitors, namely the New York Times Company, which saw third- quarter numbers near $80 million.
Donald Graham, CEO and chairman of the Post Company, sees the Web as critical to the newspaper’s survival. “ If Internet advertising revenues don’t continue to grow fast,” he told Fortune,. “I think the future of the newspaper business will be very challenging. The Web site simply has to come through.” Judging by the moves made with Newsweek, he seems to believe improving the magazine’s Web traffic and ad revenues also are key.
Zuckerman Properties also had a quiet year with its lone magazine, U.S. News & World Report. After major cutbacks a year earlier, its owner, Mortimer Zuckerman, avoided headlines in 2007. U.S. News revenues grew in 2006 to $254 million, up from $246 million in 2005 – an increase of a little over 3%. The company is not among the top 20 in magazine revenues.
The year 2007 was not so quiet at the fourth, and newest, name in the U.S. newsweekly business. Briton Felix Dennis made news in 2007 by divesting three of the magazines that made his Dennis Publishing famous. Dennis, who breathed new life into the male magazine market with “lad” magazines, featuring scantily clad starlets, decided it was time to bid farewell to Maxim, Stuff and Blender and their decreasing circulations. He sold the magazines to Quadrangle Partners, a private investment group, for $250 million.
With the sales, a company poised to become a major force in the magazine world has disappeared from the top-20 list.
The one magazine Dennis held onto: The weekly news aggregator and summarizer, The Week.
The divestiture apparently allows Dennis to focus more intently on the multi-platform magazine he calls “my baby.” The Week has proved to be a cash cow with very low productions costs (a small staff and no outside bureaus). The magazine’s Web site was updated (See Online Section) to focus more on daily headlines with new stories every day – a move that makes creating content more labor intensive.
“The Week is going to be a huge global brand,” Dennis said in an article that appeared in the New York Times. “Cross my heart and hope to die, I have already been offered hundreds of millions of dollars for it. I will throw The Week onto no pile until it becomes a half a billion or billion-dollar franchise.” 2
The sale of the “lad” magazines has two meanings within the world of magazine ownership.
First, a company that was growing to become a major force in that world has disappeared from the list of biggest magazine owners. The Week may be doing well, but the company lost a lot of revenue streams when it dumped its other magazines.
Second, it shows that at least one owner sees the long-moribund news magazine field as a potential big money-maker, if only from the ultimate sale of the property.
1. Wall Street Journal, September 13, 2006.
2. “A Magazine Challenges the Big Boys,” David Carr, the New York Times, November 26, 2007.