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Economics

Introduction

By the Project for Excellence in Journalism

The decline in advertising the magazine industry has experienced since 2006 accelerated in 2008. The biggest hits came in declines in ad buying from automakers, pharmaceutical companies and financial service providers.

The question that needs to be sorted out in 2009 and beyond is how much of the accelerating drop in print magazine advertising is a function of a difficult economy and how much of it is a permanent shift in the way the producers of goods and services reach consumers.

Across the 251 magazines analyzed by the Publishers Information Bureau, ad pages were down 12% in 2008, compared with a 1% drop in 2007.

Just one news magazine studied, The Economist, succeeded in adding pages and advertising revenue in 2008. The readership of the British-owned magazine’s North American edition is the youngest, most educated and most affluent of all the news magazines examined, all factors desired by advertisers. Analysts also attribute the publication’s recent success to two of its main subject areas: overseas news and trends, coverage that other news magazines have trimmed in recent years, and the global economy, which likely drew readers as global markets hit choppy waters.1

The two largest news weeklies, Time and Newsweek, failed in 2008 to reverse the trend of declining ad revenue, despite slashing ad rates and giving their print product a makeover the year before. At Newsweek, the continued decline in ad revenues resulted in overall losses for the year, even with significant cuts in staffing. Time still managed to turn a profit.2

The failure of previous print publication redesigns to capture additional readers spells trouble. So does the failure of cuts to the “rate base”3— the number of distributed copies guaranteed advertisers — to attract new ads.

Ad Pages vs. Ad Dollars

Divining the financial health of a magazine is challenging

Two of the biggest owners of magazines—Hearst and Advance—are privately held companies, and as such are not required to issue public financial reports. Even the publicly traded media companies that do issue reports generally do not break out revenue figures for specific magazines.4

The Publishers Information Bureau offers estimates by combining ad rates and published pages. It multiplies the rate magazines charge on their rate card by the number of ad pages they published. The resulting estimate is an imprecise representation of actual ad revenue because advertisers often get discounted prices from the rate card. Because of various discounts and incentives, experts say that actual revenue is often half what the reported ad dollars would suggest.

For 2008, the collective discounts at Time Inc.’s two dozen American magazines, for example, amounted to 44% off the official rates, according to press accounts. And at Meredith, which owns 25 consumer magazines, reports put the collective discounts at an average of about 75% below official rates.5

The figures for how many pages of advertising were published, on the other hand, are based on an actual count of ads in a publication.

Both ad dollar and ad pages are cited here.

The Magazine Industry Over All

Ad pages decreased across the entire magazine industry by an estimated 12% in 2008, with the sharpest declines in the fourth quarter.

The declines cut across most magazine categories. Consumer magazines — those intended for a general audience, including People and Reader’s Digest — did worst as a group, falling 12%.

Some of the biggest declines for the year were experienced at Home (down 38%), U.S. News (32%), The New Yorker (27%) and Nickelodeon (27%). Home’s ad page decreases were indicative of similar declines among shelter magazines—those publications about the home, decor, furnishings and gardens.

The year-end numbers offer scarce good news for publishers, with nearly every major category posting substantial declines in ad pages. All automobile magazines tracked by the Publishers Information Bureau had declines, most by more than 10%. Among entertainment and celebrity magazines, only InTouch Weekly managed to increase ad pages in 2008 over the year earlier, by 3%. Music publications had some of the steepest declines among magazines tracked by the Publishers Information Bureau. Blender had a 31% decrease, Rolling Stone dropped 24% and Vibe decreased 18%. Spin had the only increase in the category, gaining a modest 2%.

In all, just 18% of magazines tracked by the Publishers Information Bureau posted gains in ad pages for the year.6 Among the gainers were a smattering of parenting magazines, including Meredith’s Spanish-language publication Ser Padres (an increase of 42%), Scholastic Parent and Child (up 28%) Disney’s new parenting magazine, Wondertime (up 21%), while competitors including Condé Nast’s Cookie (up 11%) and Bonnier Corporation’s Working Mother (up 4%) grew more modestly. Despite growth at Wondertime in 2008, Disney announced its closing in January 2009; the last issue appeared in March.7

Also having modest growth in ad pages were health and fitness magazines. Women’s Health was up 12%, Body + Soul added 4%, Muscle & Fitness was up 4% and Men’s Journal added 3%.

Some relatively new publications, which started out with smaller ad bases in 2007 relative to more established magazines, grew in 2008. Ad pages at Rodale’s Bestlife, a men’s lifestyle publication, were up 7%. New magazines featuring Food Network personalities also had a good year in 2008: Cooking With Paula Deen had ad pages grow 18% from 2007, and Every Day With Rachael Ray was up 3%. The gains came as the network launched its own magazine with Hearst.

Business and finance magazines mostly followed the fortunes of the troubled economy in 2008. Ad page counts for the year presented a mostly downbeat picture.

Many more established business publications suffered double-digit declines throughout the year. Ad pages dropped 30% at Smart Money; BusinessWeek was down 16%, Forbes 14% and Kiplinger’s Personal Finance 15%.

The one clearly positive result was enjoyed by Mansueto Ventures’ Fast Company, which had a 24% increase. The magazine, founded by two former Harvard Business Review editors, Alan Webber and Bill Taylor, reports on digital media, technology, change management and social responsibility.

The Harvard Business Review, for its part, had more modest (3%) page increases. Condé Nast Portfolio, launched in 2007, had slight growth (2%) in 2008 over all, but hemorrhaged in the fourth quarter, when it had a 33% decline in ad pages compared with the same period in 2007.

Business and Finance Publication Ad Pages
2007 to 2008
Number of Pages
Percentage Change
Publication
2007
2008
BusinessWeek
2243.8
1882.4
-16.1
Condé Nast Portfolio
656.0
668.9
+2.0
The Economist
2364.0
2,468.3
+4.4
Entrepreneur
1156.8
1,043.3
-9.8
Fast Company
497.3
616.2
+23.9
Forbes
3,238.6
2775.3
-14.3
Fortune
2379.3
2,382.7
+0.1
Fortune Small Business
477.5
474.5
-0.6
Harvard Business Review
456.3
468.7
+2.7
Inc.
824.5
817.9
-0.8
Kiplinger’s
497.3
424.8
-14.6
Money
807.7
793.6
-1.7
SmartMoney
713.6
501.9
-29.7

Source: Publishers Information Bureau

Niche publications over all, thought to be less susceptible in economic downturns than general-interest magazines, were not immune from the advertising slump in 2008. Publications targeted at boating and automobile enthusiasts experienced some of the biggest declines of any magazines. Steep ad page decreases at Motorboating (down 31%), Boating (down 25%), Power & Motoryacht (down 27%) and Yachting (down 15%) showed acute weaknesses in luxury niche magazines. The collapse of the automobile advertising market no doubt contributed to steep decreases at Automobile Magazine (down 13%), Motor Trend (down 12%) and Car and Driver (down 11%).

Automobile Publication Ad Pages
2007 to 2008
Number of Pages
Percentage Change
Publication
2007
2008
Automobile
2243.8
1882.4
-16.1
Autoweek
656.0
668.9
+2.0
Car and Driver
2364.0
2,468.3
+4.4
Hot Rod
1156.8
1,043.3
-9.8
Motor Trend
497.3
616.2
+23.9
Road & Track
3,238.6
2775.3
-14.3

Source: Publishers Information Bureau

But news magazines were not much better off.

All three of the big news weeklies had double-digit decreases in ad pages through the third quarter of 2008. And the other news magazines did not perform much better.

News Magazines

For the eight news magazines examined, ad pages were down 16% in 2008 compared to the previous year.8 Ad dollars fell by nearly 19%.9 The declines are much more severe than those in 2007, when pages were down by less than 1% and dollars by 4%.

Time, Newsweek, U.S. News

Among the hardest hit were the traditional Big Three of the news magazines.

At Time, ad pages fell 19% and ad dollars 27%.

Newsweek had a 19% drop in ad pages with a 14% decline in ad dollars.

At U.S. News & World Report, ad pages fell 32% and ad dollars 35%.

What’s more, the 2008 ad page estimate for the traditional news magazines represent the lowest total since 1988, when the data first became available from the Publishers Information Bureau.

Biggest Three News Magazines, Ad Dollars and Pages
2007 to 2008
Publication 2007 Dollars
(in millions)
2008 Dollars
(in millions)
Percentage Change 2007 Pages 2008 Pages Percentage Change
Time
$475
$346
-27.1%
1,859.0
1,505.9
-19%
Newsweek
$543
$466
-14.1
2,162.2
1,752.0
-19
U.S. News
$270
$175
-35.4
1,640.6
1,109.8
-32.4

Source: Publishers Information Bureau

The two leading news weeklies, Time and Newsweek, were both hoping that changes made in 2007 (See State of the News Media 2008) would lead to new growth in 2008.

Both publications launched redesigned magazines in 2007, cut ad rates and reduced circulation in an effort to attract more advertisers. Publishers base advertising rates on the number of consumers an ad may reach—the higher the number of guaranteed consumers, the higher the rate for advertisers. By offering cheaper rates to advertisers, the magazines hope to get more of them to advertise.

But signs of continued declines in early 2008 led to yet more changes both in print and online.

Time’s website (www.time.com), for instance, underwent its second redesign in two years.

The first came in January 2007, to coincide with the magazine’s redesign that March. In September 2008, time.com was again retooled, this time under the direction of its online e ditor, Josh Tyrangiel, who also serves as assistant managing editor of the print publication. Tyrangiel described the previous redesign of the website as “rushed.”10

A month later, in October of 2008, Time Inc. CEO Anne Moore announced that the company was devising a two-year plan to weather the economic downturn. Moore stated that “it will be tough to grow revenues” in 2009. Time Inc., which publishes Time and several other publications, with Time as its flagship, sought to increase digital revenues in 2008 by 53%, a target Moore said the company would not hit.11

At Newsweek, the plunge in ad pages and dollars came at a time when management seemed unsettled. Its president and publisher, Greg Osberg, formerly an executive of the online computer consumer and news guide CNET, left the magazine in the fall of 2008.12 In December 2008, Osberg was named CEO of Buzzwire, a company that streams video content to mobile devices.13 Newsweek said it had no plans to replace Osberg.14

In February 2009, Newsweek announced radical changes. In addition to slashing its rate base from 2.6 million to 1.5 million by 2010, the magazine announced it would double its subscription rates, focusing on a core of affluent, highly educated readers. The magazine hopes that with a smaller, more dedicated audience it will attract more luxury goods advertisers and get higher rates for ads.15

Both of these strategies will have to navigate an almost certainly difficult economic climate in 2009.

It was a periodical once considered the third general news magazine, U.S. News & World Report, that suffered most in 2008. Already down 5% in ad pages and 1% in ad dollars in 2007, ad pages in 2008 fell 32% more. Estimated ad dollars were down 35%.

U.S. News’ average number of distributed copies decreased slightly in 2008, after remaining flat for three years, to 1.994 million, from 2.038 million in 2007. (See Audience).

The publication refocused itself around double issues designed to help people make decisions about such things as healthcare plans, colleges or retirement communities at the expense of the hard news that traditionally filled its pages. (See News Investment.)

Niche News Magazines

For all that magazines in general and news magazines in particular suffered in 2008, not all the news was bad. Niche news magazines continued to fare relatively better.

First among these may be The Economist, the British publication that launched its American edition in 1993. The publication benefited from an 11% increase in circulation in the U.S., to almost 750,000 in 2008, from 666,000 in 2007. It has expressed a goal of hitting 1 million in U.S. circulation. With the help of a growing audience, ad pages grew by 4%, and estimated ad dollars grew 26%. It had the distinction of being the only news magazine to show growth in both ad pages and dollars in 2008.

The Week, another British-owned publication, has no reporters but its staff of 20 editors aggregates the reporting in the rest of the press into a weekly summary. Ad pages in its U.S. edition were flat, while ad dollars were projected to grow 14% percent growth, following a projected 15.8% jump a year earlier.

Nontraditional News Magazines, Ad Dollars and Pages
2007 to 2008
Publication 2007 Dollars
(in millions)
2008 Dollars
(in millions)
Percentage Change 2007 Pages 2008 Pages Percentage Change
The Atlantic
$33
$32
-2.8%
636.7
528.7
-17%
The Economist
$105
$132
+25.5
2,364.0
2,468.3
+4.4
The New Yorker
$266
$179
-20.7
2,019.6
1,478.1
-26.8
The Week
$28
$31
+13.6
602.7
602.7
0.0
National Journal
$13
$11
-14.8
929.3
751.5
-19.1

Source: Publishers Information Bureau

As the editorial director of a competitor, Thomas Wallace of Condé Nast, joked when reacting to reports on second-quarter ad pages in July: “Flat is the new up.”16

The other news magazines examined all saw declines in 2008. After posting modest gains for ad pages and dollars in 2007, The New Yorker’s momentum reversed in 2008. Ad pages fell 27%. Ad revenue, based on the rate card, would have fallen 21%.

Samir Husni, the University of Mississippi Journalism Department chairman, believes the content offered by The New Yorker creates a strong and loyal core audience. “We are not going to have a mass in-depth weekly,” Husni said. “Dense content is going to create a core audience, not a mass audience. But core audience will pay more for magazines.”17

National Journal, a weekly magazine that reports on the political-governmental environment and political and policy trends, had less severe declines than most other specialty news magazines. The magazine is part of National Journal Group, a division of the Atlantic Media Company, which also owns The Atlantic.

Ad pages at National Journal decreased 19% and ad dollars lost 15% compared with 2007 figures. Its coverage of the presidential election likely boosted readership and traffic to its website. It is less clear whether its partnership with NBC during the 2008 campaign benefited attracted more readers to the National Journal website and magazine.

Beginning in September 2007, journalists from National Journal, NBC and its sister cable channel MSNBC assigned staff members to the presidential campaign trail who filed dispatches during the nominating contests through the general election. National Journal reporters appeared regularly on the NBC-owned channels throughout the campaign. The content-sharing partnership was intended to broaden National Journal’s online and broadcast exposure.

The Atlantic, National Journal’s sister publication, had declines as well. After remaining flat in 2007, the number of ad pages dropped 17%, while ad dollars decreased by 3% in 2008.

In October, The Atlantic unveiled a redesigned magazine. The retooling follows a 2007 effort to attract more traffic and advertisers to the magazine’s website by eliminating paid subscriptions to the site. This strategy seems to have paid off in attracting more readers to both the print magazine and the website in 2008, but in a dismal year for advertising, especially in magazines, it’s unclear whether more advertisers came on board.

The range of tactics employed by news magazines—individual magazines tinkering with online identities and rethinking their established print brands—appeared, at least so far, to have made little impact. And one downside to the move online is a wealth of new competitors such as newspaper websites, Web-based magazines like Slate and Salon, and blog sites like Huffington Post that compete on any given subject area in the news.

Even in the best of times it might be too early to know if the structural changes at the news weeklies—in particular the shift at the larger ones toward remaking themselves into smaller, more targeted publications—would work. But the economics of 2008, and the apparent worsening of that picture in 2009, almost certainly will complicate those experiments. And one thing appears clearest. In the 21st century, the truly mass market news magazine appears on the way out. “The ad-supported model died in September,” Husni said.18

Footnotes

1. Nat Ives, “Magazine of the Year: The Economist,” Advertising Age, October 6, 2008

2. This refers to the guaranteed average net paid circulation of a periodical set by the publisher according to the number of copies that can be sold on a consistent basis. It is used by advertisers to evaluate the benefit of advertising in that periodical. Space advertising prices are based upon the rate base, and if the rate base guarantee is not met, the publisher must compensate advertisers for the difference. Copies sold in excess of the rate base, commonly called bonus circulation, are free.

3. Erik Sass, “Deep Cuts: Mags Heavily Discount Rate Cards in 2008,” MediaPost Publications, February 4, 2009

4. Erik Sass, “Deep Cuts: Mags Heavily Discount Rate Cards in 2008,” MediaPost Publications, February 4, 2009

5. A higher percentage of magazines may have gained in ad revenue, at least according to the Publishers Information Bureau estimates. By this count, 46% of consumer magazines would have had revenue gains had they charged from the rate card the full amount

6. Dylan Stableford, “Disney Shuts Wondertime; Hearst Stops Teen,” Folio Magazine, January 23, 2009. Online at: http://www.foliomag.com/2009/disney-kills-wondertime-hearst-stops-teen.

7. The publications are: Time, Newsweek, U.S. News and World Report, The Economist, The New Yorker, The Week, The Atlantic and National Journal.

8. While the ad dollar and ad pages figures will be discussed in this chapter, the ad pages are the more concrete figures that indicate financial health of a magazine. The total dollar figure is calculated by multiplying the rate given on the rate card by each publication by the number of ad pages. This is an inaccurate representation of actual ad revenue because advertisers rarely, if ever, pay the rate given on the rate-card. Therefore, it must be noted that experts in the industry say that actual revenue is often half what the ad dollars are reported to be.

9. Mark Walsh, “Time’ For Another Home Page Tweaking,” MediaPost Online Media Daily, September 15, 2008

10. Jason Fell, “Time Inc. CEO: ‘It Will Be Tough to Grow Revenues’ in 2009,” Folio, October 13, 2008

11. Dylan Stableford, “President and Publisher to Leave Newsweek,” FolioMag.com, July 16, 2008

12. Lucia Moses, “Ex-Newsweek Exec Osberg to Head Buzzwire,” MediaWeek, December 8, 2008.

13. “Newsweek President Greg Osberg Resigns,” Washington Post, July 17, 2008

14. Richard Perez-Peña, “Newsweek Plans Makeover to Fit a Smaller Audience,” New York Times, February 9, 2009

15. Richard Perez-Peña, “Newsweek Plans Makeover to Fit a Smaller Audience,” New York Times, February 9, 2009

16. Megan Garber, “Mag Revenue Numbers: In Which ‘Flat Is the New Up,’ ” Columbia Journalism Review, July 11, 2008. Online at: http://www.cjr.org/the_kicker/mag_revenue_numbers_in_which_f.php.

17. Samir Husni, Interview with PEJ, January 15, 2009

18. Samir Husni, Interview with PEJ, January 15, 2009