New challenges for the old media.

A five-part series on traditional media in a new marketing environment.

Remember when your high-school algebra teacher scrawled √-1 = X on the dry-erase board and offered extra credit for the first student to solve for X? After letting the class wrestle with it for a while, the teacher announced that there is no square root of minus one. √-1 is an imaginary number. The imaginary number concept has been adopted by a lot of media lately. Magazines are especially enthusiastic about the concept.

Part 4: Magazines may still be slick, but they could be losing some of their gloss. 

After data was subpoenaed and scrutinized, Time had to slash its rate base by 750,000 subscriptions.

Consumer magazines' share on U.S. advertising expenditures was up 7.1% in the first quarter of 2007. That follows share increases of 4.6% in 2006 and 7.5% in 2005.  That's a very strong performance, but there are some signs of trouble.

At the end of 2004, the Audit Bureau of Circulation disallowed 30,000 of Forbes claimed paid subscribers. That took Forbes below their rate base – their guaranteed average paid circulation – and left a lot of advertisers angry.

Six months later ABC announced that Business Week had missed its rate base by 4.5%. That was quickly followed by revelations that Men's Journal, Working Mother, Fast Company, Family Circle, Child, Parents, YM (now folded), Martha Stewart Living and House Beautiful had all failed to deliver on their circulation guarantees.

Then things got worse. Elliot Spitzer subpoenaed data from Time, Inc., then the biggest American magazine publisher. It wasn't just counting bogus subscriptions from disreputable subscription agents anymore. It was potential criminal fraud.

By the time the drama had played out, Time, Inc.'s, flagship magazine, Time, had slashed its rate base 18.75%, from 4,000,000 to 3,250,000.

Time, Inc. also sold Popular Science, Field & Stream, Parenting and fifteen other magazines. They shut down several more, including Teen People and their original franchise book, Life (which was in its third incarnation as a newspaper supplement). They also cut 500 jobs on top of the 600 cut in 2006, and closed a bunch of Time and People's news bureaus. But CEO Ann S. Moore told a recent Magazine Publishers of America meeting "Everybody stay calm. This is a great business we're in."

Can she put lipstick on a pig or what?

That's going to be a very useful skill. With a diminished rate base, what will Time sell advertisers? Readership, of course. Their contention is that every single copy of the magazine is read by six people. Adds up to 19,500,000 readers. And some pretty tattered copies by the time half a dozen folks have read each one.

Lipstick or not, advertisers may not be buying readership as the new paid circ. Heck, they're not even buying paid circ. any more.

For years publishers have been selling average circulation, not the circulation of the issue your ad happens to be in. And the circulation averages are pumped up by copies "bought" (for cents on the dollar, if that) to be distributed free to readers. So even with ABC-audited circ, you don't always know exactly what you get for your consumer magazine ad buy.

Unless, of course you spend almost a billion a year on magazine space. Carat, one of the mega-monster media companies, recently announced that it won't be spending any of its $900,000,000 annual magazine buy on the basis of average circ. It's an issue-by-issue guarantee or it's no sale.

Look for all the major players to follow Carat's example. And when they do, everyone else will, too. Because the big guys will compel magazines to deal with the real numbers.

There are some other numbers publishers have to deal with, too:

§      Mediamark Research reports that the total number of U.S. magazine readers grew 7% from 1977 to 2006, but that growth didn't keep pace with population increases. Over that period the percentage of U.S. adults who read magazines declined by about 4%.

§      The Audit Bureau of Circulation's Annual Combined Paid Circulation Per Issue (the total paid circulation of all American magazines) has been virtually flat for more than a decade. So each new magazine launched is simply cannibalizing readers from existing magazines.

§      Hundreds of new magazines are launched every year and 60% of them fail before the year is out. Half of the new titles that survive the first year go under sometime in the next three years. Only 20% last four years or more.

§      According to the Magazine Publishers Association, the top ten U.S. magazines had a cumulative 0.6% increase in paid circulation in 2006. But the top 100 were down a cumulative 1.7%.

Things have gotten so rough in the magazine industry that even some successful publications have folded. Elle Girl's rate base doubled in just four years from 2001 to 2005. Ad pages increased 46% and ad revenues were up 77% in 2005. It was regularly on Adweek's "Hot List," and its growth was triple that of other magazines in its category. Despite all that, Hachette Filipacchi shut down Elle Girl's print edition. As CEO Jack Kliger explained, "To reach these girls [teens] we must invest in the media where they spend most of their time and where we see our greatest growth potential." And so Elle Girl morphed into ellegirl.com.

OK, is the web the answer?

Some magazines think so. The laddie books have all lost huge numbers of "readers."  (OK: gawkers.) So they're online big time. Maxim's publisher, Rob Gregory, says "There's a term in the Marines called a force multiplier. If you're putting print together with digital the right way, that's the result."

Everyone else from GamePro to Us Weekly to Runners World is on the web in a big way or soon will be. 

But magazines' audiences and efficacy are really their trump cards.

§      The audiences are pretty self explanatory: Modern Bride, WaterSki, Business Week, Bon Appetit, Golf Digest, Prevention, Vogue and Motor Trend all pre-select audiences tailored to specific product and service offerings.

§      And magazine readers actually like ads. 48% of readers say ads add to their enjoyment of magazines. 61% have a positive attitude toward magazine advertising.

§      More important, a series of twenty independent studies cited by Market Evolution is pretty convincing in showing that magazines beat TV and the internet in generating brand awareness and, most important, purchase intent.

Magazines:           5-point increase in purchase intent

Television:            2-point increase in purchase intent 

Online:                  2-point increase in purchase intent

§      A study by Dynamic Logic showed the same trend, but with a more dramatic spread. That study also showed that magazine outsell TV by a factor of three and online by a factor of six.

The more specific magazines' silos are, the brighter their futures may be. General interest magazines began to die off decades ago as Look, Colliers and The Saturday Evening Post disappeared. The newsweeklies are now feeling pressures similar to that newspapers are experiencing as content is available sooner – and often free – online.

Despite the newsweeklies problems, publications that can attract and deliver niche audiences like fashionistas who are all wrapped up in Vogue, foodies who devour Bon Appetite, fisherfolk immersed in Saltwater Sportsman or adolescent boys revving their motors over the contents of Car and Driver are here to stay.  

Part 1:  TV's picture isn't as bright as it used to be.

Part 2:  Radio isn't generating a lot of buzz, but the signals are strong.

Part 3:  Newspapers can't paper over their problems much longer.
 

Next week: Outdoor's signs are positive.
 

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