With Ad Sales Off, Magazines Face Tough Year : Media: Weakness in auto and tobacco advertising has struck a blow to many publications at a time when more magazines are entering the market.

Some observers took it as a sign of the booming health of the magazine business when the French publisher Hachette bought the 12-publication Diamandis Communications chain two years ago. The price was an eye-popping $712 million, including what some analysts estimated was $400 million for the flagship Woman’s Day magazine.

Today, Woman’s Day is in its eighth week on the auction block. With its advertising and earnings off sharply, bidders have been scarce, say industry officials. And to some observers, its plight is a symbol of the times.

Woman’s Day “has some unique problems, but it shows what’s been going on out there generally,” said Martin S. Walker, a magazine consultant in New York. “It’s not an easy year.”

Indeed, some industry officials contend that it’s the worst year in a quarter century for the magazine business. Tobacco and automotive advertising are off sharply, other ad categories are not strong, and the number of magazines fighting for the ad dollar continues to grow apace.

The downturn has battered mass-audience magazines, regional magazines and the men’s auto and outdoor magazines that carry large amounts of tobacco and auto ads. But almost no magazines have been immune from the industry’s ills.

“The disease is pretty much everywhere,” said George Green, executive vice president of Hearst Corp.

While trade group officials and some publishing executives insist it’s a cyclical slump that may end in the second half of the year, others argue that the downturn will force long-lasting changes in the way the industry does business.

The industry recession has already contributed to the demise of some magazines and forced major changes at others.

Manhattan Inc., the flashy New York business magazine, announced in May that it would be sold to Capital Cities/ABC and merged with Cap Cities’ ailing M magazine. New York’s hip 7 Days shut its doors this spring. The Family Media chain says it is turning its Model and Taxi fashion magazines into freebies this fall.

“You’ll see a lot more shaken out before it’s over,” said George Dillehay, managing director with Jordan Group, an investment banking and management consulting firm in New York.

Analysts said the ad slump has also understandably made life tougher for start-ups, such as Time Warner’s Entertainment Weekly, which was launched in February and underwent a redesign in June.

Figures compiled by the Publisher’s Information Bureau for 154 magazines show that advertising pages were off 3.2% for the first five months of the year, compared to the same period of 1989. Ad revenues rose a scant 1.3% for the period.

But many magazine publishing executives and analysts say those figures conceal the effects of widespread ad discounting. Charles Elbaum, a consultant in New York, for example, believes that the overall slide in revenues has been closer to 5.5%.

For some individual magazines, the slide in page counts has been dramatic. Among the mass-circulation books, Time-Warner’s People was off 10.1% in ad pages through the first five months of the year, while News Corp.’s TV Guide slid 12%.

Time magazine was down 8.2%, as Newsweek declined 12.2%. Among the women’s “service” books, Woman’s Day was off 18.1% and Family Circle posted an 18.3% decline.

The decline in auto industry advertising, which fell 14% in the first five months, is clearly cyclical. Many analysts expect the domestic car makers to increase spending sharply as the year advances and the Big Three bring out new models.

But few expect a turnaround in tobacco advertising, which declined 28.1% in the first five months. Many industry officials expect Congress to ban all magazine tobacco advertising, and while Congress considers that step, the tobacco companies seem to be cutting back on ads “to try to make themselves a little less visible,” consultant Elbaum said.

Indeed, many publishers are so gloomy about the outlook for tobacco advertising that they are projecting no income from the category in their 1991 budgets, analysts say.

Another key concern for many publishers is a major rate hike that the Postal Service will put into effect in the fall. Postal officials say the hike will raise average commercial rates by an average of about 20%, but some magazine publishers may see their costs rise 35%, consultant Walker said.

The hikes will force many publishers to raise their ad rates 8% or 9% in the fall, Walker said. “Then, after they raise them, they’ve got to worry if advertisers will go along,” he said.

Magazine publishers are worried about the continuing expansion of the industry, which adds 500 to 600 new titles each year. Many, of course, are limited-circulation magazines produced on personal computers equipped for “desktop publishing.”

But many other new magazines promise to be formidable competitors.

Even now, in the midst of the industry’s agony, publishers are planning a crop of new general and special-interest magazines for men. This fall, News Corp. is bringing out Men’s Life, while a new company called Norris Publishing is planning a title called Men, and Advance Publications remakes its languishing Details magazine in a format designed to appeal to male baby boomers.

“The fact is, there simply are too many magazines in this country,” said Reginald K. Brack, chairman and chief executive of Time Warner’s magazine unit.

Publishers are using a variety of means to combat the industry recession, beginning with restraints on payroll spending.

“I don’t think there’s a single publisher who’s not trying to cut payroll costs in one way or another,” said one magazine executive, who asked to remain unidentified. “It’s part of our life these days.”

Even while it has launched or purchased 11 magazines in the past four years, Time Warner has shrunk its magazines’ staffs about 10%, Brack said. The magazines now employ about 4,500.

The weaker ad climate has also provided an incentive for publishers to accelerate their efforts to sell large blocks of ads for several publications simultaneously. Hearst Corp., for example, has recently set up a special corporate advertising sales group for such special efforts.

The downturn has given publishers new reason to look for alternative revenue sources. Some have already been heading in this direction; for instance, Times Mirror Magazines--a unit of Times Mirror Co., publisher of The Times--has licensed its Field & Stream magazine’s name to companies that produce videocassettes explaining hunting and fishing techniques.

Some industry officials maintain that the gloom should not be overstated.

Time Warner’s Brack points out that despite the weakness in the auto sector, the economy is not in a recession. Nor is the magazine industry as dependent as it once was on advertising revenues, he notes; now fully 50% of revenues come from subscriptions and newsstand sales.

According to Brack, cash flow for Time Warner magazines is actually up this year, due to the strength of single-copy and subscription sales and the company’s cost-cutting efforts.

And officials of the Magazine Publishers of America say they are optimistic that advertising will turn around in the second half of the year. James Guthrie, executive vice president for marketing of the trade group, said all of the top 10 advertising categories except tobacco and autos showed a rise in the first five months of the year, and some were up strongly. Food advertising, for example, rose 17% through May, compared to 1989, he said.

“The evidence shows that what’s been happening is just part of the cycle,” Guthrie said.

DOWNTURN IN MAGAZINES With tobacco and automotive advertising off sharply and other categories showing signs of weakness, this could be the worst year for the magazine business in a quarter century. The chart below is a sample of how some publications have been hit. Figures are for Jan.-May.

Life Advertising pages 1989: 356 1990: 296 Motor Trend Advertising pages 1989: 463 1990: 340 Newsweek Advertising pages in thousands 1989: 1,462 1990: 1,287 Time Advertising pages in thousands 1989: 1,149 1990: 1,054 TV Guide Advertising pages in thousands 1989: 1,462 1990: 1,287 Woman’s Day Advertising pages 1989: 778 1990: 637 Source: Publisher Information Bureau