Company Town : Magazines Are Music to Warner’s Ears : Marketing: Publications help boost recording industry as a whole, and that’s good for reigning champ.
Two and a half years ago, recording industry titan Warner Music Group embarked on a marketing strategy to speak directly to consumers. The result is a quintet of music magazines, the last to be introduced at the end of this month, that Warner executives hope will stimulate sales of compact discs and audiocassettes.
“The tactic was to create credible, independent music magazines that we can use our expertise to market and reach music consumers,” said Larry Lieberman, vice president of marketing for the new Warner Music Enterprises.
The five magazines--BBC Music, Jazziz, New Country, huH and Radio Aahs--are aimed at niche markets such as rap, classical and children’s music. Each issue includes features on new bands, music reviews and personality pieces.
The magazines are delivered directly to subscribers with a compilation compact disc for $3.95 a month plus shipping. The CDs feature artists on major and independent labels alike.
Ironically, in creating mainstream magazines that will attract subscribers, Warner is in the unlikely position of providing new promotion vehicles--both print and audio--for artists on competing labels.
“It’s essential that our magazines don’t read like Time Warner promotional copy or annual reports,” said Lieberman, who left a marketing job at MTV to launch the magazines. “Otherwise, nobody would want to buy a second issue.”
But it’s not magazine sales that will make money for Warner; it’s CD and cassette sales--through Warner’s mail-order business advertised inside the magazines. Warner makes a small profit on every CD or cassette it sells this way, regardless of who distributes the music.
“It’s a global economic concept,” said Roy Parkhurst, senior editor of Jazziz. “Who cares what company I am? All that matters is that I sell you stuff. It doesn’t matter whether I sell my product or Columbia’s product. Either way I make money.”
And if readers walk into music stores instead, that’s OK too, Lieberman said.
“Whenever a consumer goes into a music store and makes a purchase, it’s good for us because one-third of all music sold in America is from Warner Bros.,” he said. “The more frequently someone goes to a music store to buy anything, the more potential there is to sell Warner artists.”
Warner’s music distribution company, WEA, is the worldwide leader, commanding a 21.1% market share. WEA’s closest competitor, Sony Music Distribution, weighs in at 15.2%. That’s an important reason why Warner’s strategy could work, analysts say.
“Any disadvantage they might have in terms of helping their competitors, hopefully, will be more than offset by building magazines that people want to read” with articles about music they want to buy, said Keith Benjamin, an entertainment analyst with Robertson, Stephens & Co. in San Francisco.
Each of the six major music companies is so large it makes sense for any of them to promote the industry as a whole, analysts said. Time Warner is uniquely well-suited to do so with magazines because of the company’s publishing infrastructure, said Jeffrey Logsdon, an analyst with Seidler Cos. in Los Angeles.
Warner Music Enterprises’ first magazine, BBC Music, was developed jointly with the British Broadcasting Corp. in London. The classical music magazine was first published in the United States in March, 1993.
A year later, Warner took over distribution for New Country, a Peterborough, N.H.-based country music magazine that began publishing in early 1994. In the fall, Warner made a distribution agreement with Jazziz, which had been publishing for a decade out of Gainesville, Fla.
Two other magazines were created by Warner, though, like the others, they are produced by independent companies. Santa Monica-based huH, which covers rock, rap and alternative music, published its first issue in September. New York-based Radio Aahs, which is built around a new children’s radio network of the same name, will mail out its first issue in late February.
Through an aggressive direct-mail campaign targeting “super-heavy music buyers” and a series of advertisements in high-profile magazines, Lieberman has built a subscription list of 1.1 million customers for the five magazines combined. He expects total circulation to reach 2.25 million within the next 18 months, with 1 million subscribers to huH alone.
“They have a blitzkrieg advertising campaign,” said Mark Blackwell, huH’s executive editor and a former senior editor at Spin. “I love these people. They let us do what we want, and then they advertise like crazy.”
With an average circulation of 200,000 per magazine, entertainment analyst Lee Isgur of San Francisco-based Jefferies & Co. said the magazines are small potatoes for a publishing company the size of Time Warner.
“This is more like a toe in the water than a real blastoff,” Isgur said.
But Warner Music Enterprises is pleased with the results.
“As a result of receiving our magazine, about 35% of our readers went out and bought a record (in a music store) because they heard it on our disc or read about it in the pages of our magazine,” Lieberman said. “That means about 10% of our readers are buying music from us.”
Warner also earns a small margin on every CD it sells through the magazines’ catalogue service. Most of those orders are for huge hits or obscure tracks on independent labels that are hard to find in mainstream music stores.
Jim Kelly, a spokesman for BMG in New York, said all major record labels stand to gain from Warner’s investment in the five magazines.
“Any time we can get the word out about new releases, it certainly can’t hurt,” he said. “Anything that interests people in music will probably help everybody.”
Lieberman said that kind of thinking is radically different from 20 years ago, when Warner released a series of “loss leader” compilation albums featuring new songs by Warner artists only.
“Obviously, the business has changed radically since then,” he said.
Analysts say the magazine strategy is part of a new spirit of cooperation in the music industry. There is even talk among Warner, BMG and PolyGram of collaborating to produce music television stations outside the United States, Logsdon said.