Magazines’ Outlook Not So Glossy

January revenue for the magazine industry rose by 5.3% to $929.6 million, and just more than half of 13 advertising categories--including automobiles and home furnishings--showed increases. So why is everyone saying the magazine industry is in for a tough year?

For starters, 2001 follows a record-setting year in which industry revenue rose by 14% to $17.7 billion and the number of advertising pages jumped by 10.1% to 286,932.

Now some companies, including struggling DaimlerChrysler, are cutting back on ad spending. Philip Morris USA has stopped advertising in magazines that target younger consumers. On top of that, bullish dot-com advertisers have largely turned into bears.

But publishers say now is the perfect time to go after new advertising from companies that purvey upscale goods and apparel. The AARP is targeting baby boomers with a new magazine. And Bride’s magazine broke its own Guinness world record with its 1,286-page, 4.9-pound February/March issue.

“Last year everyone looked like a hero,” said Michael Friedenberg, publisher of InformationWeek magazine. “It was very easy to mask mistakes because there was so much money from the venture capital world being funneled into marketing and advertising. But this is a year of truth. Not everyone is going to find out they’re as good as they thought.”

Magazines clearly are facing the broad slowdown that is pushing most advertising-dependent media companies to cut costs. The New York-based Publishers Information Bureau reports that the number of advertising pages in January slipped by 0.8% to 15,176. And even the most optimistic forecasts include a strong finish to balance a relatively weak first half.

“That’s what I’m promising management,” said Michael Rooney, general manager of ESPN magazine. “We have very aggressive goals here, but we do have some making up to do in the second half.”

The storm clouds were evident as long ago as October, when magazine publishers met at an oceanfront hotel in Bermuda for their annual meeting.

“The feeling in Bermuda was very different from any industry conference in the past five years,” said Bride’s magazine publisher Nina Lawrence. “The leaders of all the major publishing companies in attendance were cautious about their prospects for 2001.”

Publishers are keeping a wary eye on economic reports that could make consumers even more bearish if they sense a hard economic landing in the offing.

“It’s hard to separate it all out, but you’ve got the financial market conditions, energy costs going up, and the dot-com craze is over,” Friedenberg said. “Almost every publisher is experiencing some sort of, if not softness, then at least a decline in ad pages compared to last year.”

Magazines will also miss the massive wave of dot-com advertising dollars that helped several publications ring up record numbers during 2000. The Industry Standard’s revenue rose by 240% to $158.7 million, and Red Herring was up a whopping 306.5% to $87.2 million. But as the dot-com ad wave evaporated, the Industry Standard responded by cutting 7% of its work force and Red Herring endured two rounds of layoffs.

Measured by the number of advertising pages, last year’s top-10 magazines represented a who’s who of business and technology titles. The Industry Standard led the pack, followed by business giants Fortune, Forbes and Business Week. The only titles outside the business and technology sectors were Bride’s, People and Modern Bride.

“The top 10 in 2001 will not be the same as it was in 2000,” Lawrence predicted. “The growth you saw in dot-com books is obviously going to drop back significantly.” Business books also will be hard pressed to continue their red-hot ride during 2001.

Page counts might be falling, but magazine executives maintain that 2001 still can be a relatively healthy year. Because advertising rates are driven by circulation, magazines that continue to build readership could see solid revenue growth.

“It’s not as bad as everyone said in October, and it’s not as bad as everyone was predicting in January,” Rooney said. “It’s almost as if everyone agreed it’s been too good for several years so it automatically has to get bad.”

Publishers know they can’t afford to stand on the sidelines until they decipher 2001’s economic direction.

Irvine-based Road & Track is rolling out an enlarged format that’s designed to showcase bigger pictures of snazzy cars. “What editor wouldn’t like to have a larger format?” said Road & Track Editor in Chief Thos L. Bryant. “It gives you a bigger canvas to work with, and when you’re able to use more artwork and bigger photographs, to grow in size is a godsend.”

Not surprisingly, Road & Track hopes to use its turbocharged format to court what Bryant describes as “nonendemic” advertisers--upscale apparel and lifestyle product companies not directly related to automobiles.

Economic slowdown or not, AARP is betting there’s a substantial market for a new magazine that targets baby boomers. The membership organization is rolling out My Generation, a title that gradually will replace mainstay Modern Maturity magazine as boomers age. AARP is describing My Generation as the biggest magazine introduction in history.

“This isn’t some small publisher deciding to take a gamble, it’s a 3.1-million-circulation magazine that will go up to 10 million in five years,” said Editorial Director Hugh Delehanty, who previously worked at People magazine and Utne Reader. “We own the marketplace in terms of this audience.”

Bride’s February/March issue broke the Guinness World Records magazine category--for the fourth year in a row. “We sent it to a Yellow Pages bindery and the head of production shut me down at 1,286 pages,” Lawrence said. “And there was a waiting list of advertisers.”

Magazine executives view recent growth, along with the continued introductions of new titles across the board, as proof that the category is fundamentally healthy. “Magazines provide a function that’s unique at the moment,” Delehanty said. “Until we get electronic paper that can duplicate them exactly, they’re the only way to arrive at this merging of words and images. Magazines still offer a sense of immediacy and urgency.”

Still, a slow year could catch up with magazines that aren’t fundamentally sound. “This year should be a pretty good one for the core magazines, the ones that have been around for a while and have loyal followings,” Bryant said. “It’s still a very risky business when it comes to starting up new magazines. The huge majority of them don’t survive.”

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Magazine Slowdown

Last year was a record-setting one for the magazine industry, when revenue rose by 14% to $17.7 billion and the number of ad pages jumped more than 10%. For 2001, however, the outlook is decidedly mixed. While some large advertisers are cutting spending, some publishers are launching magazines and Bride’s set a world record with its 4.9-pound February/March issue.

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Number of ad pages in 2000

Industry Standard: 7,440

Fortune: 6,259

Forbes: 6,083

Business Week: 5,993

Bride’s: 4,245

People: 4,227

Business 2.0: 3,749

Red Herring: 3,358

Modern Bride: 3,334

PC Magazine: 3,315

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Source: Publishers Information Bureau