MPA Speeches--Nina Link VDZ 2006

November 2, 2006

Nina Link
President & CEO
Magazine Publishers of America

Zeitschriftentage
November 2, 2006
Berlin, Germany

Guten Morgen.  I was delighted to receive the invitation to speak at this conference – Zeitschriftentage 2006 – from my colleague Wolfgang Furstner, Managing Director of VDZ … and I am honored to be following a most admired friend…Dr. Hubert Burda. This is my first time in Berlin and I am looking forward to exploring this dynamic city.

Germany is home to some of the strongest media companies in the world, home to one of the largest publishing associations and proud home to some of the world’s highest subscription and single copy prices.

America can learn from you in this respect.

And I hope in the next twenty minutes or so you will learn from some of our experiences in the U.S., particularly how we marry print and the Web. Magazine publishers around the world are dealing with challenges in the areas of distribution, readership, measurement, advertising, and, of course, the explosion of digital opportunities.  By sharing our experiences, I believe we can all share in the future growth of our powerful magazine brands.

Last week, MPA had its annual executive conference in Phoenix Arizona, which we call the American Magazine Conference, or AMC for short.  The theme of the Conference was “Beyond the Page”… recognizing that great magazines are brands and ideas that live beyond their pages.  It was a conference about transformation – transforming how we do business; how we organize ourselves; how we become customer-centric; and how we measure our efforts.

It was especially difficult planning our conference this year because of the enormous range of topics to be covered.  I am sure that VDZ went through some of the same processes preparing for this event.

I see many similar topics on your program – Publishing Beyond Print, Media Convergence, Online Publishing, and Organizing Community to name a few. I thought by giving you some of the highlights of our conference program, you will get a sense of how we are facing addressing these issues. 

Topic #1:  Are we a brand or a magazine?  -- This might be the most important question magazine publishers need to be asking these days.  We think it’s so critical that on the opening morning of the conference, Rick Smith, Chairman and Editor-in-Chief of Newsweek moderated a conversation about this topic with Ann Moore, Chairman and CEO of Time Inc., and Steve Murphy, President and CEO of Rodale.  It was called “Just What Business Are We In?”

How would you answer the questions? Would you say we are in the magazine business, the content business, the brand business or the business of community? 

These U.S. executives answered that we are in all those businesses – magazine, content, brand and community –but the brand is in the center.  In other words…we are in the brand business…brands that are presently anchored in our print publications and now encompass every available medium and format: Web sites, video, live events, wireless, podcasts, RSS feeds and licensed products.  All three of these CEO’s are transforming their companies by centralizing their editorial staffs and making their editors-in-chief the stewards of their brands.  They are also reorganizing their sales staff to address the shifts taking place in the advertising business.

Everywhere we see a proliferation of media and content channels.  Advertisers, at least in the U.S., won’t give much credence to a proposal that doesn’t follow their customers across the various content platforms. An executive from ESPN (the sports franchise) spoke at an MPA breakfast recently and said he was in the sports fan business and would follow them wherever they go. Consumers follow their passions and advertisers follow the consumers.  To be sure ESPN, like Newsweek, Rodale and Time Inc. faces the usual business, organizational, and cultural issues that come with change.  Each will admit that it is hard, but they are pressing forward to strengthen their relationship with the readers and to “reach out and touch” the reader wherever they are … in print or on a screen through elegant photography or moving pictures, even in the case of ESPN, on a T-shirt.

Also on the AMC program that first morning, the Chairman and Chief Creative Officer of RGA, an advertising company; the Chief Operating Officer of Lippincott Mercer, a branding company; and the Global Brand Director of the Coca Cola Company all spoke about the reinvention of their own businesses illustrating that magazines are not alone. All of our business partners – advertising agencies, marketing organizations and clients are going through a similar transformation.

Topic #2:  Retail – Whenever publishers gather, retail is a natural topic of conversation.  Even though single copies only account for about 15% of U.S. circulation, retail sales provide 30% of circulation revenue so it’s an important area of focus.  At our annual conference, we heard good news and bad news.  Stephen Riggio, the Chief Executive Office and Vice Chairman of Barnes & Noble was interviewed by Cathie Black the President of Hearst Magazines. We were thrilled to hear Mr. Riggio declare that reading was alive and well. His analysis of Barnes & Noble store data shows that consumers are hungry for print, and he has seen no decline in teen reading.  He had the conference audience clapping and cheering when he told them he would like to give more space to magazines. 

Magazines have the prime real estate in his stores. European publishers might be interested to note that the second best-selling magazine in his chain is not from an American publisher.  It’s The Economist. That certainly says something about his customers who spend an amazing one hour during store visits.  Only 10% of transactions include a magazine – a number he feels leaves tremendous room for growth.   He also told the audience that Barnes & Noble online and the retail stores compliment each other and do not cannibalize sales from each other as many had predicted.

This positive news from Mr. Riggio was one of the few bright spots in an otherwise challenging circulation picture in the U.S.

As you can see from this chart, subscriptions have dramatically grown over the years, but are now leveling off.  U.S. publishers face rising circulation marketing expenses.  Direct mail has become increasingly expensive for a number of reasons, including rising postal costs and the decreasing availability of large effective lists for reaching prospective magazine readers.  Subscription agent sources, while a valid part of the circulation mix, are by and large not as renewable as direct mail and other direct-to-publisher sources.  And certainly the challenging retail environment has put additional pressure on generating more subscriptions. 

It’s no secret that overall U.S. single-copy unit sales have been declining over the years. This is a result of many factors, including a troubled distribution system and intense and constantly growing competition for space within supermarkets and other key retail classes of trade. 

The change in consumer shopping patterns also plays a key role in our retail picture. Magazines have been primarily in groceries and supermarkets, but over the years consumer traffic to those outlets has decreased dramatically. Supercenters like Wal-Mart and warehouse clubs like Costco are absorbing more and more of the shopping trips, so magazines are putting a lot of effort to get into those stores to be where the consumers are.

And speaking of where those consumers are, in the U.S., they’ve been deeply entrenched in the cult of celebrity.

Celebrity has been the biggest growth category at retail, representing 30% of our total retail sales. Four years ago, the celebrity category was only 19%.

However, this chart shows what happens when we remove the celebrity category.   Instead of the 1.7% revenue gain we posted last year compared to 2002, we would actually have an 11.5% retail revenue decrease. 

One also has to question, how long can the industry absorb the costs of sell-through rates averaging 35%?  At AMC we discussed an industry initiative to address this one-billion-dollar-a-year retail issue – the shredding of about 65% of all issues sent to newsstands.  The initiative involves single-copy waste management.

MPA is working closely with national distributors and other retail chain partners and here are some of the things our publishers are doing:

- Eliminating retail outlets selling less than one copy.

- Increasing, decreasing and shifting draw within wholesalers and depots based on retail-level sales data.

- Shifting significant amounts of draw to move copies from unproductive retail outlets to those selling cost-effective volumes. Many titles need to cut significant amounts of draw.

In the end, this initiative will help magazines run healthier and more efficient operations.  It will also help create stronger business relationships with retailers by streamlining processes and eliminating inefficiencies and redundancies.

On a brighter note at AMC – and related to our newsstand efforts – we celebrated the art of the magazine cover by announcing our first-ever best cover winners for the past 12 months.  Magazine covers are a true reflection of our culture and our world.  And a cover is totally unique to our medium.  It captures a snapshot in time and freezes it forever.  They are the face of our brands and we depend on them to generate retail interest.   So here they are…

Best news cover of the year:  The New Yorker for Watch Your Back Mountain.  This cover was published when the movie Brokeback Mountain was just about to be released and it shows both the U.S. President and Vice President as prisoners of their fate.

Best Celebrity Covers:  there was a tie between Julianne Moore in Harper’s Bazaar and Busta Rhymes in Vibe.  Green covers don’t normally sell well but Harper’s Bazaar ignored the rules with this striking Julianne Moore cover.  And when Mr. Rhymes was criticized for allegedly withholding information in the murder of his bodyguard, he accepted Vibe’s invitation to address it on the cover.

Best Concept Cover:  Time for “The End of Cowboy Diplomacy.”  This provocative cover opened a national dialogue on President Bush’s foreign policy.  It exemplifies the power of magazine cover to impact the national agenda. 

Best Fashion Cover:  Departures, for the Style issue featuring this woman veiled in an ethereal floral headpiece.  This September cover captures the sophistication and glamour of the fall  fashion season.

Best Service Cover:  Time Out New York for the Fitness issue.  This cover addresses overindulgence at the holiday season followed by the ritual need to find a gym. 

Best Cover Line:  The Economist for Rocket Man, featuring Kim Jong-il of North Korea. The right words, married to the right image at the right time produces an instant classic. 

And Cover of the Year went to The New Yorker for Flood in the Oval Office.  In the aftermath of last year’s Hurricane Katrina, this cover captured a White House staff flooded by rising waters in the Oval Office. 

Topic #3:  Brand Extensions – At the AMC, we featured a panel of editors who discussed the fascinating ways of bringing their magazines to life beyond the page. These examples demonstrated quite clearly that the brand is clearly the center of our world.

Teen Vogue reinforced its cool image by placing one of its interns on the MTV reality show “The Hills.”  It helped propel newsstand sales. 

Black Enterprise hosts a golf and Tennis Challenge that has become the nation’s premier networking event for African-American business owners and corporate executives.  It has sold-out attendance of 1,200 each year and has generated thousands of sponsorship dollars. 

The editor of Playboy discussed the new Playboy Club Las Vegas.  He also said that Playboy’s sponsorship of a NASCAR racing team led to attracting new advertising because they were able to offer the racing team’s other sponsors discounted ad rates. 

And American Baby draws more than a quarter million expectant parents to their events every year to see and try new products for infants. 

These extensions of magazines brought new, relevant experiences to their readers while at the same time introducing their brands, and their magazines, to a new audience.

Topic #4:  Advertising – At AMC, we explored the vital topic of advertising, especially as it relates to accountability and engagement.  These two words are at the center of publishing discourse in the U.S. and they are quickly becoming the lingua franca around the rest of the world.  They will be will be on the international tongue, no matter what the language

Engagement refers to the complex and rich relationship between the consumer and magazines – and the ways to measure this encounter.  Accountability means insuring that advertising performance achieves results and delivers a return on investment for advertisers. 

Engagement and Accountability must become bookends to the magazine publishing business model.  MPA has conducted ground-breaking research in this area, even though we are not the only organization seeking to universalize these concepts.  Large agencies and packaged goods companies such as P&G are putting considerable money and muscle behind these ideas.

On a panel devoted to magazine accountability research, we released the results of a comprehensive research analysis prepared for MPA by Marketing Evolution, an independent market research firm.

In the U.S., marketers are very focused on the “purchase funnel,” which illustrates the consumer’s purchase decision process. 

Historically, television, not magazines, was thought to be the primary contributor to “brand awareness,” which is early in the purchase decision-making process.  But our groundbreaking new research debunks that myth: magazines were the most consistent performer throughout the purchase funnel out of all the other media studied. 

This means that magazines consistently delivered both brand awareness, near the top of the funnel, and purchase intent, which is at the very bottom of the purchase funnel…which is the most important metric to any marketer.

In addition, Marketing Evolution analyzed 19 studies across a number of categories including automotive, pharmaceutical and packaged goods, and found that when it comes to purchase intent, magazines are the most effective medium for advertisers across the categories.

In the U.S. the link between magazines and accountability has grown stronger in the last two years, which we think is due to the latest efforts of our Magazine Marketing Coalition.  Just look at this chart illustrating the U.S. share of advertising for eight media sectors since 2004.  Three sectors shown in red—Radio, Spot TV, and Newspapers—have a decline in share.  Network and Syndicated TV, in yellow, are flat.  The good news is that magazines are one of the four media sectors – highlighted in green – that posted an increase in share over the last two years.

The Coalition is a collaborative effort by magazine publishers, printers and paper companies to boost awareness in the advertising community about the effectiveness of consumer magazines.  We began this three-year initiative last year.  It has helped transform our industry from one with an individual-magazine focus with disparate voices into a powerful marketing force carrying unified messages about the strength of magazines. We are committed to changing advertisers’ perceptions about the value of advertising in our pages – and beyond. We are committed to increasing the growth of advertising revenue. 

As you can see from this chart, our ad pages are up more than two percent compared to 2004. 

That also suggests that our new B-to-B torn page advertising campaign, which we debuted earlier this year, is effective as well.   Our last report from the Publishers Information Bureau, which tracks advertising in our magazines, showed that in September revenue was up more than six percent and pages rose more than two percent. 

And by the way, since the inception of this initiative, we have been urging publishers around the world to become part of the Coalition.  And I am not shy about using my speaking platform here today to urge you to consider this opportunity.  We are working with publishers in the U.K. and Italy, and we would love the opportunity to work with you.

Topic #5:  Digital – Without question, we have never had an annual conference where so much time and discussion was focused on digital.  Undoubtedly this is a reflection on the increased important this subject has with U.S. publishers.

MPA Chair Jack Kliger said our industry sees digital more as an opportunity now and less of a threat.  I couldn’t agree more. Time Inc. Chairman and CEO Ann Moore said that we can sit in a corner and whine about digital or we can roll up or sleeves.  Well, I did not hear any whining at our conference.  One of the reasons was that the news about digital opportunities we heard was encouraging. 

For instance, we invited leading executives from Google and Yahoo! to speak.   The message they delivered was quite clear:  they need us.  They asserted that branded content is the key to growth.  Yahoo’s Rosensweig stated that his company loves magazines because they can partner with them to attract traffic and sell ads.  Google’s Tim Armstrong maintained that search engines can help close the gaps between magazine brands and their web traffic.  And he told us not to worry about getting bulldozed by his company.  And I’m quoting here:  “Google is not great at creating content.  It’s not something we talk about.”

We also heard from Dr. Jeffrey Cole, the director of the Center for the Digital Future at a leading American university.  While he sounded pessimistic about the possibilities of young adults and teenagers developing into hard copy newspaper readers, he was much more encouraging about the magazine industry.  He stated quite clearly that magazines in print will always have an appeal.  “Some magazines will last forever,” Dr. Cole predicted.  He did not say which ones, although I did notice many publishers dashing eagerly to meet him after his fascinating presentation.

But some of the most exciting digital developments at the conference were examples of what magazines are doing on the digital front. At least, they were the most entertaining part of the AMC. That’s why we featured a panel focusing on video on magazine digital platforms.  We put together a rather eclectic group of publications for the discussion that included Newsweek, Time Out New York, Sports Illustrated and Ehlert Publishing, which publishes 15 power sports and boating magazines. 

A few themes emerged from the panel.  One is to keep the videos short…that means less than four minutes unless you’re showing swimsuit models like Sport Illustrated does.  Another was to try to limit the amount and length of advertising at the front of your online videos…less than 15 seconds if possible. 

Newsweek is giving its reporters video cameras.  And they are producing videos at very low prices:  literally for a just a few hundred dollars a video.  Time Out explained that one of the reasons the magazine made the push to video was that readers wanted to meet the writers behind the bylines.  Steve Hedlund from Ehlert Publishing said his company originally was producing content for cable TV outlets but they decided a few months ago that broadband was a better use of their assets.  The company hires professional TV talent to host some of its online efforts.  And Sports Illustrated is one of the few magazines that is producing video content for both the Internet and mobile platforms.  Star columnist Rick Reilly is featured on both platforms. 

My staff tracks what’s going on the digital lives of our member companies very carefully.  In fact, as I noted at AMC, we’ve created an online database of magazine digital brand extensions that we update daily.  It’s posted on our website – www.magazine.org. 

In the first nine months of this year, we found that our member companies announced the launch of 85 digital initiatives.  These included the following:  online radio stations, branded email accounts, podcast series and interactive dating blogs.  We also discovered that more than three dozen magazines have profiles on MySpace.

Already, MPA has staged two digital conferences in the last 11 months and I know that some of you in this room were in attendance.  Our next digital conference will be held February 27 in New York City.  A special part of it will be MPA’s first-ever digital awards ceremonies for magazines.  We’ll unveil the winning magazines websites in 10 categories.  These include Best Online Video, Best Mobile Strategy and Best Online Community.  I hope to see some of you there. 

As I told conference attendees last week, most of what we’re seeing magazines accomplish in the digital space is evolutionary.  Some of it is revolutionary.  But none of it suggests that we abandon the past.  To paraphrase Frank Moss, the head of the M-I-T Media Lab who was the keynote speaker at our April Digital Conference: “Magazines as an object will never go away.  Their form is simple and elegant.  Magazines are a human-centered design.”

I believe that print magazines are the centerpiece of the brand experience.  They endure because they offer readers and advertisers unique attributes unmatched by other media. 

Magazines are both timely and timeless.  Before Google…before 24 hour news…before television…before radio…before the telegraph…there were magazines. 

But today, we know that magazines are more than ink and paper.  Their power and pull…their magical gift for drawing communities of people together…their ability to connect advertisers to those communities…extend way beyond the hard copies that are folded into our briefcases, sit on our bedside tables or elegantly decorate our living rooms. 

Our future depends on the health and strength of our brands.  In other words, what we do with our pages.  And what we do beyond the pages. 

There’s a world of opportunity out there for great content companies and it’s just waiting for all of us.

Thank you.