THE MAGAZINE PUBLISHING INDUSTRY IN THE U.S.

Magazines are “glitzy,” filled with pages of cleaver advertising campaigns and fantastic four-color photographs (Byron, 1984; Clurman, 1992; Gill, 1975; Kitch, 2001; Kover, 1995; Posgrova, 1995). Yet magazine publishing in the United States is a hotly competitive $30 billion industry with about 6,300 companies and +137,000 employees publishing approximately 17,694 magazines (also called titles; the precise number of magazines in the United States is unknown) fighting it out for scarce revenues (U.S. Department of Commerce, Bureau of the Census, 2001). In this industry, a faulty business model will lead ultimately to an untimely death, and the landscape is lit- tered with thousands of titles that died (e.g., Look, Talk, The Saturday Evening Post, Brill’s Content, Inside).

In the United States magazines are also called serials; and there are three types of magazines:

6. THE ECONOMICS OF BOOKS AND MAGAZINES

1. “consumer” or general interest titles (e.g., Newsweek; O—The Oprah Magazine) or the increasingly popular “niche” oriented books (e.g., American Baby; Working Mother);

2. trade magazines (also called business-to-business or b-to-b) category, publishing “must have, need to know” information a professional re- quires to perform his or her job (Greco, 1988, 1991). Books in the b-to-b category include The ABA Journal, Variety, PC Magazine, and W. Al- though these titles lack some of the panache associated with, perhaps, The New Yorker, b-to-b titles are immensely important books, dili- gently read and followed by millions of individuals each week; and

3. scholarly journals, titles produced for academics and scholars. Some of the more prominent journals include The Journal of American History, the Journal of Scholarly Publishing, and the Journal of Media Economics. Since scholarly journals are so specialized, they will be excluded from this chapter.

New Magazine Launches

First Amendment protection allows anyone to publish a magazine, and, aside from some difficulties related to distribution, all anyone needs to launch a title is enough capital to hire (or subcontract) editorial and protection functions. In 1985, 231 new magazines were launched in the United States, and the annual total increased at a rapid rate, reaching 557 in 1990; 838 in 1995; 1,065 in 1998; and 874 in 2000. Overall, 11,045 new titles were launched between 1985 and 2000 (annually averaging 690 new titles), flooding the channels of distribution and ratcheting up pressure for scarce advertising dollars (Veronis Suhler, 2001a, 2002).

Although it may seem a bit odd, in 2002, a year marked by profound problems in the advertising sector, a significant number of new titles were launched, including 9 Magazine (for Porsche enthusiasts), Elite Traveler (lux- ury travel), Grace (for women size 12 and above), Rev (off-road motor- cycling), and Women’s Health & Fitness (wellness and relationships). Hope springs eternal in the magazine business, even though the odds of launch- ing and sustaining a new magazine beyond the 3-year mark are almost in- surmountable.

Circulation Issues

The laws of supply and demand cannot be rescinded (Becker, 1998); and the combination of existing and established titles with this staggering outpour- ing of new titles ultimately affected consumer magazine circulation (also known as circ) by the end of the 1990s. Many of these newly launched magazines initially offered heavily discounted subscription rates. When the trial

GRECO

periods ended in 1997 and 1998, many individuals decided not to renew; by 2000 the economy began to sour and some advertising began to dry up; and in 2001 the harsh combination of a recession, the impact of the September 11th terrorist attack on the United States, and a debilitating drop in advertising expenditures took a toll on the entire magazine industry.

Total consumer magazine circulation stood at 292.2 million copies in 1996. During the next 2 years, the industry posted modest increases of 0.9% (294.8 million) in 1997, 0.4% (295.9 million) in 1998, and 0.6% in 1999. The market declined sharply in 2000 (–1.2%; 294.1 million) and 2001 (–0.6%; 292.3 million). The prognosis 2002 through 2005 is unsettling: 2002, –0.7%, 290.4 million; 2003, –0.6%, 288.7 million; 2004, –0.5%, 287.4 million; and 2005, –0.3%, 286.5 million. Overall, circulation posted a compound annual growth rate (CAGR) of 0.1% between 1996 and 2000. The projections is for a –0.5% CAGR for 2000 through 2005.

The total number of magazines purchased per adult stood at 1.49 copies in 1996. By 2000, this total fell to 1.44 copies, and industry analysts believe con- tinued deterioration in the marketplace will result in a 1.34 total in 2005. Clearly, concerns about the economy in 2002 (and in all likelihood through 2003), stiff competition from cable and satellite television, the emergence of the DVD as the platform of choice (about 40% of all U.S. households will have DVD players sometime in 2003), and the inevitable “sticker shock” associated with steep increases in the price of magazines at newsstands influenced consumers to readjust their purchases and subscriptions of consumer magazines. Cutbacks in corporate profits triggered declines in company subscriptions and advertising campaigns for many trade magazines.

Compounding this problem were two other substantive trends. First, there was an increase in the average cost for a single copy at newsstands, growing from $2.13 in 1996 to $2.76 in 2000. The CAGR edged up 6.7% between 1996 and 2000. Second, consolidation in the wholesaler distribution network made it far more difficult to get magazines placed at newsstands, convenience stores, supermarkets, etcetera.

A declining circulation base meant that a magazine’s guaranteed circ was not achieved, forcing publishers to provide space for free or at reduced rates. Many consumer magazines addressed these declines by purchasing subscription lists from defunct books. The goal was to boost circulation and hide a declining readership base. Although this practice appealed to publishers, the newly acquired readers had no loyalty to their new magazine; and many advertisers complained about this practice in 2001 and 2002.

Magazine Industry Consolidation

This industry was also affected by the growing consolidation in the global mass-media industry. Many industry analysts insisted that economies of

6. THE ECONOMICS OF BOOKS AND MAGAZINES

scale could be achieved if large media (and magazine) companies were cre- ated to take advantage of the bulk buying of paper and negotiate better terms with commercial printers and distributors. The end result was the formation of some exceptionally large, influential magazine operations, many of which were owned by foreign corporations. AOL Time Warner was the largest owner of magazines in the United States with revenues hovering near the $4 billion mark in 2000. The Hearst Corp. was a distant second ($1.9 billion); Ad- vance Publications ($1.6 billion), International Data Group ($977 million), and the British-Dutch conglomerate Reed-Elsevier ($956 million) rounded out the top five. Some of the other major foreign corporate owners included Hachette Fillipacchi Magazines ($627 million, France, 10th); Gruner & Jahr ($573 million, owned by Germany’s Bertelsmann AG company; 11th), and VNU ($466 million, another Dutch corporation, 12th).

THE MAGAZINE PUBLISHING INDUSTRY IN THE U.S.