Magazines make up lost ground in the United States, Part II.

Editor's Note: This article is the second of two articles exploring magazine publishing tends. The first article appeared in the May 2005 issue: Go to www.tappi.org, click on "Publications" and then "Solutions!" Choose "Archived Issues" and click on May 2005.

The U.S. advertising recovery of recent months, along with mostly positive economic news, has fueled magazine publishers with near-term hope. In 2004, U.S. consumer magazine ad pages, tracked by the Publishers Information Bureau (PIB), grew 3.8% while ad revenues spiked up 11.1% to US$ 21.4 billion, marking the highest percentage page and revenue increases since 2000.

The improvement in year-over-year comparisons mostly results from a poor 2003 advertising year as well as increases in cost per ad page. Considering that publishers raise ad rates about 7%/yr on average, the ad revenue performance is encouraging. However, the 3.8% ad page increase is disappointing given the strong advertising environment in 2004 and the weak base year used for comparison.

Advertising spending is linked to corporate profits and there is typically a lag between the rise in profits and increases in company marketing and advertising budgets. Also, ad dollars reflect not only ad spending, but also increases in advertising rates. The problem for magazines is convincing advertisers to spend more for ad pages even though circulation has declined somewhat in recent years. Business publishers are mostly wary of an economic slump and continued job losses that would eat away at their advertising and circulation bases. Based on a Jaakko Poyry Consulting survey of end users, there are several key opportunities and threats:

GROWTH OPPORTUNITIES

Consumer Magazines

* Expand ad revenues and pages as economy grows

* More new niche titles, e.g., catalog-like shopping titles

* Cross-platform ads and media tie-ins

* Win the newsstand battle; improve distribution

* Consolidation to lower competition for ads

* Increase subscription rates

* Subscription Web sites equal to printed titles

* Custom publishing

Business Publications

* Economic expansion and increased ad sales

* Online publishing as a base for ads

* B-2-B community building to develop more ad value for readers

* Custom publishing

* Supplemental revenue streams, e.g., conferences

* Niche titles for emerging industries

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* Market research to advertisers

THREATS TO GROWTH

Consumer Magazines

* Large advertisers shifting budgets to another media

* Lack of sustained advertising recovery

* Advertiser demands that magazines prove productivity of ads

* Higher paper, printing, and distribution costs

* Postage rates increases in 2006 and 2007

* Competition from other media channels for advertising

* Newsstand inefficiency: self-check-out and scan-based systems reduces impulse buying and tends to undercount sales; rise of ware-house shopping cuts trips to grocery store; too many titles;

* Circulation scandals hurts confidence of advertisers

* Declining subscriptions and low-priced subscriptions

* Free Web sites with compelling information

Business Publications

* Falling economy, terrorist attacks, job layoffs

* Fewer ads and reduced ad budgets

* Loss of ad dollars to online and other media

* Consolidation of advertisers and industries

* Loss of circulation due to layoffs and consolidation

* Higher paper, postal and printing costs

Overall magazine paper consumption is forecast to increase, which is good news for publication paper producers. Corporate profits will contribute to grow in 2005, along with new magazine launches and the steady expansion of the economy in the long term.

Note: This article is part of a series by Jaakko Poyry Consulting, Tarrytown, New York, USA, a provider of marketing and consulting services. Contact Ms. Soile Kilpi by email at [e-mail], or by phone at [phone].

JAAKKO POYRY CONSULTING