Publishers hopeful that the 2003 economic "turnaround" bodes well for 2004.

Many newsletter and specialized information publishers we talked with this past week are seeing glimmers of growth in the respective industries they target and, consequently, in their own businesses. But problems persist: declining direct marketing response rates, the elusive nature of online revenue, an economic turnaround that seems to resist trickling down to the average American, and the consolidation of industries in practically every sector.

One large publisher of consumer newsletters, who wished to be unnamed, said they're still in the traditional direct mail business and getting pretty good response. But it's a bullish company with pockets deep enough to mail into ill winds.

Another large business-to-business publisher of regulatory news-letters said their mature titles are not doing well but that they're making up for the slack with site licenses, for which they are building a growing sales force. Here are some other publishers' comments.

Frank Joseph, DM copywriter and directory publisher

"We've had a better year (for the Guide) and my consulting business has been even better. I consider my DM consulting practice an economic indicator--it tanked six months before the economy at large and it came back six months before the current uptick," Joseph said.

Regarding declining DM response, Joseph said, "My Federal Personnel Guide goes to federal agencies and employees. I have no option other than to stay in the mail. I do online promoting, too, but the mail is the mainstay."

From his "worm's eye view" as a consultant, Joseph pointed out that many publishers erroneously look to make money up front with their promotional campaigns. "I believe it's not that important for most of us to make money up front. Most of us are in the renewal business. Keep mailing as long as you break even and then concentrate on renewals."

A shining example of thinking outside the box and spending big money upfront with an eye on renewals comes from another publisher who wished to remain anonymous. He's rolling out a forced free trial campaign with twice the number of trial issues as is the norm. He's sending out eight issues of his twice monthly. He calls this campaign "generous, assertive, and aggressive"--generous with the number of free issues, assertive with promo letters in each issue, and then aggressive with follow-up telephone calls, even after the trial has expired.

Nancy McMeekin, CEO and president, Oakstone Publishing LLC 

"In 2003 we saw some turnaround in our business. We moved from an uncertainty as to when business managers and professionals (our market) would begin to feel comfortable spending again to a sense that this has at least begun," Nancy McMeekin said. "While the symbols of that turnaround are many--some tangible, other symbolic--I believe we still face hard work and tough decisions to make our publishing business successful. The belt-tightening we've done is not likely to loosen all at once."

McMeekin continued, "The carefully chosen direct mail marketing we've been doing has proven which areas are working and we're starting to mail more in those areas as 2003 ends and 2004 begins. But we're watching those results like a keen-eyed hawk. The opportunities to acquire and grow are definitely out there but we will be careful when considering them. We'll be launching, but we never stopped launching; we're just hoping more launches work better!"

"Overall," she concluded "we are not the same world, nor are we the same newsletter and electronic publishing industry we were before 9/11, the economic slump, or the advent of the internet. That's why we have to work harder and smarter than ever before, and I, for one, relish the challenge."

Wayne Cooper, CEO, Kennedy Information Inc.

"2003 was another tough environment for selling subscription newsletters to our markets--consultants and recruiters," Wayne Cooper said. "We are starting to see an improvement in our markets and are bullish that 2004 will be a year of growth for our subscription newsletters as well as our conferences and other higher priced products such as research and advisory. The one weak area remains controlled circ magazines. We are hopeful that the ad market will recover but advertising hasn't recovered yet."

Eugene Simonoff, investment banker specializing in M&As

"I think there's a lot more interest in acquisitions than in the start of 2003," Eugene Simonoff said of newsletter M&A activity. "But most buyers are financial buyers, not publishers. Private equity firms are actively pursuing acquisitions."

He said that with consolidation in the industry, large publishers aren't as involved in mergers and acquisitions as in the past. "There are hardly any large companies--say, in the $30 million range--on the market. But, I will say, 2004 will be more active than this past year."

As far as the putative economic turnaround, Simonoff said it seems to be limited to the upper level--"luxury goods, for example"--but for most people it's still to come.

Jon Anderson, publisher, Random Lengths Publications Inc.

"2003 ... We entered the year feeling like the bottom might drop out of the economy," Jon Anderson said. "The events in the Middle East had everyone frozen. We experienced a significant drop in sales of our annual publications (directories of the industry and a 'yearbook' of price and other information), along with 'cost savings' moves when our subscribers received their renewal notices. We also experienced some wild swings in how quickly (or slowly) customers paid us. It took until the late summer for things to look 'more normal' as clearly checkbooks have opened up again.

"I can only speak for Random Lengths. We came through '03 well, ending the year quite healthy. Feels a whole lot better than it did 9+ months ago," Anderson said.

"Trends we face are much the same as those cited a year ago, I think. Consolidation in the industry we serve [the forest products markets] presents a challenge that I suspect other newsletter publishers serving other industries also face; fortunately, the lumber biz remains very fragmented and diverse, so this currently appears to be an adverse trend we can manage or deal with," Anderson said.

"Crummy response rates vs. the old days. I think it's time to forget about those old days, and readjust accordingly. We still believe direct mail is the base of our promotional efforts. (I still get a charge out of getting direct mail pieces that promote websites.) If someone comes up with a truly better alternative to direct mail, I'm ready to try it. Don't believe it's even on the horizon, though.

"We are pursuing increased use of the internet to deliver our information, something that started long ago. We are taking a very close look at a launch (something we have done rarely over my 30 years here). While we have expored some possibilities outside our comfort zone (the wood products industry), we have not diversified."

Jim Sinkinson, president, Infocom Group

"The newsletter industry is definitely returning to good health," Jim Sinkinson said, "as evidenced by a resurgence of marketing creativity (particularly internet-based) and a wide variety of new product development over the past year.

"However, it's also clear that our industry's growth will not come primarily from newsletters, but rather from a range of new information services, such as audio conferences, webcasts, training material, and research--what we used to call ancillaries." Sinkinson said.

"The focus has shifted definitely to our markets, as opposed to the

newsletter modality--we are now forced to exploit our customer base and our brand or credibility, rather than our expertise with a certain publishing model. This is exciting, but it is also scary, because we're having to invent new information commerce models--the old formulas that carried us so comfortably for the last two decades are essentially bankrupt."

Mark Ziebarth, president, Bongarde Media Company

"For someone like me, 2003 represented a banner year," said Mark Ziebarth. "After 15 years as a worker bee, I finally took the plunge and became an owner of a newsletter business (or, as we say these days, a specialized publishing platform).

"I had lots of preparation and experience, and jumped into the opportunity with my eyes wide open. And still, I faced daunting challenges: making quarterly debt service payments, hiring and firing, transitioning our content into the electronic age, launching new products, etc. Not for the faint of heart.

"But I also think 2004 can be a great year for properly positioned publishers," Ziebarth continued. "I'm hearing about good-to-great response rates in the consumer sector, for health and finance and political titles.

"Some of our fellow b-to-b publishers are having banner years and expecting or hoping that it will carry into 2004.

"And I'm seeing decent response with my own direct marketing (FFTs, one-shots, faxes, e-mails, etc.). We're launching audio seminars in early January, and I'm confident about introducing other new products and services in the new year.

"And," he concluded, "we'll continue our 'big-game hunting' for possible acquisitions."

RELATED ARTICLE: A Purchase at 55 times profit?

We began our interview with Gene Simonoff by joking about the recent purchase of New York magazine for 55 times profit. Bruce Wasserstein, investment banker, owner of some of Steven Brill's magazines, and, in the words of The New York Times, "a transaction geek if there ever was one," paid $55 million for the magazine that last year made about $1 million in profit on revenue of about $43 million.

Simonoff said the purchase was obviously an ego trip. "Bruce Wasserstein invested his own money and he has his own agenda." Needless to say, there is nothing comparable in the newsletter industry--neither a title that carries as much cachet as New York does in New York nor a purchaser with as big an ego and bankroll as Wasserstein.

RELATED ARTICLE: Copyright infringement still a great concern

Jon Anderson of Random Lengths Publications told us, "Copyright infringement remains a great concern given the ease by which it can occur. The combination of pressures on subscribing companies to cut costs and the tools available that can facilitate infringement results in a great temptation for subscribers.

"The calls come to me in waves: 'You mean I can't do that? I can't use the tools we have to cut costs?" Our approach remains education, education, education.

"But we are close to taking a more aggressive approach on our own, letting people know very bluntly what can happen if they infringe our copyrights. One step in this direction would be our own brochure that covers the topics in a Q&A format. Large, publicly held companies are not as much a concern as the smaller, independent ones. One answer: licenses ... and we have seen a very gradual increase in interest in them," Anderson said.