SOURCE: The Wall Street Journal
Why a Magazine Giant Wanted Nothing to Do With Time and Fortune
Meredith tries to navigate a collapsing business by dropping news-driven prestige titles in favor of lifestyle and celebrity magazines like Happy Paws and People
DES MOINES, Iowa—At magazine publishing giant Meredith Corp., top brass believes business can be divided into “problems” and “situations.” Problems can’t be solved with any amount of time and money. Situations, on the other hand, can.
Managing the difference, they contend, is the key to surviving a declining industry at its darkest moment.
When Meredith acquired Time Inc. last year, it quickly spotted the problems: Time magazine, Fortune, Money and Sports Illustrated. The titles had the richest history and greatest prestige, but they depended on news content easily found elsewhere. Meredith didn’t see a way to change the downward trajectory, so it put them up for sale, with little nostalgia.
People magazine, on the other hand, was a situation. It was highly profitable, but reflected all the stresses on modern publishing, including substantial declines in print advertising and newsstand revenue, and insufficient online ad growth. Meredith saw a powerful brand that wasn’t fully capitalizing on its unparalleled access to celebrities. It had valuable exclusive material—from Hollywood stars to human-interest stories and true-crime tales—and there was room to bring in more money.
It’s a practical approach: Invest in assets with the promise of profit growth; don’t waste money trying to fix hopelessly weak ones, no matter how strong the romantic attachment.
People are buying fewer magazines on the newsstand, said Doug Olson, president of Meredith Magazines, shown at the Des Moines headquarters. ‘The solution is give them magazines they want,’ he said.
“We aren’t media barons,” Meredith Chief Executive Tom Harty said in an interview.
The Des Moines, Iowa-based magazine publisher, known for women’s lifestyle titles like Better Homes & Gardens and Allrecipes, became the nation’s largest with the Time Inc. acquisition. The company embodies the philosophy of Chairman Steve Lacy. He believes in being direct and unemotional in business decisions, according to an interview last year. And he isn’t afraid to be the bearer of bad news when cuts need to be made.
Nearly two months after acquiring Time Inc. in January 2018, Meredith held dozens of meetings to make clear who would be losing their jobs. One batch would be out by March 31, another group would go later. “We felt it would be more fair,” said Dina Nathanson, senior vice president of human resources, about the plain speaking. In all, about 600 Time Inc. employees in New York were cut.
A Path Forward
Meredith magazines focus on lifestyle content that has held up better amid the downturn in advertising. It has invested in categories such as women’s service, celebrity and epicurean, and is exiting categories such as business and finance and sports.
“They aren’t sentimental,” said Lesley Jane Seymour, the former editor in chief of Meredith-owned More magazine who today is chief executive officer of CoveyClub.com, an independent online social platform. “There are moments when you wish the doctor wasn’t so frank.” The print edition of More, a women’s lifestyle title, closed in 2016.
Last year, total ad pages across the magazine industry fell 14%, according to data collected by the Publishers Information Bureau. Since 2014, they’re down 38%.
Earlier hopes that digital advertising revenue would compensate have faded, partly because marketers are spending their ad dollars with tech giants like Alphabet Inc.’s Google and Facebook Inc. instead of digital magazine sites. Print and digital magazine ad spending is forecast to fall nearly 20% in the next four years, according to eMarketer.
Executives at Meredith don’t see the picture as uniformly grim. While they believe there isn’t value in magazines providing news or sports coverage in an online world awash in real-time updates, they see big opportunities in the lifestyle arena, where food, fashion and home content isn’t time sensitive, and the styles of famous personalities have unique power.
They are banking on growing sources of revenue like licensing, live events and online retailing. And they see ways to limit the damage of print’s decline. High newsstand prices on more titles means you sell fewer copies, but each copy brings more revenue, and printing costs are lower. The thinking is a departure from the traditional model that depended on revenue from print ads targeting the large numbers generated through inexpensive subscriptions.
The company’s newest title is Happy Paws, which focuses on the emotional needs of animals and issues they face, including stress and anxiety. The debut issue in April, priced at $9.99, contained such stories as “Understanding the Canine Mind” and “What is Your Dog Saying?”
“Pet articles are among the best read, and Meredith knew that,” said Marty Becker, a celebrity veterinarian who partnered with the media company. “There’s an absolute demand for this magazine,” he said.
People are buying fewer magazines on the newsstand, said Doug Olson, president of Meredith Magazines. “The solution is give them magazines they want,” he said.
Meredith hit a home run with the Magnolia Journal, a lifestyle publication launched in 2016 with Chip and Joanna Gaines—a duo made famous by their home-renovation show “Fixer Upper” that ran for five seasons on the cable network HGTV. An annual subscription for the quarterly costs $20. The Magnolia Journal was the most profitable brand in its first year in operation in Meredith’s 116-year history.
Meredith also added Hungry Girl, a newsstand-only, recipe-focused publication priced at $9.99 that debuted last year in partnership with Lisa Lillien, a cookbook author and creator of the Hungry Girl food website.
Mr. Harty, the CEO, told an investor conference earlier this year that the company outperformed its key rivals in recent years, citing “our philosophy of focusing on women and not news-generated content.”
Meredith believes its print advertising, once it has fully turned around the Time Inc. titles, will beat the industry and return to mid-single digit annual revenue declines. It expects growth in digital advertising and e-commerce and other areas to produce increased revenue in three years. Print advertising in People, Mr. Harty said in an interview, will rise to the low-single digits for its April through June 2019 issues, compared with a nearly 20% decline in the prior-year period.
Still, Meredith’s stock has underperformed the S&P 500 year to date. “When they bought Time Inc. it was a very big bet that they could transform the business,” said Reed Phillips III, chief executive of investment banking firm Oaklins DeSilva+Phillips. “The jury is still out.”
Mr. Phillips said Meredith will be able to lift profitability at the former Time Inc. titles because of its low cost structure. “They probably have two to three years to prove that they have a strategy that makes the business much less dependent on print,” he said.