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‘Legacy’ Publishers Have (Finally) Turned The Corner, Despite The Odds

The once print-centric mass market magazine publishing business has been toiling away at transitioning to digital-first, and expanding revenue bases, for more than two decades now. As Karlene Lukovitz reports, that hard work is starting to pay off.

By Karlene Lukovitz

‘Legacy’ Publishers Have (Finally) Turned The Corner, Despite The Odds
“Hearst continues to invest in ambitious media initiatives like its brand-new FirstFinds marketplace.”

Print remains important for the publishers still on the field, but its relatively new status as a secondary source of revenue and profits speaks to the progress in transforming business models. And this year, long-deteriorating print economics were slammed not only by further reductions in print advertising budgets, but large, simultaneous hikes in paper and postage costs.

Amid pundits’ consensus about their imminent doom and tsk-tsking about their late embrace of digital and lack of innovation, companies including Hearst, Condé Nast and TMB (née Reader’s Digest Association / RDA) started restructuring and investing in new capabilities, despite – and because of – shrinking print revenue. Along the way, there have been some poor management choices, strategic reversals and plenty of pain from magazine closings, job cuts and cultural shifts. The struggles to compete and keep evolving and meet new challenges (like current inflation-driven cutbacks in digital ad spending) will continue, and stumbles are always possible. But after all of the carping and second-guessing directed their way, these companies deserve credit for managing not just to hang on, but build profitable businesses off of media brand portfolios that required both pruning and reinvention to extract their value in a new era. And for doing so while up against giant tech companies with seemingly limitless funding fed by digital revolution buzz. Meanwhile, scores of big legacy and start-up tech companies failed to make it.

Of course, lots of publishers also failed to make it, so what distinguished these three? Perhaps a combination of scale, private ownership (RDA sold to a private equity group in 2007), and owners willing to invest, absorb some losses, and give decision power to digital transformation leaders (even if finding the right ones took a while). Public companies may have some advantages, but in tumultuous times, reporting to impatient investors can result in rash decisions: Witness Time Inc’s merger with Warner in 1990 and subsequent history. Hearst, Condé and TMB also had some diversity in their traditional media holdings and investments in non-media holdings like real estate.

Despite their transformations, however, annoying tropes about legacy publishers and print “versus” digital persist. Example: the “shocked” headlines that proliferated in May, after Condé Nast CEO Roger Lynch told Kara Swisher, during a New York Times podcast, that Condé is “no longer a magazine company”. Well, as publishing consultant Peter Houston pointed out, it’s kind of absurd for a company with 70 million-plus worldwide print readers to say that it’s not a “magazine” company, even if its web and social media interactions are at roughly 300 million and 450 million per month (numbers cited by Lynch himself). I would add that print aside, the digital engagement is more or less all driven by magazine brands.

The irony is that the mini media frenzy occasioned by Lynch’s remark were probably exactly the attention he’d hoped for. No novice to tech culture or corporate positioning, he chose his wording for dramatic impact. Not to diss print magazines – although that was how many apparently interpreted it. Knowing that Swisher’s audience includes tech players that could be potential partners or advertisers, the idea was to drive home the point that digital is (surprise!) how most people now interact with Condé’s (and other) brands these days. And yes, Lynch pointed out that print advertising has been in decline for years, and that magazines now account for a minority of Condé’s revenue. However, he also reported that Condé’s print subscriptions are still growing – even as digital ones grow faster – and that print magazines’ enduring prestige factor, along with the credibility of the brands they established, are still valuable, particularly as “part of the brand statement” on which the rest of the company is being constructed.

Why any of that would still surprise anyone is beyond me. Hearst, TMB and even digitally native Dotdash Meredith have also stated and / or demonstrated, the same basic stance: Print magazines will continue to be supported to the extent that they can cover their costs and contribute to the bottom line, including as a platform or value-added for other profitable brand extensions.

Print, Social Commerce Venture Co-Exist at Hearst

That pragmatic, unsentimental business modus operandi was perhaps best articulated by Hearst CEO Steve Swartz, in a recent interview with Axios. At age 135, Hearst has zero debt, managed to get through the digital revolution with minimal layoffs, and expects to post a record $12 billion in revenue this year. Diversification has been key. Specialty (B2B) media, data and software businesses across health, finance and transportation now contribute the largest chunk of total profits: 40% – up from under 10% a decade ago. The Fitch Group bond rating business is the company’s single largest profit generator.

Hearst Ventures has invested more than $1 billion in digital media, tech and transportation companies since 1995, and spends another $30 million to $50 million per year on acquisitions like AI-based real estate valuation platform GeoPhy, per Swartz. And it continues to invest in ambitious media initiatives like its brand-new FirstFinds marketplace / online community, which aims to get Gen Z social media shoppers to visit on a daily basis, and vote on and buy hot new products. While FirstFinds is a separate business, it’s getting promotional / traffic-driving help from the magazine brands via links in their online commerce content.

Within consumer media, TV contributes the biggest share of profits. But Hearst is also looking to expand its newspaper business (which now has 338,000 digital-only subscribers, versus 65,000 in 2018), and is “absolutely” committed to holding on to Hearst’s magazine brand portfolio, according to Swartz. The company recently hired New York Times advertising chief Lisa Ryan Howard in the newly created role of chief revenue officer of Hearst Magazines – presumably to grow the business.

But, importantly, adhering to one of its key maxims, Hearst isn’t using its growing B2B profits to shore up magazines or any other segment. “They need to be able to stand on their own two feet,” says Swartz. “If you have one part of the company really subsidising the other, in the end, they’ll drag the whole down.”

Condé’s Latest Restructuring Pays Off

Condé Nast has taken a lot of heat for its 2021 restructuring, in which it merged the oversight and some of the operations of its international magazine brands. But having several different teams covering the same material (like fashion shows) was clearly a wasteful, pre-digital-era holdover. Today, the ability to instantaneously share appropriate content across editions and platforms is invaluable. And as a result of such cost-saving decisions, along with digital revenue growth from ecommerce, video (Condé is one of YouTube’s top traffic generators) and adding paywalls on some brand sites, the company last year generated $2 billion in revenue and made a profit for the first time in several years, Lynch has reported.

That in turn supports further expansion plans. Those include pumping up digital subscriptions and ecommerce, which currently generate a quarter of total revenue, to yield a third within four years (in part by investing in more ecommerce and video capabilities). Investment in brand extensions like podcasts, events and Web3 experiences (like a GQ Discord community) are also in the mix.

TMB: From Bankruptcy to Digital Powerhouse

TMB, parent of Reader’s Digest and Taste of Home (now its largest brand) has perhaps the most impressive turnaround story, having gone from two bankruptcies (in 2009 and 2013) and being $100 million in debt to showing a profit as of FY 2020. That’s thanks to CEO Bonnie Kintzer’s aggressive shift to developing digital channels and ecommerce, D2C products, membership programs and myriad other initiatives, based on an understanding of content and audience synergies across platforms and an emphasis on first-in-class data capabilities.

TMB’s $100 million 2021 acquisition of streaming and social video platform Junkin Media added several large digital brands (including FailArmy and The Pet Collective) and the resources to enable a rapid scale-up of video – including the launch of branded FASTs (free, ad-supported streaming services). TMB has tripled video production budgets and produced more than 1,000 episodes of TV and streaming programming for MTV, Facebook, Fox and other outlets. Its worldwide audience has quadrupled, to more than 200 million, and its video content across social and streaming generates more than 2 billion minutes of viewership monthly, according to a WNIP report. TMB says its revenue from Amazon’s two 2022 Prime Day events beat Amazon’s performance as a whole. Last year, TMB recorded 110% year-over-year growth in EBITDA in its US operations, 105% YoY growth in affiliate and ecommerce revenue, and 37% YoY growth in streaming TV revenue.

As for print, Kintzer says that TMB is “very pleased” with Reader’s Digest’s print performance. (That title, whose circulation peaked at about 28 million in the 1980s, is now at 3 million.) Taste of Home, which has a 1.5 million circulation, is accurately described on TMB’s site as having evolved from a magazine to a brand that “engages audiences across multiple platforms”. (It’s consistently in the top 10 media brand rankings for mobile and desktop reach.) Family Handyman and Birds & Blooms are also still in print, with 1.1 million and 1 million circulations, respectively. But TMB, like other publishers, has folded magazines with failing print economics and insufficient potential to scale up through digital extensions – most recently, Country and Reminisce.

For magazines to work today, they “have to be part of a much broader digital and video strategy – certainly that’s what we’re seeing and what we’re committed to,” Kintzer has summed up.

To put it another way, TMB, like Condé Nast, is no longer a “magazine company”.

So, what are they? TMB calls itself a “community-driven entertainment company”. A bit unwieldly, yes. But maybe a decent candidate for replacing the now-shunned “magazine media company”… or the even more dreaded “legacy magazine publisher”?

This article was first published in InPublishing magazine. If you would like to be added to the free mailing list to receive the magazine, please register here.