Austrian psychiatrist Viktor Frankl once said: “When we are no longer able to change a situation, we are challenged to change ourselves.”
Frankl’s words resonate strongly with the findings of this year’s Publishing Futures survey, the fifth annual study into the consumer magazine and business information sector undertaken by Wessenden Marketing on behalf of the PPA and in association with InPublishing.
The survey, which polled the views of over 100 Business and Consumer publishers, revealed a group of companies that, having faced the forces of major change in recent years, are adjusting their approach accordingly and are now more in control of their own destiny. So, how have they changed and what does their future look like?
The shape of the brand portfolio
The table summarises what the “average publisher” looks like in terms of brand activities, giving some broad pointers as to the shape of the industry and the differences between consumer and B2B operations.
* Print products still lie at the core of many publishers’ operations, almost invariably supported by a branded website. An online presence also generates significant email newsletter activity.
* Digital editions and mobile apps are evident in both Consumer and B2B, but mobile is becoming more important for Consumer.
* Live events are becoming more significant in Consumer publishing and remain a core activity for B2B.
* The average size of the Consumer companies in the sample is slightly larger in terms of turnover (+12%) and headcount (+15%), yet the B2B companies are managing a wider portfolio of brands (+51%). The result is that staff productivity (turnover per FTE) is slightly higher in B2B (+2%) at £625,000 turnover per capita, yet the product yield (turnover per brand) is much higher in Consumer (+70%) at £549,000 turnover per product.
* The range of business models and revenue profiles is much more varied in B2B than in Consumer. Consumer magazine publishing has more common business dynamics which run more consistently through most companies.
Optimism is growing
The increased optimism within the industry springs from the fact that key indicators are moving in the right direction:
* Turnover growth continues - albeit faster in B2B than Consumer, which remains volatile.
* More companies are in profit, and profit margins are edging up to an average 16% of turnover.
* Headcount is rising again, but at a slower rate than turnover and profit - companies continue to squeeze more out of their staff.
* Marketing budgets are growing, but they are being spread more thinly across more channels.
* Confidence levels are rising, although there is a wider range of scores than ever before.
Digital, and most specifically mobile, offers many new opportunities. It is creating a range of new revenue streams and it is the key to unlocking the potential of international growth, which is becoming increasingly important for both Consumer and B2B companies.
* Digital activities account for 51% of B2B industry revenues currently, rising to a predicted 66% in two years’ time, and for 19% of Consumer revenues, rising to 35%.
* Overseas activities account for 32% of B2B revenues currently, rising to 36%. For Consumer, the current figure is 17%, rising to 20%.
“Digital”, however, is as much about streamlining internal processes as delivering content. A number of companies now feel well-placed: having survived intense competition and reshaped themselves over the last three years, they are more ready now to seize any opportunities that arise, whether that is launches, acquisitions or partnerships. There is generally less emphasis than in the past on cutting costs and more on growing revenues.
The vital signs are looking stronger
* Turnover: Industry turnover is growing currently (+6%), but faster in B2B (+11%) than consumer (+2%), which remains turbulent. There is growing optimism about the prospects for the coming year.
* Profits: While turnovers have been erratic over the last four years, profits have been much more stable: the result of determined cost control and, in some cases, major re-engineering. More publishers are moving into profit and the profitable companies are edging up their margins to the current average of 16% of turnover – a trend that will continue through 2014.
* Headcount: After some ups and downs, industry staff numbers continue to rise modestly. After a major staff cull in 2010, staff numbers rose in 2011 – perhaps an over-reaction to the severe cuts in the previous year - before cooling down in 2012. In 2013, headcount rose again, and is projected to accelerate through 2014 but still at a more modest rate than either turnover or profits.
* Marketing budgets: Total publisher investment in promotions and research is rising to 7% of turnover (10.5% for consumer and 2.7% for B2B), but the range of channels and platforms being managed is increasing too, so individual budget allocations may be smaller by department.
* Publisher confidence: All these positive “vital signs” are feeding through into a growing confidence about business prospects over the next two years. Respondents were asked “On a scale of 1 to 10, how confident do you feel about the financial success of your company over the next two years?” The average score across the survey is 7.9 out of 10 – a good score with a net +49% saying that they feel more confident than a year ago (60% more confident minus 11% less confident). The current survey shows there is little difference in the confidence scores by company size and that confidence is actually growing more strongly among small and medium-sized publishers than among the larger operators.
A new realism for a new world
Overall, the sense of uncertainty and destabilisation felt throughout the industry four years ago in the face of recession and the rapid rise of digital channels has morphed into a hard-nosed realism in 2014. The economy is gradually improving, and there is an acceptance of the ongoing reality of grinding and permanent cost control in a more austere environment.
With regard to print as a platform, for consumer publishers in particular, there are concerns over the ongoing decline in retail sales, and print is losing share more rapidly than in the past. It is, however, far from being in terminal decline in most markets, and there also seems to be a growing recognition that the value of print goes beyond pure revenue – print can add presence and substance to a brand’s digital offering.
More widely, there are recognised gaps in three broad areas:
* Skills: having the internal know-how to find a path through the dizzying technology options - yet those who have been investing are beginning to see a return.
* Resource: having the sheer headcount and budget to: analyse a torrent of data; publish across multiple platforms; set up potential partnerships; and put all the creative ideas into action. An increasing use of subcontractors and suppliers has been highlighted as one route to solving this issue.
* Revenues: There is increasing recognition that digital is simply not coming on-stream fast enough to make up for the decline in print.
These factors are driving organisational change, both in structure and culture, as companies are becoming more agile, fluid and shaped around short-term tasks rather than fixed processes.
What has changed in this year’s survey, is that these factors are being discussed more calmly and pragmatically than a couple of years ago, and there seems to be a greater willingness to review and tweak what works currently rather than hurtling into completely new areas and business models.
Yet the challenges keep on coming
The sense of challenge running through the survey comes from the fact that many companies have creative and positive plans, but which they are finding difficult to put into action quickly enough. The opportunities are too many, coming too fast and in too random a manner to manage properly: prioritising ruthlessly has, therefore, become a key requirement.
A very specific frustration that comes through the publisher responses is with advertisers and agencies - the feeling is that they have become so digitally-fixated that print and traditional publishing models are being unfairly dismissed and discounted.
Managing a changing business
With the current trading conditions being so challenging, how are publishers managing all the changes?
Respondents were asked to score on a scale of 1 to 10 in terms of importance, the critical actions for their company at the moment. Scores were given across 16 action areas which consolidate into three broad categories. There has been a subtle shift in attitude since the last survey a year ago:
Streamlining the business has increased in importance. This area is also much more important to consumer publishers, underlining the fact that the B2B sector is further down the re-engineering road, and that times are still tough in most companies.
There has also been a slight shift in priority from developing new products to developing existing products, showing some refocusing on current operations rather than driving exclusively into new areas.
In summary, while the overall focus remains more on developing revenues than simply cutting costs, grinding budget control is still the ongoing reality for most companies for the foreseeable future; as is making the most of what works now.
So what does it all mean?
Optimism, realism and challenge: these three words capture the mood outlined by Publishing Futures 2014. In line with Dr Frankl’s observation, publishers have faced up to the external changes which they cannot control and are emerging, reinvented, to explore some exciting new opportunities, many of them enabled by digital.
Yet in tandem with the optimism of these new opportunities, there is a realistic sense of the associated challenges – and finding the time to do it all seems to be the main one. There might still be no clear view of the horizon, but the fog is lifting, navigating the twists and forks in the road is becoming easier, and pace and confidence are building.
Methodology & sample
PPA commissioned Wessenden Marketing to create and manage an online self-completion questionnaire. Targeted emails were sent to senior executives within publishing companies who then completed the survey. The fieldwork for the project ran from October to December 2013. InPublishing was the media partner. 106 questionnaires, with an equal split between consumer and B2B operations, were received and analysed. For more information, contact Nicola Rowe at PPA (firstname.lastname@example.org / 0207 404 4166).