It is actually very difficult to define what a "specialist magazine" is. Traditionally, there are two definitions. The first is based on editorial focus: magazines which zoom in on a "single subject or specific interest category". Titles which fit this definition account for just under 60% of total magazine newstrade RSV and include a good number of titles in the top 100. The other definition is based purely on size. Looking at it this way, magazines with a circulation under 100,000 copies account for 45% of the total magazine newstrade RSV and for 95% of all new launches each year.
However one defines this type of publication, they form a major part of the total magazine market. They are massively important in driving the pace of the industry’s launch activity. They introduce many of the new creative ideas into the business. They provide the depth and variety which attracts so many consumers to magazines as a medium.
Yet they are vulnerable. This is because so many of them are published by small independent companies who, while they may be fast-moving and creative can also be under funded and often lack the full range of business skills required to survive in the modern publishing environment.
What does a specialist publisher look like?
The average publishing company covered by the research project has an annual turnover of £6.5m, employs 52 people, publishes eight titles and has been running for ten years. Yet this "average" stretches across a wide range of operations, from single title publishers with under ten people through to large, multi-title companies. The survey divides the businesses into three categories, defined by their staff headcount:
* Small: Under 10 staff
* Medium: 11-50 staff
* Large: Over 50 staff
It is important to note that a number of significant publishing companies regard themselves as "specialist publishers". While the larger companies may enjoy the protection of critical mass and scale economies, most of the marketing challenges are still looked at on a title-by-title basis. If magazine publishing is a cottage industry, then EMAP and Future are just multi-story cottages.
Where do they make their money?
The three key revenue streams for the specialist publishers in the survey are shown in the table below.
|Sources of Revenue||% of Total Revenue|
|Magazine Copy Sales||53%|
|Magazine Advertising Sales||38%|
* The bigger the publisher, the more reliant they become on advertising sales. This is often due to the fact that the larger publishers are more professional in their whole approach to ad sales.
* 82% of ad revenue comes direct from advertisers. Only 18% comes through ad agencies – an area where publishers see potential for future focus and growth.
* The smaller the publisher, the more reliant they become on non-magazine sales, which include reader offers and events, websites and contract publishing.
* Looking forward over the next two years, ad sales are felt to be the most buoyant revenue stream and copy sales the least buoyant. The reasons for this become very clear later in the research.
Where do the copy sales come from?
The table below shows the percentage of circulation sales revenue which comes from the three principal sources.
|Source of Copy Sales||% of Circ Revenue|
|Mainstream Retail Newstrade||62%|
* The balance between retail sales and subscription sales varies markedly from company to company and seems to be related to whether there is any subscription expertise within the company rather than to any external market factors. Yet, despite this erratic pattern, subscriptions are universally seen as the most buoyant circulation source over the next two years.
* Specialist (non-newstrade) retailers provide a small, but significant route to market with publishers polarised at the two extremes. Many companies have few or no sales from this source, while a number rely for over 20% of their sales from specialist retailers. This is seen as a moderately buoyant source in the future, but well behind subscriptions. In theory, this route to market should hold great potential, but publishers who have tried it know that there are massive practical hurdles to overcome.
* The mainstream retail newstrade still accounts for over 60% of copy sales revenue, but this is felt to be under great threat.
Respondents were asked to list what they saw as the main opportunities for their company over the next two years. Two key areas stood out:
* New launches and acquisitions. The need to build scale by adding extra titles to the portfolio was seen as essential.
* Increased levels of subscriptions. Concerns about the newstrade are pushing publishers down the subscription route.
In addition, publishers are looking to the usage of websites to raise the profile of the magazine, generate more subscriptions or add value to the subscription by creating "closed user" areas. Specialist publishers are also looking to develop their business through spin-off publishing activity in the shape of contract publishing (often on behalf of advertisers) and book publishing.
Respondents were asked to list what they saw as the main threats facing their companies over the next two years. The negative influence of the major retail multiple groups is seen as THE major threat. This has two manifestations:
* The trend for retailers to edit and reduce their magazine ranges, with the future intentions of WH Smith Retail being a repeated case in point.
* The increasing costs of mounting in-store promotions, many of which simply do not make financial sense, apart from manipulating tier listings.
Another key threat is the competition from other publishers. The relatively low entry costs for specialist publishers are a double-edged sword. They allow open access to the market. Yet this also means that many sectors are "over-magazined" with too many similar products available to the consumer.
The Internet is seen as both an ally and a competitor. It can enhance the information offering that publishers can make and can offer an exciting new route to market in a variety of ways. Yet it is also eating into the consumer’s leisure time.
Behind these issues are a number of connected concerns which relate to rising costs: rising postage costs, rising consumer promotion costs and the need to make a threshold leap in staffing in order to drive real growth in the future.
How are specialist publishers helping themselves?
The research respondents were spending between 2-5% of their turnover on "marketing" with the larger publishers tending to spend more. This spend breaks down in the following way:
* Below-the-line consumer advertising (24% of total spend) which attracts a much bigger allocation than above-the-line activity, due to the costs and critical mass required for above-the-line work. Predictably, the balance shifts from below-the-line into above-the-line, the larger the company.
* In-store retail promotions (24%) where the larger publishers devote significantly more resource than the smaller publishers.
* Added value promotions such as covermounts and supplements (23%) which are more important to the small and medium publishers than the larger companies.
* Subscription marketing activity (16%) attracts a significant slice of the budget and one that is growing faster than any other.
* Above-the-line consumer advertising (8%).
* Consumer research (4%) has a low profile in most companies’ marketing activities. This is a real weakness.
Where can external help come from?
A very clear message that comes through the research is that specialist publishers recognise that they need help in the whole area of circulation. They are looking for more help from their service companies, particularly their distributor and bureau.
* 90% of the research sample use a third party distributor. On average they have been with their current distributor for just under five years and they have reasonable confidence in their distributor’s ability, giving them a solid if uninspiring score of 6.1 out of 10 for their overall range of services. Where publishers feel their distributor is weak is in the more basic, "sharp end" functions such as controlling unsolds and maximising retail availability.
* Only 36% of the research sample use a third party subscription fulfilment bureau, the majority opting to handle subs in-house for a variety of reasons. Those who do use a bureau give their service company another solid 6.3 out of 10 for their overall service. Whereas publishers rate their newstrade distributor’s input most highly in the area of marketing, information and account management, these are the precise areas where the bureaux produce their weakest scores. Publishers clearly want more help with their subscription marketing strategy and feel that they are not getting this from their current bureau.
So what does the future hold?
The growth of retail multiple power is seen as the single biggest threat to the future of the independent, specialist publisher with reducing ranges and increasing promotional costs being the two key concerns. This should represent an opportunity for independent newsagents to develop their magazine sales, but the publishers themselves seem to have little confidence in the newstrade per se. Instead, postal subscriptions are seen as the real alternative. Yet there are clear signs that not enough money, resource and focus are being devoted to this whole area and that publishers lack the confidence and expertise to develop these sales as fast as they need to.
The future looks challenging, with consolidation, both in retail and in publishing itself, accelerating. Yet, although specialist publishers feel under pressure, they have developed their niches and they are ready to defend them with utter conviction and commitment: qualities that got them into the publishing business in the first place.