NEW YORK — Over the past decade, magazine ad spending followed a simple, recognizable pattern: a prolonged boom, followed by a steep downturn and a gradual, tentative recovery. But now that publishers at last find themselves back on firmer ground, the landscape is less familiar.
In contrast to the boom-and-bust years, when spending advanced and retreated more or less across the board, the print ad economy of mid-2005 is more complex and variegated, marked by both pockets of solid growth (watches and jewelry, men’s grooming, entertainment) and patches of softness (European fashion, American automotive, pharmaceutical).
On balance, magazine ad spending growth has slowed somewhat from its pace in the final three months of 2004, when pages increased 7.1 percent and reported revenue jumped 14.1 percent, according to the Publishers Information Bureau. (PIB revenue figures don’t reflect discounts, and thus are considered less reliable than page tallies.) In the first quarter of this year, pages were up a more modest 1.2 percent, while revenue rose 9.4 percent.
The good news is the tempo is starting to pick up again, said Michael Clinton, executive vice president, chief marketing officer and publishing director for Hearst Magazines. “The year started out slowly, but it’s been a fairly robust second quarter,” he said. “There are more campaigns, more ad dollars, more people committed to print than in the previous year.”
“I would say we’re looking at a year that has some bright spots and definitely a few weaker spots,” said Chris Mitchell, publisher of Details. “The general perception is that last year was a more robust ad market.”
The best way to make sense of the confusing ad picture is by focusing on a handful of consumer, business and economic trends that are driving spending. Of these, perhaps the most significant is what’s happening with television. As the reach of the big networks dwindles and viewers increasingly use digital technology to avoid seeing commercials, makers of entertainment programming have shown greater willingness to weave sponsors’ marketing messages into the fabric of their shows.
Publishers have mixed reactions to this. On one hand, ad zappers and audience shrinkage give them leverage to lure dollars away from TV. Peter King Hunsinger, publisher of GQ, said he has seen new business from what he calls “Super Bowl advertisers” such as Pepsi and Anheuser-Busch. “We have an audience of five million readers,” he said. “As TV continues to fragment, that’s a bigger and bigger number.”
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The downside is that, as advertisers have grown used to seeing their brands worked into sitcom plots and reality TV contests, they’ve started to demand the same from magazines. “We are hearing more and more of our clients talk about product integration,” said Playboy publisher Diane Silberstein.
“The agencies are being more and more hard-lined about our unwillingness to play at this high-stakes game,” agreed Us Weekly publisher Victoria Lasdon Rose.
Publishers who don’t want to compromise their editorial integrity can point to stringent guidelines set by the American Society of Magazine Editors, which forbid, among other things, the use of brand names on the cover to promote deals or contests. But these rules seem to be losing some of their force. Earlier this year, Atoosa Rubenstein, editor in chief of Seventeen, let her ASME membership lapse rather than risk censure for putting brand names on the cover. Shop Etc., a new Hearst title, also features brands on the cover; editor in chief Mandi Norwood is not an ASME member.
Seventeen publisher Jayne Jamison insisted the magazine’s decision was not driven by advertiser pressure. “The idea of featuring brands and stores where kids shop is what’s really driving our newsstand growth,” she said, adding that the magazine does not plan to meld editorial and advertising content. “I feel like the advertorial is the answer for advertisers who want to integrate products.”
Wherever publishers choose to draw the line, such efforts by advertisers reflect a chance for magazines to bring in new revenue, said Rose. “A lot of this funding [for product placement and branded entertainment] is outside the traditional media budget.”
But even in their traditional media buys, advertisers are showing renewed interest in “impact units” that go beyond the usual ad page or spread, say publishers. “For the last few years, it’s been simply ‘Maintain a presence and sell product,’” said In Style’s Lynette Harrison. “There seems to be more of an openness now to really making a splash.”
“Everybody wants the completely disruptive unit that stops the reader dead in his tracks,” said Maxim group publisher Rob Gregory. “Marketers today expect as much creativity from magazines as they do from their agencies.”
Another shift some publishers have detected in advertisers’ thinking is a heightened interest in circulation quality. A spate of scandals involving both the magazine and newspaper industries over the past year has made media buyers acutely aware that a “subscriber” does not necessarily equal a reader. “I find you go into so many meetings now and [the clients] want to make sure that you’re clean and a vital brand,” said Jack Essig, publisher of Men’s Health.
“Companies are starting to embrace more of the qualitative aspects of their buy,” added Jill Seelig, publisher of O, The Oprah Magazine. “They’re looking at reader relationship, reader involvement, wantedness, connectivity, all of those things.”
Another trend key to understanding the ad market is the remarkable dynamism of the luxury sector, with companies like Coach and LVMH Moët Hennessy Louis Vuitton issuing strong earnings reports in recent weeks “I’m going to go out on a limb and say the end of last year’s luxury economy was the best it’s ever been in the history of the United States,” said Town & Country publisher Jim Taylor. “A brand’s success right now is very much predicated on how much they have captivated the top 20 percent of consumers.”
But the mass end of the spectrum continues to thrive as well, at least in fashion and retail. That leaves everything in between. “I think the big concern is, ‘Where is that middle market right now?’” said Silberstein. Carol Smith, publishing director of the Elle Group, agreed. “People are either buying it from Wal-Mart or they’re buying it from Bergdorf.”
The luxury boom is widely seen as being driven not only by the affluent but by middle-income consumers who are “trading up,” in the phrase coined by the 2003 book of that name and frequently cited by publishers. Jason Lundy, executive director of marketing and strategic planning at Harper’s Bazaar, attributes the rise in sales of products such as high-end watches to a better-informed customer base. “People’s desire for quality has gone up so much,” he said. “They’ve become much more astute about why brands are good, what goes into the making of something.”
Marketers, too, are becoming more educated — particularly about the importance of tailoring their pitches to female consumers. Publishers for a number of women’s magazines noted that automotive, technology, financial and spirits advertisers are all devoting more of their budgets to women’s titles. “These are categories that didn’t speak aggressively to women in the past,” said Redbook publisher Mary Morgan. Allure’s Nancy Berger noted that Best Buy recently went so far as to open a spa, called EQ-Life, in one of its stores in an attempt to attract more female shoppers.
Looking forward into the second half, publishers are neither exuberant nor gloomy, expecting to see more of the same rather than a spending surge like the one they experienced in late 2003. “It’s going to be a dogfight, but I think there’s going to be enough business out there,” said Rolling Stone publisher Steven DeLuca. “As a whole, I bet the industry will finish up 2.5 to 3 percent [in pages].”
“We’ve been in a recession, whether it’s formally a recession or not, for so many years, that our clients are reticent to tell us that things are good,” said Us Weekly’s Rose. “Their spending shows that guarded optimism.”
Here’s a look at what’s going on in some individual categories:
FASHION: The big story here is the effect the weak dollar is having on spending by European, particularly Italian, fashion houses, whose goods have become increasingly expensive in the U.S. “I believe we’re all looking at the same thing: Can we hold on to our European fashion business with what’s happening with the euro?” said Elle’s Smith. “Our European fashion business is growing, but it continues to be affected by the exchange,” agreed In Style’s Harrison.
The conversion problem is compounding another issue American publishers face, which is competition from media outlets in emerging markets. “The problem with the Italian companies is they’ve continued to put money against Asia and Russia, and it takes away money from the U.S. market,” said Men’s Journal publisher Carlos Lamadrid.
American fashion spending is somewhat less vexed, though still something of a mixed bag. While business overall is up, introductions among women’s bridge and better lines are off from last year, said Elle’s Smith. On the men’s side, however, “you have a lot of brand growth in the better and midtier department store lines,” said Details’ Mitchell. “The retail community is obviously not going gangbusters right now, but I do expect that to pick up in the second half because of an influx of new brands,” added Complex publisher Rich Antoniello. Youth-oriented retailers, meanwhile, are spending heavily, resulting in strong gains in apparel and accessories for the teen titles.
Where the “trading up” phenomenon is truly manifesting itself is in accessories. Virtually every publisher cited jewelry and watches as a fast-growing part of their business. “Consumers can’t afford the $2,000 jacket, but they sure can afford the little Prada bag or the Christian Dior wallet,” said Smith. In fact, following on the heels of W, which publishes W Jewelry, Elle is introducing a newsstand-only accessories spin-off in September.
Overall ad pages for apparel and accessories were up 3.6 percent in the first three months of 2005, according to PIB. Retail pages were up 1.3 percent.
BEAUTY: Ad pages for toiletries and cosmetics were down 4.1 percent in the first quarter, and the biggest reason for that was a sharp decrease in print spending by L’Oréal. “You can’t make up that much business,” said Smith.
“Beauty companies have been choosing magazines outside of what has been core to them in the past,” said Allure’s Berger (while noting that her own beauty pages are up this year). Within beauty, skin care and hair care-hair treatments are driving growth, while fragrance “is still sort of crawling its way back,” said In Style’s Harrison. “The fragrance business has been a challenge for many marketers over the last couple of years,” added Glamour publisher William Wackermann. One exception: “A lot of these celebrity fragrance launches have had big bucks behind them,” said Berger.
Men’s grooming continues to come into its own as an ad category — so much so that Allure will publish a magazine-within-a-magazine in its December issue devoted to the topic. “I know people have been talking for years about a men’s skin care boom, but I’m finally starting to see a real pulse there,” said Best Life publisher Mary Murcko. “The drugstore brands are really starting to get into the idea of skin care for men,” added Rolling Stone’s DeLuca.
AUTOMOTIVE: Solid spending by Asian and European automakers hasn’t been enough to offset large cutbacks by struggling American companies, resulting in a 2.6 percent decline in ad pages in the first quarter. “We’re all sort of licking our wounds and looking to other categories to make up the losses in automotive,” said Details’ Mitchell. “Domestic auto is killing everybody,” added People publisher Paul Caine. “The problems there are beyond advertising.”
SHELTER: Despite a flurry of new shelter books, including Domino and O At Home, home furnishings spending has been surprisingly weak, falling 5.6 percent in the first quarter. “There’s a softness in the home category,” said Shop Etc. publisher Cynthia Lewis. “There are too many shelter books out there,” added Town & Country’s Taylor. “You would think the advertising would be there in support, but it’s not.”
PHARMACEUTICALS: Safety concerns, particularly in the wake of studies linking Vioxx to heart disease, have drugmakers playing it safe by curbing their marketing. Pages for the category were down 4.1 percent. “It’s not an industry that’s necessarily challenged, but everyone’s moving a little slower because of these issues,” said People’s Caine.
SPIRITS: Cable continues to drain away liquor advertising, once largely the preserve of magazines. “I’ll be curious to see if this is a long- or short-term trend,” said Esquire publisher Kevin O’Malley. “Cable can’t do what we in print do for them beyond the pages of the magazine,” in terms of events and added-value programs.