Magazine Industry Using New Media Extensions to Redefine Sales Strategies

Why are magazine revenues increasing and what does it have to do with cable TV circa 1983?

Jack Myers Media Business Report projects 2007 consumer magazine ad revenues will grow 4.1 percent. In the first half, growth has been an estimated 6.1 percent according to PIB data, pacing equal to last year's growth. Overall ad spending this year on all traditional media is forecast to grow less than two percent.

In 1983, a cadre of cable television network sales executives gathered for a closed-door meeting at the Cabletelevision Advertising Bureau. Chaired by then CAB-president Robert Alter, the group of eight or ten executives debated the optimum sales strategies for the fledgling cable industry. The core question was if cable network TV inventory should be valued following a print model that pays premium prices for valuable narrowly targeted audiences, or priced as a more cost efficient (cheaper) alternative to broadcast network television.

The catalyst for the meeting was an industry conflict, focused on advertising agencies, over where cable planning and buying should be positioned organizationally. Specialist groups, typically comprised of one or two cable "experts," were operating independently within media agencies. There was virtually no consistency, from agency to agency, over where cable planning and buying were located.

In several agencies, cable was handled by network television groups. In other agencies, cable was being handled by print media groups. In several agencies, cable was managed independently of other media and in a couple, it was actually in the radio or local television group! In the 1980s, most media planning and buying was organized in what was known as "agencies of record." Different agencies were assigned media planning and buying for different media, often with little rhyme or reason. So print, network television, radio, local media, newspapers and out-of-home media were rarely connected organizationally within agencies and rarely connected in any strategic context. Typically, media planning and buying were managed by completely different agencies and, even when they were within a single agency, the functions were separated.

Cable buying was scattered all over the place. Cable sales organizations, typically with fewer than 20 sales executives, were required to cover a widely diverse group of buyers and planners. The industry executives meeting that day understood the importance of their discussion. Although cable networks at the time were capturing 14 percent of the TV viewing audience, marketers were investing less than two percent of their TV ad spending on cable. The disparity was dramatic and one of the primary reasons was the lack of agency accountability and responsibility.

Where in the media planning and buying process, the executives asked, did cable naturally belong? The obvious answer was national television. But the highly targeted nature of several cable networks argued for a more print-based sales approach. Following a broadcast supply-demand model in a medium that promised to be heavy on the supply side and weak on the demand side would translate into significant cost discounts. Cable, which was generating costs-per-thousand averaging 20 percent of broadcast primetime costs, would be unlikely to reach parity, the executives believed, for at least a decade.

Here we are, more than two decades later, and average cable network CPMs still hover at 40 to 60 percent of broadcast primetime costs, except in sports, some news and selected high demand categories. Ironically, magazines, responding to initiatives launched by General Motors, Procter & Gamble and other leading advertisers, moved closer to the television model, competing based on price rather than uniquely differentiated relationships with their audiences.

Although price negotiation remains a standard reality in magazines negotiations with advertisers, industry growth is being fueled by publications that inspire and motivate their audiences. Magazines that have established brand equity and can demonstrate the emotional connections they have with audiences are able to extend their brands to new distribution platforms and generate premium value for their advertising inventory. Meredith Publishing and other publishers are aggressively pushing into video-on-demand, DVD and online distribution. Men's lifestyle publications are clearly emphasizing their ability to transfer their brand equity to advertisers, with products like Unilever's AXE capitalizing.

While many magazines remain enmeshed in tough negotiations and rely on active discounting, a growing number of publications are discovering that new media extensions are empowering them to return to their roots, and they are using new media as an opportunity to refocus their core sales strategy on brand equity, audience loyalty and emotional connections. Magazine executives who are not having these discussions and exploring new models should take a lesson from the 1983 CAB meeting and avoid the pitfalls of commoditization.

The rules for the magazine business related to monetizing multiple distribution platforms are being written today. How marketers will perceive magazines and their fundamental role in the marketing process are being redefined right now. Magazines' sales and branding strategies established in 2007 and 2008 will have repercussions for decades ahead. Share your comments on magazine sales and branding strategies. Email Jack Myers with your thoughts and comments.