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Can Consumer Mags Profitably Transition To Digital? Credit Rater Fitch Is ‘Skeptical’

Fitch is taking a jaundiced view of whether or not consumer magazines as a group can make the switch to digital with their profitability intact. In a report entitled U.S. Consumer Magazines: Weakness To Continue — But Better Positioned Than Newspapers (PDF is here), the credit ratings agency points to the crowded and varied field of web publishers and the fact that online mags’ ad revenues make up less than 5 percent of the total ad market. That’s not to say that Fitch doesn’t applaud the efforts of publishers like Conde Nast, for creating portals and branded destinations that mix original and print material; Hearst, which has created events aimed at seasonal ad campaigns, and Martha Stewart Living and National Geographic for forming communities and using online video in novel ways.

Not paying off yet: Despite getting a nod of approval, Fitch wonders how much of these various efforts are actually paying off, concluding that mags’ online activity remains nascent and ancillary as revenue generators. If magazines are able to provide engagement measurements for users’ who go through the archives and as has been stated many times, the use of vertical ad networks should lead to rising CPMs and higher sales volume. But overall, just released numbers from the Publishers Information Bureau demonstrate that as the economy worsens, online isn’t enough to prop up the whole operation, as magazine ad revenue fell 4.9 percent year-over-year from April to June; during the same period, ad pages dropped 8.3 percent.

Newspapers are worse off: The woes of newspapers have been cataloged repeatedly. But in terms of comparison, while both magazines and newspaper are being roiled by the transition to digital, Fitch says that newspapers possess myriad disadvantages over their print brethren, including:

Too much reliance on classified ads: All have been migrating online, but without the ability to offset print losses. Plus, help wanteds are struggling at a number of publishing chains, as are auto ads and real estate.

Too much competition: Also, newspapers find themselves forced to compete more aggressively against radio, TV stations, directories and others for local ad dollars. Magazines, on the other hand, are mainly up against cable TV for targeted national ad dollars — and cable’s inventory for certain demos are fairly limited. Furthermore, there are plenty of incentives for magazines and cable TV nets to offer cross-platform campaigns, since both work with media buyers; newspapers tend to deal directly with local marketers, as opposed to media agencies, so the opportunity to craft campaigns across a Yellow Pages and a radio station are pretty unlikely.

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One Response to “Can Consumer Mags Profitably Transition To Digital? Credit Rater Fitch Is ‘Skeptical’”

  1. there is also an indirect effect on magazines caused by newspapers. As newspapers search for a new role as hard news is moving online, they produce more background magazine-like stories. And more an more newspapers add (free) magazine supplements to their newspapers. That also puts pressure on copy sales and advertising income for magazines.