Strange recipe for a magazines solution

The announcement by News Ltd earlier in the week that it would launch a magazine version of its successful Taste.com.au website was an interesting one.

The move brings Taste, acquired by News in their purchase of the Federal Publishing Company back in 2006, into the realm of paid magazines in addition to the web and within News Ltd newspaper titles as a weekly insert.

What’s interesting is that what News has done with Taste is relatively rare – it’s not often you see a publishing company taking a successful internet brand and moving it into broadcast, analogue channels. Normally the trend involves the opposite: taking successful broadcast assets (such as TV shows, magazines, newspapers) and trying to migrate audiences onto the digital platform.

Problem is, the digital migration, while great for the consumer, is proving challenging for the media company and despite popular assertion, this inequity cannot exist forever.

Magazines, like newspapers, have become the resident punching bag for the wider media sector over the past two years. With dropping circulation and dropping ad revenue, many think that magazines are effectively doomed to a quick death due to external factors beyond their control.

Maybe.

Or maybe not. It’s also possible that the falls in circulation and advertising revenue are equally due to matters the magazine publishers can control, if they want to.

I am sure you are familiar with the concept of a locus of control. It is basically a theory referring to the extent which an individual (or group in this instance) believe they can influence or control events that affect them. A high external locus of control implies one attributes their circumstance to situations outside of their control -- external factors. A high internal locus of control implies the opposite, that they can control the situation or environment through their own actions.

The digital evolution has a knack of turning even the most confident of media professionals into people with an external locus of control, leaving them paralysed against the impending, inevitable revolution rapidly arriving which is bound to take down their business model. Such thinking leads to bad strategic decisions – such as giving away all your content for free and allocating a value of $0 next to your product.

What is facing many publishers now is that the $0 the consumer allocates in value to their web properties is now being matched by a similar figure in the value an advertiser allocates. A glut of inventory and the rise of automated buying has taken a lot of the intangibles out of the valuation of a media property in regards to advertising space online.

For News Ltd the current situation is challenging for the growth of Taste, one of its stronger brands. How does it fuel it? Sure, it can rely on the predicted 10 per cent growth in online display revenue that is predicted for the next 12 months, but that will most likely be offset by declines in newspaper revenue.  Its only real options are to try and charge for recipe access (unlikely given the generalist nature of the brand), put more banner ads on the webpages (which will most likely only add more supply and not increase demand or yield), move the brand onto another channel (such as TV or radio) or look to find ways to monetise their audience beyond advertising.

A magazine is one way to do this. For News the thought process is pretty simple. The company has an existing print production plant, existing distribution channels, an existing advertising sales force, and a large amount of content already produced. This is on top of an audience that are still relatively heavy consumers of magazines as well as an advertising base that are still believers in the efficacy of magazines as a channel. It is entirely possible that with 50-60,000 monthly sales the magazine can bring in gross circulation revenue in the range of $500,000, with advertising likely to bring in double that amount. This means that, under these circumstances, a magazine such as Taste could bring $15 million or more of new revenue to the table annually. The key challenge is keeping costs contained. Print media businesses are equally troubled by ridiculously high legacy overheads as they are with falling ad revenue.

Personally, I’d love to see this experiment by News work. Taste is a great brand with a solid reputation among its users. And in many ways, the problems the magazine industry is seeing as a collective are entirely of its own doing. It became complacent, both editorially and commercially, causing many of its supporters to look elsewhere. There was a time when magazines were the elite operators of the media world – with the sharpest content, innovators in integration, and armed with the best sales people. The digital industry realised this and stole a large amount of the industry’s best people, leaving a lot of average ones.

The rejuvenation of the Magazine Publishers Association is a positive step forward for an industry that needs to reclaim its rightful place. Hopefully a successful launch of Taste for News Ltd gives people the confidence the magazine industry is, in fact, somewhat in control of its own destiny and not a powerless dinosaur anxiously biding its time before digital puts a fatal bullet in it.