Pressure on the Bottom Line, Folio

1988: publishers plan more aggressive ad marketing.

Publication:
Folio: the Magazine for Magazine Management
Publish date:
December 1, 1987


Pressure on the bottom line will put increased demands on ad sales; special events will bring some relief

If you thought 1987 was a rough year, competition for ad pages may be worse in 1988. Paper costs are expected to rise again, and a big second class postal increase is anticipated; both will put pressure on ad sales to bring in more revenue.

"Every time that there are cost pressures in the industry and the market softens up, you have more aggressive marketing by the industry," says Robert Burton, president, ABC Publishing. "It happens every time, and this is the worst cost pressure the industry has faced in the last 15 years.

"We're talking about postal rates being up 13 percent to 14 percent next year. And we just got hit with a 9 percent increase in the price of paper on top of another 7 percent to 8 percent paper price increase, and there'll probably be another increase next year. It will be a real challenge for any publisher to keep costs from rising less than 10 percent," Burton adds.

Some things will benefit magazine advertising next year, however-the Olympics and the Presidential election, which traditionally boost spending.

The economic outlook, on the other hand, which has a major impact on spending, is still uncertain. A couple of publishers interviewed by FOLIO: predict gloom and doom, but most are optimistic.

Here's a report on how several magazine publishers view advertising in their magazines next year:

* Walter J. Cahners, vice president, development, Cahners Publishing Company, expects a 6 percent to 9 percent page increase for the company's 52 business-to-business magazines.

He predicts the economy will be up across the board, especially in electronics and computers. The forecasting department at Cahners, he says, which provides advertisers with information 18 months in advance of publication, has a history of being "extremely accurate."

* Owen Lipstein, publisher, American Health Inc., sees the economy "taking a nose dive" next year. But his magazines, American Health and The Mother Earth News, will do well anyway. "We should still be up 10 percent in pages for both magazines," he says. "That may sound good, but that's down from a steady 25 percent gain for both magazines over the last few years.

* Paul McPherson, executive vice president, McGraw-Hill Publications Co., looks for continued strong growth for Business Week in 1988. He remains conservative about the growth of business-to-business publications, however, expecting only a 2 percent to 4 percent increase in pages and a 6 percent to 10 percent revenue increase.

In the sectors served by the 31 McGraw-Hill business-to-business magazines, McPherson sees a recovery for textiles, plastics, computers and aviation. When business improves, he says, the business management books historically show the first signs of growth, then consumer magazines and then business-to-business publications.

* Robert E. Wood, publishing director, Modern Maturity, expects pages to be flat in 1988 because of tremendous increases in 1987 and "astounding" increases in business over the last four or five years. Revenues will be up because of rate increases of about 5 percent. Wood points out that it is now extremely expensive to advertise in Modern Maturity, with out-of-pocket costs for a four-color page at $159,000.

* Burton is expecting ad pages to be up 2 percent to 3 percent and revenues to increase 5 percent to 5.5 percent for the approximately 80 ABC Publishing magazines. Los Angeles magazine is coming off a record year in 1987, he adds, with the best fourth quarter in pages and revenue since the 1984 Olympics.

The market for farm titles is still "very fragile," according to Burton, whereas, on balance, the computer titles will do very well.

The 17 business magazines at Chilton had another record year in 1987 for profits and revenues, says Burton. A lot has been done with the products and marketing efforts, he adds. Most magazines, Burton notes, can't raise their rates more than 4 percent or 5 percent, which is the rate of inflation.

* Jack Rehm, executive vice president, Meredith Corporation, says his company is coming off a prosperous 1987, with a very strong fourth quarter. While it's still early to predict-a lot of advertisers have not committed-he is optimistic about 1988, looking at a modest increase in pages and a slightly greater increase in revenues.

"The real question," says Rehm, "is, 'Can we pass through the postal and paper cost increases to customers?' We're in a very competitive market, so that's hard to do."

*Peter Clancey, senior vice president and national ad director, Petersen Publishing, says his company's 11 monthly consumer titles have had a spectacular year-up 10 percent in pages-and he expects continued gains in 1988. Next year he's looking for a 4 percent increase in pages. Rates will be up 4 percent to 5 percent on a CPM basis. "I think we're right on the money in terms of what people are doing with rate increases," he says. Overall, Clancey thinks the magazine industry will have a good year in 1988.

* William Gorog, vice chairman, Magazine Publishers of America, is bullish about 1988. He expects pages to be up over 5 percent for consumer magazines with revenues up 10 percent to 12 percent. He thinks the economic indicators support 7 percent of that growth; the other 3 percent to 5 percent will come from the Olympics and the elections.

In a speech to MPA members, McPherson acknowledged "the ongoing challenges inherent in the competitive world in which we function and the increasing clamor for more creative pricing practices." He said magazines must face these challenges as thoughtful publishers "and not truckle to our advertisers."

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