Time Magazine’s 2007 Business Model Changes Were a Great Financial Success But There Was a Serious Blip – Subscription and Newsstand Sales Took A Dive.

Philip M. Stone February 14, 2008

Time Magazine Editor Richard Stengel boasted to the Direct Marketing Association (DMA) this week that 2007 was the second most profitable year in the magazine’s history, not something you hear too often from a media executive these days, and it must have been especially pleasing to employees who the year before were going through continuous culls.

What he didn’t boast about is the nosedive in both subscriptions and newsstand sales. The unanswered question is whether subscriptions were down 17.57% in the second half of the year  from the year earlier solely because of efforts in the first half to get rid of unprofitable subscribers, and whether the newsstand sales were down by 19.4% only because of the $1 cover price increase, or whether it is all of that plus magazine news reading habits are still changing and Time still hasn’t found its proper niche.

A preliminary analysis would indicate there is something more to the Time’s circulation drop than just getting rid of subscriptions it didn’t want any more or the cover price increase affecting newsstand sales. Newsweek and US News &World Report, for instance  saw their circulations stay basically flat during the same reporting period whereas the Economist actually saw its circulation shoot up 13%, albeit from a lower base.

And although Stengel says that for all of that the magazine still had its second most profitable year ever, there must be some consternation in the executive suites that circulation is getting somewhat close to the 3.25 million copies promised to advertisers. In the past reporting period the subscriptions sank from 4,066 million the year before to 3.352 million now. For the sake of argument, add the newsstand sales of 107,277 ( down from 133,084 the year before)  and total verified weekly sales are at 3,459,149, just 6% above that advertising guarantee. Or put another way, have another bad circulation year in 2008 like 2007 and the advertising guarantee will be kaput.

So, is the problem the model for the editorial product? Stengel’s view of the job that his web site should be performing and the job  the magazine should be doing is quite clear. “There’s no news that breaks in print anymore. Print takes the facts and adds insight. Online is for the ‘what’ and print is for the ‘why’. The magazine puts it in context and that’s why we see them as complementary brands,” he told the DMA annual circulation day meeting.

The secret of the magazine success will be bringing it back as a “must read”, he said. “Magazines have to become more premium products,” he said. “They have to be doing things other media cannot do. They need more beautiful photography, more beautiful paper. They  need things you can’t see on television, things only a magazine can do, and they have to do it each week so people get addicted.”

And he noted that convergence between magazine reader and web reader may not necessarily be desirable. Completely separate readerships are fine by him. He says that focus groups indicate readers don’t like the notes in the magazine enticing readers to go to the web site for more information on a story and vice versa. “They should be two separate audiences. Someday there will be people who don’t know there’s a print product,” he forecast.

“If you have 100% overlap between print and online, that’s a disaster. Look at it as two separate audiences, where you can grow brand and perception of the brand online, and it doesn’t mean the print product will go away. They don’t cancel each other out,” Stengel said.

In other words, what he sees as the key to success is to use the web site to break news, but when it comes to analysis and in-depth coverage then that’s the magazine, and he believes that is also two separate audiences.

The magazine industry as a whole seemed to have its problems in 2007. The total circulation for 608 titles was up just 2.2% for the second half of the year, but Time’s 17.57% decline was by far the largest percentage decline among the top 25 verified circulation.

Still top-dog is AARP The Magazine  that added 4.31% more subscribers for a total of 24.444 million subscribers/members monthly to easily be the largest circulated periodical.  The AARP Bulletin follows right behind  and then there is more than 14 million drop to Reader’s Digest at 9.322 million, but their figure was down 7.64%.

Playboy took a real hit, down 10.04% for 2.7 million circulation. The company reported Wednesday that  the magazine expected a full 30% advertising decline this quarter and Wall Street slammed the parent company shares by 10% before they recovered to end down just 1%.

"We are working through some difficult transitional issues  (free erotic material on the Internet is killing it) and laying the groundwork for the future," Chief Executive Christie Hefner said on an analysts conference call. "It is important to remember that the Playboy brand is stronger and more popular than at any time in the company's history."

If that’s so, then where are the missing readers? Same question that Stengel could be asking, too.