Brutal Market Conditions Precipitate Massive First-Half Newsstand Sales Slide

Changing buyer preferences, acute price sensitivity and the influence of large publishers roil the market.

By Baird Davis
Monday, November 9, 2009

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During the decade prior to 2008, newsstand unit sales of audited publications in the U.S. had been annually declining at about 2 percent while revenue remained essentially flat. But in the first half of 2008 the unit sales decline jumped to 5.9 percent. The sales slide continued in earnest in the second half of 2008—unit sales fell 15.1 percent and revenue declined 6.5 percent.

The decline further accelerated in the first half of this year. For the period, unit sales of audited publications fell to 360.5 million, down 15.6 percent, and revenue dropped nearly $228 million to $1,377.1 million, off an unprecedented 14.2 percent. Note that the unit sales decrease in the first half of this year is similar to the decline in the previous six month period, but the revenue descent has grown enormously. This phenomenon will be discussed later in the pricing section of this article.

Magazine Closings Reach Record Highs
In the first half of this year 62 audited publications, all of which reported newsstand sales in the first half of last year, were closed or in several instances discontinued from being audited. I mention this at the outset because the unusually high number of closings has increased the difficulty of evaluating year-over-year newsstand sales performance. I’ve estimated that the publication closing effect added approximately 3 percentage points to the sales decline in this period. This means that the estimated sales decrease from continuing publications was about 12 percent during this period. I make this distinction in this article when separating the discussion of industry or category sales performance from sales of continuing publications.

Things Are Not Good at the Newsstand
In the last 12 months, unit sales declined 15.3 percent and revenue has fallen 10.4 percent.

There is no one reason to explain the precipitous decrease in magazine newsstand sales. The weak economy, of course, is a major culprit. But it has not been the only sales deterrent. The dramatic drop in advertising, which has resulted in smaller folio sizes producing magazines with less visceral appeal, has also contributed. Plus the first half sales were affected by the departure of Anderson News, one of the four largest wholesalers. We don’t, yet, know the full effect of the Anderson departure, but it appears, after a few anxious moments, that the necessary corrective adjustments have been made to the distribution system.

In this article we’ll not further conjecture about the newsstand market effect of the economy or the distribution disruptions. Rather, we’ll concentrate on the more strategic issues concerning changing buyer product preferences, the crucial effect of pricing in a market that remains very price-sensitive, and the critical influence of the largest publishing companies.

Checkout Sales Flop: Celebrity Declines Led the Way
In the first half of this year, sales of checkout titles dropped—unit sales fell 14.4 percent and revenue declined 11.6 percent. This performance was slightly better than the overall market average, but still terribly disappointing.

The checkout sector is led by the six weekly celebrity titles, which represent 40 percent of checkout revenue—People, US, In Touch, Star, Life& Style, OK! Weekly. The sales of those publications were slightly better than the checkout sector as a whole. Their unit sales fell 12.4 percent and revenues declined 10 percent.

The sweep of the sales difficulties spared few checkout publications. Among the 68 checkout titles analyzed in this report a total of 16 titles suffered unit sales declines of 20 percent or more. Those particularly hard hit were the so called six sister publications—Ladies Home Journal (- 46.0 percent), Better Homes & Gardens (-35.6 percent), Redbook (-23.3 percent), Family Circle (-22.6 percent), Woman’s Day (-22.3 percent) and Good Housekeeping (-17.6 percent). Their sales fell a combined 25 percent. Other titles with steep sales declines included Sports Illustrated (-25.1 percent), TV Guide (34.1 percent), Newsweek (-24.8 percent), Martha Stewart Living (-20.6 percent), and Reader’s Digest (20.1 percent).

There were, however, a few checkout titles that avoided the sales wrath. Time Magazine sales rose 4.2 percent—helped by the newsstand retreat of Newsweek and U.S. News.

Real Simple’s unit sales grew 1.3 percent and its revenue rose 8.7 percent on the basis of a modest price increase. Relative newcomer Women’s Health (first audited in August 2005) continued its impressive sales climb with an 8.5 percent sales gain. The sales performance of Shape is also noteworthy. Its revenue rose 27.4 percent on the strength of a one-issue frequency increase and an apparently successful cover price increase. The unit sales of All You, a title that is sold primarily (if not exclusively) at Wal Mart, fell only 2.9 percent and based on a price increase its revenue rose 22.7 percent—the highest percentage revenue gain (not associated with a frequency increase) among checkout titles.

Checkout Buyers Gravitating to Leading Titles
In the six-title celebrity category People and US increased their dominance. The sales of the lower priced women’s service magazines—Woman’s World and First—performed better than the market average. On the other hand, the traditional women’s titles, exemplified by the “six sisters,” continued to give up market share. Vogue extended its sales lead over its competitors in the fashion category. Several relatively new brands appealing to younger women continued to gain sales momentum—Real Simple, All You and Women’s Health—represent this trend. In these uncertain economic times, checkout buyers appear to be more value-oriented and are increasingly gravitating to the leading titles in their respective categories.

Performance Even Worse On The Mainline
The checkout title sales decline was harsh, but the mainline title sales shortfall was even worse. The unit sales of audited mainline publications fell 19.3 percent and revenue dropped 20 percent. However, it should be noted that the effect of discontinued titles was far greater at the mainline than at checkout. Allowing for the effect of discontinued titles, it’s roughly estimated that the sales decline associated with continuing mainline titles is 11 percent, slightly less falloff than it was for checkout titles.

The most prominent mainline closures were Men’s Vogue, Bestlife, Blender, Hallmark Magazine, Mary Engelbreit’s Home Companion, Home and PC Magazine. Vibe and EGM, two titles that are reportedly going to be resurrected by new owners, are also among the closures. Plus there are a few publications that ceased being audited, but continue being published. The most significant examples are two titles from Future US, Inc.—Official Xbox and PC Gamer.

A Price Sensitive Market
For the period between 2004 and 2006, average price remained stable at about $3.38. In 2007 prices began edging higher and by the second half of that year they reached $3.57—up 5.6 percent.

By 2008 the pricing increase stampede reached epidemic proportions. In that year the average price rose to $3.81 ($3.88 in the second half of the year). In the first half of this year the price increase flurry began to abate. Prices rose only 1.6 percent—from $3.76 to $3.82. Checkout title prices increased from $3.38 to $3.50 and mainline title pricing actually declined—from $4.99 to $4.94.

In a nearly two-year period, average price increased 13 percent. The sales impact of this pricing orgy is still being felt. In the four-year period (2004-2007), prior to the major price increases that occurred in 2008, unit sales minimally declined—an average of .9 percent. Coincidentally, unit sales fell at an annual average of 12.3 percent in the succeeding 18-month period, which, interestingly, is about the same as the 13 percent increase in average price that occurred during this time.

In the second half of last year unit sales declined 15.1 percent, but the revenue decline was only 6.5 percent. There had never been such a large performance difference between unit sales and revenue. In the first half of this year a similar (15.6 percent) unit sales decline occurred, but this time the revenue fell by a nearly like amount—14.2 percent. How do we account for this change and the extraordinary revenue decline? I conjecture that the zero-based revenue pull of the market helped subtly change buying patterns so that the out-of-pocket purchases remained the same even though unit purchases declined. This helps demonstrate the adverse unit sales effect of increased pricing.

Sayonara Sweet Computer Titles
PC Magazine was shuttered during this period, bringing to an end Ziff Davis’ glorious 82-year print publishing run. In addition, another mainline publication that was previously published by Ziff Davis, Computer Shopper, was closed during this period (full disclosure: I was Ziff Davis’s Circulation Director in the ’80s and ’90s). The PC Magazine and Computer Shopper closings mark the symbolic end of the magnificent computer magazine era of American publishing. Those two publications, along with PC World (which continues to be published), were spawned in the early ’80s in the wake of the launch of the first IBM personal computer. PC Magazine, Computer Shopper and PC World (all among the top 100 newsstand revenue producers of their time), along with a host of lesser selling computer titles, reached their advertising and newsstand sales peaks in the early ’90s. For nearly a decade, from the late ’80s to the mid-’90s, computer magazines were the most vibrant aspect of the mainline buying experience.

Leading Publishing Companies Feel the Pain
The sales decline of the top 10 newsstand publishing companies mirrored those of the industry. Unit sales of these companies were down 14.9 percent and revenue declined 13.1 percent. Everyone of the top ten companies experienced both unit and revenue declines.

1. Time, Inc.
In the second half of last year, Time, Inc. escaped the ravages of a souring newsstand market. But in the first half of this year the expanding market difficulties caught up with them—unit sales fell 12.3 percent and revenue was off 10.3 percent. Four of their titles performed relatively well—Time Magazine (+4.2 percent), Real Simple (+1.3 percent), People Stylewatch (-2.7 percent) and All You (-2.9 percent). But the company’s newsstand fortunes ride on the broad shoulders of People (it represents 58 percent of the company’s newsstand revenue) and its unit sales were down 12.8 percent in the period. Several of their other important titles—In Style (-20.1 percent), Sports Illustrated (-25.1 percent), Cooking Light (-19.7 percent) and Money (-34.3 percent)—also posted weak sales results that contributed to the lackluster performance of the leading newsstand publishing company.

2. Bauer
Its unit sales were down 11.6 percent and revenue declined 12.4 percent. The company is still reeling from the effects of the hefty price increases they initiated across their entire line of products in the fall of 2007. The hardest hit was In Touch (down 17.7 percent), although all of their 6 leading titles were off seven percent or more. However, their second place market share position remains secure.

3. American Media
Sales were down—units decreased 9.6 percent and revenue was off 6 percent. Their performance was weak, but better than the market average. Star’s sales were down 14.3 percent, their two tabloid titles (National Enquirer and Globe) suffered a combined unit sales decline of 8.6 percent and Muscle & Fitness performance was weak—unit sales off 24.4 percent. Their bright spot was Shape’s 27.4 percent revenue gain.

4. Hearst
Unit sales were down 30.8 percent and revenue declined 21.7 percent. These figures, however, are misleading because the deep sales decline is largely a result of closing four titles (Quick & Simple, Cosmo Girl, O at Home, Teen) that reported sales in the year previous period. If the discontinued titles are excluded from the calculation their unit sales from continuing publications were down 10.1 percent and revenue off 9.0 percent. This performance is better than the market average, but it can’t hide the fact that the Hearst stable of titles exhibited a few trouble spots. Good Housekeeping sales fell 17.6 percent and Redbook’s sales declined 23.3 percent. Cosmopolitan’s sales fell (down 7.9 percent) less than the market average, but its performance surely must concern their management.

5. Wenner
Of all the top ten companies its performance was the best. Its sales were down only 3.3 percent. The relatively strong performance was primarily a result of the excellent showing by US—sales down 3 percent. Rolling Stone sales, off 6 percent, were better than the market average and generally helped contribute to a successful six-month period. In a tough market it was a good showing for Jann Wenner and his troops.

6. Conde Nast
Its unit sales were down 14.8 percent and revenue declined 19.3 percent. But if the first half 2008 sales data from the two publications (Vogue for Men, Domino) that were closed are excluded, its sales from continuing publications would show that unit sales were down 10 percent and revenue off 16.6 percent. It was a disappointing period, but several performed well above the market average. GQ’s sales were up an impressive 7.1 percent and Vogue ’s sales were only off 2.8 percent. Conversely, seven of its major titles experienced sales declines of 15 percent or more: Gourmet (-25 percent), Details (-24.7 percent), Architectural Digest (-21.0 percent), Golf Digest (-20.9 percent), Modern Bride (-19.9 percent) Allure (-17.0 percent) and Lucky (-16.4 percent). Mr. Newhouse was probably not pleased with this performance.

7. Source Interlink Media
Both unit sales and revenue were down 18.3 percent. The combined sales of its two soap opera titles (Soap Opera Digest and Soap Opera Weekly) were down 14.6 percent. The unit sales of its 36 other audited titles (all specialty publications, many in the automotive field) were down 21.3 percent, exacerbated by the closure of five small specialty titles that reported sales in the first half of 2008. Their dependence on automotive publications, and their propensity to continually raise cover prices, has contributed to their newsstand vulnerability in this “cash for clunkers” market climate.

8. Meredith
Unit sales were down 35.7 percent and revenue was off 38.1 percent. Things are not going well for Meredith on the newsstand, but it’s not quite as grim as those figures indicate. By excluding the sales data from discontinued publications (Country Home and Figure were closed), its sales revenue from continuing publications was down by more than 25 percent. This is the highest revenue decline among top 10 newsstand companies. Meredith’s sales were hurt by an over dependence on three large circulation women’s service publications: Family Circle (-22.6 percent), Better Home & Gardens (-35.6 percent) and Ladies Home Journal (-46.0 percent) and unfavorable year previous comparisons caused by the inclusion of first half 2008 sales from retailer Dollar Tree (sales made at significantly discounted prices). Their lone newsstand sales success in this period among its major titles has been More, which grew sales .5 percent during the period. Meredith, burdened with a cadre of mature women’s service publications, is facing an uphill battle in its attempt to recapture its lost newsstand sales momentum.

9. Northern & Shell
OK! Weekly’s initial sales climb came to an abrupt halt in the second half of last year. Sales difficulties were, in part, caused by a price increase from $2.99 to $3.49. It reduced the price of OK! (back to $2.99) in the middle of the first half of this year. But it was not enough to turn the angry sales tide. Unit sales were down 20.6 percent (the worst performance of any of the six major weekly celebrity titles). OK! Weekly is now buried in last place in newsstand revenue in the tightly competitive celebrity title category—not a pleasant thought to contemplate for Northern & Shell management.

10. Rodale
Unit sales were down 11.9 percent and revenue off 7.9 percent. But like four of the other top ten companies they closed a magazine (Bestlife) during this period. Their sales performance from continuing publications reveals a reduction in unit sales of 7.2 percent and a revenue fall of just 2.4 percent. On the revenue front this is the best performance, from continuing publications, among the top ten companies. In fact the only serious newsstand cloud on the Rodale horizon appears to be Prevention, whose unit sales in this period fell 19.5 percent primarily because of a large price increase. The performance of Men’s Health, although its sales were down 9.9 percent, still edged into a virtual tie with Maxim as the largest newsstand revenue producing male-oriented magazine. As previously indicated Women’s Health (up 8.5 percent) continues to make large forward strides and Runner’s World has captured the fancy of newsstand buyers—its sales are up 1 percent. Overall this was a very good period, in a down market, for a company that is increasingly being recognized as an innovative newsstand marketing leader.

Publisher Considerations
The economy is dicey and the magazine distribution system remains in fragile condition. These are reasons for concern, but not ones that should cause publishers to throw up their hands in frustration. Market conditions are going to improve. As they do, surviving publishers will enjoy the benefit of having fewer titles populating the newsstand and a group of retailers and wholesalers that are more responsive. It’s entirely possible that publishers will eventually come to realize this market downturn was the catalyst needed to cleanse the system of the many excesses it’s gathered the last several decades.

For wise publishers this could be an opportune moment. A time to build the base that will allow them to prosper when the newsstand business recovers. In order to take full advantage of this situation publishers should consider several things. First they must learn to be more patient in making cover pricing increase decisions. The retail magazine market is acutely price sensitive. They should resist the temptation to raise cover price for short-term profit.

Unit sales (not revenue) performance should guide most pricing decisions. To succeed, publishers must emphasize (and in some cases reemphasize) editorial quality in order to attract and maintain buyers that have become more discerning. The market is already witnessing a shift in product preference patterns that favor the leading titles in each category.

However, smart pricing and product quality strategies will not be enough to take full advantage of what’s likely to be many new newsstand opportunities. Publishers must be more involved in the newsstand marketing process. Those publishers that have abdicated too much responsibility to their National Distributors might find it advantageous to take some of it back. It makes sense to do this because it’s now much easier (and cost effective) to access newsstand sales data. This will enable circulators to realistically be more intimately involved in making sound newsstand distribution and marketing decisions. Finally, publishers that truly care about the magazine business should be working more proactively with their National Distributors in exploring ways to reform the fragile and archaic newsstand distribution system. Much needed distribution system reform is unlikely to happen without dedicated publisher involvement and support.