WorkCustom® – is a label brought to you by jeaners and industry veterans who have been behind some of the most coveted and prolific denim brands in the world. The label offers interpretations of your most-loved silhouettes. While design is heavily influenced by modern & pop art, culture, architecture, music and film, it’s the factory workers, operators and technicians behind-the-scenes that are the real spirit of the brand. It’s their imagination that shapes and molds forms from rough sketches; it’s their skilled and trained hands, meticulously sewing, washing, processing… working fabrics into completed garments with uncompromised quality and attention to detail. It’s the passion of the factory workers — their pride of workmanship that fuels WorkCustom®. You’re not just getting another pair of jeans, you’re getting the culmination of their blood, sweat and tears. The result of their efforts: jeans that mold to your body like they were custom made… Jeans that last and only get better with wear. And while the label’s popularity and fan base has expanded from its original artist enclave in Echo Park, WorkCustom®’s philosophy remains the same as when it was first created: to love what you do and do what you love. – from – http://www.workcustomjeans.com/
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Recent Developments
INDUSTRY INDICATORS
Total US consumer spending, a driver for magazine sales, rose 2.9 percent, primarily from nondurable goods expenditures, in August 2011 compared to the same month in 2010.
US corporate profits, an indicator of corporate spending on magazine advertising, rose 8.5 percent in the second quarter of 2011 compared to the same period in 2010.
Total US revenue for periodical publishers rose 1.8 percent in the second quarter of 2011 compared to the same period in 2010.
MONTHLY NEWS
Magazines Join With New Tablet Challenger
The Wall Street Journal Online, 29 September, 2011, 785 words
Magazine publishers have been anxious to find a true rival to Apple Inc.’s iPad. Some say they may have finally found it with Amazon.com Inc.’s new Kindle Fire. Amazon has struck accords with several large publishers including Cond? Nast, …
QUARTERLY INDUSTRY UPDATE
More Magazines Launch – In a development signaling continued industry recovery, more magazines launched during the first half of 2011 while fewer closed shop. Some 138 new magazine titles debuted between January and June, compared to 90 during the same six months a year ago, according to MediaFinder. Some 74 titles folded, down from 86 closures in 2010. The food and regional interest sectors enjoyed the most growth; however, regional interest magazines also faced the most closures. The business-to-business segment flourished, launching 34 new publications (Progressive Cattleman and Converting Quarterly among them) while shuttering 13. Specialty topics offer publishers new opportunities for delivering a tightly targeted readership to potential advertisers.
Weeklies Outpace Monthlies in Ad Pages – Weekly and bi-weekly consumer magazines outpaced monthly ad pages in the first half of 2011, growing 1.3 percent, while monthlies managed less than half a percent increase, according to MagazineRadar. Weekly and bi-weekly publications added 224 ad pages, compared to 167 ad pages contributed by monthlies. Overall ad pages rose a modest 1 percent over the first half of 2010. Advertising spending in the magazine industry is measured by the number of pages sold to advertisers, or ad pages.
Business Challenges
CRITICAL ISSUES
Dependence on Advertising – Advertising accounts for the bulk of magazine publisher revenue. More than 85 percent of total ad spending is by 12 industries, making magazine publishers susceptible to downturns in those particular industries, according to the MPA. The two top spending industries are toiletries/cosmetics and food products, while retail and automotive — both of which were hit hard by the late 2000s recession — have lost advertising share. Ad spending is measured by the number of pages sold (“ad pages”).
Paid Circulation Slows – Total industry circulation revenue has slowly declined in the past decade and circulation has been flat. The annual paid circulation for magazines covered by Audit Bureau of Circulations plunged to its lowest level in a decade in 2009, at 346 million copies. Magazines aren’t a growth industry, although the value of magazines as an advertising medium has increased. Circulation is defined by subscription and single-copy (newsstand) sales.
OTHER BUSINESS CHALLENGES
Customer, Supplier Consolidation – Consolidation among distributors, retailers, ad agencies, and suppliers has left many magazine publishers with little power for price negotiation, with smaller profit margins, and fewer sources to buy paper from. Increased consolidation among major advertisers can depress the level of advertising spending. Publishers that license ancillary products are additionally vulnerable to retail consolidation. Likewise, as paper manufacturers consolidate, magazine publishers may be forced to pay higher prices for paper supplies.
Internet Competition – Many trade magazines attract readers by offering information, like industry news, trade show calendars, and supplier lists, that is often more easily found on the Internet. Because consumer magazines are more likely to provide entertainment information, Internet magazines are a greater danger to traditional trade than to consumer magazines.
Vulnerability to Postal Rate Increases – As one of the largest commercial users of the postal service, the magazine industry is vulnerable to periodic rate increases. Under political pressure to keep first-class mail rates low, the US Postal Service will likely raise magazine rates again in the next few years. In addition, the government is considering ending Saturday postal delivery, which could impact publishers.
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Trends & Opportunities
BUSINESS TRENDS
Growth of Multimedia Companies – Many magazines are now published by media companies that also own newspapers and TV and radio stations, which can give advertisers a complete selection of media outlets. Even publishers that remain independent have generally increased the number of titles they own to be able to offer advertisers a larger selection of demographic groups. Magazines account for less than 20 percent of the money spent on all media activity, far behind TV, according to Kantar Media.
Changes in Magazine Distribution System – Historically, national magazine distributors delivered single-copy products to regional and local distributors, who in turn delivered magazines to retail outlets, owned display racks, and provided stocking services. The rapid growth of large retailers like Wal-Mart and giant drug and food chains prompted retailers to contract directly with national distributors rather than with a host of local ones. Hundreds of smaller distributors have gone out of business in the last few years. Retailers now demand, and frequently get, a larger percentage of the magazine sales dollar, and in many cases, are now paid directly by large publishers that want their publications displayed on store racks.
Digital Online – Magazines that want online distribution are increasingly opting for digital, rather than special Web versions edited for the Internet. Digital versions are not websites but are downloadable data files with software tools to help readers navigate the text. Since the text is unchanged from the original print version, no additional writing or editing is involved.
INDUSTRY OPPORTUNITIES
Better Retail Distribution Practices – Bar coding allows retailers and publishers to track magazine sales just like any other stock item, allowing more sophisticated product selection. Magazines traditionally were sold without regard to customer demographics at each retail outlet, partly because deciding which magazines to display was made by distributors, not retailers. As magazine sales have become a greater source of profit to retailers – about 25 percent of checkout profits, according to the MPA – retailers have taken a greater role in deciding which magazines will sell best at individual locations.
More Specialized Magazines – Established publishing companies have low entry barriers for creating new magazines. The startup cost for a new magazine publication is fairly small for an existing publisher that already has staff and production and distribution capabilities. By probing for underserviced consumer niches, publishers can deliver a tightly targeted group of readers to advertisers. Production improvements also mean that publishers of mass circulation magazines can insert ads into issues received by specific subgroups of readers.
Magazine Significant in Marketing Mix – Among all marketing media, magazine advertising is one of the most effective in the marketing mix. A study by the MPA shows the tremendous impact of magazines in marketing: magazines generate a far lower cost-per-impact for brand familiarity than TV or the Internet. Increased spending in magazines increases the effectiveness of trade promotion. Brands with a higher percentage of magazines in the media mix experience a substantially higher return on their overall investment.
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Executive Insight what is this?
CHIEF EXECUTIVE OFFICER – CEO
Competing for Advertiser Revenue
Ads account for 70 percent of US magazine industry revenue and half of a typical issue’s pages, making ad revenue a primary concern. Due to the trend toward better-targeted ad placement, magazine publishers compete for ad dollars primarily by delivering readers in a demographic that marketers want to reach. Delivering audiences to advertisers is so important that PRIMEDIA’s corporate description is “a targeted media company that provides consumers with tools and information they need to find a place to live.” Magazines account for less than 20 percent of all media spending, according to Kantar Media.
Reaching Profitable Reader Segments
Total US industry revenue from circulation – sales of subscriptions and single copies – has been flat for years, and the annual number of magazine sales plunged to its lowest level in a decade in 2009. These trends are a concern, since revenue from paid circulation is second to advertising, and because advertisers want to reach potential buyers. To better attract and retain profitable reader segments, publishers extensively research markets and measure circulation, and as necessary, redesign, retarget or rename magazines, or introduce new titles.
CHIEF FINANCIAL OFFICER – CFO
Managing High Accounts Receivable
Many magazine CFOs carry high accounts receivable, mainly from ad agencies, the dominant source of industry revenue. Ad agencies have poor credit histories, pay in arrears, and place large numbers of ads in fourth quarter, contributing to seasonal cash flow issues for many publishers.
Restructuring to Improve Margins
US magazine industry revenue is flat; advertising declined during the late 2000s recession, and consolidation of distributors, retailers, ad agencies, and paper suppliers has affected margins and circulation. Most companies periodically analyze each magazine title and may recommend cost-cutting, restructuring, layoffs, or eliminating unprofitable titles.
CHIEF INFORMATION OFFICER – CIO
Improving Data Collection
Accurate and extensive data collection is a key asset for magazine publishers, because it helps sell advertising, acquire shelf space at retailers, and better target consumers. Reader demographic data attract advertisers to magazines that reach targeted audiences. In addition, many business magazines sell information from their own databases and industry data they gather through reader surveys. Meredith’s consumer database has an average of 700 data items for about 85 million consumers.
Using Multimedia Technology to Increase Readership and Revenue
By implementing online and multimedia technologies, publishers can attract new readers, develop additional revenue streams, and bypass distributors. PRIMEDIA’s online revenue-generating plans include subscriber acquisition, e-commerce, pay-per-click advertising, and lead generation. In addition, digital technology enables publishers to easily develop and deliver customized issues to different geographies or demographics of readers, a capability that appeals to advertisers.
HUMAN RESOURCES – HR
Recruiting and Keeping Key Editorial Staff
Creative and business-savvy top editors can make or break a magazine’s appeal to readers and advertisers. Getting and keeping key editors is a major concern of magazine publishers and their HR management. With consolidation at the top and relatively flat revenue for a decade, the industry experiences fierce competition for top editors. HR professionals help executive management understand what incentives appeal to high-level editors, so as to better negotiate, hire, and retain them.
Staffing for New Technologies and International Markets
Web technology makes reaching international markets easy and unavoidable, challenging HR departments. Recruiters need to find people with traditional editorial and publishing know-how, who are also adept at technology, and in many cases, speak multiple languages and understand multiple cultures. For US hardcopy magazines with international distribution, the challenge may extend to country- or language-specific content, coverage, and staffing in other countries.
VP SALES/MARKETING – SALES
Increasing “Sales Efficiency” Rates
Because industry revenue and circulation have been flat for a decade, sales management of many magazines struggle to improve “sales efficiency” – the percentage of magazines sold – by increasing subscriptions or single-copy sales or both, depending on a specific magazine’s distribution mix. Typical industry subscription renewal rates are around 50 percent; sales rates of single-copy magazines about 30 percent; average sales efficiency is as low as 35 percent.
Delivering Highly Qualified Audiences to Advertisers
Magazine marketing management must keep a pulse on the changing needs of advertisers and readers, and marketing VPs fund extensive market research to do so. As advertising is typically 70 percent of a magazine’s revenue, accurately defining reader demographics and interests is vital to delivering advertisers a highly qualified audience of potential buyers. Marketers also use research to recommend how their editorial staff can improve and focus content, which in turn can help appeal to specific groups of advertisers, such as the top spenders: cosmetics/toiletries and food products.
Call Preparation Questions
CEO: What advantages or challenges does the company have competing for ad revenue?
Magazines compete for ad dollars, which comprise about 70 percent industry revenue, mainly by delivering readers in marketers’ targeted demographics.
CEO: What strategies does the magazine use to reach profitable reader segments?
Publishers extensively research markets and measure circulation, and as necessary, redesign, retarget, or rename magazines, or introduce titles.
CFO: What challenges does the magazine have managing high accounts receivable?
Ad agencies have poor credit histories, pay in arrears, and place large numbers of ads in fourth quarter, contributing to seasonal cash flow issues.
CFO: What strategies does the company use to improve margins?
Most companies periodically analyze each magazine title and may recommend cost-cutting, restructuring, layoffs, or eliminating unprofitable titles.
CIO: What plans does the company have to improve data collection, especially of reader demographics?
Data collection is a key asset for magazine publishers, because it helps sell advertising, acquire shelf space at retailers, and better target consumers.
CIO: What benefits can the company derive from implementing online and multimedia technologies?
Digital technologies enable online subscriber acquisition, e-commerce, pay-per-click advertising, lead generation, and product customization.
HR: What challenges does the company have recruiting and keeping top editors?
Publishers competing for top editors need to understand what incentives appeal to high-level staff, so as to better negotiate, hire, and retain them.
HR: How do new technologies and international markets affect staffing strategies?
Recruiters look for people with traditional publishing skills, technology savviness, and an understanding of multiple languages and cultures.
Sales: What strategies does the company have to increase the percentage of magazines sold?
Many magazines struggle to improve “sales efficiency” – the percentage of magazines sold – by increasing subscriptions or single-copy sales or both.
Sales: What methods does the company use to deliver highly qualified audiences to advertisers?
Publishers accurately define reader demographics and interests, and then improve and focus content accordingly to get and keep readers.
CONVERSATION STARTERS
How does the company mitigate downturns in advertising by major customers?
Advertising accounts for the bulk of magazine publisher revenue.
What strategies does the company use to increase circulation?
Total industry circulation revenue has slowly declined in the past decade and circulation has been flat.
What impact does customer consolidation have on the company’s ability to set prices?
Consolidation among distributors, retailers, ad agencies, and suppliers has left many magazine publishers with little power for price negotiation, with smaller profit margins, and fewer sources to buy paper from.
How do bar coding and other marking technologies benefit the company?
Bar coding allows retailers and publishers to track magazine sales just like any other stock item, allowing more sophisticated product selection.
What plans does the company have to expand its product line?
Established publishing companies have low entry barriers for creating new magazines.
What opportunities or challenges does the company see in catering to marketers?
Among all marketing media, magazine advertising is one of the most effective in the marketing mix.
QUARTERLY INDUSTRY UPDATE
How aggressively has the company added or closed publications?
In a development signaling continued industry recovery, more magazines launched during the first half of 2011 while fewer closed shop.
OPERATIONS, PRODUCTS, AND FACILITIES
How many magazines does the company publish?
Most companies publish more than one.
How large is the circulation for the company’s magazines?
The rate base is the circulation that publishers guarantee to advertisers.
To what extent does the company use an audit service to verify circulation?
Many companies use the Audit Bureau of Circulations.
Does the company produce mainly consumer or trade (and professional) magazines?
Trade magazines often have lower circulation than consumer, but there are more of them.
What percentage of circulation revenues is from subscriptions, from single-copy sales?
The mix can be very different for different magazines.
What percentage of total revenue comes from circulation, from advertising?
For most consumer magazines, advertising is the largest source of revenue.
How does the company determine the mix of advertising and editorial content in its magazines?
The average for consumer magazines is 50 percent for each.
How often does the company rent its subscriber list?
This is a modest source of extra revenue for many publishers.
How large an editorial staff does the company have?
Editorial expenses are often the smallest cost for publishers.
How many magazines does the editorial staff produce?
This is usual if the company has a string of small trade magazines.
How many printing presses, if any, does the company own?
Many companies now use third-party printers.
How does the company distribute its magazines?
Postal Service is usual for subscriptions; national distributors for consumer magazines.
How would increased postage costs impact the company?
Magazines with a high proportion of subscription readers would be most affected.
CUSTOMERS, MARKETING, PRICING, COMPETITION
Who is the company’s target audience?
Audience is often defined in demographic terms (such as 18-to-35-year-old males).
How often does the company conduct market research to identify its readership?
A well-defined readership is more attractive to advertisers.
To what extent has the magazine tried to expand to overseas markets?
Most big or popular magazine publishers enter foreign markets under license deals or via a joint venture with suitable local partners.
What types of advertisers buy space in the company’s magazines?
The largest advertisers in consumer magazines are makers and sellers of cosmetics/toiletries and food products.
How does the company find new subscribers?
Advertising, direct mail, and point-of-sale promotion are the main marketing tools.
How important is telemarketing to the magazine’s marketing strategy?
The FTC has proposed several amendments to telemarketing laws, which limits magazine sales and marketing strategies.
How much of a discount off the cover price does the company give distributors?
Distributors typically buy magazines at a discount from the cover price.
What percentage of the company’s newsstand copies is returned?
The industry average is 65 percent.
How often does the company pay large retailers for favorable display space?
This practice has become more common in recent years.
ORGANIZATION AND MANAGEMENT
Is the company independent or part of a larger corporation?
Magazine publishers are being absorbed into larger media companies.
To what extent are editorial offices separate from business offices?
Editorial offices must sometimes be located in big cities to attract appropriate employees.
What is the annual turnover of editorial employees?
The annual personnel turnover rate for the information industry, including magazine publishing, is less than 25 percent, slightly lower than the national average of 35 percent.
How reliant is the company on freelance contributors?
Most magazines contract with freelancers.
FINANCIAL ANALYSIS
How profitable has the company been in recent years?
Many publishers have had losses in recent years, partly as a result of the late 2000s recession.
How has circulation changed?
Nationally, magazine circulation has been flat for many years but took a dip in 2009.
How vulnerable is cash flow to seasonal fluctuations?
Advertising is usually heaviest in fourth quarter.
How do large receivables impact the company?
Advertising agencies usually pay in arrears.
To what extent has the company had to write off significant amounts of bad debt?
Many ad agencies have poor credit histories.
BUSINESS AND TECHNOLOGY STRATEGIES
How does the company adjust to cyclical advertising revenues?
Advertising from large industries like cosmetics, toiletries, and food products can rise or fall sharply.
How often does the company launch new titles?
The failure rate among new publications is high.
To what extent does the company plan to buy more titles?
Consolidation of titles creates efficiencies in selling advertising space.
What sort of computer systems does the company use to create its magazines?
Most magazines are created entirely in a digital format that can be sent straight to the printer.
To what degree are Internet versions a viable alternative to the company’s print offerings?
Internet versions are a growing segment of total circulation sales.
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