Magazine Publishers
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Industry Overview
About 1,000 companies in the US publish magazines, journals, and tabloids, with combined annual revenue of about $40 billion. Large companies include PRIMEDIA, Meredith, and the magazine divisions of integrated media companies like Time Warner and The Washington Post Company. While the total number of magazines published in the US is greater than 10,000, only about 2,000 have significant circulation. The industry is concentrated: the 50 largest companies hold almost 70 percent of the market.
Competitive Landscape
Demand for magazines is driven largely by growth in consumer income. The profitability of individual companies depends highly on marketing expertise. Small companies can compete by specializing in niche topics and markets, while larger companies benefit from a wide selection of magazine titles to offer advertisers. Large companies also have economies of scale in production and distribution. The industry is labor-intensive: average annual revenue per worker is $120,000.
Products, Operations & Technology
Products include weekly and monthly general interest magazines, industry trade publications, and various non-print information products like CDs and Internet websites. General interest magazines account for about 60 percent of industry revenue, trade publications for 15 percent.
Most companies have an editorial staff that prepares features and a business staff that handles promotion, production, circulation, and advertisement sales. Freelance writers are often used in addition to in-house staff. Printing may occur at one or several locations, depending on how widely the magazine is distributed. Some publishers operate their own printing operations, but most have contracts with outside printers who can make more efficient use of expensive printing equipment. Even companies that use outside printers must often buy their own paper, usually coated stock that fluctuates significantly in price.
Magazines have two major sources of revenue: circulation and advertising. Overall, about 35 percent of industry revenue comes from circulation sales, either single-copy sales or subscriptions. For many large-circulation titles, like Sports Illustrated, single-copy revenues are less than 10 percent of subscription revenue. But for a large number of titles, like Cosmopolitan, single-copy sales provide the bulk of circulation revenues. Subscriptions are very valuable to publishers, even though they're often achieved by giving subscribers a large discount from the single-copy price. The value derives from having a steady readership - with typical renewal rates of 70 percent - and access to information about the magazine's readers. Many publishers rent their subscriber list to marketers. Some magazines have no circulation revenue; they're specialized controlled circulation publications sent free to individuals who have signed up to receive them.
Advertising is usually a greater source of revenue for publishers than circulation, overall accounting for 50 percent of industry revenue. To a large extent, magazines are a vehicle to present advertising to a selected group of consumers. The largest advertisers in consumer magazines are car, computer, financial services, and drug companies. The average ratio of advertising to editorial pages (those with content) in consumer magazines is about 1:1; in other words, 50 percent of a typical magazine is devoted to ads. The two types of advertising are formatted display ads and direct-response promotions, which include tear-outs and inserted postcards for the reader to respond to by phone, mail, or email. Advertising rates depend on the size, color, and positioning of ads, as well as a magazine's circulation.
Publishers and independent firms closely measure circulation because of its importance to advertisers. Publishers usually guarantee a certain circulation (“rate base”) that may be lower than actual circulation. Publishers can estimate circulation fairly accurately by counting subscriptions, single-copy sales to retailers, and returns from retailers. Third-party firms, the most prominent of which are the Audit Bureau of Circulations (ABC) and BPA Worldwide, also conduct independent surveys. Advertisers measure the cost of reaching a target audience by dividing the cost of a magazine ad by the number of thousands of readers who will see it, expressed as a cost per thousand (CPM). For example, a $30,000 ad that reaches 1 million readers has a CPM of $30. Extensive research defines the precise demographics of a magazine's readers – by criteria such as age, sex, income, education, location, and interests -- so that publishers can offer advertisers a highly qualified audience. The Publishers Information Bureau (PIB) tracks the quantity and types of advertising pages in many consumer magazines. The Standard Rate and Data Service (SRDS) compiles information about ad rates.
Magazine publishers use computer technology heavily to create and edit content and page design, prepare copy for printing, and manage distribution. Some magazines publish a digital version on their websites. Ad content is digitized, and printing presses are typically computer-controlled.