Rising East Essays

Introduction: Savage Regulator

Recession is a savage regulator of the magazine industry. It hacks at jobs, magazine titles and people’s roles. This industry is particularly based in London: 18 of the top 20 consumer publishers employ their journalists, publishers and commercial staff within Greater London; also 18 of the top business-to-business publishers do the same; and 13 of the top contract, “customer” magazine publishers, the third leg of magazine publishing, employ their staff within Greater London. The big players in the magazine market – Bauer, IPC, National Magazines, Condé Nast – all have their operations within the M25. And most of them operate within five miles of the centre of London in a tight group of postal codes – mostly W1, WC1, SE1 and SW1 1.

Magazines first hit

Magazines are hit early by a recession because advertising is one of the first things to go when other industries look for cuts; and because magazines are discretionary spending. If you don’t know what tomorrow’s business is going to look like, many business sectors see it as folly to continue to pour money into advertising with its often questionable results. And, as all magazine publishers realise, magazines are a discretionary buy for the public: nobody has to buy a magazine; they are, in this sense, a luxury purchase. The decline of circulation figures shows just how much the buying public is cutting back on this leisure activity. At the same time the distribution channels of magazines – newsagents and especially supermarkets – are trying to keep their profits up or at least stay in the black by bargaining harder for their margins from magazine publishers.

What’s recession and what’s structural?

As if this was not enough, there’s worse. Magazine publishers now find it hard to distinguish what is the effect of a recession in the purchasing of advertising and copy sales, on the one hand, and the effect of a structural change as their readers, or some of them, move online to Internet-based media. If it’s a recession, then they can ride it out as they have in the past. If it’s a structural change, long predicted and already underway before the recession, then many need to cut their losses on the bulk of their revenue from paper-based products, and plunge deeper into the digital world. Yet as they are facing the further investment required in new digital products, they also face a contraction of revenue from their traditional paper-based magazines, squeezing the amount they can invest in their future.

London’s magazine publishers have been used to hefty profit levels. The NUJ calculates that Informa had a margin of 22.9%; Reed 24.8%; and IPC 15.8%. Other sectors of commerce and industry would give anything for such margins. As public companies their shareholders have become accustomed to these margins, generating the profits for good dividends. In order to try to hold these levels in times of recessions, redundancies have to be made and any publication in the red or not “performing” is up for the axe. Holes are appearing in the offices of London’s magazine publishing companies where perfectly good magazines used to be produced, and journalists, publishers and commercial staff employed.

It all makes for a perfect storm.

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Men’s magazines

Some of the lightning in this storm has already struck. The men’s magazine sector has been particularly hard hit. Arena has gone down. It was a leading men’s magazine in its time, stylish, fashionable and agenda setting. It appealed to the new man of the creative industries and won first a hard core readership, then a wider influence, and then fell back into a hard core readership in the crowded men’s magazine market which could not sustain enough profit for its publisher Bauer to keep afloat. For 22 years it served up style and even substance for its readers. Many came to it when The Face, seven years younger, went down in May 2004, switching from the iconic 1980s style and culture magazine to its younger competitor. But even this could not stem the steady decline: Arena’s circulation peaked at about 90,000 a month in 1996, then fell away through 44,000 in 2003. It just could not compete with its rivals within even its own publishing house which include FHM at about 273,000.

Arena was close to the hearts of many magazine journalists. It was the type of magazine they read, admired and would have aspired to work on. It was emulated by others which have also gone, such as Jack (2002-04). It is part of the wreckage in the men’s magazine market. This wreckage includes the print-version of Maxim which closed this April. Maxim was “down market” compared with Arena: more girls and gadgets. Its success had made Felix Dennis a reported £121 million mainly in the UK and USA, when in 2007 he sold off worldwide publishing rights to venture capitalists. But now the title is only available online.

The whole men’s and lads’ sector has been hit by falling circulations: Loaded down by 22% in 2008; FHM by 14%; and weekly lads’ magazines which once did so much damage to the monthly men’s magazines, are also down themselves. Nuts fell by 13% in 2008 and its rival Zoo by 19%. Increasingly the readers of these magazines and others expect to get their “content” free on the Internet. Again the crunch question which London’s magazine publishers have to decide: recession or structural change?

Maxim is still available online. Dennis Publications now have a growing portfolio of online magazines. Monkey “subscriptions” are up 15% to 284,000; iGizmo is up to 101,785; and iMotor is up to 108,000.

But other sectors are also hit. Perhaps the strangest death is the closure of Press Gazette by Wilmington. This was the journalists’ own publication covering all media. Wilmington tried to revive it after it nearly died, but could not interest enough advertisers to support it nor journalists to buy it. What better sign of the times? Other sectors where there have been clusters of closures include lifestyle, women’s magazines and teen magazines 2.

Pressure from Online

This pressure on print titles and the rise of online titles creates pressure for London magazine publishers in two ways. How can the journalists versed in print be retrained? How can the commercial side of the business develop the new business models to make them work given that “content” online is increasingly free? And it’s not only the Internet. Increasingly magazine publishers are dropping the concept of the magazine: they are focusing on the “content” deliverable to anybody on any media platform whenever and wherever they want it. That is the depth of the structural change underway.

Magazine publishing companies had hoped that “online” publishing would by now be delivering about 20% of their revenues and perhaps a higher proportion of their profits. But they have seen, in most cases, online revenues fail to reach this level while the “traditional” 80% of their business based on paper magazines falls away, sometimes at some speed.

The only answer is cuts in costs. And the costs today are people. The printing presses are long gone and the much of the production process after editorial is outsourced. The pressure on the magazine publishing supply industry is shown by the announcement in January 2009 by St Ives, a major magazine printer, that it would make 170 people redundant as it issued a profits warning.

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Falling Propaganda Value

The position of St Ives does not hit London jobs so much because it operates outside London. The position of magazine publishers does. Magazine publishing is one of the sparkling bits in the jewel in the crown of London employment: the creative industries. It was a focus of propaganda and pride, along with the financial sector, for London’s politicians. London was the centre for 40% of the nation’s creative industry employment, the Department for Culture, Media and Sport reported in 2007. Neither the creative industries not the financial sector are so much of a focus for propaganda and pride now. The Greater London Authority does not focus on the creative industries as it did. The most recent figures for employment in the sector are from 2002. Magazines are in the “publishing” sector. This had an employment level of 39,000 staff and 12,000 freelances in 2002: 51,000 in all. And there has been a grand confusion about the levels of employment even in this larger sector of employment, depending on which source you trusted. IPC has about 2,200 people employed directly on the staff within London. Bauer, the Germen owned magazine publishing house, has a smaller number because of its extra location in Peterborough. In all I estimate that there are about 10,000 people in magazine employment in London. And this is a very conservative estimate.

‘Creativity’ on the cheap

It is not only the numbers which are under threat; there is also pressure on the type, rhythm and status of the work. First the status: there are far more people willing to enter the magazine industry in London than jobs. Publishers offer “work experience”, often unpaid. This is, in effect, no-waged labour for publishers. And publishers were using more freelancers to fill their pages. This was in effect casualising magazine work. I say “were using freelancers” because one of the casualties of the recession is the freelance budget. Employed staff are having to generate more as a result. But to the rescue comes User Generated Content (UGC): let the readers write the magazine, or at least parts of it, online. This is the ultimate casualisation of the workforce. Yet, if the readers can write their own magazine, why have magazines at all? What is the authority of magazines? Magazine publishers hope that they can work the formula that content creates communities and communities can be commercialised. They look at Second Life, YouTube and other community sites and say “we can have a bit of that”. But that puts them face-to-face with pure players: online community sites which focus exclusively on that business without having the problems associated with managing the heritage of magazines.

The development of online publications – first as an extension of the paper magazine then as often a substitute for it – means that the magazine production workforce is being reskilled to work across all the media. But given no extra time to do the extra work.

Tricky Matrix

This development of online publishing raises the issue of how magazine publishing companies are managed. Magazine publishing companies were never monolithic organisations; they were more like villages linked loosely together into a confederation. Each village was almost self-contained, a production line for the content often with its own commercial side with associated central services to support it. But the development of online publishing means that most magazine publishers have created a central operation of online expertise rather than scattering this expertise among the villages. In short, they have built a matrix style of organisation instead of a product-oriented style. And matrix-style organisations are the most complex to manage. Several magazine publishing companies are only just realising the complexity of the task facing them.

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Capitalists Flee

Two magazine publishing companies have in the past few months shifted their HQs to Switzerland: UBM and Informa. Informa owns Lloyd’s List, among other publications, the publication first put up on the walls of Mr Lloyd’s coffee house in the 1730s, the era of the birth of the magazine industry in the UK. The stated reason is that Informa will be able to cut its tax level on profits to 26-27% from 30-31%. This five percentage point reduction in taxation as a result of being a Swiss-based company may warm the hearts of the shareholders. On last year’s tax bill it would save £1 million. But it will be costly. All those air fares, all the costs of opening up an office in expensive Switzerland, all those hotel bills.

More important than cutting the company’s tax bill, maybe, is that the key directors of the companies can now become non domiciled, slash their own tax bills and not be open to the greater scrutiny the UK regulations may demand in the future for directors of publicly-listed companies. No financial director of any magazine company would be earning their salaries, bonuses and share options in the next months unless they were also examining the benefits for them, their fellow directors and their shareholders by a similar move. We can expect more of the same.

These two moves to Switzerland are part of the trend in London’s magazine publishing sector to hollow out ownership and to move ownership outside London, let alone the UK. IPC was taken over by AoL Time Warner. EMAP was dismembered as a UK-listed company by, on the one hand, a Guardian+venture capitalist operation and, on the other, by Bauer, a German family-owned publishing empire. In other words, the London magazine publishing sector is increasing foreign and privately owned: not private as in public sector and private sector, but private as in family owned and not fully accountable to markets nor required to disclose comprehensive details of operations.

The privately-owned companies within the London magazine publishing scene now include: Bauer (German family-owned company); National Magazines (part of the Hearst family-owned corporation of the USA); Condé Nast (part of the Newhouse private family group of the USA); Haymarket (Lord Heseltine’s publishing empire); and Dennis Publishing (Felix Dennis’ own company).

An Industry Created in London

The London magazine industry started with private wealth. The UK magazine industry was created in London in the early 18th century. Pre-publication censorship by the state was abolished in the mid-1690s giving licence to publishers to debate the issues of the day which had, until then, often remained closed to the public. Magazines recognisable as such by today’s conventions, started to be published in the 1710s. They were projects, a projection of ideas to the public by the editor. Better to debate the ideas than the fight over them as in the Civil War of the 17th century. Editors projected their ideas through their publications to the public gathered in coffee houses and their homes. The public debated and fed back their own ideas in letters and contributions. These were then fed back into the public. A circuit of information and ideas about politics, manners and values was established, just like the circuits of trade then expanding across the globe making London the centre of trade in goods and ideas. London was by then the largest city in Europe – 600,000 people out of the total population English population of 5.5 million. The next largest town had 30,000. It was sucking in people from the countryside and provincial towns. What they should think, do and judge was provided for them in the magazines they bought and discussed. The early pioneers included Joseph Addison (1672-1719) and Sir Richard Steele (1672-1729). They wrote, edited and published The Spectator and The Tatler. They dedicated themselves to refining English manners, supporting the emerging constitutional monarchy, lauding trade and proposing, in the most refined way, that pleasure and happiness were a suitable aim. In 1711 Addison claimed in The Spectator to sell 3,000 copies and calculated with for 20 readers for every copy he had a readership of 60,000 – 10% of London’s population. The first publication to bear the name magazine was Edward Cave’s (1691-1754) The Gentlemen’s Magazine which lasted from 1731 to the eve of the First World War.

Note that none of this 18th century growth in magazine production had to do with a new technology: printing remained much the same as in Caxton’s time until the development of the steam-driven rotary press in the early 19th century.

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New Middle Class

This kind of plant came into its own in the 19th century with the growth of a new middle class eager to spend their leisure time improving themselves, which they often did by reading magazines. Charles Dickens (1812-1870) fed this market with his Household Words magazine and his contributions to the magazines of other publishers. Another spurt in magazine production was created in the 1870s to feed the newly educated working class now in receipt of free, elementary education.

Great publishing houses were created around the success of a magazine: one of the greatest being the Newnes Company founded by George Newnes (1851-1910) who started in the Midlands and moved his operations to London. Newnes published The Strand, Titbits, Wide World Magazine and Country Life, still published by Newnes’ successor company IPC. Thomas Gibson Bowles (1841-1922) also built a magazine empire in London: part of it still remains in family ownership, The Lady first launched in 1885. The Lady, by the way, has been relaunched after years of steady decline. It has gone full colour, put the classifieds in the back and gone to a larger size.

New Projects

The desire to project ideas into the world is still a motive for launching magazines. Monocle, which claims to be a briefing on global affairs, business, culture and design, achieved its second anniversary in March. It is the latest venture of Tyler Brûlé who had previously made his mark by launching and running Wallpaper*. Brûlé is building a small empire around Monocle, opening a chain of small shops across the globe to provide the type of stylish artefacts beloved of his readers.

Publishing empires are still today built out of successful magazines. Haymarket, launched in 1957 by Michael Heseltine and partners, has grown to be a worldwide operation generating profits of £31.7 million on a turnover of £247 million, a 12.8% margin. His flagship magazines include Campaign, Management Today, What Car?, GP and F1Racing. Another is the £85 million turnover empire of Felix Dennis founded in 1974 and now with over 50 magazines. Having caused the axing of so much timber for their papers, both are making amends by using their wealth to plant the two, largest privately-owned forests in the UK. Both companies are counter-cyclical: when publicly listed companies are weakened by recession they often go on a spending spree picking up magazines at knock down prices. But what is a knock down price in today’s terms? With circulations on paper declining what will this or that magazine be worth in a couple of years’ time? The answer depends on what is caused by the recession and what by the structural change to online technologies – and this is extremely hard to quantify.

Leaving Magazines, Leaving London?

Sensing the shift to online provision of information some magazine publishers want to get out of the business altogether. Reed Business Information, based in Sutton, was put up for sale by its parent Reed Elsevier but it failed to find a buyer at an acceptable price. Once the storm abates this publisher of, among others, Computer Weekly, Farmers’ Weekly and Flight International, will presumably start looking for a buyer again.

Addison, Cave and Steele needed to be in London in the 18th century because that was where their reading public was and London was the centre of their gaze. Their magazines could be distributed through the postal system along the growing network of roads. Newnes and Bowles needed to be in London in the 19th century because London was the centre of the rail network and, again, their sources were mostly in London or could communicate easily with London. Hence history determined the clustering of magazine publishers in London. Now sources are not so much met face-to-face over the lunch table but online. And distribution comes from the print plants which are scattered across the country. So the focus on London is in danger. Central London is expensive compared with a business park outside the M25 or along the M4 corridor. We can expect magazine publishers to start seriously looking at their central-London locations and deciding to shift their operations outside.

For some, such as Condé Nast and National Magazines, the thought of relocating their operations outside London is probably inconceivable. For some others it will be inevitable.

Conclusion: changes come storming through

The recession accelerates change: change in location, change in levels of employment, change in jobs, and change in the media for the delivery of content. There will be a London-based magazine publishing sector after the storm has abated. It will be smaller. It will be more controlled from outside London. And it will be more focused on online publishing rather than its traditional paper-based product.

Richard Sharpe is a founding partner of editorial trainers and consultants, ETC. He is a research fellow of the University of East London, and key contributor to UEL’s postgraduate courses such as MA Magazines and MA Journalism and Society.

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Notes

1. 1Postal districts of leading London-based magazine publishers:
   • Bauer: WC2
   • BBC: W8
   • Cedar: W1
   • Centaur: W1
   • Condé Nast: W1
   • EMAP: NW1
   • Haymarket: Hammersmith and Teddington
   • Hello!: SE1
   • IPC: SE1
   • John Brown: W10
   • National Magazines: W1
   • Northern and Shell: EC4
   • Publicis: W1
   • Time Out: WC1
   • UBM: SE1
2. 2

Recent magazines closed in London

Men’s	Maxim	Arena
Frees	Sport
Women’s	New Woman
Business	Brand Strategy	Press Gazette
Lifestyle	BBC Good Homes
Teen	Cosmo Girl

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