Ad gloom hangs over launches

Publishers are putting millions into magazine launches, just as advertising stagnates. Colin Grimshaw reports.

It is boom time for consumer magazines - or so the volume of mega-launches executed in 2004 would have us believe, with plans for more in 2005.

Zoo and Nuts kick-started it, creating a lads' weeklies genre, followed by celebrity-led Reveal. Their £10m launch budgets will be surpassed in March with the £17m debuts of weekly fashion glossy Grazia and 30-something lifestyle title Easy Living, bringing the total launch investment in the sector to more than £60m inside 12 months.

Publishers appear to be supremely confident about the immediate fortunes of their sector. Yet two reports published last week do not support such assurance. The Advertising Association reported consumer magazine advertising up 1.5% year on year in the third quarter. But this amounts to just 0.3% after inflation is discounted, easily the lowest increase of all media sectors. The average real growth for all media was 3.3%.

Furthermore, ZenithOptimedia's latest advertising forecast predicts further magazine under-performance, with growth stagnating to zero over the next three years. Real growth in 2005 is forecast at 0.5%, whereas TV is expected to achieve 2.2% and newspapers 1.9%.

Tough competition

In light of this, many question whether the new entrants will merely ignite a dogfight, competing with existing titles for readers and advertising.

Tim Caira, press director at PHD, is sceptical about the new brands' ability to expand the advertising market. For the weeklies, whose business models are built more on cover price revenue, this is less of a concern.

However, he believes that there is a greater challenge for Easy Living, a glossy monthly, for which advertising will be the key earner.

Its publisher, Conde Nast, has an exemplary record with launches, most recently Glamour, but Caira argues that Easy Living will face tough competition for its target 30-something audience.

'It is a very competitive advertising sector, with low yields. I think Conde Nast is getting some nasty surprises and isn't going to generate as much for its advertising as it expected,' he adds.

Chris Hughes, publisher of Easy Living, rebuffs this assertion. 'I agree that 2005 doesn't look like a boom time for advertising, but we have had an extraordinarily positive response from advertisers,' he says. 'If the proposition is strong enough, a launch can always find a way of busting into the market.'

Hughes sees similarities with the cosmetics industry, a key advertiser category for both Easy Living and Grazia. Both sectors rely on innovation, constantly introducing and marketing new products to satisfy consumers' tastes for new brands. Just as women try new cosmetics and ditch their old brands, Hughes says new magazines, if done well, will squeeze out 'the weaker players'.

Creating categories

Where Easy Living hopes to find readers with a new take on an existing formula, Grazia is attempting, like Zoo and Nuts before it, to create a genre by putting a glossy celebrity, fashion and beauty package into a weekly format.

To succeed, it will need higher production values than a typical weekly, and a higher proportion of advertising.

Like Hughes, Paul Keenan, chief executive of Emap Consumer Media and publisher of Grazia, is undaunted by the challenge. He claims the women's glossy sector is crowded with un-differentiated products, with publishers having to cut prices to maintain their position.

Keenan blames 'me-too, rip-off' launches for failing to attract new readers into the sector and driving down ad yields, 'whereas Grazia is a genuine innovation that will shake up the market, and we expect advertisers to reward such innovation. They will enlarge their budgets for exciting propositions.'

Zoo and Nuts, he points out, are examples of successful innovations that have grown the men's market, adding about 400,000 young male readers to the weekly products, with men's monthlies shedding fewer than 100,000 readers.

However, advertisers have been slow to add them to their schedules, uncertain whether their brands sit comfortably among the titles' raunchy content.

Retaining readers

It is too early to tell the impact this year's other big launch, Reveal, which debuted in October, has made on the already crowded celebrity sector.

Its publisher, The National Magazine Company, claims that sales of the first three issues averaged 300,000, double its target, while the sector grew by 2%. Yet it admits that Reveal's sales went on to fall 40% when the 45p introductory cover price was increased to £1.

With all this investment, predictions that the sector will fail to profit from an overall surge in adspend over the next few years might seem odd.

But not to Caira, who believes magazines are paying the price for overblown claims about their relationship with readers.

'Publishers have historically sold the medium on the basis that magazines have an intimate, 'best friend' relationship with their readers, who are incredibly brand loyal, and advertisers have been prepared to pay a premium for this,' he says. 'But inducements to switch brand through expensive gift cover-mounts and price-cutting have made readers very promiscuous.'

Launches, backed by eight-figure marketing budgets, can only add to this promiscuity. In a flat advertising market, there are likely to be some bloody skirmishes for market share in 2005, with as many losers as winners.

DATA FILE

Year-on-year adspend growth (%)

2004-2005 2005-2006 2006-2007

1 Internet 9.3 11.0 7.9

2 Outdoor 6.3 5.5 4.9

3 Radio 2.5 3.1 3.0

4 TV 2.2 3.1 2.1

5 Newspapers 1.9 2.1 1.0

6 Cinema 0.8 0.9 1.1

7 Magazines 0.5 0.4 0.0

Total 2.4 2.9 1.9

Source: ZenithOptimedia Figures exclude inflation

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