COVER

A GOLDEN AGE FOR MAGAZINES

GUTS AND MONEY DRIVE NEW GROWTH

PATRICIA CHISHOLM July 17 1989
COVER

A GOLDEN AGE FOR MAGAZINES

GUTS AND MONEY DRIVE NEW GROWTH

PATRICIA CHISHOLM July 17 1989

A GOLDEN AGE FOR MAGAZINES

GUTS AND MONEY DRIVE NEW GROWTH

Customers in the midtown Manhattan restaurant last month were tired and grumpy, annoyed by an unusually long wait to pay for their fast-food lunch. Tempers were beginning to fray when a young woman in the slow-moving line suddenly laughed out loud. She was reading a magazine. Beguiled by pop art graphics in electric shades of blue, green and yellow next to a screaming headline, “Sex addicts, serial killers and the women who love them,” she passed the time discussing the article with a fellow customer. The publication, Fame, was launched only eight months ago, and already the glossy celebrity-and-lifestyle magazine has a circulation of 200,000. Like many other new magazines, Fame offers its readers temporary relief from an increasingly stressful world. And despite soaring costs and high risks, the late 1980s are

proving to be an era of unprecedented growth for many other new magazines in Canada and the United States.

The changing tastes of consumers, as well as the lure of generous profits for investors, have propelled much of the recent explosive growth in new magazines. With the market for specialized magazines nearly saturated, editors and publishers have turned their attention to a reading audience defined by age, income and attitudes—and away from narrowly defined special-interest groups. Emerging technologies have made fine production quality less expensive. At the same time, editors are discovering that competing media, especially television, are failing to fulfil the consumer’s growing appetite for a portable mix of information and entertainment. Robert (Terry) McDonell is editor-in-chief of Smart, a men’s lifestyle

magazine based in New York City that was also launched last year. Said McDonell: “Magazines are beautiful things. That was dimly perceived when other media were proliferating faster. But you can sit and look at a magazine slowly, read it, remember it, maybe even save it. There are very few things you can say that about and also offer the advertiser an opportunity to reach these people.”

As appreciation for the buying power of magazine readers grows, editors and investors are lining up to start their own publications. According to Samir Husni, professor of journalism at the University of Mississippi in Oxford, almost 500 magazines were launched in the United States last year, twice the number started in 1986. If the rate of new start-ups this year remains constant, even more magazines will have been launched by the end of 1989. Last year in Canada, 77 magazines joined the Canadian Periodical Publishers’ Association.

Staggering: The costs can be staggering. In the United States, where the vast majority of magazines that appear on Canadian newsstands are produced, many publishers estimate start-up costs for a top-quality magazine to be as high as $18 million to $24 million. And the triumph of starting a new magazine is often short-lived. In the United States, 50 per cent of new magazines have no second issue. More than 80 per cent disappear entirely within four years. In Canada, eight out of 10 consumer magazines do not survive past their fifth year.

But the rewards can be enormous. Peter Diamandis, president and chief executive offi-

eer of Diamandis Communications Inc., borrowed $780 million in October, 1987, to buy CBS magazines, owner of such money-makers as Road & Track. In June, 1988, he resold the renamed company to Paris-based Hachette Group, the world’s largest magazine company, for more than $860 million. And while the buyout was under way, Diamandis also hatched a new magazine aimed at middleaged readers who want to relive major news events of the past. Called Memories, the magazine has surprised even Diamandis with its success. Said Diamandis: “People are seeing the incredible amount of money that can be made selling magazines.”

Intense: In Canada, a smaller audience and intense competition from well-funded American publishing giants including Reader’s Digest,

Time, Playboy and Condé Nast Publications Inc.—publishers of Vogue, Gentlemen ’s Quarterly and Vanity Fair— make magazine publishing even riskier than it is south of the border. Said Lynn Cunningham, executive editor of Toronto Life magazine:

“Anybody who tries to start a

magazine in Canada right -

now needs their head read.” Cunningham points to a new federal sales tax that would apply to magazines, as well as plans to alter the terms under which postal rates are established. Both were proposed in the federal budget last April. James Warrillow, president of Canadian periodical publishing at Maclean Hunter Ltd., said that “substantial losses” could occur if magazines are forced to pay higher postal rates.

Cunningham credits such companies as Montrealbased Telemedia Inc., which owns Equinox and Harrowsmith magazines, with continuing to publish magazines for the love of it: losses at Equinox reached $260,000 last year. Telemedia’s moneymaking properties—including Canadian Living and TV Guide—subsidize its other ventures. It also expects to increase profits under a joint venture with Hachette, which publishes the spectacularly successful women’s fashion magazine Elle. Telemedia plans to publish a Quebec edition of Elle starting in September.

The Toronto Globe and Mail, owned by Thomson Corp., has launched four new magazines since March, 1985, and plans to launch West in September, as well as a redesigned Montreal. All of the Globe’s magazines are

distributed only with the newspaper. Globe publisher A. Roy Megarry told Maclean’s that the Globe uses its magazines as a “primary tool to develop circulation for The Globe and Mail.” He added: “ Outside Toronto, we get up to a 50-per-cent lift in single-copy sales when the magazines come out.” Megarry said that the

Globe wants its magazines to make money on their own. The Report on Business Magazine is the only consistent money-maker in the group, which also includes Toronto, Destinations (a travel magazine) and the fashion magazine domino. Said Megarry: “They’re too expensive to have just to get a one-day lift.”

Some other groups are also braving the deep waters of new magazine publishing. Maclean Hunter Ltd., which publishes Maclean’s, Chatelaine and Flare, last April launched Stature, a men’s fashion magazine aimed at affluent consumers in their 30s. Frank Stronach, the main shareholder of autoparts-maker Magna International Inc., last year created Vista, a glossy new entry into 3 the competitive field of busi! ness publications. And in § 1987, Conrad Black’s Hol| linger Inc. bought Saturday g Night and revamped the ven8 erable magazine.

At the other end of the spectrum, a group of three veteran journalists in Halifax—David Bentley, Lyndon Watkins and Dulde Conrad—run a shoestring operation that produces Frank, a sassy magazine of gossip and satire modelled on Britain’s Private Eye. Frank now prints 5,000 copies every two weeks and has survived without

advertising since its 1987 start-up.

The search for readers whose needs are not being met by other magazines can produce surprising results. Victoria, a women’s decorating magazine launched by Hearst Corp. in 1987, astounded the U.S. magazine industry by achieving a circulation of 750,000 in less than two years. According to editor Nancy Lindemeyer, Victoria ’s soft-focus photos featuring romantic, oldfashioned rooms, long lacy fashions and a minimum of print, appeal to busy, welleducated career women who are also looking for a little “grace and loveliness in everyday life.” Toronto-based nurse Agnese Bianchi, who says that she reads at least 10 magazines a month, agreed that it is Victoria’s quiet style that appeals to her. “I can sit on the porch at the cottage, put my feet up and have a little drink while I read it,” she said.

Women: Indeed, there is a 5 clutch of wildly successful I new magazines aimed at z women. Grace Mirabella, 59, I who edited Vogue for 17 years before being unceremoniously removed from her post last year, now has her name on a new magazine. Published by Murdoch Magazines, the first issue of Mirabella disappeared from newsstands in only a few weeks in May and June, forcing the new publication to rush out with its second issue ahead of schedule. A gracious, down-to-earth woman, Mirabella seems surprised by her fashion and lifestyle magazine’s immediate success. Said Mirabella: “Now I’m doing the things I always wanted to do.”

And Frances Lear, 65, has also scored with Lear’s, a New York City-based magazine aimed at women over 40. After little more than a year on newsstands, Lear’s boasts more than 350,000 new readers. Lear, a woman of iron determination, launched the magazine using $30 million from a $133-million divorce settlement with television producer Norman Lear. According to Lear, her publication has succeeded because there was no other magazine that exclusively addressed the concerns of older women, an affluent group of consumers that advertisers frequently ignore. Said Lear: “My mother’s life was very simple, but our lives are more complicated now. We must have support systems to help us, and magazines are one of those systems.” More and more, providing that support is the key to establishing a base of loyal—and affluent—readers. And for both editors and investors, finding those readers has become a game of nerve and intuition on which reputations and millions of dollars depend.

PATRICIA CHISHOLM in New York City