Jack Kliger, Breakfast with a Leader

December 7, 2005

Jack Kliger
President & CEO
Hachette Filipacchi U.S., Inc.
Chairman
Magazine Publishers of America

MPA Breakfast with a Leader
December 7, 2005
New York, NY 

Thank you, Mark, and good morning, everyone.  And thanks to our friends at AdMedia, who sponsor these breakfasts and to the MPA.

I should also thank you for selecting Pearl Harbor Day as the day for me to give a speech about being prepared for dealing with change.  Hopefully this will NOT be a speech that will live in infamy.

And thank you also for referring to me in the invitation as a titan of the industry.  My mother asked if that’s the same as being the Titanic of the industry.  “No, Mom, it just means I need to lose a little weight.”

These forums offer an opportunity to discuss issues, and this morning I’m going to focus on three I think are among our most pressing issues.

First is ensuring our credibility with readers and advertisers.  Second is overhauling our audience measurement system.  And third is  using technology to recharge our business.

First  magazines’ credibility with our customers.  Readers trust magazines, both the editorial and advertising, more than other media.  Our editorial integrity and objectivity are essential to preserving that trust.  Nothing will be more damaging to that trust and to our credibility than blurring the boundaries so that readers have difficulty distinguishing between editorial and commercial messages.

Magazines are not plagued by TiVO or zapping problems, which have lead to TV commercial avoidance and which have driven the demand for product placement by advertisers.  Not only do magazines not have an advertising-avoidance problem, but quite the opposite is true.  Numerous studies have shown that magazine readers actually welcome and value the advertising in our pages.  They view it as a part of their reading, as part of the content, not as an interruption.

So we need to keep in mind that product placement is an advertising solution driven by a problem our medium doesn’t have.  Our advertising challenge is not how to deal with commercial avoidance, but rather to show how magazine advertising is effective – which we can and must do.

But, just as it is important for readers to trust the editorial content of our magazines, it is important to our commercial integrity for advertisers to trust what we say about our circulation.  And trust is earned through actions, not words.  That means publishers need to act on the commitment we’ve made as an industry to follow “the highest standards of circulation reporting.” 

Each of us needs to take a hard look at our circulation practices and eliminate anything that has even the potential for being misleading.  Simply put, no magazine company should claim that someone has received a copy who hasn’t, that someone paid for a copy who didn’t, or that someone paid more for a copy than was actually paid.  We need to embrace – not resist – transparency in circulation reporting.  And practices that are unacceptable in any other line of business should certainly not be tolerated in ours.

At the same time, we need to recognize that  the issue of unacceptable practices and circulation transparency is a different one than the connection between audience measurement and distribution and readership.

Which brings me to my next point -  the need to overhaul the metrics of magazine measurement.  It is essential, I believe, that our industry moves to a more timely system of readership measurement – a system that shows the connection between distribution and readership more effectively.

The 4As, ARF and ANA recently announced their Audience Measurement Initiative, which is designed to examine measurement in all media. Our industry supports this initiative and we want to ensure that magazines are a part of that evaluation from the beginning.

We should also ensure that magazine measurement covers three subjects – accountability, comparability, and engagement – or what I’ll call ACE:

- Accountability in measuring reader exposure and connecting that to behavior;

- Comparability in that there has to be more timely data, with magazine-audience accumulation on a weekly – not monthly – basis, to put us on a par with audience-accumulation data for other media;

- And engagement metrics to demonstrate that the strength of engagement leads to measurable results for the advertiser.

Magazines have led the charge in focusing on engagement, starting with the work we did with Northwestern University three years ago.  We have been very effective at communicating our medium’s strength on engagement.  In fact, some think engagement is just a magazine measurement. 

But engagement levels exist in all media, and more advertisers and media have begun focusing on it as a metric.

This is good for magazines.

But for our audience measurement to be truly connected to advertising-effectiveness measurement, it must include all of our readers – and I mean readers from both paid and non-paid sources.

Research has consistently shown that the quality of engagement with a reader is not determined by how much – or whether – he or she paid for the magazine, or by the circulation source. 

A number of studies show that the magazines read in public places – such as medical offices, hair salons, and fitness centers – bring a valuable audience and return to the advertiser.

The Affinity Research Group did work that examined actions taken by magazine readers, which underscores this point.  Based on interviews with more than 60,000 magazine readers in 2005, their research concluded that reader actions taken, based on exposure to specific magazine ads, were similar between the readers derived from paid and non-paid sources.

MRI data shows that in 2005, 24% of magazine reading is done in public places, up from 14% in the last 10 years.

These are often readers with desirable demographic characteristics, and public-place copies typically generate many more readers per copy than paid sources.

The bottom line is:  We need a better and faster system of audience measurement that relates to and underscores the connection between distribution – from both paid and non-paid sources, and readership.

In order to move toward a better system of measurement, publishers, the MPA, and representatives from the research and advertising communities, have been meeting to agree on specific goals for the evolution of more timely, reader-based magazine measurement.   The goals they have identified are:

- To provide audience measures, using distribution as a point of reference, so that reader behavior can be evaluated.

- To issue timely data as close as possible to when the consumer is exposed to the message.

- To measure as many magazines as reasonably possible.

- And to explore measures that provide insight into consumer receptivity based on engagement.

As an industry, we need to participate in the audience-measurement initiative and push for these ACE goals as quickly as possible.

In addition to maintaining our integrity with readers and advertisers and changing the metrics of measurement, there is a third thing I want to talk about this morning, and that concerns the many opportunities technology offers for transforming and recharging our industry.

Everyone knows that today’s consumers have more control than ever over what information and entertainment they receive and when, where, and how they consume it.  In a world that is content-hungry, magazines have advantages.  We have always operated from the perspective that the consumer is in control.  And magazines create trusted, branded content. 

We are now beginning to see how effectively we can use technology to build new, engaged consumer relationships – particularly with young, technology-savvy consumers.

Through digital asset management and new content-management systems, technology has made it possible for magazine publishing companies to extend their brands and content to new platforms – introducing fresh audiences to our products and bringing new sources of revenue to our companies .

Migrating our assets to new digital platforms will require new strategies for creating content.  As content is increasingly conceived for multiple platforms, we may, at times need to form new partnerships.  We’ll need to develop the skills and systems that enable print- and screen-based resources to be shared and vigorous cross-promotion to be fostered. 

But we must also focus on the opportunity technology offers our industry to improve our existing magazine distribution strategy and our front- and back-end processes.

One example of this is digital editions of our magazines.  At Hachette, we’ve announced that we’ll offer all of our consumer magazines in digital format at the end of first-quarter 2006.

Digital editions offer the opportunity to add rich media to our editorial and our advertising pages, among other advantages.  Let me describe two immediate applications for digital editions:  in complimentary subscriptions and in the college market.

As we know, magazines issue millions of comp copies every year in support of advertising sales efforts. The collective cost is significant, as is the effort required to maintain accurate mailing lists.  And many of those copies don’t get to their intended recipients. Having complimentary subs delivered in digital format would not only generate savings but would also make additions and deletions of names a much simpler process.

A database of complimentary subscribers with a simple sign-up process for receiving digital copies could cut much of the waste from the system and would get copies of our magazines digitally into the hands and before the eyes of the right people at the right time.

Digital format subscriptions can also serve us well in the college market – traditionally a distribution “black hole” for magazines.  There are few distribution points for magazines on college campuses.  Students don’t generally live in one place for four years and direct-mail subscription marketing is difficult.

But today there is one address students tend to keep throughout their time at college:  an e-mail address.  Does anyone in the room know a college student who doesn’t have a laptop or desktop computer?

College students live in a screen-based world, and digital subscriptions present a tremendous opportunity to reach this important and underserved segment of readers and develop their magazine-brand loyalty at a key life stage.

Technology has already enabled our magazines to be produced better and distributed faster, and  there is some room for improvement in both of these areas.  And in the future, digital technology will enable us to provide advertisers with faster distribution and audience measurement and reporting.

But it is also very important that as an industry, we are committed to using technology to make it faster, cheaper, and easier to order, to place, and to pay for advertising in magazines.

Right now, it is much more cumbersome and costly for advertisers to do business with magazines than to advertise in other media.

And we all know it is much more efficient and profitable for advertising agencies to deploy budgets in electronic media than in magazines.

Technology gives us an opportunity to create systems that make it faster and cheaper to place advertising in magazines.  And I can’t stress enough how important this is. 

Many publishing executives’ eyes glaze over when we talk about this subject.  And that is a major mistake.

The work of the IDEAlliance in this area is key. We cannot afford this disadvantage any longer, especially now when digital technology gives us a much greater opportunity to make this part of our business more efficient.  Every magazine publisher, big and small, needs to make this a priority.

So what's the bottom line on where we need to go on these issues? 

1. We need to protect the trust and credibility we've built with our readers by preserving the boundary between editorial and commercial messages.

2. We need to weed out the misleading circulation practices that endanger our credibility with advertisers.  At the same time, we should understand the issue of circulation transparency and the issue of readership and audience measurement are different issues.

3. In that context, we need to develop metrics that connect net distribution – both paid and nonpaid, to audience metrics so we can measure our readership in a more timely manner comparable to audience measurement for other media.  This is essential if magazines are to participate fully in the discussion of advertising effectiveness, ROI, and ROO. 

4. And we need to embrace technology as an accomplice in our efforts to develop new and better products, new distribution channels for our magazines, and new systems that make it faster and easier for advertisers to do business with us.

Let me add that our collective challenge is to not only address these issues, but also to continue to market our medium to advertisers.  That means we must still work on changing one our industry’s long-standing practices:  focusing on selling our individual company’s magazines and packages to advertisers while negatively selling against other magazines.

I believe we have made progress by creating the Magazine Marketing Coalition, with the goal of promoting the power of magazines, and by launching a marketing program, including the advertising campaign that has run this past year, as well as sales training for our magazine staffs.

Unfortunately, our ad agency closed down recently– hopefully not because we were the client!  But we are choosing a new agency and will be unveiling the second phase of our campaign in the coming weeks. 

And we have made progress by centralizing valuable tools for magazine sales teams on the Web. 

In marketing our medium, I believe we have to adopt a spirit of perseverance. Changing habits and attitudes won’t happen overnight, but with every speech or sales call we are improving our own ability to articulate the power and the value of magazines to our customers. And we need to continue doing that.

We need the perseverance to insist and ensure that our business culture does change. We must stop the practice of tearing down the value of our medium by selling so negatively against only each other.  Instead, we should use every opportunity to express positive messages about our medium, it’s strengths and its value.

While we face serious challenges, there are enormous opportunities for magazines as this media landscape unfolds.

Let us not stand in our own way and impede our progress.  Let us have a sense of both urgency and purpose and a firm belief that our issues are tactical but our opportunities are strategic.

Thank you.