Jack Kliger: ABC 90th Conference & Annual Meeting

November 11, 2004

Jack Kliger
President & CEO
Hachette Filipacchi Media U.S.

ABC 90th Conference & Annual Meeting
November 11, 2004
Toronto, Canada

Thank you, Brian.   Good morning, and thank you for inviting me here today. 

I want to thank the ABC for its important role in our business.  I appreciate the conscientious commitment and hard work that many of you contribute to keeping ABC’s process up-to-date and relevant.    The role of the ABC is a good and necessary one and your organization is known for its high standards and credibility.  And part of your strength is the two points of view represented on your board by members from both the publishing and advertising industries. 

I am a passionate believer in the power of magazines, and I am optimistic about the future of our business.  I want to talk about some of the reasons why, and why I think we need to evolve some of our traditional practices, in order to take advantage of changes in the media landscape and make the most of magazines competitive advantage.

Now I can’t think of a time when there have been more high quality magazines being produced by magazine publishers.  Their content spans our culture. At Hachette, Car and Driver and Road & Track create content for enthusiasts who love to read about high performance and design in the automotive world. Unlike most cable TV shock news shows, TIME and Newsweek provide us with expertly edited news and analysis each week - GQ and Maxim report on style, substance and humor for the male reader. 

And long established brands like Atlantic Monthly and Esquire have re-invented themselves and are celebrated for excellence in writing and reporting.  Isn’t it great that 75-year-old brands revitalize their business?  Newer magazines like Oprah and Real Simple have made themselves known and successful in just a few years.  And this week, I’m proud that Hachette has launched For Me and Speed  - two titles targeted to younger readers in their twenties and thirties. 

The magazine industry’s ability to design, redesign, produce and distribute magazines has been greatly enlivened by technological advances in production and distribution.  So, technology has really benefited our business. And we now have, what I believe is the best content and production quality this industry has ever had, and I’m proud of it.  This is happening at the same time that other media are frequently dumbing down to reach the broadest possible audience to maintain eroding audience levels.  That’s a competitive advantage.

Magazines are, in so many ways, at the top of our game when it comes to putting out high-quality consumer products. I still believe content is king and our titles are strong brands beloved by consumers with content that is trusted, valued and credible.  The portability of magazines, the tactile experience, the beautiful images - are all qualities that are highly valued and help make magazines an engaged “lean in”  experience.  And, that’s a competitive advantage.

If one of the most valuable commodities that people have is their time, then the time a person spends with a magazine is really prime time.  Most people feel time slipping away. We are all trying to do six things at once and that includes the use of different media at the same time - like keeping the TV on while browsing on the computer. We all know that multi-tasking of media is becoming a big issue.  And not surprisingly, of all consumer media, magazines are the least multi-tasked when used by their consumers.  I guess when a person has their minds, eyes and hands occupied with a magazine, there’s not much attention room for anything else. At least that’s what I tried to tell my daughter’s boyfriend. 

So with all these strengths of engagement, how do magazines do better with and for advertisers?

One thing I believe strongly is that brand strategy should incorporate media channel planning at a much earlier point than it currently does.  One medium doesn’t do it all.  More than ever, what McLuhan said was right - the medium is part of the message.  Audience fragmentation, the rise of  many new media options and the increasing control of media use by consumers have all made the media buying  agency more important in brand strategy and I believe media channel planning will become a bigger part of brand strategy and come in at a much earlier point.

Currently magazines aren’t seated at the main table when clients are carving up their budgets to various media segments, we don’t get the entrée; we end up fighting for the scraps.  It’s not surprising that magazine reps have done so much negative selling against each other.  They don’t believe magazines compete with any other medium but their own.

But, going forward, magazines have, I believe, a golden opportunity to increase the value placed on our medium and, as a result, to increase share of investment.  One important difference is that our readers have been proven, over and over, to actually like the ads in a magazine.

As Donny Deutsch said recently at the AMC, the magazine industry should have our chest stuck out because magazine advertising is bulletproof.   And, it’s hard to say that about another other medium.

Does anybody know a TIVO or dvr owner who doesn’t skip the commercials?  Perhaps as some have said, the 30-second spot might rapidly be coming the advertising buggy whip of the new millennium.

Magazine readers are engaged while most other media advertising interrupts.  So, this past January, the Magazine Publishers Association formed the Magazine Marketing Coalition consisting of 22 magazine companies and our supplier partners to promote the effectiveness of advertising in magazines to improve advertising ROI. 

In May, we hired a respected strategic planning company to develop an industry-wide strategy. Briefly stated, the conclusion was that – at a time when consumers are rejecting advertising interruption and television viewership is fragmenting, magazines offer advertisers something important -  “engaged reach” , that is, our readers consider advertising a valuable part of magazine content and this engagement with magazine advertising is directly related to advertising ROI.

The Coalition has initiated a large-scale campaign to promote the value of magazines.   We hired Fallon New York to create advertising as part of the marketing campaign, and we’ve committed $40 million to this three-year effort which will also include advertising guerrilla marketing, events and PR.

And the stakes are high – as many of you know every 1% that magazines gain in their share of advertising expenditures is worth over $1 billion in advertising revenue to our industry.

So up until now, magazines have been in an advertising ghetto, and we’ve often times been told that we can only compete with each other and forget about getting share from TV, and we have become focused almost exclusively on competing against each other.

People shouldn’t be forced to live in ghettos and neither should magazines.  Our industry needs to expand its scope from just worrying about improving our own house or even our own street, but to look toward selling the desirability of the whole neighborhood.  We will not eliminate the competitive selling, but what we can shout about is to say what’s right about magazines.  Beyond promoting our medium, we also need to focus on running our business better.

If we want to focus on what really matters, I believe, it’s important to realize it benefits everybody; publishers, readers and advertisers if the magazine industry can focus more on circulation profitability.  Let’s face it, publishers have made too many consumer marketing decisions based on advertising sales department demands on circulation rate bases and as a result the effect on subscription pricing.

One thing that is very important, I believe, is to move the mission of the magazine consumer marketing department to focus more on two areas: circulation profitability and maximizing readership. 

We should learn something from the way that the cable television business operates.  The consumer marketing director of a cable TV channel is responsible, I believe, both for maximizing subscription revenue and growing audience. Their mission is to maximize subscriber revenue while attracting the largest number of viewers possible and their ad sales departments sell advertising based on that reach. Advertisers don’t really care what a viewer has paid for his or her cable service.

 It is to the benefit of both the advertiser and the publisher to work towards a similar mission for magazine consumer marketing departments. The current system makes that very difficult to accomplish.

It is extremely difficult for the head of  consumer marketing for a magazine publisher to make circulation decisions based on P & L issues and readership,  when managing to a rate base and when many sources of readership are undervalued based on price paid or source.

We also need to better understand the connection between circulation and readership and audience.  We need new forms of measurement based on engagement.   Engagement is a new currency in terms of measurement - not only for magazines but for all media.

At the AMC, Starcom’s Andrew Swinard said that he believes print is on the cusp of an explosion and the value placed on engagement is a key reason. 

As you know, the MPA’s Northwestern study began to take an overview of some of the real measurements of readership and involvement - why people like magazines, why people buy them and read them or don’t.   This year a new study, sponsored by individual publishing companies including Hachette, will look at measuring the relationship between pricing and retention.  I believe involvement level does not necessarily relate to price paid or source of subscription, and so far Starcom’s research confirms that.

Let’s face it, most consumers first decide what they want and then they figure out how to get it at the best price.  That’s the American way.  It’s true for cars, its true for lipstick, its true for Viagra and its true for magazines. 

And we need to do a better job in connecting circulation to readership because readership leads to audience which is really what impacts advertising ROI.  We need to change their magazine perspective to encompass our total readership – not just the 25% of the audience who purchased the magazines.

Magazines can’t really be comparable to other media unless we have not only credible readership measurement but also have audience accumulation data in a more timely manner.    The improved ability to measure circulation and readership accumulation via subscriber data bases and scan based trading data will enable our industry to move on this area.

Publishers also need to redirect where we spend our research monies.  At Hachette, we have dedicated consumer research focusing on the readers.  In the past, less than one fourth of the budget Hachette invested in research was focused on the consumer. That is not healthy.

Editors are more involved in shaping consumer research, they take ownership and incorporate the findings into the pages of their magazines.   We give editors, on a regular basis, key information about direct mail, renewal figures and newsstand data. 

We have reconnected the communication between those people who write copy within the pages of the magazine and the people who write copy asking for a subscription or renewal. 

In the area of single copy sales – we now – for the most part – have a collaborative effort between the editors who design the cover and those people responsible for newsstand sales.  The editors now have real influence and responsibility in the consumer marketing area. 

As I said before,  we should not fear technology’s impact on the future of magazines.  For example, I think that the Internet is one new technology that has and will continue to help magazines.

The Internet is one our best allies and a natural medium for extending our brands and our content.   The Web is a productive area to sample product, conduct research, sell and renew subscriptions and create new content forms.

Most magazine covers are now tested on the Internet.  The web is a fast, cost-effective way to communicate with readers about what they would like to read in our pages and also how they feel about advertisers’ products. 

It is not a coincidence that Greg Coleman, head of Yahoo, said at the AMC conference that he believes in the future there will be a natural alliance of print and the Internet vsTV .

Yet the Internet is a vast, unedited landscape of information.  One of the great strengths of  magazines is that they are highly focused and edited products, saving that valuable commodity called time. So when consumers are looking for information on the Web, I believe strong magazine brands have an advantage.
 
To sum up, magazines are better products than ever, at the same time that other media are seeing audience fragmentation and dumbing down their product. Magazines are a strong medium because of their powerful brands, excellent content and engaged reach with consumers.

The time is right to take advantage of the opportunity to aggressively sell readers’ engagement with magazines to advertisers, who are more interested in connectedness than ever.  With a long-term commitment, we have formed an industry effort to promote magazines at every opportunity.

As we focus on growing the share that magazines take out of the media pie, we must also  reshape audience measurement so that it is more timely and makes a better connection between circulation and readership.

We should move toward a system where the circulation director can focus on the things that really matter --circulation profitability and maximizing readership.

I believe we can also be confident that most of our readers will remain loyal to the high quality print products that they love.  Some will rely on the content that we create in other environments like the Internet. And some of our content will likely be delivered digitally in the future, but I’m sure the power and uniqueness of the printed page will endure. 

The success of the magazine industry will ultimately depend on whether we can act not only as a collection of companies, but as an industry and the ongoing success of the ABC will be based on focusing on those areas that really matter to publishers and advertisers at their point of connection the consumer.

I believe this can and must be a win win proposition.

Thank you for the opportunity to speak to you today.

Are there questions?