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NYT : Bad Business for Magazines About Business

By DAVID CARR

WHEN the Meredith Corporation announced its purchase of Gruner & Jahr's women's magazines last Tuesday, Meredith said that Gruner's business magazines, Fast Company and Inc., were not "material" to the sale. What that means is that two magazines that sold for more than half a billion dollars four years ago now have a value of zero.

As it flees toward its exit from a billion-dollar experiment gone horribly wrong, Gruner & Jahr, a division of the German media giant Bertelsmann, may salvage a few dollars, if not its dignity, by selling Inc. But Fast Company, always more of an idea than an actual magazine, is probably gone for good.

The decline of these two business magazines may reflect management pratfalls - usually a good guess at Gruner - but the bottom line may be darker and broader than that. Business publications, which spent years as the ugly cousins of mainstream media, were transformed into prom queens when the Web took off and gorged on the deal flow until they became as over-inflated as the sectors they covered. After the market bust, the herd was winnowed and publications returned to earth, but something funny happened when it came to touch bottom: there was none.

No one is surprised that Red Herring, a magazine that once weighed two pounds an issue, is now brochure size. But longstanding business franchises like Fortune, Forbes and BusinessWeek are finding little traction in a post- Enron world. Thus far, 2005 has been bleak, with all three magazines flat or off from last year's miserable advertising numbers. As one of the arch headlines that are their stock-in-trade might suggest, "Stuck to the Bottom in a Rising Tide?"

During the bubble years, a windfall of an additional 35,000 advertising pages flowed into existing business publications, along with a bunch of newly thrown-together magazines, some cynically conceived just to get a place at the trough. But never mind the dreamy days of 2000 - business publications would love to get back to the good old days of 1995, pre-boom, pre-bust, practically pre-history. Last year, according to Media Industry Newsletter, the big three in business sold just over 10,000 advertising pages, a shadow of the 18,300 they sold in 2000.

That drop is almost axiomatic, but they have yet to crawl back to their 1995 level of more than 11,500 pages sold. Collectively, the three are reporting almost half a billion dollars less in revenues in 2004 than they did in 2000. Those ad revenue numbers are notoriously inexact, but still represent a breathtaking hemorrhage.

The boom, the would-be salvation of a publishing sector that got no respect, has left it maimed. The day Gruner bought Fast Company was when the first cracks appeared, at least for me. On December 19, 2000, Daniel B. Brewster Jr., Gruner's chief executive, met with reporters in a conference room to explain why Fast Company, a five-year-old magazine, was worth $360 million, plus another $150 million if certain performance targets were met. (Mortimer B. Zuckerman, the seller, timed the market nicely.)

"This magazine's profitability, circulation and ad revenue has doubled in all five years of its existence," Mr. Brewster said, perhaps unconsciously invoking Moore's Law, a maxim that held computing power doubled every 18 months. He cut a very convincing figure, but I can remember making nervous jokes at the briefing with my fellow reporters - even then, the brawny pronouncements sounded brittle, past their prime and not a little scary. Could we, the lowly business press, become what we covered?

Sadly, yes, as it turned out. Skeptical readers now reserve special distrust for the business press, which blew air into faux companies and created princes out of people who turned out to be frogs, and felonious ones at that. ("The Brand Called You," was a trope for Fast Company, while Forbes reveled in "The Upside of Optimism.") Just as the sports pages are a first-read when the home team is hot and fish wrap when they are not, consumers tuned out when the market tanked, snapping off CNBC and leaving their business magazines in the to-do pile.

Many potential advertisers are happy to stay out of magazines altogether - image ads do not seem like a great idea when every other headline is about corporate executives on trial. ( Morgan Stanley and BP now require business publications to pull their ads if an issue contains negative coverage of their businesses.) Detroit, which provided such durable horsepower for the business press, is stuck in a ditch of its own and as telecom, financial services and wireless have merged and rolled up, the pool of potential advertisers has become shallower.

Some of those advertisers are more than happy to branch out into the online world, the place where many of their potential customers live. The five top advertisers on the Web - financial services, Internet sites, computers and software, telecom and travel companies, according to TNS Media Intelligence - are all traditional business publishing categories. Together, they spent more than $3 billion on the Web, a 42 percent increase in just the last two years. As a result, Dow Jones acquired MarketWatch as a hedge, CNN/Money continues to grow and a Forbes executive said the digital version of the storied brand will produce more revenue than the print version within the next two years.

Women-oriented magazines retained their value in the Gruner deal - Meredith paid $350 million for Family Circle, Parents, Child and Fitness - because advertising for packaged goods, the backbone of women's magazines, has been slow to come online. Family Circle, which has been known to put needlepoint on its cover, was seen as a much more vital property than Fast Company, which is more prone to slogans that look good in needlepoint, quaint artifacts of a by-gone era.

Fast Company may be imprisoned by a rhetorical set that cannot be used without inviting derision - spare change agents, anyone? - but the big three business magazines employ some of the best journalists in the business; it was Fortune that first revealed the Enron house of mirrors. But the general interest business magazine continues to suffer long after the correction because there is no longer general interest in business. And even as journalists write and edit articles about a creeping economic recovery, they stare at their own bottom lines and see no evidence of the same.

posted by Henry @ 12:54 AM