Printing Money

Contract publishers have proved themselves astute entrepreneurs and, as a result, their industry continues to experience extraordinary growth.

Mintel’s latest market report, released at the end of last year, says the market for contract publishing is worth about &£237m, an increase of 127 per cent since 1995.

Furthermore, it confidently predicts that the market will break the &£300m barrier by 2005. Growth may slow down, but it will remain healthy nevertheless.

Unlike many other sectors, contract publishing is getting used to hearing good news. Mintel’s last report on contract publishing in 1998 was equally bullish, but since then, as the report points out “the industry has been virtually reinvented”.

And this is where the entrepreneurial nous of publishers has emerged. It is a sector that quickly recognised itself as perfectly placed to be the content providers not only for traditional magazines but for new media. The shift in focus is evidenced by the number of contract publishers that have dropped the word “publishing” from their names and the increasing insistence on being viewed as media-neutral content providers.

According to the Mintel report, online revenue for the contract publishing industry accounted for &£16m of turnover last year and of the 310 contract titles surveyed by Mintel, 32 were online titles.

The words “confluence”, “synergy”, “complementary”, and “blurring of media” recur throughout the report, reinforcing the belief among contract publishers that the development of online publications is unlikely to replace print products, but will serve to expand the market.

Different objectives

Online and offline publications appear to have different objectives: the hard copy format has shed its loyalty-building function and become more about adding value to products and services; online publications, however, tend to be aimed either at business partners, staff, or dealers and distributors; or, when consumer-oriented, they may be more about targeting prospects and offering special deals.

The success of contract publishing has attracted the attention of other sectors interested in following the money trail, and in the past few years consumer publishers in particular have moved into contract publishing.

Condé Nast Contract Publishing was launched two years ago and is said to be in talks with the Association of Publishing Agencies (APA) about becoming a member. Condé Nast’s position is slightly ambivalent; it publishes a number of contract titles including Canary for the Canary Wharf Group and an in-house magazine for HSBC, and it is understood to have been involved in the recent repitch for BA’s high-life. Chief executive Nicholas Coleridge, however, continues to be outspoken on his doubts about contract publishing.

Condé Nast is also understood to have been involved in the recent re-pitch for BA’s High Life; the magazine would have been a good fit with its other titles, particularly Condé Nast traveller, though High Life is clearly a contract publication.

Among other consumer publishers, National Magazine Company has shown its commitment to contract publishing with the purchase of Aim Publishing; and IPC has been involved in pitches during the past year.

On the face of it, traditional contract publishers are not worried by the competition and many quite rightly believe that consumer journalists don’t easily switch to contract publishing because they can’t get used to the client involvement.

APA chairman, and publishing director of Mediamark, Peter Moore says: “Not all consumer editors make good account handlers. They don’t like clients objecting to a particular headline or wanting to change copy.”

Extra Services

But Moore and others do acknowledge that consumer publishers have much more advertising clout. And although it was seen as a one-off, BBC Worldwide’s success at winning the South Bank Centre contract publishing business last year should serve as a warning to contract publishers: some new entrants may be able to provide a menu of services they can’t compete with. The BBC’s guarantee of radio coverage obviously swung the deal.

The real thorn in the flesh of contract publishers, however, is the Royal Mail, whose postal rates continue to make up the bulk of any contract publishing budget. Again, on the face of it, publishers’ relationships with the Royal Mail, particularly during the past year, have improved. Each publisher now has its own account manager at the Royal Mail; in turn, the Royal Mail continues to pour sponsorship money into the sector.

But, according to Atom Publishing managing director Steve Quirke, the fact remains that “on average, for a magazine which uses postal distribution, our fees can account for no more than 20 per cent of the final budget. The remainder is spent on print and the majority on postage.”

Postal deregulation

Although the Royal Mail is now making much more effort with the sector, the potential for deregulation, and therefore competitive undercutting, should make it more attentive still. The APA estimates that 293 million customer magazines were mailed during 2000; Mintel quotes a figure of &£65m spent on postage, production and fulfilment. Customer magazines, therefore, generate high mail volume as circulations are high and 72 per cent of them are distributed by mail.

APA director Hilary Weaver comments: “The possible impact of the postal regulator is still uncertain; what is certain is that the regulator is keen to bring more competition to the market.”

Peter Moore has tried to use his position at the APA to forge a better relationship between the Royal Mail and contract publishers and says the situation is now harmonious. However, he still maintains that “every time publishers are more successful, the Royal Mail penalises us”.

“If we increase the frequency of a magazine or increase the pagination – it costs more.”

He acknowledges the fact that the Royal Mail is concerned that in the wake of any deregulation companies will move in and cherry pick the most lucrative postal business, leaving the Royal Mail with the remainder. These concerns, he says, are prompting the Royal Mail to be more reasonable.

Market restructuring

Apart from continued growth, what the industry will probably also face is a restructuring of the market. The success and continued potential of contract publishing has not gone unnoticed by major global media services agencies. Omnicom owns three of the top ten contract publishers – Redwood, Premier Media Partners and Specialist Publications. In the event of Omnicom needing to rationalise, at least one of those publishers would probably be vulnerable.

In the past few years media groups and advertising agencies have been a growing presence within contract publishing: AMD Brass Tacks became part of Chime Communications last year and two years ago Publicis established Publicis Blueprint.

Most of the other contract publishers are owned by traditional publishing groups – leaving a diminishing number of independent players. Among these is TPD Group, which was one of the first to blaze the new media trail, and has established a reputation for itself as an innovative player. However, in the past six months, speculation has been rife about it being in talks with a major advertising group.

The general feeling seems to be that if a publisher like TPD, which has a very distinctive character, is vulnerable to the lure of major media ownership, it will only be a matter of time before the few remaining independents sell out as well.