The contract publishing industry has changed dramatically since the days when it was seen as glorified direct mail. Buoyed by healthy growth, the sector has become a magnet for start-ups, beleaguered advertising networks (which see the sector as a much-needed source of new revenue), and major magazine publishers keen to grab a piece of the pie.
But the sector’s spell of good fortune came to a sudden end last week when Associated Newspapers shut its contract publishing division Cube (MW last week). The closure has made the industry sit up and debate which is the best structure suited to the needs of contract publishing.
MediaCom Group press director Steve Goodman does not believe Cube’s closure is the start of a downturn. “The market will continue to find space for more contract publishers and I do not see much more consolidation happening,” he says.
Others in the industry share his views and remain bullish about the future. A recent Mintel report estimates growth of up to ten per cent a year up to 2004 for the sector.
In the latest set of figures from the Audit Bureau of Circulations (ABC), 11 of the top 20 contract publishing titles are customer magazines. The figures, which cover January to June 2002, show John Brown Citrus Publishing’s listings magazine for Sky taking the top slot with a circulation of 5.3 million.
The market is split into three groups. The big agency and media-owners such as Omnicom, which owns Redwood, Cedar and Specialist Publications and WPP Group, which owns Forward, began producing customer titles while offering clients a complete brand man- agement solution, including direct marketing. Traditional publishers, such as Condé Nast and National Magazines (NatMags) are marrying their editorial skills with their relationships with advertisers. And then there are the big independent specialists such as John Brown Citrus and Centurion.
Jules Rastelli, managing director of Cedar, which has produced British Airway’s magazine High Life for 29 years, says the demise of Cube shows how even a business such as Associated can find it tough to survive in a specialist sector.
“The issue with traditional publishers is that they are attuned to working with much more healthier margins than we are,” she says. “The business has changed and is not as incremental as before. In fact most of the pitches taking place are for existing magazines.”
It is not surprising that at a time when big brands are trimming ad budgets the future may appear uncertain for the smaller, independent players.
Brave New Words managing director Adam Baines predicts major consolidation and says his company would want to be part of a bigger agency network, such as WPP or Omnicom. “At the moment, budgets are being squeezed and contract publishing is sometimes seen as expendable,” he says. His clients include BA London Eye.
But the question remains why Cube’s proposition, which had an attractive mix of editorial skills and relationships with advertisers, failed to produce a new revenue stream.
Only last month, Cube won the contract for Bluewater shopping centre in Kent. The magazine was expected to be distributed with the Evening Standard.
One industry insider blames lack of investment in Cube for the closure, but the newspaper publisher refused to comment on the closure as Marketing Week went to press.
Redwood planning director Steve Martucci adds: “Associated put very little backing behind Cube and thought it was an easy business to get into; a licence to print money. The market is slowing down and there could well be further mergers and consolidations.”
The last round of major consolidation saw former consumer publisher John Brown Publishing acquire Citrus. John Brown recently poached the Sky magazine contract from Redwood. Other big name clients include the Automobile Association, Waitrose and Ikea. Prior to the merger, John Brown offloaded its ailing consumer magazines, selling Viz and Fortean Times to I Feel Good Publications.
Alison Dow, former commercial director at Cube and now managing director of Potter Dow Creative agency, says: “In the past ten years, customer magazines have moved from being a peripheral part of the marketing mix to becoming a core element. And from a client’s point of view, I think media-owners are best placed to offer the best solution because they have the advantage of a distribution system and a relationship with advertisers.”
However, Dow adds that smaller contract publishers will need to become more specialised, citing Editions Publishing, which publishes largely financial titles for banks such as NatWest and Bank of Scotland.
Condé Nast president of new business Sue Douglas says: “Publishers like us, which produce successful glossy titles such as Glamour, have a genuinely unique selling proposition for customer titles. We have the distribution base, relationships with advertisers and a proper buying capacity. Also, because we have to market our consumer titles, we have the desired marketing skills for clients as well.” The publisher produces glossy customer titles for Harrods and Tate Gallery and is involved with 40 pitches, so sees lucrative times ahead.
The fortunes of the publishing industry as a whole may be blighted at the moment, but while brands are looking for less expensive alternatives to the conventional media mix, the contract magazine sector is likely to keep growing. However, those behind the titles will have to invest in their service and not palm clients off with weak offerings.