Vogue, Time Out and Wallpaper* develop spin-off businesses to create additional revenue
As publishers continue to establish their titles as brands in their own right, spin-off businesses including restaurants, colleges and clothing lines are gaining ground and opening up additional revenue streams.
Launching a clothing line, a restaurant chain or a travel business may not sound like the move of a traditional publisher but as print audiences and advertising revenue continue to decline, media owners are being forced to devise increasingly creative ways of expanding their brands and developing new revenue streams.
Fashion magazine Look has just launched a clothing collection with plus-size label Simply Be and is preparing a second design-led fashion line with retailer Little Mistress, which is due to launch in mid-June. The IPC-owned weekly title earns a percentage for every item sold, according to publishing director Julie Lavington, who believes it is critical for magazines to build legitimate brand extensions such as this.
“It’s important commercially for all publishing businesses today to have a variety of different revenue channels in addition to print,” says Lavington. “We are about content and inspiring people, and while print remains our single biggest revenue strand – in terms of both advertising and copy sales – the [brand extensions] we have collectively make up a large chunk of revenue.”
Working collaboratively is vital for any brand spin-off of this kind to ensure that both parties benefit from the venture, says Lavington, who helped develop the collection with Look’s editor and fashion editor as well as marketing teams from both sides and the retailer’s in-house buyers and designers. Likewise, when collaborating with furniture retailer DFS on a range of sofas, the teams at Hearst Magazines’ UK titles, Country Living and House Beautiful, were heavily involved.
“It’s incredibly important for any brand extension or licensing agreement that the editorial team and the partner work very closely,” says group publishing director Michael Rowley. “It can’t just be a token add-on; it must be a genuine exercise to give the reader value.”
Hearst recently appointed former marketing director Anna Jones as chief executive of the UK business. She has pledged to keep developing “new platforms, ideas and ways of doing business” to keep up with the changing media landscape.
In keeping with its reputation as a leading voice in fashion, Vogue publisher Condé Nast opened its College of Fashion & Design in London last year following two years of development and significant investment. The first 40 students for the year-long Vogue Fashion Foundation Diploma are due to graduate early next month. With the diploma costing £19,560 and a 10-week course £6,600, the brand extension looks set to be lucrative.
College principal Susie Forbes says: “Our education arm has significant revenue potential and we are excited to be opening two further colleges in Shanghai and Delhi over the course of the year.”
The publisher has also introduced the Vogue intensive summer course, which will run in July and has already received “an extremely high volume of demand”.
Condé Nast has long had a strategy for building business extensions outside publishing. In 2003 it opened the first Vogue Café in Moscow under licence to Russian restaurateur Arkady Novikov and in 2010 it launched Tatler Club Moscow. Last year saw the opening of Vogue Café Kiev under the guidance of Ukrainian hotelier Elisaveta Yurusheva and the launch of a Vogue Café with Inspired Lifestyle at The Dubai Mall. In January this year, GQ Bar Dubai was opened and Gary Robinson, director of Condé Nast International Restaurants, claims both Dubai venues are performing well.
He says: “The Middle East is proving a very powerful market and the following our brands have is strong considering we have no local magazines alongside our restaurants and bars.”
Next on the agenda is the launch of the Vogue Lounge in Bangkok, where the title is still relatively new having started publishing a Thai edition only in 2013. This year will also see a GQ Bar open in Almaty, Kazakhstan, and a second Vogue Café in Dubai.
“Taking powerful and iconic brands from the Condé Nast stable and delving into a new world such as this is a constantly evolving project and will always move in a considered and strategic direction,” says Robinson.
“Condé Nast does not personally operate any of its restaurants, but we are the brand guardians and support and direct the businesses while allowing our partners access to the power of our brands. In return, and as a revenue stream for Condé Nast, we take a fair market average percentage of revenue, a figure which differs from market to market,” Robinson says.
Sharon Douglas, Hearst’s new business development director, believes well-established and reliable brands can be used to leverage new business ideas.
Good Housekeeping, which has been running for more than 90 years, has built trust [from readers through mechanics such as ‘Tried & Tested’] giving it licence to operate in other sectors and the magazine now runs an online travel business.
“You cannot go off-piste when working with a brand like Good Housekeeping so the magazine and travel business have to be 100 per cent aligned,” Douglas warns. “But that said, it is really important that the editorial team has independence. The day you only talk about what you sell is the day you’ve completely lost your way. We are an added experience but not the core focus of what Good Housekeeping writes about on travel.”
People not only like brand extensions, they now expect them, so publishers have to work harder
As a result of sticking to this strategy, the publisher claims it has not received a single reader complaint since launching the travel business four years ago. Hearst has since launched a spin-off travel business for its Country Living title and in October last year it began operating the standalone Top Breaks travel site. This offers tailored holidays for each of its core titles such as Cosmopolitan, Red and Prima without being overtly connected to a particular magazine.
A dedicated team of two people works across the travel spin-offs and Hearst takes a commission for each holiday booked, but the fact that it enables the publisher to collect additional consumer data and attract new customers is equally valuable, says Douglas.
“A lot of people who don’t buy the magazine find Good Housekeeping holidays online through search, so it brings in business that we wouldn’t necessarily get via the magazine. If we only ran travel off the page, we wouldn’t have the business that we’ve got today,” she adds.
GQ discovered it was able to reach a new audience through brand extensions when hosting its sold-out Comedy Extravaganza event at London’s Hammersmith Apollo in March.
“It was an interesting sampling exercise for us because it wasn’t the traditional GQ demographic that attended,” says GQ editor Dylan Jones. “The Venn diagram was skewed a little younger. It was a fantastic crowd but probably not a generic GQ crowd.”
He thinks the bar has been raised for publishers looking to branch out and while brand extensions might traditionally have reflected negatively on the master brand because they were deemed “cheap and tacky”, the opposite is now true.
“People not only like brand extensions, they now expect them, so publishers have got to work harder,” Jones adds.
But branching out into new areas is not always a fruitful strategy, as Trinity Mirror discovered after launching daily deals business Happli in 2012. Looking to take on the likes of Groupon and LivingSocial, it invested £10m in the venture with a goal of generating £20m by 2014.
However, the group was forced to shut the business down just seven months later having decided it was “unlikely to reach sufficient scale to become profitable in the near term”.
Time Out’s recently appointed chief commercial officer, Kimberley O’Hara, says the brand’s foray into the daily deals market has been more advantageous.
“The Time Out Daily Offers platform is extremely important to our product portfolio in the UK, second only to brand advertising, and is another opportunity for consumers to extend their engagement with Time Out,” she says.
The deals site was launched in 2011 following the acquisition of Keynoir and has 700,000 people signed up. It sits within Time Out’s broader commercial offering, which includes concert tickets and restaurant bookings.
The Sun is reportedly looking to expand its repertoire with the launch of a branded gambling service after publisher News UK applied for a series of trademarks on the Sun Bets name. The move will extend its gambling offer, which already includes the Sun+ ’Second Chance Sunday’ Lotto game and Sun Bingo.
While some spin-off businesses are promoted by a brand’s commercial division, others are led editorially, as with Wallpaper* Composed, the interior design title’s consultancy service.
“This [business venture] didn’t come about because the commercial team wanted to make an extra £500,000 on a new idea,” asserts Wallpaper* publishing director Gord Ray. “It came about organically from the editorial team and has since grown into an extra commercial concept.”
Wallpaper* Composed has just finished a six-month project for Wembley Stadium’s Club Wembley directors’ box and has previously developed retail concepts for footwear designer Sergio Rossi, as well as working on the Neo Bankside and Howick Place developments in London. It is selective about the work it takes on, however, and does not automatically feature projects editorially.
“Media owners have to start operating their publishing and media entities like a brand, which means thinking about their assets. It’s about doing things that benefit the brand as well as making money,” Ray adds.
Although the title’s special projects arm – which includes Wallpaper* Composed alongside sponsorship and events – accounts for only 15 per cent to 20 per cent of the magazine’s overall revenue, Ray envisages this figure increasing as the media backdrop continues to evolve.
“Any media brand that has advertising as its core source of revenue has to think about how else it can grow. The special projects route is one way; the other would be digital,” he says.
It is no secret that publishers are struggling as print audiences and ad revenue decline. But those that can develop well-aligned brand extensions will be far better prepared to adapt to the continually changing media landscape.
How to make a spin-off business successful
- Brand extensions must add value for the reader as well as the publisher
- Any spin-off must be 100 per cent aligned with the magazine business
- Editorial content must remain independent and be included only on merit, not simply because the businesses are connected