Magazine Advertising Future Looks Dim

"2002 Ad Turnaround: Likely or Long Shot?" was the theme of one panel discussion at yesterday’s American Magazine Conference in New York, sponsored by the Magazine Publishers of America. Long shot seemed to be the answer, with all of the panelists expressing wariness about the ad market.

"There's a lot of uncertainty and it's painful for Q1," said Jeff Bell, VP of marketing communications at DaimlerChrysler, a major automotive advertiser. "Sept. 11 set it aside and expectations are down."

"There will be the same level of spending, but print is down," said Peggy Kelly, VP of global advertising for Bristol Myers Squibb. She said the pharmaceutical industry will limit print advertising because of the long lead-times. "It's on a shorter string because we can't commit at the last moment and get out of committed funds. It delays the decision making.”

Frederick Hill, executive VP of marketing at JP Morgan Chase & Co. also complained about the long lead-time for magazine advertising. He also said magazine spending was down 6.4 percent since Q2 and "there's more uncertainty since Sept. 11." He says all financial services companies are suffering and laying off employees, which leads to ad cuts.

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Jon Mandel, co-managing director at MediaCom Worldwide, said the publishing industry underperforms the general economy in every recessionary period. Projected ad falloffs will occur through next May to July and possibly until early 2003, because "advertising follows the general economy by six months," he said. Sept. 11 didn't affect the economy, but affected "the psychology."

"Business was lousy on Sept. 10," said David Verklin, CEO of Carat North America. "Clients have been looking for reasons not to spend, it's a process of de-selection." He sees volume next year dropping 5 to 5.5%, which would mean a 10% drop over two years, the first time advertising has dropped two successive years in the past 30 years. The travel, financial services and business-to-business technology sectors are the worst, he said.

The conversation strayed from magazine advertising to TV, with much discussion of the fall in upfront prices and what effect they will have on magazine advertising. The drop in upfront prices will lead to drops in all media, Kelly said. Verklin said that lower TV prices would lead to more TV buys, which could hurt magazine sales.

Later in the day, John Suhler, president of Veronis Suhler, the investment banking firm that provides media spending reports, offered the latest magazine figures. He projected ad spending growth of about 3 billion from 2000 to 2005, when spending will jump from $12.7 billion to $15.8 billion. But he also reported that magazines are losing market share, dropping from 18% of all communications advertising in 1995 to 15% in 2000 to 14% in 2005. He attributed this to an inability to pass on price increases, such as postage and paper.

He also reported that 11 ad categories have had flat or negative growth recently.

He also spoke of the "winnowing of weak titles," making reference to the numerous publications that closed recently.

If Suhler was asked the ad turnaround question, his answer would be up in the air because he projects two possible scenarios. “If we avoid recession in Q4, magazine advertising will grow gradually in Q4 and more strongly next year. But if we enter recession, it will fall 3.5% below the original forecast, dropping 4% for 2001.”

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