Go Figure: Amid Mag Shakeout, Some Pubs Prosper, Re-Launch Titles

Just one day after the world's largest consumer magazine publisher, Time Inc., pulled the plug on the print edition of a major title, Teen People, two big publishers Wednesday announced strong magazine results. As if to prove its vitality, one of them, Meredith Corp., even announced plans to re-launch fitness title Figure magazine.

Both Meredith and another big publisher, Martha Stewart Living Omnimedia (MSLO) revealed strong second quarter earnings, largely on the strength of their consumer magazine operations. MSLO, which has been in rebound mode ever since founder, publisher and namesake Martha Stewart's exoneration, said second quarter revenues rose 47 percent vs. the second quarter 2005. Meredith's second-quarter revenues jumped 28 percent. Both companies attributed their strong performances to revamped print divisions and strong Internet growth.

Print was a successful area for MSLO, with overall publishing revenue growing 29 percent to $40.9 million. Ad pages increased 47 percent at Martha Stewart Living and 22 percent at Everyday Food during the second quarter of 2006 compared to 2005. The quarter also marked more rate base growth for MSLO's Body and Soul magazine, which grew to 400,000 from 350,000 in March.



Nonetheless, MSLO's Internet operations showed the single greatest proportional revenue growth, posting a 107 percent gain in ad sales and 117 percent gain in page views since second quarter 2005. Between Internet ad revenues of about $2.1 million and revenue from MSLO's online flower sales franchise, Marthasflowers.com, total revenue topped $4.6 million in second quarter 2006. MSLO's Web business broke even in second quarter 2006--another relative gain over 2005, when it posted a $1.1 million loss. Looking to the future, MSLO also boasted of its upcoming partnership with Kodak, which will allow digital photo sharing through MSLO Web sites.

Meredith Corporation also benefited from revitalized and expanded print operations, including the acquisition of Gruner + Jahr's titles targeting younger women. Print revenue rose 34 percent from second quarter 2005 to $340 million, driven in part by a 40 percent increase in ad revenue. Overall, Meredith print operations enjoyed an 18 percent increase in profit to $67 million during the second quarter, on a year-over-year basis. But within print publications, revenue for Meredith's entire 2006 fiscal year (ending in June) was just 2 percent higher than 2005, suggesting that the latest quarter may be evidence of an upswing.

Meanwhile, Meredith's online operations have also been a key growth area for the company, according to Chairman and CEO Bill Kerr, who remarked after the first quarter of 2006: "The Internet has provided a rapidly growing source of advertising revenue at both our business groups. In the first nine months of fiscal '06, Internet advertising revenue grew nearly 80 percent in publishing... and more than doubled in broadcasting." Earlier in the same address, Kerr noted: "We were particularly pleased with our local advertising performance and the growth in online advertising on our stations' Web sites."

But for all the attention paid to the two companies' revamped print operations and growing Internet presence, outside observers remain skeptical.

George Janson, managing partner and director of print for Mediaedge:cia, concedes that it's a positive sign. It points out that magazines "are still a vibrant, influential medium." Some, he says, lend themselves to online platforms more than others. But he cautions that "the penetration of a lot of these magazine Web sites is still very low." Janson says it's best to look at the totality of the situation; "one quarter doesn't make or break a company." Similarly, Merrill Lynch analyst Karl Choi has maintained a "neutral" rating for Meredith stock, citing concerns about the company's broadcast operations, specifically TV pacings.

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