American magazine market towers over Britain

American magazine market towers over Britain
Dan Sabbagh: Analysis
http://business.timesonline.co.uk/tol/business/columnists/article1867868.ece

Visiting the headquarters of the world’s biggest magazine company, Time Inc, on New York’s Sixth Avenue, reveals plenty about the difference between British and American media. In Britain, television and newspapers rule, and magazines are a cottage industry. Yet one look at the vast reception and escalators in the atrium of the 1950s skyscraper, opened, naturally, by Marilyn Monroe, suggests that the balance of power is somewhat different in a country where there are only a handful of national newspapers. After all, Time Inc – home to Time, People, Fortune and Sports Illustrated – makes $1 billion (£505 million) a year, which is somewhat more than the £72 million that Emap ground out of the magazine market back home.

It helps, of course, that the United States is a country the size of a continent. A niche title in America can find a circulation of a few hundred thousand, and afford staffing to match, whereas in Britain three journalists and two production staff can easily chuck out a monthly. The great strength of the scrappy British culture is its innovation, thinking nothing of building titles on the back of boob jobs or high street fashion, but its problem is that it encourages a lack of ambition as the internet changes the rules of the game – which is partly what did it for Emap’s boss Tom Moloney, who was ousted last month.

In the States, magazine publishers such as Time have their eyes on television. Collectively, Time websites manage 19.3 million monthly unique users, not much behind Disney (which owns ABC, as well as Mickey Mouse) or CBS Corporation, at 22 million and 23 million respectively. The publisher believes that, on the net, its products could exceed the reach of competing television shows, and that ad dollars may follow. Why shouldn’t Sports Illustrated run a video interview with Tiger Woods, or put together a one-hour weekly show if that’s what people want to watch – or People take on the late night talk shows for audience: they have enough capital to be competitive.

It’s not immediately easy to imagine the same dynamic back in Blighty. Emap has pushed brands like FHM, Kerrang! and Mojo into television and/or radio, but brand extension is not about trying to dominate a category such as sports. Troublingly, even Time is not so sure – and it owns IPC, the Horse & Hound market leader in the UK. Back in New York, the parent company is asking whether British magazines have the reach to take on the BBC. That, in turn, hardly bodes well for IPC, which seems to have become a straight financial investment for Time Inc’s parent, Time Warner. We already knew that most magazines don’t travel internationally: Sports Illustrated’s swimwear issue (the swimwear is worn by women) may be racy enough for American tastes, but hardened readers of Nuts and Zoo would be underwhelmed. However, a diversion of strategy between Time and IPC could be wrong.

Internet economics shows that the spoils go disproportionately to the winner. The traditional game in magazines is to identify the right audience and exploit the gap, but the new model requires more ambition. Already the BBC has seized the consumer motoring audience with the transition of Top Gear online (although, fortunately, it can’t buy AutoTrader to control the car market as well). If magazines are to have a chance, the sector needs to cultivate more ambition: bet on winners and build audiences before the BBC snaffles them all. Or find new owners and managers who are willing to try.

— Six weeks from now, even the most hopeless Muggle will not be able to move for the outburst of Harry Potter mania. The fifth film – which will gross somewhere between $800 million (£404 million) and $1 billion, if previous form is anything to go by – will be followed just over a week later by the last book. Amazon.com has already passed 1.5 million preorders of the title globally; 12 milion copies have been printed in the States; small children will wear out overjoyed parents as they queue for the midnight release.

This, of course, is big business. The author J. K. Rowling is worth more than £500 million. She has helped to create an industry with some 200 spin-off titles and, even if the wizard does not survive the Deathly Hallows, he will live on in the remaining two movies, even more spin-offs and a theme park in Florida that ought to be sponsored by Eton, as Hogwarts is such a good advert for the British boarding school.

The curiosity with Harry Potter is that the books are so startlingly successful in the postmodern era. The usual refrain of commentators is to bang on about how audiences are fragmenting, how computer games and/or the internet are ruining reading, and corrupting supposedly innocent teenagers. Read Chris Anderson’s The Long Tail, with its emphasis on discovering there is money to be made on supplying niches, and you’d be forgiven for thinking that hits don’t matter so much any more.

Yet as shareholders in Bloomsbury, Rowling’s British publisher, can ruefully attest, profits slumped last year when there was no new book to be released. Audiences are fragmenting, but there are times when vast numbers of people want to consume the same thing, whether it’s the World Cup final, The X Factor, Spider-Man 3 or Harry Potter’s seventh and last story. Mass entertaintment is far from dead: and those who reach global audiences make super-normal profits.