Newsweek had unique troubles as industry recovers

[October 19, 2012]  LOS ANGELES (AP) -- Newsweek's decision to stop publishing a print edition after 80 years and bet its life entirely on a digital future may be more a commentary on its own problems than a definitive statement on the health of the magazine industry.

Magazine ad revenue in the U.S. is seen rising 2.6 percent this year to $18.3 billion, according to research firm eMarketer. That would be the third increase in three years, driven mainly by gains in digital ad sales, though print ads are expected to be flat.

Paid magazine subscriptions were up 1.1 percent in the first half of the year, according to the Audit Bureau of Circulations. And while single-copy sales at newsstands are down 9.6 percent, overall circulation -- the bulk of which is in print -- is steady compared to a year ago.

The water is so warm for the magazine industry that in the first nine months of the year, 181 new magazines were launched while only about a third as many, or 61, closed, according to publication database MediaFinder.com.

By several measures, the magazine business has stabilized, albeit at a lower level, since the Great Recession ended three years ago.

For some, that casts a harsher light on Newsweek's decision to abandon print -- affecting the nearly 1.4 million Newsweek subscribers who get their copy each week in the mail. They say it speaks to the magazine's trouble connecting with and keeping its readers.

That brings to mind some questionable covers, like the July 2011 what-if image depicting what Princess Diana would have looked like at age 50, or last month's "Muslim Rage" cover depicting angry protesters, which was roundly mocked on social networks like Twitter.

Newsweek is using a difficult print ad environment as an "excuse" for its decision to end print runs, said Samir Husni, director of the Magazine Innovation Center at the University of Mississippi School of Journalism. He lays the blame at the feet of Tina Brown, the editor who took control of Newsweek when it merged with the news website she ran, The Daily Beast, two years ago.

"Tina Brown took Newsweek in the wrong direction," Husni said. "Newsweek did not die, Newsweek committed suicide."

To be sure, the problems were acute by the time Brown took control. Newsweek's circulation had plummeted from about 3.1 million in 2007 to 1.8 million in 2010, when The Washington Post Co. sold the magazine to stereo equipment magnate Sidney Harman for $1. Harman later placed Newsweek into a joint venture with IAC/InterActiveCorp's The Daily Beast website in an effort to trim the magazine's losses and widen its online audience.

This year, total circulation is down to about 1.5 million, less than half of what it was five years earlier, even including about 29,000 digital copies.

Meanwhile, circulation of rival Time magazine is down from about 4 million in 2006 to 3.3 million this year, a decline of just 19 percent.

General news format magazines have been challenged with the rise of news reading on the Internet, much of which is free. And Newsweek isn't the first to drop its print product. US News & World Report dropped its weekly print edition years ago and now focuses on the Web and special print editions, such as a guide to the best graduate schools. SmartMoney announced in June that it was going all-digital.

Yet others are succeeding. The Economist has nearly doubled its circulation to 1.6 million from 844,000 a year ago. The Week is up to 541,000 from 525,000.

And unlike the bold move by Newsweek, many publications are taking steps to add digital formats while maintaining the print product, which is still the mainstay of their business.

Paul Canetti, the founder and CEO of MAZ, a company that helps magazines publish digital editions, says he tells prospective clients to "dip their toes" into digital publishing and "wade in as the market demands it." He notes only about a quarter of Americans own tablet computers, which have become a popular way to read online magazines.

"Maybe what they're really facing is an audience-connection problem and not really a print-versus-digital problem at all," he said.

Going all-digital could solve many problems associated with the print magazine business. For instance, magazine publishers charge advertisers according to a so-called "rate card" that is based on a promised number of paying subscribers, called a "rate base." If subscriptions fall, publishers then must spend a lot of money mailing potential customers and offering heavy discounts just to keep advertising revenue from falling.

In contrast, online advertising usually requires advertisers to pay only for ads that are seen or clicked on by readers, a number that is easily measurable in real time and that doesn't require the discounting of subscription prices.

Moving online could solve that problem, which hit Newsweek in particular, said Tom Rosenstiel, director of the Project for Excellence in Journalism at the Pew Research Center in Washington.

"Newsweek's problems came from spending an enormous amount of money to maintain a guaranteed rate base," he said. "They ended up spending millions each year to try to reach a number of readers they needed to reach."

Newsweek is betting that there will be enough growth in the number of tablet users to make up for the fact that when its print runs end with the Dec. 31 issue, a lot of subscribers will be left without a way to get the magazine.

The magazine expects that the number of tablet users in the U.S. will exceed 70 million this year, up from 13 million just two years ago, Newsweek spokesman Andrew Kirk said.

"We have reached a tipping point in the industry at which we can most efficiently and effectively reach ... readers in an all-digital format," he said.

However, it's a choice that doesn't reflect the general health of the industry, said Mary Berner, president of The Association of Magazine Media.

She said she doesn't want a decision by one publication to be an indication that the entire magazine industry "is going down the toilet."

"That's simply not true," she said. "The experience of reading the print version of magazines is not going away."

[Associated Press; By RYAN NAKASHIMA]

AP Business Writers Michelle Chapman and Barbara Ortutay in New York contributed to this report.

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