By Robert MacMillan - Analysis
NEW YORK (Reuters) - Some U.S. business magazines may not survive this recession as they struggle with sharp cuts in advertising budgets and increased competition, often from free rivals online.
Business news publishers rubbed their hands in glee when the financial crisis grabbed headlines last fall, saying the meltdown would deliver a windfall blown in by widespread interest in their stories.
It did not turn out that way. Appetite for news does not always translate into revenue, especially at a time when blogs, wire services such as Bloomberg and Thomson Reuters (TRI.TO) (TRI.N) and other outlets crowd into news analysis territory that the big magazines had long claimed.
The big three U.S. financial news magazines, BusinessWeek, Fortune and Forbes, must now prove their relevance. If they cannot, at least one might go out of business, experts say.
“I don’t think that the big three will remain standing or remain in the same competitive situation a year from now, or maybe even six months from now,” said Kevin Gentzel, president and group publisher of Forbes Media.
Questions about the fate of the big three arose last week after McGraw-Hill Cos MHP.N put BusinessWeek, which it started in 1929, up for sale.
A day later, Forbes said its online chief quit, prompting reports that the 92-year-old magazine faces a shakeup. Time Warner Inc’s (TWX.N) Time Inc then said the 79-year-old Fortune magazine will get a makeover.
Chris Roush, director of the Carolina Business News Initiative, said he expects one of the big three business magazines to close within five years.
“I don’t know which one because I think they’re all equally in trouble,” said Roush, whose group trains journalists and students at the University of North Carolina at Chapel Hill.
Business magazines’ problems reflect a wider erosion in print media. Many stalwart advertisers are slowly devoting more of their remaining ad budgets to the Internet instead of to print, said Martha Cleary, an ad buyer at Carat USA.
“Everybody is asking two things,” said Cleary, whose top client is Philips (PHG.AS) Electronics, a big buyer of business magazine ad space. “What can we do with social media, and how can we get it cheaper?”
Competitors of business magazines include Pearson Plc’s (PSON.L) Financial Times, News Corp’s (NWSA.O) The Wall Street Journal and Barron’s, and free sites like Yahoo Inc’s YHOO.O Yahoo Finance, said Piper Jaffray analyst Peter Appert.
“It’s all these pigeons pecking at you from a million different angles, each taking a little tiny bite out of your hide,” he said.
The body count has begun. Conde Nast Portfolio, which was launched in May 2007 with an ambitious mandate to marry investigative business stories with the stylish flair of sister magazine Vanity Fair, closed earlier this year.
Conde Nast blamed the ad market, as did others like Doubledown Media, parent of the defunct Trader Monthly.
U.S. magazine ad revenue fell 20 percent to nearly $4.2 billion in the first quarter, with financial insurance and real estate ads, traditional heavyweights, taking a 38.4 percent dip, according to the Publishers Information Bureau.
BusinessWeek’s revenue fell 37 percent, while Fortune’s fell 24 percent and Forbes’s fell 8 percent.
“Our entire industry is going to look dramatically different and hard decisions will have to be made,” said BusinessWeek spokesman Carl Fischer. “Anyone who thinks they can stay on the sidelines and keep their businesses running as usual and that things will be rosy in two years is mistaken.”
The business magazines that survive must cut more jobs and other costs, said media banker Reed Phillips. “You can’t continue to publish with the same level of resources you had a year or two ago and think the market’s going to rebound enough to really make up the difference,” he said.
Their focus must change too, said Roush, who worked at BusinessWeek and Bloomberg. “The average American doesn’t read Forbes, Fortune and BusinessWeek,” he said. “They need to stop trying to be everything to everybody.”
“Get rid of the personal finance, stop telling me what stocks I need to buy or what mutual funds I need to hold. Stop giving me advice from Jack and Suzy Welch about how to run my company,” he added.
Representatives for BusinessWeek, Fortune and Forbes all said their publications would fight through the downturn.
“We have no intention of being shaken out,” said Andy Serwer, managing editor at Fortune.
Reporting by Robert MacMillan; Editing by Richard Chang