Will Condẻ Nast Changes Make a Difference, and Is a Deal with Scripps in the Works?

In this week's Jack Myers Media Business Report I review the recent changes at Condẻ Nast and argue that they will have little material impact on the company's success in expanding its digital initiatives. I also connect the dots between Condẻ Nast and other media companies with complementary needs, such as Scripps Networks. In this context, I review the overall prognosis for magazine publishing companies as the business continues to transform around digital expansion and free content distribution.

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Scripps Networks announced last week the planned rebranding and re-launch of its Fine Living Network as the Cooking Channel. Wachovia analyst John Janedis suggests there is risk of cannibalization of Scripps' Food Network and he points out the potential size of the incremental food/cooking audience is unclear. The popularity and audience interest in food and cooking related programming on several networks shows no signs of abating however and as Janedis comments, "the repositioning will be relatively inexpensive given FLN's current programming slate and SNI's expertise in the food related programming, limiting downside."

The timing of Scripps' announcement is especially interesting and ironic, coming in the same week that Condẻ Nast announced the shuttering of Gourmet magazine. In the company's e-mail to its employees, CEO Chuck Townsend advised that "Gourmet magazine will cease monthly publication, but we will remain committed to the brand, retaining Gourmet's book publishing and television programming, and Gourmet recipes on Epicurious.com." The re-launch of Fine Living as the Cooking Channel is not scheduled until 3^rd quarter 2010, raising questions if, in the interim, a deal might be cooked up between Scripps and Condẻ Nast for the former to acquire the Gourmet brand and incorporate it into its new channel. The valuable Gourmet brand is certainly consistent with Fine Living's current slate of food-related programming.

Wachovia's Janedis also speculates that Scripps' announcement may indicate the company's optimism about its potential acquisition of the Travel Channel, which is being sold by Cox and has generated significantly more interest than originally anticipated. A rebranding of Fine Living has been anticipated with most observers assuming Scripps would shift the network's focus to another lifestyle category such as travel. With the decision now firm to expand the cooking genre under the Scripps umbrella, the company's interest in travel is either diminished or refocused on the acquisition.

Condẻ Nast's decision to cease publication of Gourmet, Modern Bride, Elegant Bride and Cookie was the most visible fall-out from the long awaited McKinsey Consulting report. Buried in Townsend's e-mail to staffers was the promise that "These changes, combined with cost and workforce reductions now underway throughout the company, will speed the recovery of our current businesses and enable us to pursue new ventures. In the coming weeks, we hope to announce initiatives to develop digital versions of our brands that will make use of new devices and distribution channels."

I expect the changes at Condẻ Nast are a precursor to a wave of magazine and newspaper closings at other companies. The shifts at Scripps may also portend restructuring of smaller cable networks that have limited distribution. My question about the Condẻ Nast announcements is whether the McKinsey consultants who prepared the recommendations have any vision for Internet-based revenue growth. McKinsey is excellent at imposing cost-cutting measures but rarely demonstrates insight into the future. Townsend may be optimistic that financial cutbacks and magazine closures will speed the recovery of current businesses. But he has demonstrated little ability to pursue profitable new ventures.

While there has been some restructuring at the company's online ventures, the individual publications remain in the last century in the development of mobile applications, social networking initiatives, user generated content models, virtual and 3-D gaming development, video content expansion, event marketing, brand tie-ins with promotional outreach programs, cause related initiatives, and other business models that are the hallmarks of visionary media industry leadership today. Editorial focus on print promises to push Condẻ Nast further and further into the print publishing hell of never ending declines without a clear strategy for turn-around.

Overall, the magazine industry has been behind the eight ball in developing mobile applications. While a couple of publications have introduced mobile interactivity in association with LinkMe Mobile, there is a dearth of established publications among the top iPhone apps and they are far behind in implementing and managing effective programs for Twitter and Facebook. While Huffington Post, New York Times and Financial Times have been aggressive in extending their brands across multiple platforms, few publications have found the right mix for introducing digital products. Meredith Publishing has been ahead of most other print-based companies not only through innovation but also by testing new revenue models to support their initiatives. Hearst's Esquire and a handful of other publications have effectively targeted promotional budgets. But for the most part, the magazine business is demonstrating very little vision in its strategic planning for the long-term future.

I continue to believe that the business model for supporting digital expansion is dependent not on traditional ad revenues but on the pool of promotional, direct marketing, event and public relations budgets that are nearly three times the size of marketers' advertising spend. Yet almost all media companies rely almost exclusively on the shrinking advertising pie.

When will News Corp, The New York Times, Condẻ Nast, Hearst, Viacom, NBCU and most other media companies follow the path that Scripps Networks, Meredith, Turner Broadcasting and a handful of others are successfully pursuing, if only on a limited basis? If the industry leaders don't make the transition soon, they will most certainly continue down a dead end that leads to further self-destruction.

Jack Myers consults with media, agencies and marketers on transformative business models and revenue growth strategies. He can be contacted at jack@mediadvisorygroup.com.