Reader's Digest: New Directions. the Giant, Cash-Rich Publisher Has Targeted 'Affinity Group' Magazines for Growth; Synergies with the Digest Abound
Love, Barbara, Folio: the Magazine for Magazine Management
The giant, cash-rich Publisher has targeted 'affinity group' magazines for growth; synergies with the Digest abound
During a recent roundtable with FOLIO:, Thomas M. Kenney, president of the
newly formed Reader's Digest Magazine Publishing Group, and five other executives revealed how the group is structured, and discussed plans for merging its four U.S. special interest magazines into an operation with the flagship publication, Reader's Digest.
The other spokespeople for Reader's Digest are as follows:
Michael Brennan, Publishing Director, who joined Reader's Digest Publications in january. Most recently, he was a vice president with the McNamee Consulting
Greg Carey, who was named publisher of The Family Handyman in 1984, when it was owned by The Webb Company. The magazine was acquired by Reader's Digest in 1987.
Kate Greer, editor in chief, New Choices for The Best Years. She came to New Choices from Better Homes and Gardens, where she had been managing editor for 10 years.
Margaret Staats Sim-inons, who became editor in chief of Travel Holiday in May 1989. Previously, she was the Features Editor at Conde Nast Traveler.
Sheila Wyle, publisher of American Health for two years, has a background in sales development. She previously held positions with Newsweek and Penthouse magazines. LOVE: Why has Reader's Digest, the ultimate publisher of mass magazines, become involved in special interest magazines? What are the overall
corporate objectives that Reader's Digest has for these special interest magazines?
KENNEY: From a corporate point of view there are four objectives: First, that they eventually provide positive cashflow and a good return on investment. This is a purely financial objective-that we make a buck with these magazines. And we Will.
Second, that they contribute to our mailing lists in one way or another, so that we can either improve our lists or add names to the lists that we sell other Reader's Digest products to. The magazines are in what we call "affinity groups"-like health, travel and do-it-yourself-that are going to fit the list dynamics of our operation. These lists are used to promote books, records, videotapes and other products that Reader's Digest produces.
The third objective is that each of the books be run entrepreneurially.
New Choices: Focusing on the mid-life age group
GREER: As you know, we have changed the name of the magazine from 50 Plus to New Choices. 50 Plus was a very copy intensive, gray magazine that was aimed at everyone over 50 and actually edited to people probably about 70.
In redirecting New Choices, we have agreed that we want it to be read by both men and women and to focus on mid-life, about ages 45 to 64, because that is a manageable editorial bite. We can focus there and serve that group well. Plus, it's an opportunity to go where no-one else is going.
There are people doing the mature market, but there was really nothing down the middle. We are treating this age group as a valid, absolute life stage, and concentrating on fitness, nutrition and improving the quality of life. We are not treating this life stage as something over the hill by addressing things like nursing homes, cataracts, or how to live on social security.
The change has also included a substantial investment in color, photography and artwork. The redesigned issue came out in April. What I find interesting is that this very different magazine was produced by the same staff, with the addition of three new people - myself, a son in fashion and a creative director.
"It's interesting that this very different magazine was produced by the same staff, and three new people: myself, a fashion person and creative director."
-Kate Greer, editor in chief,
New Choicesfor the Best years.
Reader's Digest wanted to have an additional arm in the company that does run very entrepreneurially--one that. has management expertise from the many companies that my colleagues come from to add to the expertise already here. That entrepreneurial bent is very important.
And fourth, we are mindful of the fact that the ad marketplace is changing. We want to have a series of products that will support one another, including Reader's Digest.
Reader's Digest was a single magazine all by its "one-sy" in the advertising marketplace; we now have five very-attractive-to-advertisers magazines-and they are going to become more and more active in terms of reinforcing one another. LOVE: Can you share some of the history of the magazine division--how it developed, what products make up the division?
KENNEY: Certainly. We now have four special interest magazines. The first to come to us was Travel Holiday, in December 1986; the second was Family Handyman, in December 1987; the third was New Choices, in january 1988; and the fourth was American Health, in February 1990. Overall, their circulation is about three million.
LOVE: Who is at the helm of these magazines? Did you bring in new people?
KENNEY: We have an extremely new and vibrant management team that is kind of pushing buttons in every way. What I find particularly interesting is that there are basically 12 people who run what we call "RD Pubs." There are four editors, four publishers and four critical support people, like the circulation director, manufacturing director, human resources director and a publishing director.
Of those 12 people, six have been with us for less than six months. Ten have been with us for around a year or less; and two, our friends from Family Handyman, have been with us for two and one-half years.
LOVE: When we discussed this roundtable, you told me that you felt strongly about bringing editors as well as publishers to the roundtable. Can you explain why?
KENNEY: Sure. The significance of there being two editors and two publishers here is that the most distinctive feature of Reader's Digest's involvement in special interest magazines is the high order of priority on editorial. We put the editorial product first. And that goes back to the Wallaces in terms of how they founded this company. it was started by an editor. And most of the core work being done on the special interest magazines begins with reinvigorating editorial. This is very fundamental to Reader's Digest beliefs.
LOVE: How is the RD Pubs division structured? Who reports to you, Tom? Are publishers responsible for the bottom line?
KENNEY: The structure is very lean and flat. I have 14 people reporting directly to me, so I don't spend a tot of time with anybody; I go to the movies. The result is that the individual publishers have bottom-line responsibility.
The editors and publishers of each magazine report to me-and that further reinforces the importance that we put on editorial independence at the magazines. But the publisher is the driving force toward profitability.
The publishers work very closely with Mike [Brennan], and Mike is their peer. They don't report to him. But when it comes to meeting the bottom line, Mike looks at everything and provides aid and assistance.
We are not highly structured, and we think that's positive. It reinforces
the entrepreneurial bent.
Travel Holiday: For people who want value
SIMMONS: For all the brainstorming we have done, I am very, very grounded in reality, and the reality of the competition, because I have been with the competition.
Travel Holiday is a magazine that is reality-based, not fantasy-based. We like to have real people on the cover, not a celebrity, not a model.
When I came up with the theme of value, I looked around and asked, "What do people want, given this economy, given the expense of travel? Do they really want a $400 hotel room?" The idea is very simple. It works very well. People respond to it.
The market was wide open. it was simply asking, "What would I do? What do I want? How would I spend my time? How much do I want to spend?"
The magazine is clean, lovely, inviting-and we provide a service. About 40 percent of the magazine is devoted to service--endless maps, double gatefolds giving history.
So basically, it combines the poetry of travel with the practicality of doing it with peace and value, which I think is the Reader's Digest theme. This is not a company based on glitz; it's based on reality.
Travel Holiday is reality based, not fantasy based. About 40% of the magazine is devoted to service. The market was wide open.
- Margaret Staats Simmons,
editor in chief, Travel Holiday.
LOVE,: Mike, how do you operate?
BRENNAN: One of my goals here is to make sure that we are non-bureaucratic. I've worked in that kind of organization before. Everybody here has lots of freedom. We don't have lots of rules and regulations, but we do look at the key objectives. SIMMONS: I have been given the independence I need to develop editorial-far more than I ever had at any other company. Each of us has been allowed to express our personalities visually and in terms of editorial. We really aren't given too many directives.
Tom has asked us as editors almost to develop our own policies as to how independent we need to be and how much structure we need to have. That's really the reverse order. But if you value creativity, it's the best order.
BRENNAN: We don't have a lot of time to spend in a lot of corporate meetings. And we don't have a bevy of financial analysts pouring over our numbers.
WYLE: When Tom came to me, I told him I was not a heavy-duty corporate person. He said he had heard I was "feisty," aggressive," "independent" and "strong. " And that's what he wanted.
I have to admit I was really skeptical. I thought it was going to be really tough for me in that tightly organized corporate culture. But I love it. I think this is the right kind of environment to relaunch, rejuvenate, rebuild and reinvigorate American Health. And everything is happening a lot quicker than any of us thought it would happen. We are talking about five months of changes happening just like that.
Family Handyman: improving the presentation
CAREY: The commitment to editorial excellence in the company has had a profound impact on Family Handyman. There have been dramatic improvements in the kind of product we deliver. The common perception might be that not much has changed for us. We were a fairly well-established magazine. Our logo is the same. Our name is the same. Our editorial mission is the same. What's changed is how we do what we do.
For one thing, the state of photography is a whole quantum leap from where we were before. Also, we are now concentrating on results instead of process. Take a story on a backyard playground. Our research shows that readers aren't thinking, "Boy, I'd really like to build that," as much as "Gee, I'd really like my kids to have that." We have a better understanding of the reader because of some of the research we've been able to do.
This issue compared with a similar issue of the same size two and one-half years ago has 44 percent more photographs in it. It is much more highly illustrated, a much better visual package.
The changes seem to be paying off on the circulation side. Newsstand sales for the first half of this year are up 30 percent. Circulation has grown significantly, despite price increases for two years in a row.
"Our name is the same. Our editorial mission is the same. What we have changed is how we do what we do."
Greg Carey, Publisher The Family Handyman.
KENNEY: I don't want to throw a wet blanket on this kind of love-fest, but there is a mixture of loose-tight management in what we are trying to accomplish.
On the one hand, yes, all the things we have been talking about are very true. But I don't want to gloss over the fact that we have a very, very complete management information system that we have put together. It very closely monitors the key data on whether we are being successful or not. So we are watching editorial expenses, as terrible as that may sound, very carefully. We're watching the bottom line very carefully, the number of pages, the net revenue per page and all the key indicators. So while there is a lot of entrepreneurship going on, it's a monitored, directed entrepreneurship.
LOVE: Is the compensation tied to this idea of entrepreneurship? Is it based on accomplishments?
KENNEY: Yes. Each of the publishers, especially, has a lot riding on the commercial success of the magazines. Compensation is based almost totally on performance. I love corporate citizens who look right and talk right and all that good stuff, but I am much more impressed by people who deliver the management objectives that we have set forth for our products.
LOVE: I know some of the magazines have a way to go before you reach your first objective of financial success. I heard last year they lost $17 million. Is that correct? And what is your timetable for these magazines to be profitable?
KENNEY: First of all, the numbers you heard are somewhat misleading. For one thing, just about half of that reported loss is for amortization of purchase price. That has absolutely nothing to do with what is going on with recent activities.
Second, the special interest magazines include worldwide special interest magazines. So, in addition to these four, the numbers refer to magazines in France, England and the Netherlands. it afl kind of winds up in the same pot.
LOVE: I realize that your objectives certainly go beyond profitability for each magazine.
KENNEY: Exactly. The number you mentioned reflects only the first of our four objectives for getting into special interest magazines. It reflects the financial objective, but there is nothing reflected in that number concerning contributions to the mailing lists or books and record sales or all the other good products that we are selling. Those numbers are reflected in the books and home entertainment group.
There is also nothing in that number that reflects the entrepreneurial contribution of my good colleagues to the overall company.
GREER: In my 11 months with the company, I have observed a tremendous amount of energy generated from the "Here's what we want done. Now go do it" approach. Now that that is working and the momentum on all the magazines is growing, we're also getting this synergy. We are getting good writers, good photographers and top illustrators.
We share information, such as "He's a good one. I'll use him too." So even though we have four distinct magazines, we have some common objectives.
American Health: More research and resources
WYLE: We have been on board with Reader's Digest for five months. The first new issue came out in September. We are talking about a magazine that is going through some changes. The first change is the graphic approach. We just hired an award-winning art director, David Armario.
The magazine has been very successful in its eight years of existence, but every month it seems there are new health magazines coming into the marketplace. We differ in the marketplace because American Health is a newsmagazine. You are not going to read long esoteric articles in American Health on how to buy a bathroom scale.
We are now able to do a lot of things we were not able to do as part of a small entrepreneurial company. We have many more resources. We are adding a lot of research projects. As our editor says, we don't want just to report the news; we want to create the news.
We are also staffing up. We added an award-winning medic writer from Consumer Reports We are looking to staff up in nutrition and fitness. In five months, the differences in the people and the magazine are astonishing.
Like the other Reader's Digest magazines, we are directing our editorial to mainstream America.
SIMMONS: The synergy at the thematic level is very important to making Travel Holiday work.
If you are doing travel in any real way, in a serious way, you have to work with people all over the world, and Reader's Digest has those people. With that kind of network, if I want to do something on, say, the Great Barrier Reef, with the best writer I know to do it, I have access to the people who have done the definitive book and mapping of the reef. There's a very sophisticated network available to me.
LOVE: How does that synergy work in terms of your database? I understand that Reader's Digest has 50 million U.S. households on a database. How does that contribute to the growth of the special interest books? And do the special interest books contribute new names to the database?
KENNEY: Yes. Initially, the contribution is from the Reader's Digest list toward each of the special interest magazines. For example, within a few weeks after we acquired American Health, there were millions of pieces of direct mail out in the marketplace that were all from the Reader's Digest file. We came up with lots of people right away who had expressed interest in the health area.
Now, though, after we've had a few of the magazines a while, they begin contributing to the Reader's Digest database. Family Handyman has been a great contributor both in terms of names and in helping us perfect our regression techniques that we use to further isolate the kinds of affinity groups we can approach profitably with books and other materials. So it goes both ways.
LOVE: What about ancillary products associated with these special interest magazines? How important are they to you?
KENNEY: American Health, for instance, was already in the tape business to some degree. Our next Reader's Digest corporate catalog is going to include American Health ancillary products. As a matter of fact, we are exploring some other businesses right now that might further advance the American Health idea and product line and brand recognition. So that's important.
LOVE: Do these ancillary activities contribute a significant amount of revenue compared with advertising and circulation?
KENNEY: They have the potential to be significant. Yes.
LOVE: How important are these other revenue producing activities in your decision to purchase a magazine?
KENNEY: Well, one of the things that we look at when we acquire magazines is the competitive marketplace. This is more relevant than it was a few years ago. You are often in a bidding contest with someone else who wants the magazine.
We think that we are in a position to add more value to products after we acquire them because we have three more objectives, in addition to making money, than the other bidders. And we are certainly always going to be in a position to invest more money in the product's development than a company that would be concerned only with making a buck with the magazine.
All of these products offer a significant opportunity for profits more than revenue. In other words, there is going to be a higher margin on these incremental products than the whole product itself. American Health already has a significant business in sports.
LOVE: What kind of plans do you have for additional acquisitions?
KENNEY: We have a wonderful infrastructure that Mike has built up for the corporation with a lot of his colleagues. That infrastructure is capable of taking on lots more. So we are going to be very aggressive in trying to build up the stable. At the same time, we don't have to chase products. If a good opportunity comes along, we are ready. We have one or two dollars in the bank, so we are prepared t6 make an acquisition very quickly.
LOVE: Can you be more specific than one or two dollars?
KENNEY: You can just look at the latest financial statement to see the amount of cash on hand. [As of March 31, 1990, Reader's Digest reported having cash and short-term investments amounting to $480 million.]
LOVE: How would special interest magazines be evaluated against other options for that money?
KENNEY: We are always going to be comparing investments in other magazines with the other alternatives that we have in the company. We have, fortunately, lots of ways of expanding the company, both domestically and abroad. So that is another reason why we are not just going to throw money at magazine acquisitions. I think our track record speaks for itself. There are not too many companies that have bought four magazines in three years.
LOVE: What about starting magazines? Is that a possibility?
KENNEY: Yes. We'd love to. That's another reason for emphasizing editorial. if we do start magazines, they will be editorially driven. And my colleagues here and their editorial colleagues have already been helping on a couple of projects we have underway.
LOVE: Do you have a preference for acquisitions or start-ups?
KENNEY: What we are really looking for is a passionate editor and a passionate publisher. I don't care where they come from. if they come from within the company, great. If we find someone from outside who is willing to put something at risk--meaning his time, income, whatever else that is the same risk the company is willing to put in, great.
But we are not wed to acquisitions or start-ups. We'll do whatever makes sense. Start-ups are very difficult, as everybody knows. From a corporate point of view, a personal pride point of view, a start-up would be wonderful. But we are not going to do it just for ego gratification.
LOVE: Some years ago, Reader's Digest tried to start a magazine called Families. Did the company ever try anything else?
KENNEY: Not to my knowledge.
LOVE: You said earlier that editorial is where it all starts. What are you doing editorially with the four special interest books?
KENNEY: If you look at each one of these magazines, you'll find specific quantitative as well as spiritual changes in them. You are going to find a re-established editorial well in American Health; an increased use of photographs and a volume of editorial pages in Family Handyman; a substantially upgraded quality of paper, volume of pages and size of editorial staff for Travel Holiday and the same holds true for New Choices. We have not just improved the creative on these magazines, but committed tangible additional editorial resources.
LOVE: How is management working with editors on how much to commit to editorial improvements?
KENNEY: We are not just simply throwing money at the editorial process. Each of the publishers has completed a strategic plan for the magazine, which includes the competitive advantages and disadvantages, what it takes to compete successfully in their market niches. Then we establish the editorial parameters-meaning how much we can afford to spend based on the competitive environment. Then we go to the editor and say, "Given these restraints, this is the kind of magazine we want." Or the editor will say, "Hey, this is what I want to do" and the rest of us will ask, "Does that fit in with the overall strategic position of the magazine?"
So we come back to the kind of loose-tight management. You can say creativity has no bounds, but eventually it has to come back and make sense from a business point of view. We don't want either approach to dominate or step on the other. LOVE: Would you explain the role of editorial as you - the president of the Reader's Digest Magazine Publishing Group-see it. How does it fit into your publishing strategy?
KENNEY: The importance of editorial is not just rhetorical; it is not just motherhood and apple pie. We think it makes good business sense.
For the kind of publishing dynamics we have at Reader's Digest, we absolutely require substantial reader contribution. This docs not necessarily mean size of circulation, but it does mean net profit per copy sold to the reader. That is an inherent part of our circulation and overall publishing dynamics. That is different from many companies that are very ad sales oriented, where circulation is viewed almost as a cost center.
So we start with the premise that we need a strong circulation contribution. The way you do that is to invest in a strong editorial product that will deliver that net contribution.
Directly, if I had my choice of having an A publisher and a B editor or a B publisher and an A editor, I would choose the A editor because the whole thing really does start with the editor.…
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Publication information: Article title: Reader's Digest: New Directions. the Giant, Cash-Rich Publisher Has Targeted 'Affinity Group' Magazines for Growth; Synergies with the Digest Abound. Contributors: Love, Barbara - Author. Magazine title: Folio: the Magazine for Magazine Management. Volume: 19. Issue: 10 Publication date: October 1, 1990. Page number: 96+. © 2009 by Media Central Inc., A PRIMEDIA Company. All rights reserved. COPYRIGHT 1990 Gale Group.
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