How Magazine Publishing Stacks Up

By Suhler, John S.; Lamb, David C. | Folio: the Magazine for Magazine Management, February 1986 | Go to article overview

How Magazine Publishing Stacks Up


Suhler, John S., Lamb, David C., Folio: the Magazine for Magazine Management


Despite disappointing revenue growth over the first half of the 1980s, magazine publishers outperformed the communications industry in annual operating income growth and improved profit margins.

The publishers also proved themselves to be much more efficient asset users than did other communications businesses. Their greater efficiency exhibited itself not only in terms of operating income return on assets, but also in terms of cashflow return on assets.

These conclusions are drawn from the data presented in the third annual edition of Communications Industry Report, issued by Veronis, Suhler & Associates. The report carries data for 313 business lines of 245 companies operating in the United States and Canada. It groups the data into 10 industry segments and a miscellaneous grouping for cases where less than 60 percent of the revenue in a business line comes from a categorizable communications activity.

The data show that the communications industry's magazine publishing sector, the combined results for business and magazine publishers, amounted to $3.5 billion in 1984--6 percent of the communications industry's total revenue. The magazine sector's $0.4 billion ($400 million) in pretax operating income in 1984, however, accounted for a somewhat smaller 5 percent of the industry's total income. The sector's operating income margin stood at 13.1 percent in 1984--1.9 percentage points lower than the industry's 15.0 percent margin.

The 10 industry segments, besides the two magazine publishing segments (business and consumer), include newspaper publishing, broadcasting, cable and pay television, and business information services. Also included are book publishing, entertainment programming and distribution, recorded music, and advertising.

In the magazine sector, data have been compiled for 14 business and 15 consumer magazine publishers. No publisher in one magazine segment appears in the other--an indication that the business operations of the two segments are distinctly different from each other. This difference becomes even more evident when the financial results for the two segments are directly compared with each other.

Five-year sector results

For the five years ending with 1984, the operations of 26 magazine publishers (all but one of them publicly held) managed a 9.1 percent compound annual growth in revenue, compared with 13.6 percent for the communications industry. But the publishers' pretax operating income for the period grew 38.1 percent annually. And their profit margins in 1984 improved 2.9 percentage points from margins in 1980, compared with an improvement of only 1.2 percentage points for the industry.

The magazine sector only came near equaling the overall communications industry in terms of its five-year compound annual growth of pro forma cashflow (17.8 percent versus 18.0 percent). However, the sector outperforms the industry when cashflow margins for 1984 are compared with those for 1983 (3.5 percentage-point growth for the magazine sector versus 2.7 percentage-point growth for the industry). Cash-flow is "pro forma" because it is obtained by adding depreciation and amortization to pretax operating income to approximate actual cashflow.

As for assets, the magazine sector's assets grew only 7.3 percent annually over the five-year period, compared with 18.6 percent annual growth for the industry. But, supporting its reputation as an efficient user of assets, the magazine publishing sector's 41.9 percent pretax operating income return on assets in 1984 compares with 17.4 percent for the industry. In addition, the sector's 1984 assets turned over annually at a rate almost three times the industry's rate (3.3 times versus 1.2 times). The sector again outperformed the industry on another measure of efficient use of assets--operating cashflow return on assets. The sector's 1984 return, at 46.0 percent, far outdistanced the industry's 21. …

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