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Hoffman Media’s President & Chief Operating Officer, Eric Hoffman, to Samir “Mr. Magazine™” Husni: “We’re Deeply Committed To High Quality Print.” The Mr. Magazine™ Interview…

December 16, 2019

Mr. Magazine™ Presents… Conversations With Magazine and Magazine Media Leaders…

Hoffman Media’s president and chief operating officer, Eric Hoffman, faces 2020 with solid goals and realistic expectations as many wonder what the New Year will bring. Hoffman Media’s brand portfolio is strong, with titles such as Bake From Scratch, Southern Lady, and Cooking with Paula Deen, but as Eric talks about the challenges of the future, newsstand and distribution of magazines are high on his agenda. The question remains what awaits magazines and magazine media in 2020?

So please grab your laptop, iPhone, or pen and paper and be prepared to take notes as Mr. Magazine™ delves into the world of CEO’s, COO’s, Presidents, and other corporate magazine media leaders and asks them to put on their futuristic cap and share with him their predictions for 2020.

The conversations with the magazine and magazine media executives are going to be published chronologically as they took place…

Up first on Mr. Magazine’s™ list, Eric Hoffman, president and chief operating officer, Hoffman Media.

But first the sound-bites:

On his assessment of magazines and magazine media for 2020: I think it’s going to continue to be really difficult for magazine publishers; in particular those that have exposure to the newsstand. Hoffman Media is probably one of the more unique publishers in the country because we have an outside exposure to the newsstand, just because of our balance-revenue model between subscription, single copy and advertising. It sort of all runs independently. One favorable piece to the economics this year is it looks like paper prices are coming down a little bit, which 2018 put a lot of headwind out there for publishers that had heavy print exposure. I think those prices coming down a little bit is a good thing. Maybe it will provide a soft landing for some other sides of the business that maybe have increased in cost.

On any success stories from Hoffman Media for 2019 that he can share: We bought an event business away from F+W before they filed bankruptcy. And that business is The Original Sewing & Quilting Expo. It’s eight expos that we do around the country. We got a fairly attractive evaluation on that business. We have our first full year results coming up and frankly, I think it’s going to contribute about 30 percent of our profit this year. One highlight is this is certainly an opportunity to expand, especially when you have niche markets with passion-based customers that are willing to go with you wherever you go and will value the experience that you offer them.

On whether his biggest challenge for 2019 has been newsstand: Absolutely. If you look back at the newsstands for 2015. 2016 and 2017, they were three consecutive years of growth for us at a time when the industry really started to demonstrate some substantial downward pressure. And 2018 was sort of the year when the trend line caught up with us. We grew the business, almost doubled it from 2015 to 2017; I think we cracked the Top 10 in Magnet rankings for single copy volume. And not just topline, we were making it work from a profit perspective. And 2018 was also a substantial change, paper prices being high and newsstand was going through some substantial changes that caught up with us. So, we started to pull back in 2019 and I think you’ll continue to see that trend in 2020.

On why he thinks the magazine industry can’t come up with a new business model: Publishers are going to have to face the realization that rate base is… and again, there are exceptions, but for the most part it’s an outdated business model. I think publishers actually look smart in reducing rate base and thinking more about the quality of their customer base and focusing on endemic advertising that reaches their audience in an intentional way. If you want to buy a lot of advertising and you want to buy it cheap, it’s programmatic to solve that for the world. You can buy a lot for not a lot of money.

On whether he feels social media is friend or foe to the magazine business: I really think it’s your friend. Social media is a powerful way to reach new audiences, for sure. But it also gives you some tools in the bag to work with advertisers in a different way. We’re doing a lot of custom content developed for our audience and for influencers that relate to our audience and to our brand. We’ve been able to execute really interesting advertising campaigns across that platform.

On what keeps him up at night: What keeps us up at night is despite our intentional effort around running our business that’s subscription focused, balanced with single copy, focused on high quality, high-priced customers; I worry about the broader industry, that vendors are pressured and about the economics from the vendor side, fulfillment, printing, newsstand distribution, that there may be pressure there as well. Coupled with the fact that a lot of the larger publishers in our industry are also troubled right now. So what does that mean?

And now the lightly edited transcript of the Mr. Magazine™ interview with Eric Hoffman, president and chief operating officer, Hoffman Media.

Samir Husni: As we approach 2020, what’s your assessment of magazines and magazine media?

Eric Hoffman: I think it’s going to continue to be really difficult for magazine publishers; in particular those that have exposure to the newsstand. Hoffman Media is probably one of the more unique publishers in the country because we have an outside exposure to the newsstand, just because of our balance-revenue model between subscription, single copy and advertising. It sort of all runs independently.

We run our newsstand business as its own P&L. We have liked the single copy business; we still like it, but I’ll tell you that with Curtis selling to Comag, or CMG, with national distribution, wholesale and newsstand analytics and data all sort of wrapped up under one company, admittedly I think that it makes a service. Not to name names, I’ve talked to several other publishing executives and I think there’s a consensus that it’s become a very difficult business.

One of the things that probably keeps most of us up at night is just the undue amount of fees that keep coming down the pike from the distributors and wholesalers, which frankly, just makes the economics of the single copy business almost impossible. When you look at the amount of money you’re spending on promotion, meaning checkout placements, merchandising opportunities, and trying to do those and do those right, it becomes counterproductive when you’re trying to offset more and more fees every year.

And just retailers. At the end of the day, anybody can just walk into any grocery store or bookstore and see our magazines in somebody else’s rack, their magazines are in our rack, so there’s an execution problem unfortunately, and I think that’s a wide issue that we have to get our hands around.

And what you’re going to see including coming out of Hoffman Media is a pullback in the single copy piece of the business, because the ROI is just not what it used to be. And I think that should be a scary proposition to the industry, because if Hoffman Media can’t make the single copy business work like we’ve historically been able to do, then that should be pretty indicative of where the industry is headed. We’ve always been at the forefront of the SIP business and just really managing high quality content across the newsstand. So, that’s one headwind that I think has to be addressed. And I’m not really sure what the answer is.

Second to that, I believe the printer consolidation question still exists. Quad and LSC, obviously, combined would create an odd pressure for publishers in that there becomes sort of a lack of options other than maybe a Fry or a couple of other nice, independent printers. But what does that mean in terms of the industry’s health if they don’t get a deal done? So, I think there are some questions there.

One favorable piece to the economics this year is it looks like paper prices are coming down a little bit, which 2018 put a lot of headwind out there for publishers that had heavy print exposure. I think those prices coming down a little bit is a good thing. Maybe it will provide a soft landing for some other sides of the business that maybe have increased in cost.

I tend to look at the advertising business at little bit different than most, just because most of our advertisement is very endemic; it’s a lot of relationship selling and frankly, we’re not winning a bunch of business because we’re responding to RP’s or meeting some sort of metric requirement from national advertising. We’re actually growing on the advertising side, this year we’ll be up actually almost 20 percent topline in our advertising business. A lot of that is driven by people understanding that the circulation model for our industry has been broken for a long time and Hoffman Media has always managed against the quality of our subscription file and not the quantity of it. I think now more than ever that is resonating with media buyers and with advertising clients.

Our advertising business has really been growing as a function of great custom content. If you’re good at creating content, I think that’s a way to leverage your business and grow. As an industry, I’ll tell you in total, a lot of people have their eyes on Meredith, just trying to get a look under the hood to see if they’re able to do with the Time Inc. acquisition. So far, it looks like they have not been able to successfully play out a lot of the economics of that deal. Unfortunately, being public measure, I think that’s sort of a yardstick that a lot of people keep a look at.

And finally I think for people who want to do deals, people who are leaving the media business, it’s a pretty good time to be a buyer. I think there are a lot of good magazine brands that will need to do something, either because they’re private equity backed or they have become an orphaned asset. If you have a longer view on the media business, it may be a pretty attractive time to be buying.

The flip side to it is, certainly the private equity world is saying the word print as if it’s a bad word these days, but I think there are really good businesses that are still in our industry. We still believe in the business; we’re deeply committed to high quality print. We’re complementing that with our digital business, we’re growing our cyber business. Run the right way, there is still an opportunity for people to monetize and grow in our industry.

Samir Husni: I know there is some pessimism about the future of the newsstands and what’s going on with them, in terms of distribution and the changing retail environment. Can you share any success stories from Hoffman Media that took place in 2019? What if a buyer came to you and said they were interested in buying Hoffman Media, what would be three accomplishments that you could tell them that happened in 2019? Not that you’re for sale, but just in case.

Eric Hoffman: (Laughs) If you get a high enough price, Samir, we can talk. (Laughs again)

Samir Husni: (Laughs too).

Eric Hoffman: I’m kidding. We love the business. We actually just acquired a company at the end of 2018. We bought an event business away from F+W before they filed bankruptcy. And that business is The Original Sewing & Quilting Expo. It’s eight expos that we do around the country. We got a fairly attractive evaluation on that business. We have our first full year results coming up and frankly, I think it’s going to contribute about 30 percent of our profit this year.

One highlight is this is certainly an opportunity to expand, especially when you have niche markets with passion-based customers that are willing to go with you wherever you go and will value the experience that you offer them.

Our Bake From Scratch brand, honestly, continues to thrive. Brian, my twin and counterpart that helps run the company, has become the face of that brand. He’s had several national TV appearances. We’ve won some really great advertising partnerships as a result of just being best in class when it comes to baking. And as it dovetails into our digital business, Bake From Scratch will probably cross 500,000 followers on Instagram. An enormous following for a magazine of its size, but it just speaks to a level of the quality of our content. And that has really become a tent pole for us to build that out.

The event business is one, Bake From Scratch another, and then three, in a pretty tough environment we’ve been able to grow the advertising business in excess of 20 percent this year. And I think that’s a function of us having really great sales professionals that understand our business and understand how we’re different than a lot of our competitors. We’ve become experts in the verticals we’re in and so when we talk to clients about food or about travel and tourism, we know that business and we live that business every day. So I think that has also helped us grow.

And then overall, topliners for the company will be up between five and eight percent this year. And if you look at it over a longer window, since 2014 the company is up almost 45 percent in revenue. Newsstand is going to be down substantially. Our subscription business is actually holding up, it’ll probably be flat year over year, but we’re running that business the right way. We’ve got great renewal rates and practically all direct-to-publisher subscriptions at strong prices.

Samir Husni: I take it your biggest challenge in 2019 has been the newsstands, the single copy?

Eric Hoffman: Absolutely. If you look back at the newsstands for 2015. 2016 and 2017, they were three consecutive years of growth for us at a time when the industry really started to demonstrate some substantial downward pressure. And 2018 was sort of the year when the trend line caught up with us. We grew the business, almost doubled it from 2015 to 2017; I think we cracked the Top 10 in Magnet rankings for single copy volume. And not just topline, we were making it work from a profit perspective. And 2018 was also a substantial change, paper prices being high and newsstand was going through some substantial changes that caught up with us. So, we started to pull back in 2019 and I think you’ll continue to see that trend in 2020.

As I said, I think there’s a lot of uncertainty around the A and C deal. With Curtis being acquired, there are just a lot of questions over what the future is going to look like, so we’re really working hard to build the business in other ways, to the extent that we can. That being said, newsstand in 2020 will still be 30 percent of the revenue.

Samir Husni: Why can’t the magazine industry come up with a different business model? Are bookazines with no advertisement the answer? You go to newsstands everywhere and all you see are bookazines. Are they the salvation of the industry?

Eric Hoffman: I think part of the challenge is the magazine business – if you look at the printers, if you look at the fulfillment houses, if you look at the newsstand distributors, the reality is that the top five publishers in the country are probably driving a majority of the revenue for all of them.

To a large extent, and I’m not saying everyone, but to a large extent the business model has become ‘we’ll do whatever it takes to get our subscription business to remain the same or grow because we have a rate base we need to manage.’ Magazine publishers literally do three and four-year subscription offers for less than $10. So, if you know anything about the math of the business, the hurdle they have to jump from an ad dollar per subscriber number is fairly large and I just think that advertisers have so many places to choose on where to spend their dollars. And for the last 10 to 15 years, the magazine business, while we talk about changing and innovation, selling pages is still a pretty big piece of the business whether people will admit it or not.

Publishers are going to have to face the realization that rate base is… and again, there are exceptions, but for the most part it’s an outdated business model. I think publishers actually look smart in reducing rate base and thinking more about the quality of their customer base and focusing on endemic advertising that reaches their audience in an intentional way. If you want to buy a lot of advertising and you want to buy it cheap, it’s programmatic to solve that for the world. You can buy a lot for not a lot of money.

And as a result everything else is changing. When an advertiser says that they’re shifting budgets to more digital, the print side of the house for the most part says let us rework our rates. You’re down to where there’s remnant and there are direct response advertisers, which we carry a few of, it’s not that we don’t, but the CPM they’re paying is so low.

As more advertisers shift away from their print application, it’s going to make it increasingly difficult. And I think you’re seeing that when you see magazines shutting down, or they’re rethinking the whole model. I can think of some examples where they’ve gone truly to newsstand and shifted the subscription liability on to other magazines, just to sort of buy some time.

Samir Husni: You mentioned earlier that Bake From Scratch had hit half a million on Instagram; do you think magazine media publishers are utilizing social media in the right way? Is social media friend or foe? Or just something you have no control over?

Eric Hoffman: I really think it’s your friend. Social media is a powerful way to reach new audiences, for sure. But it also gives you some tools in the bag to work with advertisers in a different way. We’re doing a lot of custom content developed for our audience and for influencers that relate to our audience and to our brand. We’ve been able to execute really interesting advertising campaigns across that platform.

It’s also a part of the brand voice. Bake From Scratch is a perfect example, where high quality print, based on subscription and single copy, dovetails the podcast and Instagram and some television appearances. We’re doing conferences. In 2020, we’re launching a Baker’s Blog, Baker’s Influencer Conference.

Bake From Scratch led four baking adventure trips this year, we took a group of our fans to Paris; another group to Alaska; we made two trips to San Francisco. And these are people that are spending thousands of dollars to have a very VIP experience with our brands. And a lot of that is done through the marketing and brand reach we have across social media.

Samir Husni: What’s keeping you up at night these days?

Eric Hoffman: What keeps us up at night is despite our intentional effort around running our business that’s subscription focused, balanced with single copy, focused on high quality, high-priced customers; I worry about the broader industry, that vendors are pressured and about the economics from the vendor side, fulfillment, printing, newsstand distribution, that there may be pressure there as well. Coupled with the fact that a lot of the larger publishers in our industry are also troubled right now. So what does that mean?

Even if we can grow and squeeze out a decent year and continue to try and build our business, are there broader economic issues that as an industry we may have that could put pressure on everybody? And I don’t know exactly what that looks like, but I think there is some validity to that.

Certainly, if you go back and look a decade ago, at Anderson News going out of business, Source Interlink going out of business; the consolidation with TNG and Comag. And then ANC and Curtis, Publisher’s Press selling, and the overall consolidation with, basically now, Quad and LSC. You’re seeing consolidation as a survival tactic, but I think it’s also sort of scary.

On the retail side, do the retailers believe in the magazine business the way they used to? We’re losing shelf space as an industry. I think we have to do a better job of telling people why we exist and why we belong on the newsstand.

So, there’s a lot that keeps us up at night. But one of the things that helps me to sleep at night is our amazing team at Hoffman. We have some of the best in the business. Our commitment is to run our business the best way we can, to the extent that we can build it up and support the people around us. We are longtime believers in this industry. I’d like to think that a lot of these issues would get worked out. Unfortunately, I imagine there will be more magazines to fold and at the same time there will probably be more magazines launched. You just have to hope that both are positive for our business.

Samir Husni: Thank you.

Next up, Bonnie Kintzer, president & CEO, Trusted Media Brands.

 

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