Thursday, January 18, 2007

Reduction in Force

Ann S. Moore, Chairman and CEO of Time Inc., announced today that Time Inc. will be cutting more than the 250 expected jobs. The total was 289 mostly editorial jobs.

Why should those of us outside of print media care? I addressed this question in a related entries Decline of Print Media Sales and What Walks Out the Door (when great senior people are let go).

Time Inc. has 150 titles (as of September 2006) with a several up for sale at the moment. They are owned fully by Time Warner, Inc. Four of their magazines were on Adweek's "Hot List" in 2006: People (#1), Real Simple (#3), In Style (#7), and Cooking Light (#8).

Culled from the Time Warner website about Time Inc.:

  • Time Inc. magazines are read 340 million times each month worldwide by 173 million adults over 18 years of age.
  • Two out of every three U.S. adults read a Time Inc. publication every month.
  • As of June 2006, Time Inc. earned 22.8% of all domestic magazine advertising spending.
  • Time Inc. ended 2005 with three out of the top four magazines in both advertising revenues and pages.
  • People remained the #1 magazine in advertising revenue for the 15th consecutive year.
  • Seven of the top 25 magazines in advertising revenues in 2005 were Time Inc. titles.

The problems facing Time Inc. are the same problems facing the entire magazine industry and the broader media industry. All of these media outlets that were swallowed up by huge corporations are now expected to maintain a level of growth that is often beyond what is sustainable. Mere profitability is no longer enough. For a media conglomerate, a modest success is today's definition of failure.

So, here is how the lay offs broke down at Time Inc. today:

  • 117 jobs from the business side
  • 172 jobs from the editorial side (50% have been offered packages, 50% are just losing their jobs)

Other casualties:

  • Time Magazine closing bureaus in Los Angeles, Atlanta, and Chicago
  • People Magazine closing bureaus in Washington, Miami, Austin, and Chicago

Recent History:

  • 105 people laid off in December 2005
  • 100 people laid off in February 2006
  • 250 more in April 2006
  • Closing Teen People in July 2006
  • Pending sale of Time4 Media and Parenting Group assets up for sale in September 2006 (560 jobs)
  • 27 people laid off in December 2006
  • Sale of Progressive Farmer Magazine

A large part of this reorganization was designed to curry favor with Wall Street. At the time I am writing this (3:16pm on 1/18/07), Time Warner's stock, (TWX), is trading at $22.98 which is:

  • Today's Open: $22.89 -- up $0.09 (~0.4%)
  • Seven Days Ago: $22.50 -- up $0.48 (~2.0%)
  • One Month Ago: $21.50 -- up $1.48 (~6.4%)
  • One Year Ago: $17.00 -- up $5.98 (~26%)
  • Today's High: $23.03
  • Highest Point in Four Years: Today $23.03

--Carter Cathey
© 2007

Tuesday, January 16, 2007

What Walks Out the Door (when great senior people are let go)

Is the gold watch for thirty years of service something that is gone now forever? Are jobs now like winter hats that you wear for a few years and then trade in on a new one? Is every employee an interchangeable cog to be pulled and replaced without consequence?

As discussed in Decline of Print Media Sales late last week, 250 time staffers continue to wait for the announcement of their layoff. It was announced today that five senior staffers are already gone through early retirement, layoff, or leaving to pursue other interests.

As, Lucia Moses reports in Mediaweek:

--Fred Nelson, VP of digital media for Entertainment Weekly, whose job was eliminated when EW adopted a new management structure. He had been at Time Inc. about 10 years in various positions. His last day was Jan. 8.

--Art Berke, in mid-February after 18-plus years as head of communications for Sports Illustrated. A search for a successor is underway.

--Time magazine's Michele Stephenson, who took early retirement Jan. 5 after 19 years as director of photography and before that, serving as deputy picture editor. Picture Editor MaryAnne Golon was named to succeed her.

--Carrie Welch, vp of communications for the Time Inc. Business and Finance Network, who is leaving Jan. 19 after 25 years at Time Inc. for Lowe Worldwide as executive vp in a communications role. No word yet on a successor.

--And Fortune's executive editor Bob Safian, who left for Mansueto Venture's Fast Company, where he'll be editor and managing director.

I am reminded of an old adage that an agency president once said, “100% of my inventory goes home at 5pm.” The people were his product. He had no widget to sell. The product of his agency was the quality and experience and ability of its people.

Time Inc. may well have been overstaffed and the trimming of these jobs and the hundreds more to follow may well be prudent. It might also have made excellent sense for the board in their duty to the stockholders to maximize profitability and curry wall-street favor. It might even eventually lead to better magazines.

But, I can’t help but wonder what walked out the door with Carrie Welch, VP Communications, after 25 years of service. What knowledge is she taking with her that they will not even miss until silence follows a question she would once have answered? What insights left the building with Michele Stephenson after 19 years as Director of Photography for Time Magazine? What did she know after two decades of selecting photographs for the pages of Time Magazine that wasn’t written in the job description?

Perhaps the more profound question is whether or not anybody cares? Is a 25-year veteran easily and instantly replaceable by a 25-year-old college graduate? Can we just move everybody up a chair and a title without impact? And, with the revolving door of celebrity CEOs and the average tenure of a CMO at 22 months, is there anybody that really knows the impact to the magazines?

I am reminded of a story about a woman that was laid off by a Fortune 100 company after a decade of service. Her specialty was that she knew more about the physical configuration of their stores than anybody else. She knew the depth of the shelves, the height of the racks, the clearance of the ceilings, etc. And, since there were dozens of store designs, across dozens of states, this was quite a challenge.

She was well-compensated and managed the group that produced in-store signage and coordinated and negotiated with external print vendors. She was laid off along with dozens of other employees in a cost-reducing move. Some time later, there was a print job that was produced to incorrect specs. Nobody caught the fact that it wouldn’t fit inside the stores because everybody relied on her for such details and she was no longer there. That one mistake with reprinting, reshipping, reinstalling, etc. cost more than ten times her annual salary.

It would be an excellent moral of the story to say that the company discovered their mistake in letting this valuable resource go and hired her back. Perhaps even saying that they hired her back to HELP in their efforts to reduce costs. It would be nice to envision Richard Gere climbing her balcony, a la Pretty Woman, and begging her to return.

As you might have guessed, this was not the case. In fact, the company had already recognized the benefit on wall-street for the layoffs and they just couldn’t seem to find anyone to blame for the mistake. After all, it wasn’t anybody’s fault. Nobody could be expected to know the dimensions of all the different store designs, could they?

In this movie, the Pretty Woman took her severance package, spent some time emotionally recovering from getting canned in her forties for the first time, then got her next job making more money and moved on with her career.

As our peers at Time Inc. might tell us, perhaps in today’s corporate environment, if you want a gold watch, you should go ahead and buy it for yourself.

--Carter Cathey
© 2007

Saturday, January 13, 2007

Decline of Print Media Sales

Mediaweek Online just reported that Time Inc. is about to lay off as many as 250 people. The formal announcement is expected one day next week.

This continues a trend of compression in the world of print that has no end in sight. With the explosion of "new media" and the expectations of today's media consumer for instant information, magazine circulations and their advertising revenues have been declining. (There is an excellent report on The State of The News Media that is full of excellent detail on the trends in print media.) The magazines that are surviving are niche magazines, category-leader magazines, and magazines that have fully embraced and been fully embraced online.

Even news magazines now routinely break their stories on their website first rather than waiting for the distribution of their print editions. The staff at most magazines know that the core product moving forward is going to be the distribution of content online branded under the print edition's masthead.

As all media continues to converge, we shall see some media outlets flourish and others flounder. As a media seller, I think it would be a difficult time to be selling print. Selling Newsweek or People Magazine in New York is probably still quite lucrative. However, most magazines are facing more of a challenge.

For example, type Kitchen Remodel Magazine into Google and you get scores of options. The top several spots are for the major print magazines for the Kitchen Remodel industry:
--Remodelling Magazine
--Kitchen and Bath Design News Magazine
--Kitchen and Bath Business Magazine

Further down the list are a few other print magazines in this category:
--Home Remodeling Cape Cod and The Islands
--This Old House

All of these magazines are going after the same potential advertisers: manufacturers of flooring, faucets, counter tops, sinks, showers, tile, hardware, lighting, etc. These same potential advertisers are being courted by a dozen broadcast and cable outlets like HGTV Network and DIY Network. These are also the same potential sponsors for several major trade shows.

Budgets are stretching thinner and thinner and the second- or third-tier print remodelling magazine is not as easy to sell as it was ten years ago. These magazines get even harder to sell when the magazines are reduced in size and quality, key strategic leadership leaves, sales teams are smaller with larger territories, budgets are slashed, and the editorial offices have more empty desks than occupied ones.

Good luck to those managers that are leaving Time's magazines and the 250 other employees walking around with targets on their backs for the next week. I hope your severance packages allow you enough time to find work somewhere outside of print.

--Carter Cathey
(c) 2007

Friday, January 12, 2007

Media Convergence: Fusion of Electronic Media

Quite a bit of research has been done to determine the relationship between television viewing and time spent online. When, for example, an advertiser puts their web address on their television commercial, there is a noticeable spike in site traffic within minutes with the majority occurring within the first twenty-four hours.

The bigger question is what percentage of this traffic occurs within those first few minutes after the commercial has broadcast? Did the television viewer have time to get off the couch, walk to the computer, log in to their ISP (remember dial-up?), and key in the address? Or, were they already online and sitting in front of a computer when the commercial aired? Were they already dividing their attention between television and online?

This is the idea of convergence.

Advertising Age published an article called "Using Double Screen to Drive TV Viewership" that suggested that it there is a big increase in people watching television while online in Japan. Are we becoming a culture of media consumers with one screen watching television and another browsing online? Does television now compete with the Internet on a minute-by-minute basis? If the content does not compel my attention, then the online world is only a click away. Or, as Advertising Age suggests, can you use RSS prompts to drive television viewership?

In years past, media was easier to categorize. Radio was listened to in the car during morning and afternoon drive times. Television was viewed primarily in the home with a noticeable spike in the evening hours as people came home from work.

So, a savvy advertiser could buy commercial time in the television morning shows at 7am, the popular radio morning drive show in each local market, and television news and prime from 6p-11p. This would allow predictable and duplicated access to target consumers. You knew where they were and what media they were consuming at any given time. You could plan for your optimal target audience and strive to attain the right mix between media reach and frequency.

Now, media planning is considerably more complicated. The first challenge was media fragmentation as television followed the trail blazed by radio by expanding from three television channels to 300 in the blink of a decade. But, you still had the foundational rock of Thursday night prime, right? Time-shifting is making the concept of appointment television obsolete. You watch television whenever you want selecting whatever content appeals at that moment. In radio, iPods, Zunes, and satellite radio are further competing for radio audiences across all formats.

Even the terms are losing their concrete definitions. Watching television used to conjure up images of Mom, Dad, and the two kids sitting in front of the big family console television. However, this Father Knows Best image is all but shattered. Now, there are more televisions in the average home than their are people and most viewing is done alone. With podcasting, mobile content, sling-casting, and other new technologies, viewing television content can be accomplished in an ever-expanding number of ways.

So, what is an advertiser to do? How does an advertiser ever know what sold his products? How can you evaluate the efficiency of different media in such a fast-changing media marketplace? How does radio, print, television, cable, outdoor, online, paid searchwords, and the rest of the vast media mix work together to sell the product and build the brand?

The reality is that we will never know and we never have known. But, more than ever, media professionals have to be smarter, more intellectually nimble, savvier, more creative, and they have to work a lot harder as advocates for their clients.

--Carter Cathey
(c) 2007

Thursday, January 11, 2007

Deal or No Deal: The Evolution of the Evening Game Show

Deal or No Deal marks two big changes in the 'game show' genre. First is the return of a game show to prime time. Second is that the show is chance-based rather than skill-based.

When "Who Wants to Be a Millionaire" became wildly successful in prime time, there was a rush by all the major networks to come up with other game shows to broadcast in prime time. Almost all of these shows were a disappointment if not an outright failure when it came to attracting an audience and advertisers. Analysts of television concluded that "Millionaire" was a fluke and that no other game show could be successful in prime time. Then, of course, "Deal or No Deal" exploded in the ratings demonstrating that the prime time game show was not dead after all.

But, perhaps more interesting, "Deal" is a very different game show than "Millionaire". Even though both have excellent production values, lavish sets, and exciting theme-music, "Deal" is a game of chance. Perhaps with our cultures renewed interest in card games, games of chance are enjoying a resurgence. Who would have guessed that the World Series of Poker would become a spectator sport? However, prior to "Deal" most of the most successful game shows in the last decade have been skill-based or knowledge-based.

With the amazing string of victories of Ken Jennings it became clear that Jeopardy was not the game for everyman. This game was dominated by intelligent, educated people that studied the game-guides extensively prior to their appearance. Even the venerable "Wheel of Fortune", with the luck of the wheel, required creativity and mental agility.

"Deal or No Deal" is completely random. The game for everyman. No education, no preparation, no intellectual problem. There is no skill component. It is solely decided on chance and willingness to risk. Were it not for Howie Mandel's odd watchability and the antics of the contestants, the show would be unwatchable. It certainly doesn't lend itself to playing along at home.

And yet, the show is performing very well in the ratings for the very reason that we all feel as though we could do just as well, if not better, than the contestants. It is not possible to watch without answering for themselves "Deal or No Deal".

If you want the experience of playing the game, attached is a link to try your luck. The great thing about this online game is that without Howie Mandel and commercial breaks, you can play ten times in five minutes.

(c) 2007

Business of Media 1: Four Types of Television Commercials

In television, there are four basic types of commercials that run everywhere: Network Commercials, Local Spot Commercials, National Spot Commercials, and Direct Response.

* Network Commercials - These commercials are sold by the broadcast or cable network and are part of the feed that goes to local stations. These are spots that run simultaneously across the country. If you buy a network commercial during Desperate Housewives, that commercial is going to be seen by every viewer of that program in every household in the country. It doesn't matter if they are in Denver or Dallas or Durham.

* Local Spot Commercials - These commercials are sold by the local television stations or cable providers in each individual market. These spots run only in the market in which they are purchased. If you buy a local spot commercial during Desperate Housewives in Dallas, you would purchase it directly from the Dallas ABC affiliate (WFAA-TV) and it would run only in Dallas. If you wanted it to run in Denver or Durham, you would have to contact those local stations and purchase from them directly. Local Spot Commercials tend to have lower production values. Imagine the local car dealer standing in front of the car lot swinging his arms and talking about the great deals at Westway Ford.

* National Spot Commercials - These commercials are sold in a couple of different ways. Primarily, each local station has a National Sales Manager that works with a National Television Rep Firm who in turn works with media agencies to complete this buy. National is used when an advertiser wants to cover several markets with their advertising message, but doesn't want to buy network. There could be many reasons not to buy network. The company might be regional so a national buy would deliver their message to people that can't shop in their stores. They might be testing a new product or a new advertising message in a few local markets. They might have different advertising messages for different parts of the country.

* Direct Response Advertising - Direct Response is an entirely different process. These are predominantly the commercials that have a phone number at the end so that you can call and purchase the new Vidalia Chop Wizard or whatever new widget they are selling. By definition, there is a way for you to "respond directly" during the commercial. These commercials are often used to fill unsold inventory. Sometimes, they are purchased and sometimes there is a revenue-sharing agreement in place between the DR advertiser and the local station. Each situation is unique.

--Carter Cathey
(c) 2007