Diane Mermigas'  Instablog

The bankruptcy of Reader’s Digest is yet another reminder of the magazine industry’s weighty dilemma: Much of its branded print content is devaluing faster than it can be exploited online. As some general interest publications fall away and some savvy niche titles thrive on the Web’s long tail, the search for new business models is taking unexpected turns.

Time Warner is inching  closer to selling its legendary magazine portfolio of titles from Time and Sports Illustrated to Fortune and Smart Money. At the same time, Activision Blizzard is entering the magazine fray with a pricey subscription-only quarterly periodical for diehard World of Warcraft video game fans. Meredith is recasting its stable of domestic titles  –  including Ladies Home Journal, Traditional Home, Fitness and Family Circle –  as “national media brands.” ESPN is reducing the annual price of its weekly glossy to $1 while giving its two million subscribers free access to the Walt Disney's ESPN.com paid site, Insider, to encourage sampling.

As magazines hang in limbo between their traditional print roots and their digital online future, the economic gains they are making are small despite the big-time experimentation. It is estimated that by 2013, consumer magazines could double their annual $650 million in revenues from Internet and mobile devices, according to private equity firm Veronis Suhler Stevenson. In print, consumer magazines this year will hit a new low of $20.7 billion in revenues, sliding to $19.9 billion by 2013, as forecast by VSS.

Subscribers and advertisers aren’t the only ones holding back. Potential buyers are dramatically discounting magazine core content and brand names that should be valuable anchors online.  A case in point: McGraw-Hill’s BusinessWeek could sell for a high of $40 million — or a mere $1, just as TV Guide did last year. Months after Advance Publications ordered Conde Nast to abruptly shutter Portfolio, another Advance unit, American City Business Journals, has modestly re-launched it as an online-only entity.

One sure way to reverse magazines’ failing fortunes, according to a Piper Jaffray report, is for the new owners of BusinessWeek to eliminate the costly physical plant and infrastructure tied to paper publishing to pursue more streamlined, profitable journalism online. BusinessWeek suitors including Bruce Wasserstein (owner of The Deal and New York magazine), OpenGate Capital (owners of TV Guide), Zelnick Media and Mansueto Ventures (owner of Fast Company) have not indicated their support for such a plan.

Although spinning off its cable systems and AOL will leave Time Warner a company devoted only to film, television, online and print content, it still seems compelled to sell its magazine group. Time Inc. publishing will continue to be a drag on overall corporate earnings even after the recession ends. It is expected to average a nine percent decline in earnings on about a nearly three percent decline in revenues over five years ending 2012, according to Bernstein Research.

Continue reading post...

The author does not directly own media or Internet stocks.