Case Report: PRIMEDIA Rochester Institute of Technology Media Industries Analysis February 15, 2006 By: Kimberly Bracken & Jesse Kraker Table of Contents

Introductions______pg. 2 Executive Summary ______pg. 5 Products and Services______pg. 6 Key Clients ______pg. 8 Key Competition______pg. 8 Financial Information ______pg. 9 Success Story: Acquisition of RentClicks.com ______pg. 10 Summary ______pg. 10

Appendix A: List of Enthusiast Media Publications ______pg. 11

Sources ______pg. 12 Introduction

More than 65,000 publishers operate in the United States. The three main forms of print publishing are newspapers, magazines, and books. With increased competition from the Internet, publishers are now considering extending their reach through a new form of publishing, electronic publishing. Many publishers are also looking to new business ventures to increase their revenues such as extending their brand names through live events and trade shows, other forms of print publishing, televising programming, product licensing, and more. Many have established Web sites that offer their publication’s content in an online form, in hopes of attracting new readers.

For the past 250 years, magazines have disseminated information and opinion. They have informed and advised us socially, politically, and economically over the years. Magazines are now starting to evolve into newer formats as publishers revolutionize the way they deliver editorial content.

Magazines are becoming more accessible than ever before due in part to the introduction of desktop and electronic publishing, and the emergence of the Internet. There are now more than 10,000 magazines published in North America, and close to 2,000 online magazines with more being created every day. About 87% of the U.S. population, 18 years or older, reads one or more magazines during an average month. Most magazine consumers are under the age of 55, with 18 to 24 year olds being the heaviest readers of magazines.

Magazine Markets The magazine industry can be broken down into three broad markets: consumer magazines, business/trade magazines and professional journals. The consumer magazine market is the most popular market of the three, and can be broken down further into general interest and special interest publications. General interest magazines are those that appeal to general age groups, genders, demographics, and/or lifestyles. General interest categories include: 1. News 2. Businesses 3. Finance 4. Entertainment 5. General sports 6. Women 7. Men 8. General editorial

Figure 1: Top 20 Mags. by Circulation Source: Albarran The market for special interest titles is much more widespread. Special interest magazines are more focused in content and targeted to a more specifi c group of people than general interest publications. Titles can be found in virtually any category imaginable. Special interest publication categories include: 1. Computers 5. Home 2. Cars and trucks 6. Travel 3. Health and fi tness 7. Arts and crafts 4. Specifi c sports

2 How magazines make money Magazine publishers make their revenue through two ways: circulation and advertising. In 1999, about 56% of industry revenues came from advertising, and the other 44% came from circulation dollars. About 70% of magazines are sold by subscription, and the other 30% are single copy sales, sold in stores such as supermarkets, airports and bookstores.

Since 1995, magazine advertising revenues have accounted for approximately 6.8% of total US advertising revenue. In 1999, the total amount of US magazine advertising revenue was $11.5 billion and was expected to reach $16.4 billion by 2004. The top 10 categories of advertisers account for over 55% of total magazine advertising. The top 10 categories based on 1999 data are: 1. Automotive accessories and equipment 2. Technology 3. Home furnishings and supplies 4. Cosmetics and toiletries 5. Direct response 6. Apparel and accessories 7. Financial, insurance, and real estate 8. Food and food products 9. Drugs and remedies 10. Media and advertising Figure 2: Time Incʼs Time Magazine Source: www.time.com Major Magazine Publishers The magazine industry is made up of many companies, ranging from small one-publication publishers, to large multi-publication international publishers. However, four publishing companies dominate the industry and account for over 75% of all magazine revenues. The top 4 magazine publishing companies are:

• Time Inc. – The largest magazine publisher in the United States, owning popular publications such as Life, Money, People, Sports Illustrated, Entertainment Weekly, and Time. • Bertelsmann – Though based in Germany, they publish several popular U.S. magazines such as McCall’s, Family Circle, YM, and Parents. • Reader’s Digest Association Inc. – The company’s title magazine, Reader’s Digest, is distributed all around the world in 48 different editions. • Meredith Corporation – Publishes popular home magazines such as Better Homes and Gardens, Ladies Home Journal, Traditional Home, and Midwest Living.

Magazine Publishing Trends

Mergers The magazine industry is clearly a very concentrated industry, which is evident by the large amount of total magazine revenues (75%) held by only 4 publishing companies. This heavy concentration has been caused by a trend of consolidation and mergers/acquisitions in the industry.

3 Diversifi cation A major trend right now in magazine publishing is magazine brands diversifying themselves by expanding into other industries such as hosting live events, television programming, and product licensing.

Technology Changes Advanced computer technology has certainly played an important part in the transformation of the magazine publishing industry. New computer technology is making magazine publishers much more effi cient, allowing them to publish with much fewer employees, has led to downsizing in the industry, and is pushing companies to extend their brands through the Internet.

Increased Costs Increased paper and postage costs are big issues that publishers are facing. A major trend in the industry has been, and will continue to be, focusing on controlling these and other production costs. Publishers are also looking towards alternatives to print, which would allow them to publish their titles without some of the traditional production costs such as paper and postage. Many publishers have now created online, electronic editions of their magazines. Electronic editions offer a new way for publishers to increase their advertising revenues and to give advertisers the opportunity to reach a broader audience. However, these on-line versions are not yet viable substitutes for their printed counterparts. Publishers still have not found an adequate solution as to how to create circulation revenue from their on-line editions.

International Publishing International publishing will continue to be a big opportunity for American magazine publishers. Publishers have found that their special interest titles are especially popular in international markets. The most lucrative international markets for US publishers are Europe, Latin America, the Middle East, Asia, and Africa.

Special Interest Titles The number of special interest titles has increased dramatically over the past few decades, and is expected to continue to increase. Special interest titles are attractive to advertisers because they give them the opportunity to reach highly targeted niche markets with their advertising messages.

4 Executive Summary

Calling itself the “leading targeted media company in the United States,” PRIMEDIA started as K- III Holdings in 1989 through acquisitions of Intertec Publishing and Newbridge Communications. In 1991 K-III doubled its number of operating divisions through the purchase of Newfi eld Publications as well as the Weekly Reader and Funk & Wagnalls. Later that year, K-III bought out several publications from Rupert Murdoch’s News Corp, including the Daily Racing Form, Seventeen, and Soap Opera Digest. By 1993 K-III had made $1.3 billion in acquisitions, but was still having trouble starting its own publications; they test marketed Soap Opera Illustrated and True News, but both publications failed.

PRIMEDIA’s current education television program, Channel One Network, was acquired in 1994 along with apartment rental guide publisher Haas Publishing. In 1995 K-III went public, and two years later changed their name to the current PRIMEDIA, because, according to then CEO Reilly, “K-III is a horrible name.”

In 1998 PRIMEDIA acquired two publishing division of Cowles Media, which included 35 enthusiast and trade magazines and 15 trade shows. They also bought out nine teen-oriented magazines from other publishers. The next year Reilly retired as PRIMEDIA’s CEO and was replaced by former NBC executive Tom Rogers.

PRIMEDIA’s Consumer Magazine & Internet Group was formed in 2000 through realignment and consolidation of its publishing and Internet operations. The realignment was made to better organize their publications with their respective web site complements. In 2001, in an effort to enhance their magazine business, they bought 60 magazine titles from Emap USA. Three major magazines included in the deal were Teen, Motor Trend, and Hot Rod.

CEO Rogers resigned in 2003 and was replaced by Kelly Conlin. That year, and earlier in 2002, PRIMEDIA sold or shut down several of their mainstream titles (including Modern Bride, New York, Seventeen, and Teen) in an effort to focus on their current target media identity.

In the past few years, PRIMEDIA has focused on streamlining the company and highlighting its stable of enthusiast titles. The current company is divided into four business segments: PRIMEDIA Enthusiast Media, PRIMEDIA Consumer Guides, PRIMEDIA Education, and PRIMEDIA Enterprises (trademark and content licensing division). In 2005 the Consumer Guides unit acquired AmericanHomeGuides.com, an online new home listings site, and agreed to buy a majority stake in Automotive.com, with plans to buy the entire company by 2010. Current CEO, Dean Nelson, replaced Conlin in 2005. Also in 2005, PRIMEDIA sold its Business Information segment for $385 million, a net gain on the segment of around $219 million.

After a thorough search of the company web site, published information and other sources, PRIMEDIA’s mission and vision statement could not be found. Judging from the company provided information, it is obvious that PRIMEDIA’s goal is to reach targeted niche markets with content specially tailored to that special interest. PRIMEDIA “specialize(s) in matching the right message to the most relevant audience.”

5 Products and Services

PRIMEDIA’s assets comprise over 135 target media brands, which include print publications, web sites, events, newsletters, and video programs. Its media products can be divided into three market segments: Enthusiast Media, Consumer Guides and Education. The Enthusiast Media segment comprises more than 60% of PRIMEDIA’s revenue (see table 1 for PRIMEDIA’s 2005 revenue breakdown by market segment).

2005 Revenue PRIMEDIA Enthusiast Media $ mil. % of total According to PRIMEDIA, their Enthusiast Enthusiast media 513.7 64 Media group is America’s number one special Consumer guides 236.4 30 interest publisher, with over 120 enthusiast Education 48.2 6 Total 798.3 100 magazine brands, spanning the following 13 Table 1: Revenues from the fi rst 9 months of 2005, categories: broken down my market segment Source: PRIMEDIA 3rd quarter 2005 results • Consumer Automotive • Performance Automotive • International Automotive • Action Sports • Crafts

• Equestrian magazine cover • Gems • Marine magazine cover • Entertainment • Home Technology Motor Trend ng Surfi • Home Photography Figure 3: • History Figure 4: Source: store.primediamags.com Source: store.primediamags.com • Outdoors

PRIMEDIA is the market leader in the Automotive, Actions Sports, Crafts, History, Marine, Equestrian, and Home Technology publishing categories. Their special interest titles generate more ad pages than any other publisher (see fi gure 3). For a complete list of PRIMEDIA’s enthusiast magazines refer to Appendix A. The magazine brands include their printed publication and also the following non-print entities: • Web sites - PRIMEDIA’s more than 115 online properties are the 15th most visited consumer web sites in the US. • Live events - They host more than 200 special events annual, such as Hot Rod Power Tour and Snowboarder Super Park. • Television programming - The Enthusiast Media segment produces 10 special interest programs in the outdoors, automotive, and crafts categories. Their programming includes Hot Rod TV and In-Fisherman TV. • Branded merchandise - More than 340 branded products, such as apparel, toys, furniture and automotive accessories are sold in popular retail outlets all over the country such as Wal- Mart and Target.

6 Figure 5: Total Ad Pages by publishers Source: www.primedia.com

PRIMEDIA Consumer Guides PRIMEDIA’s Consumer Guides segment is America’s largest publisher and distributor of apartment, new home, and auto guides. It publishes over 36 million guides annually, and is comprised of: • Apartment Publications Group - 81 publications containing the most extensive group of apartment rental guides in the United States. With distribution in over 16,000 locations, the apartment guides have a combined monthly circulation of 1.6 million, and along

Figure 6: ApartmentGuide.com logo with their sister web site ApartmentGuide.com, generated over one Source: www.apartmentguide.com million leases for apartment property managers in 2005. • New Home Publications Group - Consists of new home publication guides in 25 regional markets. • Auto Guide - PRIMEDIA Consumer Guide’s latest division. Auto cover Guide and AutoGuide.com feature comprehensive listings of vehicles for sale by auto dealers in 14 markets from California to New England. Auto Guide • Interactive Division - Operates PRIMEDIA’s real estate and auto web sites, including ApartmentGuide.com, AutoGuide.com,

Figure 7: Source: www.primedia.com NewHomeGuide.com, AmericanHomeGuides.com, Rentals.com, MovingResourceGuide.com, and newly acquired RentClicks.com.

PRIMEDIA Education PRIMEDIA’s Education segment is comprised of Channel One News, Films Media Group, and Interactive Medical Networks. The segment “empowers millions of students to learn with educational media programs.” • Channel One News – As the leading source of news and information for teens, Channel One News is the highest Nielsen rated teen television program in the country. The 12-minute daily news and education program is broadcasted to over seven million students in 350,000 classrooms nationwide. • Films Media Group – A leading provider of educational media products in North America. Films Media Group provides over 12,000 educational programs, and is comprised of Films for the Humanities & Sciences, Cambridge Educational, Meridian Figure 8: Channel One News Education and ShopWare. Source: www.channelone.com

7 Key Clients

As a publisher, PRIMEDIA gets their revenue from circulation dollars and advertising space. Therefore, their clients are their special interest consumers who subscribe to or buy single copies of their publications, attend their special events, visit their web sites, purchase their merchandise, watch their television programs, etc, and also the advertisers who purchase ad space in PRIMEDIA’s publications, web sites, television programs, and/or exhibit at their live events, etc.

For the customers who consume their publications and other offerings, PRIMEDIA provides targeted, highly specialized news, information and entertainment. For the broad range of advertisers, PRIMEDIA provides the opportunity to reach and advertise to highly targeted niche markets. For example, one of the many advertisers in PRIMEDIA’s Skateboarder Magazine is DC Shoe Company, a maker of skateboarder shoes, snowboarding boots and lifestyle apparel. Skateboarder Magazine provides DC Shoe Co. the ability to get their advertising messages out to the specifi c niche markets that would be consuming their products, because the readersof Skateboarder Magazine are the same consumers who would be buying DC Shoe’s products.

The most important advertisers for PRIMEDIA, in terms of total dollars spent, are automobile manufacturers. Automobile manufacturers advertise in a broad range of PRIMEDIA’s publications, but mainly in their consumer and enthusiast automotive segments including popular publications Motor Trend and IntelliChoice.

Key Competition

• Time Inc. With over 140 magazines in its collection, Time Inc. is the leading consumer magazine publisher in the United States. Their titles include both general interest magazines such as People, Sports Illustrated and Time, and special interest magazines such as Field and Stream, Skiing and Yachting. They compete with PRIMEDIA Figure 9: Time Inc.ʼs Yachting for position, and thus readers and advertisers, in the different Source: www.amazon.com special interest categories that both companies publish in. For example: Time Inc.’s Skiing competes for readers and advertisers with PRIMEDIA’s ski magazine Powder, and their Yachting title competes with PRIMEDIA’s marine line of publications such as Power and MotorYacht and Voyaging.

• World Publications Publishing over 20 titles, World Publications is a leading publisher in the marine and water sports categories. Like PRIMEDIA, they have focused on building a strong on-line presence for their publications. Their titles include Garden Design, Saveur, Power Figure 10: PRIMEDIAʼs Cruising, and Sport Diver. World Publication’s line of marine and Power & MorotYacht Source: store.primediamags.com

8 boating publications, such as Boating Life, Power Cruising and Sailing World compete for position with PRIMEDIA’s line of marine publications. In the same sense, World Publication’s line of water sport publications, such as WaterSki, Wake Boarding and Windsurfi ng, compete for position with PRIMEDIA’s line of action sports magazines.

• Hachette Filipacchi Médias (HFM) Based out of France, HFM is the world’s largest magazine publisher. They generate more than 50% of their sales outside of France, and produce 262 magazines in 39 different countries. Their titles include Bon Voyage, Elle, Parents, Car and Driver, Popular Photography and American Photo. Many of HFM’s special interest titles fall under the same categories as PRIMEDIA’s publications, and therefore the two companies compete for position within those

categories. For example: HFM’s consumer automotive titles Car Figure 11: HFMʼs Source: www.popphoto.com and Driver and Road and Track compete with PRIMEDIA’sPRIMEDIA’s Motor Trend and other consumer automotive titles; HFM’s American Photo and Popular Photography and Imaging compete in the home technology and photography category with PRIMEDIA’s Shutterbug and Petersen’s PHOTOgraphic.

Financial Information

2004 Sales (mil.) $1,307.1 1-Year Sales Growth 13.3% Figure 12: PRIMEDIAʼs Shuterbug 2004 Net Income (mil.) $35.5 Source: store.primediamags.com 1-Year Net Income Growth (8.7%)

Revenue (mils) for nine-month period ended September 30 2005 % of total 2004 % Change Advertising 492.2 61.7 484.3 1.6 Circulation 183.0 22.9 192.8 (5.3) Other 123.1 15.4 105.4 14.4 Total 798.3 100 792.5 0.7

Expenses (mils) for nine-month period ended September 30 2005 % of total Cost of Goods Sold 179.8 26.8 Distribution/Circulation/Fulfi llment 150.8 22.8 Labor 235.8 35.7 Other expenses 97.4 14.7 Total 660.8 100

9 Success Story: Acquisition of RentClicks.com

On January 31, 2006, PRIMEDIA announced their acquisition of RentClicks.com, the largest online marketplace for small unit rental properties. RentClicks.com houses over 12,000 active listings, and is visited by more than one million potential renters each month. Small unit rentals are the largest segment of the rental market, and with this acquisition PRIMEDIA becomes the leader in the Small Unit Owner (SUO) rental market. One of the most lucrative segments of the marketplace, the SUO rental market accounts for 70% of the total rental market, and is comprised of rental houses, townhouses, condos and single unit apartments. The acquisition of RentClicks.com strengthens PRIMEDIA’s already strong and dominating presence in the consumer guides marketplace.

Summary

The publishing industry is an always evolving industry as new challenges arise for publishers to contend with. Publishers are now facing rising costs and increased competition from other media such as Internet publications. To deal with these challenges, publishing companies, and especially magazines, have embraced the Internet as a new and cheaper format to publish and advertise their titles. Other trends in the magazine industry include the rising number of special interest titles, and publishing companies turning toward international markets for new opportunities.

PRIMEDIA has been constantly evolving and restructuring over its more than 25 years of existence. With its Enthusiast Media division, it has repositioned itself as a leader in the special interest magazine market. In 2005, PRIMEDIA sold off their Business Information trade magazine segment, one of their four main business units, and are now focusing on their remaining three units: Enthusiast Media, Consumer Guides, and Education segments. Enthusiast Media is their principal segment, and it can be broken down by magazine category, with their automotive category being the largest.

PRIMEDIA’s customers, like most magazine publishers, can be broken down into two groups: consumers who purchase, visit, or watch their many media offerings, and advertisers who advertise through their publications/media products. Their main competition are the many magazine publishers who publish titles in the same special interest markets as PRIMEDIA’s publications. Three competitors discussed in this case were Time Inc, World Publications, and Hachette Filipacchi Médias, but PRIMEDIA competes with many more publishers and media companies than these three.

In the writers’ opinion, PRIMEDIA will continue to penetrate current and new special interest magazine markets, as well as build on their dominating consumer magazine segment. They will further develop their on-line presence with both their magazine brands and consumer guide web site counterparts. PRIMEDIA has positioned themselves as a leader in special interest and consumer guide publishing, and will continue to build on this position. We would not be surprised to see them sell off segments of their Education unit in an effort to focus more assets on these two stronger business divisions.

10 APPENDIX A Complete List of PRIMEDIA Enthusiast Media Publications Consumer Automotive International Automotive Marine • Automobile • Car Audio and Electronics • Boatworks • IntelliChoice • European Car • Power & Motoryacht • Motor Trend • Eurotuner • SAIL • Motor Trend Classic • Honda Tuning • Voyaging • Truck Trend • Import Tuner • Wardʼs AutoWorld • Lowrider Entertainment • Wardʼs Dealer Business • Lowrider Arte • Soap Opera Digest • Sport Compact Car • Soap Opera Weekly • Super Street • Super StreetBike Home Technology & Photography • Turbo & High-Tech Performance • Home Theater • Petersenʼs PHOTOgraphic magazine cover Action Sports • Shutterbug • Bike • Stereophile • Canoe & Kayak • Climbing History

Automobile • Powder • American History • Skateboarder • Americaʼs Civil War • Slam • Aviation History • Snowboarder • British Heritage • Surfer • Civil War Times Figure 13: Source: store.primediamags.com • Surfi ng • Military History • Quarterly Journal of Military History Performance Automotive • Vietnam • 4Wheel & Off -Road • Wild West • Classic Trucks • World War II • 4Wheel Drive & Sport Utility • 5.0 Mustang & Super Fords magazine cover Outdoors • ATV Rider • Bowhunter • Car Craft • Florida Sportsman • Chevy High Performance • Fly Fisherman • Circle Track • Game & Fish

• Corvette Fever Skateboarder • Gun Dog • Custom Classic Trucks • Guns & Ammo • Custom Rodder • Handguns • Diesel Power • In-Fisherman • Dirt Rider • In-Fisherman Bass Guide Figure 14: Source: store.primediamags.com • Engine Masters • In-Fisherman Catfi sh Guide • Four Wheeler • In-Fisherman Ice Fishing Guide • GM High-Tech Performance • In-Fisherman Walleye Guide • High Performance Pontiac Crafts • North American Whitetail • Hot Bike • CrafTrends • Petersenʼs Bowhunting • Hot Rod • Creative Machine Embroidery • Petersenʼs Hunting • Hot Rod Bikes • Creating Keepsakes • Rifl e Shooter • Jp • McCallʼs Quilting • Shooting Times • Kit Car • McCallʼs Quick Quilts • Shotgun News • Mini Truckinʼ • Paper Crafts • Walleye Insider • Mopar Muscle • Quilterʼs Newsletter • Wildfowl • Motorcycle Cruiser • Quiltmaker • Motorcyclist • Sew News • Muscle Mustangs & Fast Fords • Simple Scrapbooks • Mustang & Fords • Step by Step Beads • Mustang Monthly • Off -Road Equestrian • Popular Hot Rodding • Arabian Horse World • Rod & Custom • Dressage Today magazine cover • Sport Rider • EQUUS • Sport Truck • Horse & Rider • Stock Car Racing • Practical Horseman Hunting • Street Chopper • Street Rodder Gems • Super Chevy • Colored Stone

• Truckinʼ • Lapidary Journal Figure 15: Source: store.primediamags.com • Vette

11 Sources

Albarran, A. B. (2002). Media Economics: Understanding Markets, Industries and Concepts. Ames, Iowa: Iowa State Press.

Anderson, L. (2006) Hoover’s Inc. Online. PRIMEDIA, Inc. Report. Retrieved January 8, 2006 from Hoovers Online via the RIT Library.

Callahan, S. (April, 2005). Primedia may sell business info unit. Business Marketing magazine. Retrieved January 25, 2006, from: http://www.btobonline.com/article.cms?articleId=24128.

Cummings, T. (January, 25 2006) U.S. Publishing Industry Part 2. Rochester Institute of Technology: Media Industries Analysis.

Donald, W., Peters, J. (2005) Standard & Poor’s Industry Surveys. Publishing. Retrieved January 8, 2006 from Standard & Poor’s Net Advantage via the RIT Library.

HFM US. (2006). Hachette Filipacchi Media Web site. Retrieved January 22, 2006 from: http://www.hfmus.com/HachetteUSA/NoFlash/index.html.

PRIMEDIA. (January, 31 2006) PRIMEDIA’s Consumer Guides Aquires RentClicks. Retrieved February 3, 2006 from PRIMEDIA’s Web site: http://primedia.com/pr/press/rentclicks/.

PRIMEDIA. (November, 8 2005) PRIMEDIA Reports Third Quarter 2005 Results. Retrieved January 8, 2006 from PRIMEDIA’s Web site: http://www.primedia.com/3Q05earningsfi nal.pdf.

PRIMEDIA. (2004) PRIMEDIA Web site. Retrieved January 8, 2006 from: http://www.primedia.com.

Lagardère. (2006). About Lagardere: Hachette Filipacchi Medias. Retrieved January 22, 2006 from: http://www.lagardere.fr/us/groupe/media_magazines.shtml.

World Publications. (2006) World Publications Web site. Retrieved January 22, 2006 from: http://www.worldpub.net/.

12