Catalog and Publication Outlook: A Cautious New Year

A year of uncertainty is how
 many magazine and catalog
 printers might describe 2009. Amidst the rising cost of postal rates and major cutbacks, publishers and catalogers have been forced to reevaluate their marketing and business strategies. Companies in both sectors looked at cost reduction, how to gain stronger customer loyalty and better ROIs, as well as adopting multi-channel strategies.

With a double-digit decline in both ad revenue and ad pages for B2B and consumer magazines, publishers were forced to cut back wherever they could, whether that was through staffing reductions, outsourcing, vendor consolidation and/or raising subscription prices.

"We have seen publishers discontinue non-performing titles either completely, or reduce frequency, run counts or move them to a Web-only environment at a much faster pace than in the past," explains Rick Marcoux, president of RR Donnelley Magazine and Commercial Services.

Marcoux asserts that RR Donnelley's magazine customers felt the full breadth of this as newsstand sales continued to decline.

In looking back on 2009 and ahead to 2010, there is little optimism because many of these same issues will plague the magazine sector in the new year. At the top of the list will still be cost pressures, as publishers continue to struggle with the decline of advertising and subscription revenues.

"Advertisers' budgets will remain tight, and magazines will be challenged to address the ROI metrics required to maintain their share of overall ad and marketing dollars," Marcoux predicts.

"There will also be a continued migration of ad spend to online initiatives, even though online will remain a small portion of the combined print and digital ad spend. Publishers will continue to focus on ways to determine the right balance of print and online, as well as to search for ways to monetize their digital assets."

Multi-channel strategies have grown to be a viable approach among magazine publishers, and will continue in the coming year. The consensus among publication printers is that both Websites and e-magazines will remain complementary to their customers' 
printed products.

Bolstering the Brand

"Success will require being able to surround the printed magazine with complementary, cross-distribution services that enhance the magazine's brand and present more advertising revenue opportunities," contends Bruce Jensen, vice president of sales for Transcontinental's Book, Catalog and Magazine groups in Montreal.

"Print is instrumental in driving sales both directly and indirectly in today's multi-channel marketplace, and has particular advantages in the acquisition stage where marketers gain permission for an expanded digital relationship."

Many printers have taken steps to help support publishers with their multi-channel efforts. For example, Chicago-based RR Donnelley has developed new enterprise solutions and promotes capabilities such as its DigiMag 6.0 digital publishing solution, which can convert existing magazine PDF files into dynamic, online digital publications. The company also offers personalized URL (PURL) solutions to leverage the complementary nature of print and online communications.

Montreal-based Worldcolor supports its publishing clients by producing more than 400 digital editions. It recently launched its XML Custom Publishing Engine application, powered by the Mark Logic, which allows publishers to repurpose existing content into new, targeted publications—whether on a desktop, a mobile device or in print.

Transcontinental offers customers educational programs, such as newsletters and white papers, that report the measurable values of print advertising versus other media. The company also informs customers of revenue-building advertising options that are available, such as special folds, tipped-on pamphlets, diecuts, demographic editions and personalized imaging.

At Stamford, CT-based Cadmus Communications, a Cenveo Co., Harry Vinson, president, notes that his company has responded to the needs of customers by examining the benefits of PURLs, and focusing on additional services outside the traditional print side like content management design and, on the magazine side, collateral print.

On the postal front, both publishers and catalogers saw some relief this year when the USPS launched its summer sale. Some more good news came in October, when Postmaster General John Potter declared that there would be no increase in postage rates for market-dominant products during calendar year 2010.

Tricks of the Trade

Publication printers have also embraced initiatives to lower customers' mailing costs, such as co-mailing and supplemental mailings; co-palletizing or co-stitching; reduced paper basis weights and grade reductions; trim-size reductions; publication frequency cutbacks; and database hygiene efforts.

"A migration to Intelligent Mail (IM) will bring postal savings to publishers. In preparation, we are working with our customers on required initiatives, such as becoming PostalOne-ready with unique Mailer IDs for their titles, as well as reorganizing their mailing statements and postage accounts to work electronically with the USPS," notes Marcoux.

"This migration to Intelligent Mail will also enable publishers to convert from traditional Address Correction Service (ACS) to the new Free ACS systems."

Worldcolor has also taken several steps to help clients bring down mailing costs, such as investing in its co-mailing capabilities with the introduction of new capacity, flexible polybag specifications and expanded thin-book co-mail capabilities.

Most publishers and catalogers saw breaks in the price of paper over the course of 2009. While paper prices fell during the first quarter, they evened out by the third quarter.

"The paper industry continues to curtail capacity in an attempt to keep pace with the decline in demand and to facilitate more favorable return on investments," notes Ed Sheehan, executive vice president at Worldcolor. To help customers understand paper pricing trends, Worldcolor provides price/cost analysis on request so that clients can analyze the variable costs of paper ownership irrespective of price increases or decreases.

There was some positive news for directory publishers in 2009, as revenues began to stabilize. While there were declines in the printed directory arena, there were gains associated with a variety of Internet offerings.

"Direct mail has emerged as a significant new revenue stream opportunity for directory publishers. They are also focusing more resources on sales training and many are migrating to a new business model of 'pay for performance,' " explains Todd Omvig, executive vice president of sales at World-
color. "Publishers are also finding that they can optimize sales by bundling their print, Internet and mobile offerings to deliver more leads and customers to their advertisers—with print remaining at the core of the bundled offering."

Within the catalog sector, personalized and more targeted catalogs continue to be the trend, serving as idea generators that prompt readers to visit catalogers' Websites for more purchasing options.

"Catalogs will increasingly shift from being standalone direct response vehicles to drivers of Internet and in-store purchases," explains Transcontinental's Jensen. "We also anticipate more frequent catalog events with fewer pages, while transactional Websites continue to expand as order hubs."

Catalogers have also faced their share of challenges in 2009, such as the increases in marketing and postage costs, as well as lower than normal response rates and smaller order sizes. Some catalogers responded by reducing press runs, page counts and, in some cases, reducing product pricing to drive more sales volume.

"Catalogers have responded to these challenges by increasing their focus on e-mail marketing, and by reducing gross mail quantities and frequencies," says Andy Bear, director of business development, Marketing Solutions Group, at Worldcolor. "They have also focused more on the scrutiny and analysis of customer demographics and product trends, as well as increases in special offers such as percentage-off coupons and free shipping, etc."

A Moving Target

Another catalog printer, Itasca, IL-based Continental Web Press, reevaluated its mailing and fulfillment part of the business to be in compliance with USPS requirements.

"The various sizes of the catalogs, along with wafer sealing requirements combined with the Intelligent Mail Barcode (IMB), are a lot to put on one's plate all at one time," stresses Ken Field, Continental president and CEO.

"We hosted a 'USPS Best Practices Fact Finding Team' in our Walton, KY, facility. The team of USPS engineers spent a week trying to understand just what it is we do and what we will have to do to be in compliance."

An even bigger challenge, he notes, is the capital expenditures required for Continental to be in compliance, and how fast and accurately it is implemented.

While Field sees the trend for smaller, more targeted mailings to continue, he also feels that polybagging multi-product catalogs is also a highly effective solution to offset increased postal costs.

"Even though customers have reduced their frequencies, and use lighter basis weights, the comment I keep hearing is that the levels of the past will not be seen any time soon," Field concludes. PI