Magazine Publishing Outlook 2011 by Robert Witteman

Magazine Publishing

Summary

from € 971 million in 2006. Between 2001 and 2006, by contrast, consumer magazines declined at a 1.2 percent compound annual rate. We expect advertising to be the principal driver, growing at a 4.6 percent compound annual rate compared with 1.1 percent compound annual growth in circulation spending.

The magazine industry in the Netherlands posted its best performance during the past five years with a 3.2 percent advance. The increase was the first significant gain since 2000. The market declined during 2001–2004, hurt by the weak economy, and stabilized in 2005 with a narrow 0.1 percent gain. Although both consumer and trade magazines were stronger in 2006 than in 2005, trade magazines were the principal catalyst for growth. Trade magazines were fueled by a double-digit increase in advertising, its first gain during the past five years, which propelled overall magazine advertising by 6.3 percent. Circulation spending grew by less than one percent but that also was the largest gain during the past five years.

During 2002–2005, trade magazines were the weaker component of the market, declining at steeper rates than consumer magazines through 2004 and continuing to fall in 2005 while consumer magazines rose. In 2006, however, trade magazines grew 6.9 percent compared with only 1.1 percent for consumer magazines. Trade magazines are generally more cyclical than consumer magazines and were hurt more by the weak economic climate. The turnaround in the economy, however, will benefit trade magazines more than consumer magazines and we expect continued economic expansion to lead to a 3.7 percent compound annual increase in trade magazines. Advertising in trade magazines will rise by 4.8 percent compounded annually and circulation at a 1.4 percent compound annual rate. Trade magazines will expand from € 589 million in 2006 to € 708 million in 2011.

We expect a significant improvement in consumer magazines beginning in 2007. A number of new launches have been announced, which will provide a boost to both advertising and circulation. Over the longer run, however, unfavorable demographic trends and migration of readers to the Internet will dampen growth. Nevertheless, the consumer magazine market will be noticeably stronger during the next five years compared with the past five years. The consumer magazine market will expand at a 2.2 percent compound annual rate to € 1.1 billion in 2011

Magazine Publishing Market by Component (€ Millions) Category

2002

Consumer Magazines

2003

2004

2005

2006

2007

2008

2009

2010

2011

Advertising

342 311

296 302 307 325 340 355 370 385

Circulation

670

655

658

664

675

690

695

698

700

1,012

966

951

960

971

1,000

1,030

1,050

1,068

1,085

Advertising

428 385 370 363 400 430 455 475 490

505

Circulation

195

190

188

189

191

194

197

200

203

Trade Magazine Total

623

575

558

551

589

621

649

672

690

708

1,635

1,541

1,509

1,511

1,560

1,621

1,679

1,722

1,758

1,793

Consumer Magazine Total Trade Magazines

All Magazines

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

100

Dutch Entertainment & Media Outlook towards 2011

Magazine advertising as a whole will increase from € 707 million in 2006 to € 890 million in 2011, a 4.7 percent compound annual increase. While not matching the 2006 gain, it will be a significant improvement compared with 2002–2005 when advertising declined. Overall circulation spending will edge up at a 1.1 percent rate compounded annually, to € 903 million in 2011 from € 853 million in 2006. The overall magazine publishing market will expand at a 2.8 percent compound

annual rate, reaching € 1.8 billion in 2011 from € 1.6 billion in 2006. The Netherlands accounted for 5.7 percent of the Western European magazine market in 2002 but by 2005 that share had fallen to 5.1 percent where it remained in 2006. We expect that trend to reverse course in 2007 with the share increasing to 5.2 percent where it will remain through 2011.

Magazine Publishing Market Growth by Component (%) Category

2002

Consumer Magazines

2003

2004

2005

2006

2007

2008

2009

2010

2011

2007-2011 CAGR

Advertising

–6.0

–9.1

–4.8

2.0

1.7

5.9 4.6 4.4 4.2 4.1 4.6

Circulation

0.8

–2.2

0.0

0.5

0.9

1.7

2.2

0.7

0.4

0.3

1.1

–1.7

–4.5

–1.6

0.9

1.1 3.0 3.0

1.9

1.7

1.6

2.2

Consumer Magazine Total Trade Magazines

Advertising

–2.7

–10.0

–3.9

–1.9

10.2

7.5

5.8 4.4 3.2 3.1 4.8

Circulation

–1.5

–2.6

–1.1

0.0

0.5

1.1

1.6

1.5

Trade Magazine Total

–2.4

–7.7

–3.0

–1.3

6.9

5.4 4.5 3.5

2.7

2.6 3.7

All Magazines

–1.9

–5.7

–2.1

2.6

2.1

2.0

2.8

2007-2011 CAGR

0.1 3.2 3.9 3.6

1.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Magazine Market by Revenue Stream (€ Millions) Category

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

830

860

890

Advertising

770

696

666

665

707

755

795

% Change

–4.2

–9.6

–4.3

–0.2

6.3

6.8

5.3 4.4 3.6 3.5 4.7

Circulation

865

845

843

846

853

866

884

892

898

903

% Change

0.2

–2.3

–0.2

0.4

0.8

1.5

2.1

0.9

0.7

0.6

1,635

1,541

1,509

1,511

1,560

1,621

–1.9

–5.7

–2.1

5.7

5.4

5.2

Total % Change

1,679

1,722

1,758

1,793

0.1 3.2 3.9 3.6

2.6

2.1

2.0

5.1

5.2

1.1

2.8

Netherlands as a % of Western Europe

5.1

5.2

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Dutch Entertainment & Media Outlook towards 2011

101

The Magazine Market

Magazine Readership, 2005 Category

Circulation is the principal revenue stream for consumer magazines, accounting for 68 percent of total spending in 2006. The reverse is the case with trade magazines where advertising accounted for 68 percent of spending in 2006. Many trade publications are distributed on a controlled or free basis to qualified readers whom advertisers want to reach, which holds down circulation spending. Trade magazines generated 57 percent of total magazine advertising in 2006 while consumer magazines comprised 78 percent of total circulation spending. For the market as a whole, advertising represented 45 percent of spending while consumer magazines comprised 62 percent of the market. In 2006, there were 11.5 million magazine readers, representing 85 percent of the 15-and-older population, making the Netherlands one of the most penetrated magazine markets in the world. Advertisers spent € 27 annually per consumer magazine reader in 2006.

Leading Weekly Titles, 2005 Title

Amount

Number of Consumer Magazine Readers (Millions)

11.5

Consumer Magazine Advertising Per Reader (€)

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

TV listings, women’s service, and gossip magazines are among the most popular titles. There were more than 20 weekly consumer magazines with circulation of 100,000 or more. Veronica, the leading title in the Netherlands, has a weekly circulation in excess of one million. Among the leading weekly titles, Libelle a woman’s service magazine and the other only non-TV magazine in the top five, is second behind Veronica with circulation in 2006 of 509,000. In addition to Veronica, there were eight TV lis-tings magazines in the top 20 – Tros Kompas, Mikro

Publisher

Genre

Unit Circulation

Veronica

Veronica Uitgeverij

TV Listings

1,045

Libelle

Sanoma Uitgevers

Women

509

Tros Kompas

Hilversumse Media

TV Listings 460

Mikro Gids

Programmabladen AKN BV

TV Listings 452

VARA TV Magazine

VARA Omroepvereniging

TV Listings 404

AVRO Bode

BV Programmabladen AKN

TV Listings 384

Margriet

Sanoma Uitgevers

Women 328

Donald Duck

Sanoma Uitgevers

Kids 314

De NCRV Gids

Programmabladen AKN BV

TV Listings

270

Privé

De Telegraaf Tijdschriften Groep

Gossip

239

VPRO Gids

Argo Media

TV Listings

231

Weekend

Audax Publishing

Gossip

191

Televizier

Programmabladen AKN BV

TV Listings

185

Story

Sanoma Uitgevers

Gossip

175

Voetbal International

WP Sport Media

Sports

168

Visie

Evangelische Vereniging

TV Listings

153

Vriendin

Audax Publishing

Women

150

Elsevier

Reed Business Information

Business

145

Flair

Sanoma Uitgevers

Women

128

Autoweek

Sanoma Men’s Magazines

Auto

111

6,042

Total

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

102

Dutch Entertainment & Media Outlook towards 2011

Gids, VARA TV Magazine, AVRO Bode, NCRV Gids, VPRO Gids, Televizier and Visie. Margriet is another women’s title in the top ten with a weekly circulation of 328,000 and Vriendin and Flair are other women’s magazines with circulation above 100,000. Gossip titles are also very popular in the Netherlands, with Privé at 239,000, Weekend at 191,000 and Story at 175,000. There is also a kid’s title in the top ten, Donald Duck, targeted primarily to boys, with a weekly circulation of 314,000. Sports (Voetbal International), business (Elsevier), and auto magazines (Autoweek) round out the top twenty, each with weekly circulation above 100,000. The list of leading titles can drastically change in a couple of years due to the fact the Dutch cabinet has made it its intention to end the monopoly public broadcasters currently have on publishing TV guides.

Advertising Trade Magazines Trade magazine advertising rebounded strongly in 2006 with a 10.2 percent advance following five years of decline. Among the leading trade publications, Intermediair, Ondernemen!, Binnenlands Bestuur, FEM Business, Management Team and Vakstudienieuws each posted increases of 20 percent or more. Trade magazines are affected by the markets they serve and when those markets are doing well, advertising grows, which is what happened in 2006. During the prior five years, by contrast, economic conditions were generally weak and advertisers as a group cut back on their use of trade magazines for business-to-business communications. Except for the Internet, trade magazine advertising was the fastest growing advertising medium in the Netherlands in 2006. Healthy economic conditions during the next five years should support continued growth in trade magazine advertising. The ramp-up in advertising growth in 2006 was associated with a ramp-up in economic growth. Without the acceleration in economic growth that occurred in 2006 – we expect continued nominal GDP growth in the 5 percent range but no significant acceleration – we expect more moderate increases in trade magazine advertising growth. We project advertising in trade magazines to expand at a 4.8 percent compound annual rate to € 505 million in 2011 from € 400 million in 2006.

Consumer Magazines Consumer magazine advertising began to turn around in 2005 and continued to expand in 2006, but the 1.7 percent increase was far less than that of trade magazines in 2006. We expect consumer magazine advertising growth to pick up in 2007. With economic conditions strengthening, the underlying environment for consumer magazines is improving. Evidence of this is the large number of new magazines entering the market during the early part of 2007. The Dutch Publishers Association reports 25 new magazines introduced between January and early May, some of which represent major launches. Weekend Royalty from Audax, for example, was launched with an initial circulation of 85,000. The magazine covers royal news and is targeted to women aged 30 and over. There also are some innovative approaches. Body from PCM Uitgevers is a free monthly title covering health issues that is distributed in waiting rooms of doctors’ offices and in some hospitals.

Dutch Entertainment & Media Outlook towards 2011

103

Readers are expected to bring these magazines home and share them with their families. We expect these and other new titles to provide additional inventory for advertisers and provide new vehicles to reach selected readers. Helped by these new titles, we look for consumer magazine advertising to increase by 5.9 percent in 2007.

Magazine Launches in Early 2007

• Appetito

• Motorjacht

• AWARE Psychologie

• Opinio

• Body

• PIT

• Bruidegom

• Poker Magazine

• Catherine

• Quatro Lifestyle Magazine

• De Hardloper

• Ros

• Duck Out

• RTL GP Magazine

• F1 Racing

• Stuff

• Golf Estate

• UIT!

• Hollands Diep

• UNLIMITED, Passion,

• JANtje

Power and Politics

• Losange Magazine

• Vrouw

• Mind Magazine

• Weekend Royalty

Source: Dutch Publishers Association

Magazine Advertising (€ Millions)

Category

2004

2002

2003

2005

Consumer magazines generally do well when economy is expanding because they are well suited to advertise upscale products, whose purchases expand disproportionately during the rising portion of the economic cycle. Glossy paper and high quality color resolution make magazines effective vehicles for displaying expensive products. The format also allows more information to be provided than is feasible in television, radio, or out-ofhome ads. In many cases, readers need more information to induce them to buy expensive products. Consumer magazines face competition for advertising. In addition to traditional media such as television, radio, and newspapers, the Internet is emerging as an important advertising medium in the Netherlands. Magazines also are experiencing declines in readership, in some cases the result of print readers accessing magazine Web sites. Declines in print readership dampen growth in print advertising. Nevertheless, we expect consumer magazines to remain the largest of the second-tier advertising media – those media under € 400 million as compared with newspapers and television that are more than twice that level – during the next five years. On balance, the positive impact of a healthy economy will offset the adverse effects of a more competitive market. Consumer magazine advertising will total an estimated € 385 million in 2011, a 4.6 percent compound annual increase from € 307 million in 2006.

2006

2007

2008

2009

2010

2011

Consumer Magazines

342 311

296 302 307 325 340 355 370 385

% Change

–6.0

–4.8

–9.1

2.0

1.7

5.9 4.6 4.4 4.2 4.1 4.6

Trade Magazines

428 385 370 363 400 430 455 475 490

% Change

–2.7

–10.0

–3.9

2007-2011 CAGR

505

–1.9

10.2

7.5

5.8 4.4 3.2 3.1 4.8

Total

770

696

666

665

707

755

795

% Change

–4.2

–9.6

–4.3

–0.2

6.3

6.8

5.3 4.4 3.6 3.5 4.7

830

860

890

5.8

5.4

5.0 4.9

5.1

5.3

5.4

Netherlands as a % of Western Europe

5.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

104

Dutch Entertainment & Media Outlook towards 2011

Circulation Spending

Consumer Advertising (Millions of Euros) 450 400

Consumer Magazines

350 300 250 200 150 100 Consumer Magazines Out-of-Home

50 0

Radio Internet

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Overall Magazine Advertising Magazine advertising as a whole will grow at a 4.7 percent compound annual rate, from € 707 million in 2006 to € 890 million in 2011. The Netherlands’ share of Western European magazine advertising fell from 5.8 percent in 2002 to 4.9 percent in 2005 before rebounding to 5.1 percent in 2006. With magazine advertising in the Netherlands now on the rise, we project The Netherlands’ share of the market to expand to 5.4 percent in 2008 and to remain at that level through 2011. Hygiene and beauty products are major advertisers in consumer magazines, not surprising given the prevalence of women’s service magazines among the leading titles. Financial services companies also are major advertisers, again to be expected given the upscale nature of the medium. Media, food, and telecommunications also are major consumer magazine advertising categories.

Circulation spending in 2006 rose 0.9 percent to € 664 million, representing more than two-thirds of total spending on consumer magazines. Rising prices have offset unit circulation declines during the past two years. Stimulated by the new titles entering the market in 2007, we expect slower declines in unit circulation and faster growth in circulation spending during the next two years with increases projected at 1.7 percent in 2007 and 2.2 percent in 2008. Thereafter, we expect growth to moderate as the migration of readers from print to the Internet continues. We also expect demographic trends for consumer magazines to be unfavorable. While magazines are read by people in all age groups, the 15-to-44 year-old age group is the most important demographic segment for magazines. Between 2001 and 2006, that segment of the population decreased by 1.4 percent, a factor contributing to the drop in unit circulation. During the next five years, there will be an even faster 2.7 percent decrease in this age group, from 6.79 million in 2006 to 6.60 million in 2011. Consequently, we expect that demographic trends will have a continuing unfavorable impact on magazine circulation. Over the five-year forecast period as a whole, circulation spending growth will average 1.1 percent compounded annually to an estimated € 700 million in 2011.

L’Oréal and Unilever, representing the hygiene and beauty category, are major magazine advertisers. Renault, Frisia Financieringen and Lenen were also major magazine advertisers in 2006.

Leading Magazine Advertising Categories, 2006

Leading Magazine Advertisers, 2006

Hygiene/Beauty

L’Oréal

Financial Services

Unilever

Media

Lenen

Food

Renault

Telecommunications

Frisia Financieringen

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Dutch Entertainment & Media Outlook towards 2011

105

Overall Circulation Spending Size of 15-44 Population (Thousands) 7,000

We project total circulation spending to reach € 903 million in 2011 from € 853 million in 2006, a 1.1 percent compound annual increase. The Netherlands’ share of circulation spending in Western Europe decreased from 5.6 percent in 2002 to 5.2 percent in 2005 and 2006. We expect that share to drop to 5.1 percent in 2007 where it will remain through 2009 before edging down during the subsequent two years to 4.9 percent in 2011.

6,900 6,800 6,700 6,600 6,500 6,400

2001

2006

2011

Sources: U.S. Census Bureau International Database, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Trade Magazines With a significant percentage of copies distributed on a free basis to qualified readers, circulation spending is relatively less important for trade magazines than it is for consumer magazines, accounting for only 22 percent of spending in 2006. An expanding economy should have a positive impact on employment, which in turn should expand the potential readership of trade magazines. We expect of portion of that growth in readership to be on a paid basis. Consequently, we look for faster growth in circulation spending during the next five years. We project circulation spending to increase from € 189 million in 2006 to € 203 million in 2011, a 1.4 percent compound annual increase.

Magazine Circulation Spending (€ Millions)