Thursday, January 19, 2006

We like to look.

The world's most profitable magazine is its own celebrity story.

THE FUTURE OF PUBLISHING
As other publications in its stable come under pressure, Time Inc wants to squeeze even more value from People. Martha Nelson, the force behind the title, tells Joshua Chaffin of her new challenge.

By JOSHUA CHAFFIN
1264 words
17 January 2006
Financial Times
London Ed1
Page 14
English
(c) 2006 The Financial Times Limited. All rights reserved

Last Tuesday, reporters and editors at People magazine were bracing for another late night as they prepared to send the latest issue to the printers. The magazine they were wrapping up was pregnant with one of the biggest scoops in celebritydom: the news that actress Angelina Jolie was carrying Brad Pitt's baby, which would soon be picked up by newspapers and websites around the world.

Yet sitting in her 30th floor office at the Time Inc building, surrounded by congratulatory bouquets of flowers, Martha Nelson felt strangely removed. For the last three years, Ms Nelson has been at the centre of the action as People's managing editor. But that has changed following her promotion two weeks ago to head a newly created People Group.

In her new post, Ms Nelson has been asked to step back and find ways to wring even more value from People and offshoots such as Teen People, People en Espanol and People.com. It will not be easy. People is already the most profitable magazine in the world. Although Time Inc does not disclose numbers, it is believed to have generated Dollars 1.3bn (Pounds 736m) in revenue in 2004, according to Advertising Age, the industry trade publication, and contributed between one-quarter and one-third of Time Inc's Dollars 1.2bn in operating income that year. Since being founded 32 years ago, its weekly readership has grown to more than 40m.

"How do you take something that's big already and pick it up and turn it over and shake it from all sides and say: 'How much bigger could this be?'" is how Ms Nelson sums up the -challenge.

A lot is riding on her performance. While Time Inc remains the world's largest publisher, this reliable generator of cash has begun to come under pressure. Under former chief Don Logan, Time Inc racked up a legendary streak of consecutive quarterly earnings growth. Yet that was broken in 2003 for the first time in 13 years, and last year featured double-digit declines in advertising pages at Time and -Fortune.

That forced Ann Moore, Time Inc's chairman since 2002, to lay off 105 workers in December, many of them senior executives. With Carl Icahn, the activist investor pressing Time Warner to trim costs and possibly dump the publishing division, the industry is rife with rumours that more cuts are on the horizon.

As if that were not enough, there is also the looming challenge of the internet, which has already taken a toll on the newspaper industry and may also threaten magazines.

"Time Inc is really going through a transition right now," says Reed Phillips, a partner at DeSilva & Phillips, the media investment bank, who believes thatPeople Group could be part of a broader strategy for Time Inc's other major brands, such as SportsIllustrated and Entertainment Weekly.

Ms Nelson grew up in South Dakota, and prides herself on retaining a Midwestern sensibility about what people want to read. This allowed her, for example, to ignore Time Inc's strenuous consumer research and champion a People cover featuring Al Roker, the Today show weatherman, following his crash diet.

"The cover research said people weren't interested," Ms Nelson recalls. "I said: 'Here's a man - a beloved television personality - who's just lost 100lbs. Believe me, people care.' " And they did.

She joined Time Inc in 1992 in Australia to work on Who Weekly, was promoted to People and then sealed her reputation with the creation of InStyle, a fashion monthly that quickly grew to a circulation of 1.5m.

In spite of the fairytale aspects of her CV, Ms Nelson insists that she has faced publishing adversity. When, for example, she was named managing editor of People three years ago, she was well armed with ideas about how to make the celebrity and lifestyle bible into a faster, newsier read.

However, no sooner had she landed in the editor's chair than the magazine was besieged by a group of new celebrity titles, including a relaunched US Weekly, In Touch Weekly, Star and Hello. Like a pack of glossy "mean girls" they were intent on knocking People from its throne as the queen of supermarket checkout lines. "Any sane person would be worried, and I was worried," Ms Nelson recalls.

Eventually, however, she stopped being obsessed with the competition and focused on People's strengths. The magazine is broader and deeper than its competitors. While it maintains a stalker's interest in Tom Cruise, for example, People also dispatches reporters to places such as New Orleans and West Virginia to cover national tragedies. "This is a magazine that can cover Angelina Jolie's pregnancy one minute, a child dying from a food allergy the next minute and the mining catastrophe another minute," she says. "The people who work here are really best in class."

Ms Nelson also outflanked the competition with a series of new one-off, branded publications. These include People's Hollywood Daily, a showbiz guide to awards such as the Oscars and Grammies, and Your Diet, a handbook for recipes and healthy eating. It has also turned 20 years' worth of its annual Sexiest Man Alive issue into a book.

Even in a more crowded market, People posted its best results ever in 2005, with circulation and advertising revenues both rising to all-time highs. "You have to be aware of the competition," says Ms Nelson, who still features US Weekly and other competitors on the rack outside her office. "But you have to lead with your own vision - not looking back at the competition."

Looking ahead, Ms Nelson says she is still deciding "where to place the bets". She sees limited growth opportunities overseas; most foreign markets tend to have a local equivalent. Instead, like other media groups, she is focusing on the internet. Visitors to People.com have doubled in the past year after Ms Nelson moved the web staff to the same floor as the magazine. The site is now used to break celebrity news, such as the Jolie pregnancy. Yet its advertising, which is sold by corporate sister AOL, is not yet a significant contribution to the bottom line.

Ms Nelson is also testing a mobile phone service that might send paying subscribers breaking news, such as the break-up of actors Hilary Swank and Chad Lowe.

In spite of excitement surrounding digital initiatives, Ms Nelson is not yet ready to give up on the printed page. Magazines, she believes, are better insulated from the threat of theinternet than newspapers because readers tend to have more intimate relationships with them. This appears to be especially true of women's titles.

During a recent investor presentation Jeff Bewkes, Time Warner's president and chief operating officer, said that this was because men - particularly young ones - had flocked to the internet in greater numbers. Ms Nelson declines to speculate on this. Nonetheless, she intends to launch more People-branded special issues this year - although she will not disclose what subjects she is considering.

"Right now, you hear a lot of people say that print is a mature industry," Ms Nelson says. "Personally, I see print as a growth opportunity."

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