The Bonfire of the Media

04/30/2009 2:09 pm EST


Howard Gold

Founder & President, GoldenEgg Investing

This week we saw the kind of saturation coverage that only big events bring out in the US media.

No, I’m not referring to the reemergence of swine flu or even the first 100 days of the Obama Administration.

I’m talking about the demise of Portfolio, the two-year-old business magazine from glitzy publisher Conde Nast, which also puts out Vogue, Vanity Fair, and The New Yorker, among other titles.

Newspapers, media news sites, and bloggers have been all over this momentous development—which, although it satisfies the obsession media types have about themselves, does raise important issues for investors and consumers of financial information.

But despite endless dissections of the magazine’s business strategy, its eye-popping spending, and its editor’s judgment and temperament, I’ve seen very little that gets to the heart of the problem.

How can anyone have launched a new print business magazine in 2007? And although in some journalistic circles, print—and a certain cable network—are still the gold standard, the audience for financial information and analysis migrated online a long time ago. Any business that ignores that is doomed to fail.

That’s why when I read the accounts of life inside Portfolio’s gilded fishbowl, I wondered, what planet are these people on? And what century do they think they’re in? Overpaid writers strutting and griping—and not producing. Ego-driven news meetings where nothing was resolved. A reported $100 million of Conde Nast’s money down the drain. And never a clear statement of what this particular magazine was bringing to the table in a very crowded market.

What jumped out at me most, however, was how much of an afterthought online appeared to be in the grandiose plans of Conde Nast’s reclusive owner S.I. Newhouse, Jr. and Portfolio’s editor in chief Joanne Lipman, formerly a top editor at the print Wall Street Journal. was actually a pretty good Web site, with some interesting commentary. But it was never integrated into the core of the magazine’s mission—and never really tapped the Web’s potential to build a vibrant user community. (Full disclosure: In the spring of 2006, I offered to help Portfolio with its site, but nothing ever came of it.)

Fact is, there’s simply no way the old business model—aggregate a large print readership, then charge advertisers big bucks to reach them—can work these days, for two reasons: The deep recession has caused a big retrenchment in consumer spending and advertising, and the audience has moved on.

The first point is pretty obvious. Consumer advertising is dropping like a rock, and magazine ad pages reflected it in the first quarter, falling by 20% over the same period in 2008, according to the Magazine Publishers of America.

As for the second point, the numbers are overwhelming. In March, Yahoo! Finance alone attracted over 25 million unique users, according to Nielsen. MSN Money drew over 15 million uniques, while the Wall Street Journal Digital Network had nearly 14 million, and AOL Money & Finance topped 12 million.

The total for the top five sites: 76.4 million.

But if you add the reported print circulation of Fortune, Forbes, Business Week, Barron’s, The Economist, Money, SmartMoney, and Kiplinger’s Personal Finance, you’d get roughly 7.5 million. The Wall Street Journal brings in two million more. Throw in readers of The New York Times and Financial Times and maybe you get another 1.2 million. That’s almost 11 million total.

Now granted, there’s a lot of overlap among those readers and users. Many people who get financial information online also read print magazines and newspapers, and vice versa. And of course, some established print publications also have pretty robust Web sites. (I was editor of one of them, Barron’s Online, for ten years.)

But no matter how you crunch the numbers, the Internet has become the principal source of financial news, data, and analysis for an overwhelming number of US adults. Anyone who still believes in the “primacy of print” is living in a dream world.

So, is it any surprise Portfolio had a 50% drop in advertising pages in the first quarter of 2009 from the same period last year—and even established Conde Nast titles like Vanity Fair, Vogue, and the New Yorker suffered declines of more than 20%?

Does anybody really think those advertisers are coming back in the same numbers once this long recession ends? If you do, you’re suffering from the same wishful thinking as the Wall Street bonus babies who believe everything will return to “normal” once the government gets off their backs.

Magazine editors and publishers are just starting to realize what their counterparts at newspapers have had to face over the last couple of years: The game as they knew it is over.

For newspapers, lucrative local advertising monopolies padded profit margins even as readers steadily drifted away. Once competitors started grabbing the remaining readers for both display and classified ads, their business model crumbled. The agony we’ve witnessed in the newspaper industry, which now sounds like a death rattle, is the result of that.

Magazines, with their appealing presentation and highly targeted readerships, have managed to insulate themselves from the woes of their poor cousins. They also appear to have more brand equity than the metro dailies do.

But that goes only so far. As media commentator Jon Friedman noted in MarketWatch, Portfolio may not be the last major business magazine to close.

I have many friends and colleagues at business magazines and other print outlets. I like them, respect their work, and wish them the best. And I do think long-form explanatory and investigative journalism fulfills an important function for investors and society as a whole. So far, none of the new models have come up with anything to replace it.

But Portfolio’s closing is like a bell tolling its mournful message, yet again: Your audience has moved on. Deal with it.

Howard R. Gold is executive editor of The opinions expressed here are his own and not necessarily the views of MoneyShow.

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