Finance

Condé Nast accelerates digital transition to remain in vogue

When coronavirus hit the streets of Milan, Paris and New York this spring, Roger Lynch had already been mapping out a plan to turn around Condé Nast’s beleaguered magazines business. 

Several months on, the media group’s chief executive, a tech pioneer with no prior experience in publishing, said he was “totally validated” by the pandemic.

As global lockdowns put the world on pause, print advertising fell off a cliff and fashion houses were shuttered, hopes that Condé Nast — the company behind Vogue and The New Yorker — would finally turn a profit after years of losses were quickly dashed. Yet people stuck at home were watching the group’s Bon Appétit cooking videos and reading The New Yorker and Wired’s websites more than ever. 

“The only way [the plan] changed was it accelerated,” Mr Lynch said in an interview. “Some of the things we had planned to get done by the end of 2021, we finished by the summer”. 

Condé Nast is in the middle of a sweeping restructuring, two years after ousting its chief executive, merging its US and international businesses and bringing in the first outsider — Mr Lynch — to steer the century-old publisher through a tumultuous time for media. 

After dominating the pre-internet age with zeitgeist-shaping magazines that made celebrities out of editors such as Anna Wintour, Condé Nast has been reckoning with much shakier business prospects as entertainment has drifted online, often for free.

In July, Mr Lynch presented his turnround plan to the board, including cousins Steven Newhouse and Jonathan Newhouse, scions of the billionaire family that controls Condé Nast.

Faced with a rapidly declining climate for magazines, the Newhouses last year hired Mr Lynch because they wanted someone to shake up their company, telling the FT at the time they needed someone “steeped in dealing with disruption”. 

With their support, Mr Lynch is now moving forward with an overhaul of the storied publisher, investing about 10 per cent of the company’s revenues into technology and content to boost online subscriptions and ecommerce, while pushing into nascent business lines such as movie and TV licensing for its writing. The goal: find new ways to make money from its treasured brands, apart from selling print adverts in its magazines — an industry that is in structural decline.

The arrival of Covid-19 brought fresh urgency. The group’s magazine sales actually held up this year: total global print circulation for Vogue stands at about 3m, according to the company, while in the US print subscribers actually grew to 1.09m by June 30, up from 1.06m a year ago, according to the Alliance for Audited Media (AAM). 

But advertising, which still makes up about 70 per cent of Condé Nast’s business, dropped. Advertising sales for print magazines have been pummelled by the pandemic and are set to drop about a third in the UK this year, according to Enders Analysis.

To cut costs Condé Nast has laid off or furloughed hundreds of employees and reduced pay for those earning more than $100,000 — nearly half the workforce — by between 10 and 20 per cent. Even Anna Wintour took a 20 per cent pay cut, while Mr Lynch slashed his pay in half.

Vogue editor Anna Wintour took a 20% pay cut as part of pandemic response measures © Reuters

The group’s US division lost about $100m last year on $900m in revenue, according to a New York Times report. Condé Nast, which does not disclose results for the group as a whole, said the figure was “not accurate” but declined to provide details.

Mr Lynch said 2020 would also be lossmaking for the company globally, which he blamed mainly on the pandemic. “I’m not expecting to see anything approaching normalcy before the second half of next year,” he warned. “And it could take longer than that.”

The next year or so would be a period of investment, Mr Lynch said, as he looked to beef up operations in subscriptions and ecommerce with a goal of reaching profitability in 2022. The company is hiring for about 300 engineering and product roles in the next year.

Since taking the job last year, Mr Lynch has hired top executives from Disney and Google to help Condé Nast adapt to a world in which landing a show on Netflix has become an arbiter of cultural influence in the same way as a Vogue or Vanity Fair cover. He maintained that Condé’s brands remained beloved by consumers but argued that the distribution model needed to change. 

A former Morgan Stanley investment banker and physicist by training, Mr Lynch founded Sling TV, a slimmed-down TV service aimed at people ditching their cable subscriptions, before taking the top job at music streaming group Pandora Media. 

The 58-year-old wants to make Condé Nast more reliant on its readers and less so on advertisers. As part of the plan he has laid out, revenue from consumers — which ranges from subscriptions to Wired to $50 “gift boxes” of fancy deodorant and toiletries to GQ fans — will make up 23 per cent of Condé Nast’s business this year, up from 17 per cent in 2019, sped up by the disruption from coronavirus. By 2024, Mr Lynch anticipated it would be 30 per cent.

The New Yorker has been praised internally as the big success story for digital subscriptions, the highbrow politics and culture title having reached about 240,000 paying online readers in the first half of this year according to the AAM. The majority of subscriptions are for a bundle of print and digital access although that is starting to shift as more people sign up only for the website.

Condé executives are working to improve the New Yorker’s website, particularly on mobile phones, as they feel it does not measure up to the quality in the magazine according to people familiar with the matter.

According to AAM data, Wired had 142,000 digital subscribers and 722,000 print subscribers in the US in the first half of 2020, while Vanity Fair had lured 96,000 paying readers online and 1m for its print magazine.

Condé Nast makes a bigger push into digital

Last year, the group announced it would put the rest of its titles, including Vogue, behind online paywalls but Mr Lynch has halted that plan.

Instead, he is looking for specific opportunities. For example, Condé Nast is preparing to launch a subscription product for Bon Appétit, according to people familiar with the matter, to rival the NYT cooking app which charges $5 a month for access to its recipes. This Bon Appétit product, which would incorporate recipes, video and virtual cooking lessons, is scheduled for the second half of next year the people said.

Bon Appétit has been in turmoil this year over allegations of racial discrimination and pay inequity, resulting in the departure of editor Adam Rapoport. The controversy spoke to a broader struggle for Condé Nast, which rose to power by selling a brand of elitism, to stay relevant at a time when millions of Americans are out of work and a push for diversity has swept the industry. This summer, management released a diversity and inclusion report and pledged to hire more people from diverse backgrounds.

Mr Lynch also spoke enthusiastically about turning more magazine stories into films and television series, pointing to Brokeback Mountain and Argo — films that were derived from stories in Condé Nast magazines.

Douglas McCabe, senior analyst at Enders Analysis, said Mr Lynch’s plans were “perfectly good ideas”, but would probably be less profitable than the margins Condé Nast’s magazines commanded in their 1990s heyday. “They’re not going to replace all that revenue by having clever ecommerce widgets or gift boxes,” he said. 

“The big challenge for a number of publishers is that they are having to think about a world in which the amount of revenue that can be generated from being an important media brand . . . is probably just fundamentally worth less than it used to be,” Mr McCabe added. 

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