Analysis: And then there were three Sonja Koremans
An announcement on the London Stock Exchange just before 5:30pm Sydney time on September 12 was the first hint that the following day would be a very busy one for ACP Magazines. Minutes later, ACP hit the send button to deliver a press release about its $94m acquisition of Emap.
The news rounded off a year of consolidationin the Australian magazine sector where sixmajor players have now been whittled downto three.
In the past 10 months, News Limited has bought the Hannan family’s Federal Publishing Company, the Seven-owned Pacific Magazineshas acquired Time Inc titles, and now ACP has strengthened its dominance with the purchase of Emap Australia.
Industry observers are already predicting that the tighter print landscape will force magazine publishers to refresh their offerings and dramatically grow digital content to move in line with other forms of media.
Those which don’t, regardless of size, will face certain death.
ACP already owns 60 local magazines and purchasing Emap will add about 18 more and giveit the option to license Emap’s extensive international portfolio. There is also the possibility that ACP will launch a local version of ICP’s men’s magazine Nuts.
But if its nearest rival Pacific – which also bid for Emap – is concerned about the development, it’s not batting an eye. “It’s not something we’ve given a lot of thought to. ACP has been a dominant force for quite some time and we are too hectic to be concerned about what others are doing,” Pacific CEO Nick Chan says.
Chris Walton, MindShare’s chief executive, points out that there have been 100 magazine launches in Australia in the past seven years and he doesn’t expect consolidation will stem the activity. However he adds that the big publishers have more resources, which allows them to launch new titles quicker.
“The consolidation also reflects that the level of investment needed in the magazine sector to continually refresh the product has been safeguarded at the top end so these magazines will increasingly view themselves as brands and offer dynamic print and digital offerings,” Walton says.
And some observers fear the dominance of the big players could lead to advertising rate hikes.
“There are some people out there pedalling doom and gloom who believe that ACP and the other big players will increase their advertising rates. But if the publishers do that without adding perceived value, then money would walk outof magazines.”
While Walton believes it is “highly unlikely” that ACP, Pacific or News Magazines will risk travelling that path, niche publishers boasting growing profits should also take heed.
“Magazines that become too profit-focused and don’t revitalise their products will in a very short time see the size of their readership eroded.”
It would be short-sighted to assume that the market leaders won’t eye opportunities beyond their home turf or deepen their custom publishing presence, however, most small Australian publishers are confident that they will be able to hold ground.
Nick Cutler, Derwent Howard’s commercial director, says niche magazines are nimble and well-placed to evolve with trends.
“Niche magazines are traditionally entrenched in their markets and they have the ability to move quickly and these markets are not necessarily sexy enough or big enough for the larger publishers to be involved in, so I think we will continue to grow in the new environment,” Cutler says.
Jarrod Heathcote, Morrison Media’s sales and marketing director, adds that market segregation will protect smaller players’ futures.
“The big guys are more interested in the bigger markets and don’t connect with the smaller markets that we are in,” Heathcote says.
“Once the dust settles, there will be room for large and small players.”
Chris Tchakalian, Publishers Australia executive director, believes ACP, News Magazines and Pacific will increasingly flex their muscles at magazine distribution points.
“It’s at the sales end where smaller publishers are going to really feel the effects of the growing strength at the big end of town,” Tchakalian says.
“There’s a continuing battle for magazine space on retail shelves and ACP are a strong organisation and surely have a very strong capability of securing their share of facing space and the bigger they become the harder it will be for the smaller players.”
The situation would be magnified if ACP capitalises on its licensing rights to Emap’s popular overseas titles which include Heat, Grazier and Closer, Walton says.
Jeremy Vaughan, managing director of Haymarket Media, argues that the greater cost of entry for new publishers, and fewer opportunities in the lad’s market after ACP’s purchaseof FHM and Zoo, could lead more magazines going online.
“Smaller entrants will go the online route and stay there or possibly start there and launch a magazine later,” Vaughan says.
Simon Davies, OMD’s head of print, believes the major publishers will avoid shutting down magazines, regardless of competing titles within and outside their stables.
“Overall their circulation in the market is relatively strong so it’s unlikely that there will be any closures after the latest move by ACP,” Davies says.
He says closures were more likely earlierin the year following Pacific purchase of TimeInc titles.
“ACP has always been dominant and now they have Pacific as the major competitor that they didn’t have earlier so I think ACP’s latest acquisition is not going to have a further impact,” Davies says.
Peter Horgan, OMD’s managing partner, adds that the trio’s power balance will remain intact.
“The big three are in for the long haul, they are significant players and they will hang in there,” Horgan says.
“We would be extremely surprised if there was any further rationalisation.”
