4 Million Subscribers – and Unprofitable? Closing of ‘Family Circle’ Signals Shift in Meredith Print Strategy

How could a magazine with more than four million subscribers be unprofitable? I kept seeing and hearing various versions of that question last month when Meredith Corporation announced it is about to publish the last monthly issue of Family Circle.

Here are the TL/DR answers:

• Not all circulation is profitable.
• Family Circle wasn’t necessarily unprofitable.
• The magazine has assets that will probably become more valuable after it is shut down.
• Meredith is shifting its magazine strategy, not exiting from print.

Let me explain:

U.S. mass-market magazines typically have many subscribers who don’t pay enough to cover the publisher’s cost of printing and mailing them their magazines. Sometimes, a publisher collects no money for some subscriptions. The newsstand system isn’t necessarily better; sometimes the cost of promotions and of producing so many unsold copies eats up all the profits.

Boosting circulation numbers with money-losing copies can work if it provides the magazine enough scale in the ad market to subsidize the unprofitable circulation. But the digital revolution has been especially unkind to print advertising in mass-market magazines, while making consumers less willing to pay for content. It has now claimed four of the once-vaunted women’s magazines known as the “Seven Sisters.”

Family Circle attempted something of a turnaround just over a year ago, with “a shift of focus to emphasize parenting, particularly moms with teenagers,” writes Alex Johnson at NBC News. “Longstanding departments like style, home, food, health and family were ditched in favor of reporting on ‘life and the way we live it.’”

Such dramatic changes rarely succeed. Your brand is what people perceive it is, not what you think it is. And people’s (especially advertisers’) perceptions can be slow to change.

Besides, you risk turning off the people who liked the way the magazine was, especially your profitable long-time subscribers. And Meredith wasn’t about to let that happen.

Those subscribers are about to become more valuable to Meredith: After they receive the final (December 2019) issue of Family Circle, their accounts will be transferred to other, more profitable Meredith titles.

The excess subscribers will enable those magazines to boost their circulation profitability. They can cut out the unprofitable, “oh my God, we need more subscribers fast” types of subscriptions and charge higher rates when such subscriptions come up for renewal.

That could be especially true of magazines Meredith acquired from Time Inc. Meredith executives have complained that, in its last days, Time allowed the quality of its subscription lists to deteriorate.

The shift of subscribers may unlock so much value that I wouldn’t be surprised if Meredith decided to close Family Circle while it was still profitable, rather than waiting for the inevitable descent into red ink.

As usual, when a publisher shuts down a magazine, Meredith claims it is shifting resources to other parts of the business and is still optimistic about printed magazines. But in this case, that seems to be more than a cliché.

In what seems to have been a horrible year for magazine advertising, Meredith is astonishingly upbeat, recently predicting ad revenue at its remaining magazines will be up this year.

One beneficiary of the shifting resources is Health magazine, a Time Inc. alum that is reporting a 7% gain in ad revenue this year. It will be getting a larger trim size and better paper – plus a publisher and executive editor who are being transferred from Family Circle.

Health seems well-positioned to capitalize on one of the few bright spots for magazine advertising – pharmaceuticals. Many pharma companies are paying publishers high rates to place sponsored cover wraps on magazine mailed to the waiting rooms of specific types of physicians.

Meredith is also pleased with the rapid takeoff of its recent Magnolia Journal magazine and optimistic about another TV-inspired quarterly title from the Property Brothers, set to launch in January 2020.

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None of these hot properties, however, look likely to achieve the multimillion-subscriber heights once attained by Family Circle and other mass-market publications. Meredith seems to be staking its magazine future on titles with narrower audiences, six-figure circulations, and some special superpower (such as a rabid fan base) that enables them to compete in a multimedia world.

Tom Harty, Meredith’s CEO, summed it up to investment analysts last week: “As we see decreased advertising demand or volume over time, we plan to change the portfolio and look at opportunities to increase our consumer revenue, like charging people more money on the newsstand for specific titles we had, like we're doing with the Property Brothers and Magnolia Journal.”