Future Plc is one of Europe’s best-known magazine publishers. It is neither the most successful, nor the largest, nor even the most inventive. But, over the past 15 years, it has suffered the wildest swings in fortune, been the bravest, grabbed the most headlines and (for the investment-minded) issued the most profit warnings of any UK media company. It has seldom been out of the news.
Future has injected a jerky excitement into magazine publishing by seeming to be ahead of the curve. It’s been like that since Chris Anderson (now the visionary leader of TED) graduated from Oxford University, became passionate about 1980s computer games and launched Amstrad Action magazine from his kitchen table 100 miles from London.
By 1985, the Pakistan-born, British missionary’s son had founded Future Publishing with a £15,000 bank loan. For seven consecutive years, the company doubled its revenue, profit and number of employees. It was an exciting ride as the business grew from Anderson’s kitchen to a converted country barn and then to a string of converted houses dotted round historic Bath in England’s south-west.
These were boom times for specialist magazines, ‘micro-computing’, and video games. And Anderson neatly made his magazines interactive in pre-internet days with cover-mounted CDs and disks to help readers develop their skills, try out computer games and sample music they had read about. These were magazines for “readers with a passion”. Enthusiasts writing for enthusiasts gave Future its mastery of niche markets.
In 1993, along came Pearson with a buy-out cheque for £52.5m. Pearson is today the world’s leading educational publisher and the company behind the Financial Times, Penguin and Dorling Kindersley. Back then, its 63-year-old CEO was making racy investments in new fangled technologies. Future seemed to fit just right. A few years later (after the parent company had wasted £300m on California-based Software Toolworks) it didn’t – and the magazine publisher was sold on to private equity firm APAX.
Fast-forward to 1999 and Chris Anderson returned as chairman to float the company in euphoric times. The dotcom chorus cheered the tech-image Future as one of their own, although it was really a good old magazine business. Despite loss-making, its value reached £1bn. But not for long. The dotcom bubble burst, the company’s losses and debt ballooned – and the spell was broken. Future’s cycle of agony and ecstasy had begun.
Corporate collapse in 2001 brought retrenchment, magazine closures, shareholder distress, and pull-back from global ambitions.
Four years later, acquisition of a mixed bag of 38 magazines from the broken Highbury House company, brought renewed disappointment, bank debt and more cutbacks. Successive shocks in the company’s sub-scale American business – and, ultimately, sliding sales of computer and gaming magazines – brought seemingly regular share price turmoil and management executions: Future has now had three chief executives in the past 7 years. In 2011, former TV news executive Mark Wood became CEO, blown in by profit warnings, US losses, and the challenge of all things digital.
But Future always bounces back.
The company – whose wholly-owned and licensed magazines sell 20 million copies a year and have 50million monthly web site users around the world – claims to be the UK’s largest exporter of magazine content. And it’s moving forward again, with profits up by 20% and a share price doubled in the past 12 months. It has sold over 2million “products” through Apple’s Newsstand for iPad and keeps winning digital accolades from less volatile peers.
The new CEO quickly grasped the potential of the magazine-sized screen and rushed Future brands into iPad editions. Stockmarket analysts love the company once more: ” A year into the new management team tenure, Future has delivered a solid set of numbers….US profitability is within touching distance, and it feels like the business overall is firmly back on the front foot…. a significant pool of organic growth opportunity, primarily focussed in the digital/tablet space…”
It (literally) does not pay investors to recall Future’s historic performance when previous, extravagant promises and profits came crashing down. So analysts recently purred over digital revenues that had increased by 30% – with tablet income exceeding $1m a month – although not enough to offset the decline in hard copy copy revenues.
Is the ‘new broom’ enthusiasm justified by the prospects? Well, Future has had a well-deserved reputation for producing competitive, high-quality, narrow-cast monthly consumer magazines and selling them profitably through an unrivalled network of international editions. Lots of them. Future still publishes 70 monthly magazines in the UK, some of them selling just a few thousand copies on the news stand. For all the digital talk, Future’s business has (until comparatively recently) been mostly about copy sales of printed magazines.
Its whole success had been based on once-valuable cover-mounted discs and CDs – and exclusive deals with Playstation, Xbox and Nintendo – to justify the highest magazine prices. Discs which enabled avid gamers to ‘try-before-buying’ the latest £50 Playstation game helped mere magazines sell for £5 a decade ago. Now, much of the games magic is online.
The company is as exposed as any other magazine publisher to the competing challenges of creating a new business model while trying to squeeze maximum earnings from the old one. Worse for Future is that much of its success had come from the fragmentation of specialist magazine sectors into small-circulation titles, many of which can be expected to decline rapidly in the consolidating market. Worse still is its dependence on:
- Casually-purchased retail copy sales (rather than posted subscriptions) at a time of falling news stand volumes
- Higher-than-average cover prices at a time of retail pressure – and heavy discounting
- Technology markets where ecommerce opportunities may be restricted by existing offline and online retailers
- International licensing revenues which may now be compromised by digital (cross-border) expansion
Future has always talked a good game. A former CEO described its magazines as “narrow but deep”. In fact, they have been nothing of the sort. If you measure the so-called “depth” of reader relationships by the range of services that might reasonably include everything from exhibitions to ecommerce and paid-for online information services, the company has been almost nowhere. They don’t even have the names of most of their readers. Even the oft-quoted assumption that Future’s nerdy young male readers buy almost every issue of their favourite magazines and also many of its sister titles was painfully disproved by retail research showing the reverse. Once-buoyant UK news stand sales made both readers and publishers lazy.
The relative shallowness of Future’s relationship with readers is well illustrated by T3. The company’s best-known magazine was launched in 1996 (“Tomorrow’s Technology Today”). It now sells 49,000 copies monthly in the UK, some 18,000 ipad subscriptions, and has licensed print editions in 40 countries. The same CEO who delighted in the “narrow but deep” mythology was, however, spot on in describing T3 as “tech porn” – and there are sexy girls holding the latest gadgets to prove it. Not very deep. It’s another part of Future’s glossy image with perhaps limited growth potential, in a world where ownership of original content will beat magazine branding – and get online readers to pay.
At a time when many magazine publishers see prospective profits in ecommerce, Future also looks as if it is in the wrong place, give or take the odd successful venture like that in its craft magazines. There may simply be no easy way for magazines like T3, Classic Rock, Total Film, Cycling Plus and Digital Camera to become serious outlets for ecommerce. The would-be competition is fiercely-entrenched – and sometimes also Future’s own advertisers.
The publisher’s limitations are further highlighted by tomorrow’s launch (Jan.1) of the Global Cycling Network in the first wave of original videostream channels on YouTube. Some assumed that the Network was coming from Future. After all, Future’s cycling web sites attract over 5million global visitors each month led by cyclingnews.com,
But the Global Cycling Network is being launched not by Future but by Simon Wear, the company’s former UK chief operating officer. Wear left to launch Shift Active Media, an inspired media, marketing and communications agency specialising in cycling – and now about to storm the 21st century airwaves.
Shift has raced to high-margin profits in under three years and seems set now to become a major information channel for the world’s cyclists. The fledgling company’s success will have prompted Future worries, for two seemingly unconnected reasons.
First, it was Simon Wear who led the rapid expansion of Future’s international licensing revenues, forging deals with 89 media companies to publish 225 magazine editions in 76 countries. Now, though, that same high-margin revenue from licensed editions and international copy sales is at risk from iPad editions sold direct to international readers. The transition could be painful.
Second, the Global Cycling Network is an unmistakable reminder of how such video-led media channels are set to revolutionise specialist media
– and how magazine publishers like Future will have to change substantially in order to compete. Suddenly, the world’s leading cycling publisher finds itself on the outside lane in a key growth sector; and one where the ecommerce also is dominated by best-of-class sites like wiggle.com and chainreaction.com. And Wear’s Shift Active Media is a significant advertiser with Future. Sobering times.
The shrinking world of magazines
All magazine publishers must face up to some home truths:
- Hard copy (and digital-version) magazines may continue indefinitely but the whole sector will become appreciably smaller. The strongest survivors will include distinctive international brands like Vogue, Cosmopolitan, Elle, GQ, The Economist, The Week, and Marie Claire, many supported by global advertising deals. Specialist, low-circulation magazines will increasingly be forced off the newsstand and many will, therefore, only survive by posted subscriptions or through sponsorship deals. High-circulation free magazines will continue to challenge for hard-copy advertising revenues putting further pressure on paid-for titles unable to halt the decline in sales. The price of “flat” advertising will continue to fall.
- iPad and other tablet editions are clearly transitional media, representing magazines in a (sort of) hard copy way – and with a frequency based on the historic production of magazines and newspapers. Most such brands will need to become truly interactive and to incorporate ecommerce and other services in order to compensate for low reader prices and reduced advertising revenues. Content will need increasingly to be ‘live’.
- The demarcation between different media types – and between retail and media ‘channels’ – will increasingly disappear in the flood of digital channels featuring video, ecommerce, social media and live content. The new wave of YouTube channels is just the start of the video streaming explosion, initially capturing younger audiences for many of whom the laptop and tablet are already more important entertainment tools than the television. Content ownership, especially video and original data, will become vital.
These next-generation media channels will be all about Content, Community and Commerce. More than that, they will be wrapped around video, social media, and live information. The frequency of magazines and newspapers – whether weekly, daily or monthly – will be lost in a churning world of live ‘broadcasting’ on every laptop, tablet and smartphone.
In truth, Future has a lot going for it. This is a talented, buzzing company. It is generating piles of web traffic across high-value sectors. Some of its publishing and online brands are world-class, serving strong, loyal communities – and now generating total profits of almost £9m. The iPad editions are roaring ahead and are, for example, opening up profitable new markets like South Korea that had not previously been considered as viable for English language publishing. There will be much more. But the race to get digital profits moving ahead of the decline in print is a tough one because – like so many traditional publishers – most of the digital prospects come from magazine teams.
So, it’s a race to establish the independent viability of digital (ie users paying for content) before the hard copy shrinks much further. But cannibalisation can be expensive. And moving the business from ‘scheduled’ products (like hard copy or digital magazines) to services will be no easy task for magazine-centric people, systems, business models – and content. It means new skills, more outsourcing, and new partners.
Not a small series of challenges for Future. But this smart, tech-savvy, energetic company has some very good chances. It is also under-pinned by the excellent techradar.com site (7m visitors each month) which itself may be worth almost 50% of the £60m value of the whole business. A round of sell-offs and rationalisation might actually strengthen the company (and its balance sheet) as it seeks to focus on key growth sectors.
The Global Cycling Network is, though, an alarm call for magazine publishers. For Future, the message is loud and clear. The company which has punched above its weight by forming impressive technology and publishing partnerships for 27 years could soon start to show its peers just how to re-make a specialist media business for the 21st century. But they can’t do it on their own. The Future must be all about partnerships, strategic alliances and joint ventures. Just watch the company’s TV-savvy CEO make his moves.