Note to Readers: MBR Daily will not publish on Presidents' Day, Feb. 18.
Hearst Mags Names Mike Smith First Chief Data Officer
MediaPost: "In its latest move as a data-driven content company, Hearst Magazines has appointed Mike Smith its first chief data officer. Smith will report to Hearst Magazines President Troy Young. Smith was COO of Hearst Magazine Digital Media prior to his new role. Smith will now oversee the strategy and ongoing development of digital advertising operations, data capabilities and ad product offerings at Hearst Magazines. He will also continue to oversee the development of data competency across Hearst Magazines, including technology-driven division CDS Global, which provides outsourced business solutions to multiple industries. The newly created role of chief data officer comes as Hearst Magazines continues to focus on the opportunities for advertisers derived from data. The Hearst Data Studio, which Smith leads, is home to proprietary technology that leverage machine learning and business intelligence across brands as a means of enhancing audience targeting and providing attribution analytics for clients. Before his time with Hearst, Smith was president of Forbes.com and chief digital officer of Forbes Media. He was also vice president and Chief Information Officer at TheStreet.com."
Reddit Holding, Though Reduced Now, Is Part of Conde's Financial Cushion
NY Post: "Little noticed in the hoopla that Chinese behemoth Tencent had made a $150M investment in the latest $300M class-D funding round for Reddit was the reduced ownership role Condé Nast and its parent company, the Newhouse-owned Advance Publications, now have in the latest Silicon Valley darling. But the reduction does not matter, because it brings in assets. The Condé Nast-Advance Reddit stake is estimated to be in the range of 30 to 35%, and the investment carries a book value of about $1B now. Tencent is estimated to have about 5%. A dozen years ago, Condé Nast paid Reddit co-founders Steve Huffman and Alexis Ohanian around $10M...for 100% of the company that soon became known as the front page of the internet. Huffman, the current CEO, said he plans to use the new round of funding to chase mobile-ad and video-ad dollars to take shares from Facebook and Google. Ohanian, now a venture capitalist, is married to tennis ace Serena Williams. At the time of the purchase, Condé Nast was realizing that it was having a hard time attracting top-flight talent from the tech world to a family-owned, legacy media outfit back in New York that published Vogue, Vanity Fair and the New Yorker... In April 2018, Reddit was spun off as an independent company. After that first round, Condé Nast chipped in maybe another $30M in the ensuing years through four rounds of funding that raised just north of $500M for Reddit. With this latest round, Reddit has a book value of about $3B...up from the $1.8B valuation it had in 2017 when it raised $200M in its previous fund round. Oh, and guess who's going to remain the sole Advance-Condé Nast representative on the Reddit board of directors? None other than Bob Sauerberg, the man who is being forced out as CEO of domestic Condé Nast Publications as it merges with London-based Condé Nast International into one trans-Atlantic entity. The search for a new CEO to oversee both New York and London is still in the very earliest stages, with no sign of a replacement on the horizon. Of course, the Reddit valuation is still on paper only, and more than a few rumored IPOs from the likes of BuzzFeed and Vice Media seem to be on permanent hold. But the Newhouse family also had turned some of its stock in Discovery into a $500M investment fund as it scouts for a big hit. In the meantime, it still has the $10.6B that it received from selling its Syracuse-based Bright House Networks, which today is part of cable powerhouse Spectrum--with Advance keeping a minority stake. And so, even as Condé Nast continues to bleed red ink and its newspaper holdings struggle, there is a fairly large cushion."
Trusted Media Brands Drops CRO Position
NY Post: "In a shakeup at Trusted Media Brands — once known as the Reader’s Digest Association — the chief revenue officer is out, and the position is not being replaced. 'Zach Friedman has left the company,' and the CRO has been eliminated, said a TMB spokeswoman. John Boland, who joined TMB in December as VP, national corporate sales, has been promoted to SVP, advertising sales and is responsible for all print and direct digital sales."
November Bookstore Sales Jumped by 9.9%
PW: "Bookstore sales in November jumped to $729M from $663M a year ago, an increase of 9.9%, according to preliminary estimates released by the U.S. Census Bureau. The release of the figures was delayed due to the government shutdown. The sales increase was fueled, no doubt, by Michelle Obama's Becoming, which came out Nov. 13. The strong November gained followed a 7.2% sales gain in October, and the two-month rally lifted YTD sales by 0.7% over same period 2017. Total bookstores sales were $9.06B in 2018's first 11 months vs. $9B in the comparable period in 2017."
British GQ Using Free Pub to Drive Weekly Readership
Digiday: "British GQ is making a play for new and younger audiences with GQ Hype, a sub-brand it launched quietly two months ago. Hype acts as its own weekly magazine. Each week it publishes a weekly cover, plus regular daily features, separate from other GQ content published in print and online. In January, the title published 280 articles under GQ Hype across politics, lifestyle, fashion, opinion and, increasingly, news... Now, it’s launching a newsletter on Feb. 18. In January, the GQ audience grew 43% YoY to 3.7M global unique users, according to the publisher’s Google Analytics stats. In December, the first month of Hype, there were 3.2M unique users, a growth of 32% YoY. Comscore’s most recent month monitored is December, which saw 873,000 monthly unique users for GQ. 'We have good growth in digital, but we had an issue with loyalty,' said Dylan Jones, editor of British GQ. 'One of the ways to include all the verticals and increase the quantity was to launch a free-to-air weekly. It encourages the team to frame pieces in a different way. We’re committed to the project; we’re not just putting 800-word pieces under it.' GQ is planning six more in-depth pieces in the next two months exclusively for Hype... In the last three months GQ added five new editorial hires, and those journalists work across Hype and the site. Currently, its editorial team is 31 people. GQ Hype makes sense as a gateway product for people who might not buy the magazine, even if the additional revenue is modest, said Alex DeGroote, an independent analyst. 'Condé Nast International has been cost-cutting but is now more revenue-focused. GQ has one of the most resilient brands in lifestyle publishing, and the advertising proposition is clear-cut.' Hype will make money through display ads and content partnerships with brands. GQ is into its third year of working with Gucci creating five short-form films distributed on its own 22 global platforms. The title works with brands outside the luxury category, but the closure of men’s weekly-free magazine Shortlist last November points to the challenges with mass-market male-focused advertising. Plans are shaping up to make more GQ content paid for, which Jones is backing. 'I sincerely hope we reach a stage where everything is behind a paywall. It’s kind of outrageous that people get things for free,' he said. 'I don’t believe in a freemium model.' Condé Nast in the U.S. has introduced paywalls to titles like Vanity Fair, and more are highly likely. According to the ABC June 2018 report, around 12,500 already pay for a sub to the digital edition of GQ. The balance of mitigating declines in traffic, and so ad revenue, with putting up a hard paywall are well-documented, and the tensions that can arise, but building out products to encourage people to return to regularly, like Hype, will give the title a stronger start. 'You make it work... Everything will be finely calibrated,' said Jones. 'I like to think we’ll reach a stage where people pay for content.' GQ also hosts B2B awards in automotive and food and drink categories. This year is the inaugural “GQ Heroes,” a B2B conference to mirror its verticals like entertainment, technology, food, politics as well as fashion designers and CEOs. Elsewhere, in January Vogue launched Vogue Business, a B2B content product going after fashion professionals. Other GQ brand extensions like licensing are in the works. 'The trap is people get driven by traction, and you become clickbait. You can’t operate like that because you don’t have a DNA,” said Jones. “We all want to sell more. We all want more eyeballs, but it has to have GQ DNA or it doesn’t work for us.'"
S&S 2018 Profits Up Despite Small Sales Decline
PW: "A soft fourth quarter in which revenue fell 7% led to a 0.6% decline in sales for 2018 at Simon & Schuster. Despite the sales decline--from $830M in 2017 to $825M last year--operating income rose almost 6% in 2018 over 2017, to $144M. S&S parent company CBS said the fourth quarter revenue decline was due to lower print book sales. S&S CEO Carolyn Reidy said the company "came up short" on a couple of titles right before Christmas, but that it performed well in the period given the reduction in printing capacity the industry experienced over the holidays. She added that the industry now realizes it is operating in a new environment where printing capacity has declined. Nonetheless, she is confident S&S will adapt to the changing circumstances. Looking back on 2018, Reidy said sales of downloadable audio once again had gains well into the double digits that countered declines in e-book sales. Overall, total digital sales rose by half a percentage point over 2017. Sales in S&S's two big domestic groups, adult and children's, were flat with 2017. International sales fell. Reidy noted that 2018 didn't have the benefit of some movie tie-ins that helped drive sales in 2017. 'We relied on our own publishing and I am proud of that,' she said. Reidy also noted that despite the sales shortfall in the fourth quarter, profits rose for the 16th consecutive quarter of the comparable period"...
Vogue Opens Tokyo Bridal Salon
MediaPost blogger Rob Williams writes: "Vogue is extending its brand into retail with the opening of its first bridal salon. The Vogue Wedding store in the tony Omotesando neighborhood of Tokyo aims to give brides-to-be a one-stop shop for gowns from high-end designers. 'In addition to traditional wedding dresses, we have prepared a wide variety of more adventurous styles,' Mayumi Nakamura, creative director of Vogue Wedding, said in a statement. Alexander McQueen, Giambattista Valli, Oscar de la Renta, Sergio Rossi are among the designers the salon will showcase. The salon also will help customers plan their entire look for their wedding day, including make-up, hair and accessories. The Vogue Wedding team also can refer customers to stylists, photographers and videographers.It’s interesting that Vogue is opening its first salon in Japan, considering that the country’s wedding industry has been in steady decline for years. The country’s record-low birth and marriage rates have raised alarms among public officials, who are scrambling to develop policies that will urge people to marry and have kids. Perhaps Vogue will find success among well-heeled customers who are more immune to the worries of wedding and childcare costs. From there, the magazine brand could expand to more locations in the ritzy shopping districts of major cities worldwide.Vogue Germany in November opened a pop-up store in Metzingen Outlet City that was scheduled for a five-month run, WWD reported. 'It gives a brand like Vogue an opportunity to make fashion come alive and meet our readers,' Christiane Arp, editor in chief of Vogue Germany, said of the concept store. Its merchandise consisted of collections from young Germany designers whom Arp has championed. It will be interesting to see how these retailing ventures work out.The retail industry faces the same kinds of threats from digital competitors that traditional publishers do. Amazon has upended the department-store and big-box retailing industry, and is joining Facebook and Google in boosting digital ad revenue. Still, many consumers are looking for the expertise and pedigreed tastes that seasoned editors can provide. Advertisers certainly are looking for more value-added marketing solutions from publishers.Those trends may help magazine brands develop incremental revenue from retail and digital commerce strategies."
Lagardère Completes Sale of French Elle to Czech Media
WWD: "France’s Lagardère Group has completed the sale of most of its press portfolio to Czech Media Invest (CMI), including French Elle, Version Femina, Art & Décoration, Télé 7 Jours, France Dimanche, Ici Paris and Public. The transaction, which was finalized on Thursday after talks began in April 2018, earned Lagardère 52M euros and will result in the transfer of 649 employees to the Czech Republic media group, partly owned and managed by billionaire Daniel Kretínsky. In July 2018, the group also bought radio channels in Eastern Europe that had belonged to Lagardère for 73M euros. The sale of its media titles is part of Lagardère’s global strategy to focus on Lagardère Publishing, which includes publishing house Hachette, and Lagardère Travel Retail. The announcement comes a week after the group published its 2018 sale results. Revenues at Lagardère Active, its media branch, were down 6.6% in Q4: the division reported 270M euros in sales, down from 300M a year earlier. The decline was due to a decrease in advertising revenue and the sale of Lagardère Active Radio International, as well as health websites MonDocteur and Doctissimo. In July 2018, Lagardère let go of its 42% stake in French Marie Claire, which is now owned by founding family Prouvost. The group still owns Paris Match, Le Journal du Dimanche and radio channel Europe 1. 'Daniel Kretínsky is a wise and francophile businessman. I have no doubt that he will continue the development of these magazines and give them all the means to succeed,' Arnaud Lagardère, general and managing partner of Lagardère SCA, said. In November 2018, CMI acquired 49% of Le Nouveau Monde, one of the main shareholders of French daily newspaper Le Monde. Lagardère retains ownership over the Elle brand both in France and internationally, but an “exclusive license for France on the brand” is included in the transaction, according to a statement."
Opinions: Pros, Cons of Apple's Subscription News Service
In Recode, Peter Kafka reports that magazines are on board with Apple's subscription news service, but newspapers aren't. From his blog: "Apple says it wants to help save journalism. All it wants in return is half of all the revenue journalists make when they sell their stuff through a forthcoming new Apple subscription service. Cue internet outrage. The argument, made by everyone from my colleague Casey Newton [link below] to Apple blogger John Gruber: 50% is way, way too high--'insane,' in Gruber’s words--given that Apple normally takes 15% to 30% of the revenue it generates when someone buys something from its App Store. Insult to injury: Apple’s new arch-enemy Facebook takes zero percent when it helps someone subscribe to a publication. So what is Apple thinking now? Here’s the short answer, which I’ve cobbled together by talking to industry sources: Apple has already signed many publishers to deals where they’ll get 50% of the revenue Apple generates through subscriptions to its news service, which is currently called Texture and will be relaunched as a premium version of Apple News this spring. And some publishers are happy to do it, because they think Apple will sign up many millions of people to the new service. And they’d rather have a smaller percentage of a bigger number than a bigger chunk of a smaller number. In the words of a publishing executive who is optimistic about Apple’s plans: 'It’s the absolute dollars paid out that matters, not the percentage.' That argument seems unlikely to persuade the big newspapers, including the New York Times and the Washington Post, that Apple is trying to add to its service. Both of them have built their own digital subscription businesses over the past few years, and they may feel that they’re better owning 100% of a product they control than a piece of a collective run by a giant tech company. But we’ll let Apple--which declined to comment--and its negotiating partners--who don’t want to say a word about Apple on the record--sort that for themselves. But here’s how we got here... a consortium of publishers, including Conde Nast, Hearst, and Meredith put together a “Netflix for magazines” service, which let subscribers read all the stories they wanted for a monthly fee... Texture paid out 10% of its monthly revenue to its owner-operators, who divvied it up based on the usage their titles generated. And publishers who sold their stuff through the service but didn’t own a piece of Texture captured 50% of the revenue, also cut up by usage. Texture never got much traction, and last year Apple bought it for an undisclosed sum. It will make up the base of the new subscription service Apple intends to launch for $10 a month. And after Apple bought Texture, it created new deals for magazine publishers, which gives them about half of the subscription revenue the service generates. Publishers also keep 100% of the ad revenue their titles generate. That’s still a very different split than Apple offers video distributors like HBO, which can keep as much as 85 percent of any revenue generated by a subscription sold through Apple’s App Store, or other app developers like Spotify or Fortnite creator Epic Games, which keep 70% to 85% of the revenue their apps generate via Apple. Facebook, meanwhile, doesn’t capture any revenue when it helps news publishers sell subscriptions--but it doesn’t actually sell subscriptions itself. Instead, Facebook directs its users to publishers’ sites and lets them handle the deal. You could argue that since the-thing-formerly-known-as-Texture will be an Apple-owned service, it’s fair for Apple to treat it differently than stuff owned by Apple’s App Store partners. But that’s not terribly convincing, given that the service can’t exist without the content. Also, Apple pays out more than 70% of its revenue to the music owners that power its Apple Music service. The more compelling argument, I’m told by publishers that have agreed to work with Apple, is that Apple is going to spend a lot of time and money promoting the new service and thinks it can generate many millions of subscribers. The best evidence for that theory: Apple Music, which Apple launched in 2015, has signed up more than 50M paid subscribers, due to Apple’s promotional muscle and the fact that the service comes preloaded, with a free trial, on Apple iPhones. Again, none of that may convince the Times, the Post or the Wall Street Journal (which first reported on Apple’s proposed revenue share) to join up. Unlike most of the magazine publishers that are currently in Texture, those papers have built meaningful digital subscription businesses already, so an all-you-can-eat service that bundles them along with everyone else could cannibalize what they have. They are also understandably skittish about a service where Apple would have the primary customer relationship. And if arguments between Apple and media companies over subscription terms sound familiar, there’s a reason. Sometimes these things take a long time to resolve." Columns arguing that the deal makes no sense for publishers include Newton's and Rob Williams's in MediaPost--links below.
OTHER NEWS OF NOTE:
Amazon's NYC HQ2 Debacle: Plenty of Blame to Go Around
Businessweek: Following Amazon's announcement that it is abandoning plans to locate an HQ2 in Queens, NY, due to some political and resident opposition, "New York Governor Andrew Cuomo and New York Mayor Bill de Blasio, the primary backers of the deal, will now have to puzzle over how one of the most prominent development deals in recent history went wrong. According to urban policy experts and other observers of the fracas, there’s plenty of blame to go around: regional politicians who didn’t properly consult local interests, local officials who turned the debate into a national bully pulpit on unrelated issues such as the merits of facial recognition technology, and an economic development process that for decades has pitted U.S. city against city in a destructive battle to court the largest companies in the world. And Amazon, too, is to blame. 'For them to not have anticipated a political backlash to this kind of incentive package, when it sits right in the backyard of people like Alexandria Ocasio-Cortez, just shows complete incompetence,' says Richard Florida, an urban studies professor at the University of Toronto." Article lays out the landmines and mistakes in more detail.
Amazon to Pay No Federal Taxes, Thanks to Trump's Tax Changes
Fortune: "According to a report published by the Institute on Taxation and Economic (ITEP) policy Wednesday, [Amazon--valued at nearly $800B] won’t have to pay a cent in federal taxes for the second year in a row... although Amazon almost doubled its U.S. profits from $5.6B to $11.2B between 2017 and 2018. To top it off, Amazon actually reported a $129M 2018 federal income tax rebate--making its tax rate -1%"... But though Trump previously blasted Amazon for its limited state taxes--a single presidential tweet caused the company’s shares to fall by 9%--ITEP notes that its nonexistent federal tax payment is a result of the Trump Administration’s corporation-friendly tax cuts. The think tank writes that the 2017 Tax Cuts and Jobs Act not only decreased corporate tax rates from 35% to 21%, but failed to close 'a slew of tax loopholes that allow profitable companies to routinely avoid paying federal and state income taxes on almost half of their profits.' According to The Week, Amazon ended up paying an 11.4% federal income tax rate between 2011 and 2016, in contrast to the -1% rate this year"... In a separate item, MNB reports that that, "in the wake of yesterday’s announced decision that it was pulling out of its plans to build part of its HQ2 campus in New York, Amazon said yesterday that when it when it finishes building its Seattle campus--14M square feet consisting of both existing buildings and some under construction--it will be done expanding there. Amazon and Seattle have had a sometimes contentious relationship. While Amazon has been an important part of the city’s economic renaissance, there are those within the community who believe that the company’s growth has led to gentrification that has hurt the city’s character, and who decry the high cost of housing that has put the city out of reach for many people. At the same time, Amazon threatened to pull back on its Seattle expansion if the city went through with as “head tax” that would’ve charged big companies hundreds of dollars per employee that would be used to address the city’s homeless problem. (The City Council passed the tax, then repealed it.) Late yesterday, an Amazon spokesperson walked back the comments about ending the company’s Seattle expansion a bit, saying it is possible that Seattle could expand there yet again"...
With Ecommerce Expansion, Tops Delivers to 90% of Its Shoppers
PG: "Northeastern grocer Tops Markets has expanded its grocery delivery program to officially serve more than 90% of its shoppers. Partnering with third-party delivery service Instacart, the grocer has added 10 stores to to its delivery footprint of 119 stores, with 129 stores now able to bring groceries directly to shoppers' doorsteps. The new locations included are Frewsburg, Boston, Owego, Cooperstown, Norwich and Lowville, N.Y., plus Canton, Troy, Sayre and Towanda, Pa. Some stores have already begun delivery, while others will start the service Feb. 28. 'This is Tops’ ninth expansion of Instacart services since its launch in 2017 and one of our largest expansions in Pennsylvania,' said Jillian Sirica, manager, digital marketing for Tops... Tops announced that the same-day home delivery service was available across the chain’s footprint in Buffalo, Rochester and Syracuse, N.Y., as well as in Erie, Pa., in November 2017. The following year, it added 44 new stores to the fold. As one of the region’s largest supermarket chains, Tops offers customers across its footprint access to same-day home delivery from its San Francisco-based delivery partner. Shoppers can choose from thousands of items, including fresh meat, seafood, and produce, for delivery in as little as one hour. Williamsville, N.Y.-based Tops operates 169 supermarkets, with five additional stores run by franchisees under the Tops banner"...
Wegmans, Publix, Nugget Again Make 'Best Companies to Work For'
PG: Wegmans Food Markets, Publix Super Markets and Nugget Market have again made the '100 Best Companies to Work For' list published by Fortune magazine in partnership with global people analytics and consulting firm Great Place to Work. The list is based on survey feedback from more than 4.3M employees, with respondents rating their workplace culture on more than elements, among them trust in managers, compensation, fairness, camaraderie and traits linked to innovation. Rochester, N.Y.-based Wegmans was No. 3 on the list, one rung down from its No. 2 showing last year, with 94% of employees surveyed saying that the company is a great place to work. Meanwhile, Lakeland, Fla.-based Publix rocketed to No. 12 on this year’s list, from No. 47 in 2018, with 89% of employees saying the company is a great place to work, and also came in first on the simultaneously published 2019 Best Big Companies list of seven businesses with more than 100,000 associates – the only retailer to be included in the inaugural ranking. Woodland, Calif.-based Nugget Market was No. 81 in the 100 Best Companies to Work For ranking, a drop from its place at No. 70 last year, with 87% of employees saying the company is a great place to work. Other food industry companies to appear on the list include Altoona, Pa.-based c-store operator Sheetz, at No. 85, and McLean, Va.-based CPG powerhouse Mars Inc., at No. 98"...
Credit Cards Mull Higher Swipe Fees
Reuters: "Visa Inc. and Mastercard Inc... are preparing to raise certain fees levied on U.S. merchants for processing transactions from this April, the Wall Street Journal reported on Friday, citing people familiar with the matter. Some of the changes relate to so-called interchange fees, the report said. Interchange fees are what merchants pay to banks when consumers use a credit or a debit card to make a purchase from their store. Fees that Mastercard and Visa charge financial institutions, such as banks, for processing card payments on behalf of merchants, are also set to go up, the report said. A Visa spokesperson confirmed that the fee hikes would go into effect in April, 2019, but only for merchant banks, and not merchants... Mastercard did not respond to Reuters’ request for comment on the story"...
Amazon Air's Expansion Part of Plan to Be Distribution Player
CNBC: "Amazon is becoming a player in the logistics and shipping industry. That's what analysts think about the recent expansion of Amazon Air to include 50 planes and several new regional hubs, including a $1.5B hub opening in northern Kentucky in 2021. According to Wolfe Research, the e-commerce giant is now handling its own shipping for 26% of online orders. In a December press release, Amazon said that it can 'transport hundreds of thousands of packages per day' with its new "dedicated air network" and that its fleet of planes make 'two-day shipping possible almost anywhere in the U.S.' 'Amazon is looking to become a logistics company in their own right,' said Ravi Shanker, Morgan Stanley's North American transportation analyst. 'We think that Amazon will be a top logistics provider, whether it's in trucking or in air, in the coming years. I think the question is just how quickly they will ramp that operation.' Amazon is even acknowledging the importance of this business to investors: In its 2018 annual financial filing released earlier this month, it listed "transportation and logistics services" among its group of competitors for the first time"...
Wegmans' Temporary Price Cuts Aim to Aid Shutdown Victims
PG: "Wegmans is rolling out temporary price reductions from Feb. 16 through March 2. The price cuts encompass about 100 SKUs, most of them store-brand items, in the produce, meat, frozen, bakery, dairy and grocery departments. Many of the items will have certain limits imposed when purchased with the grocer’s Shoppers Club Card. For instance, a 22-ounce package of Wegmans Giant Bread will go for just 79 cents, with a limit of four when a customer presents the card at checkout. The reason for the TPRs was the grocer’s wish to help struggling folks in the communities it serves. 'One of our local United Way partners let us know there are people still dealing with the consequences of the recent government shutdown,' explained Danny Wegman, chairman of Wegmans. 'They asked if we could help. In particular, they called out the fact that February SNAP benefits were paid in advance, and that this timing created a challenge in February for some recipients'"...
OTHER NEWS OF NOTE: