Print Marketplace Observations: A Buyer’s Perspective

1. Print Marketplace Observations:A Buyer’s Perspective February 14, 2003

2. Agenda Points • Magazine Marketplace • Spending Trends and buyer implications • Magazines versus other media • Magazine Industry Challenge • Magazine Industry Response • Concentration on Profitability • Developing Better Products • Production issues: Buyer wish list • Unique executions • Bleed Charges • Regional Capabilities

3. Marketplace Observations • It’s still a BUYERS market • In 2002 total ad pages fell to 225,620, the lowest industry total since 1996. • Advertising fueled revenue growth in the 1997-2000 period and accounted for 65% to 75%+ of the average magazine revenue total • Ad revenue peaked in 2000 at $17.7BB and has slipped 6% overall since then • 2001-2002 represented a retrenchment period for buyers where pricing for many clients was “rolled back”

4. Magazine Ad Page Trends Source: PIB

5. Magazines Versus other Media • Despite overall spending fluctuations magazines’ share of national ad dollars has hovered around 32% since 1990.

6. Magazine Industry Challenge • The industry has been fighting to maintain or increase the overall dollar share. • While print struggled in 2002 and pricing dropped, television networks sold out inventory and pricing climbed. • For many clients broadcast campaigns are the last to get cut in tougher climates. • Most brand managers feel they get a better ROI from broadcast versus print. • Some clients are adverse to using print or are strictly broadcast focused. Magazine publishers are forced to be creative and persistent. This will be an ongoing industry battle.

7. Magazine Industry Challenge • As a result of ROI pressures more direct response oriented ads are likely • 1-800 numbers used more readily • Increase BRC usage for database collection (especially true in pharmaceuticals). Some titles already carry 4 to 5 RX BRCs per issue. • Monitored website traffic as it relates to ad spend • Magazines with strong response rates will benefit

8. Magazine Industry Challenge • Magazines have been hurt by the falloff in print intensive categories • Technology • Travel • Retail • Financial (i.e.: Mutual Funds) • Other categories have helped pick up some of the slack • Pharmaceutical • Food Products • Packaged Goods

9. Magazine Industry Response • Magazines are concentrating on circulation profitability not just raising ratebase so they can charge more • Effective in 2002 all ABC audited titles had to disclose their average price paid so buyers now have a benchmark. • Magazines have begun to raise basic prices and cover prices. They are also weeding out less profitable circulation. • These are all positives from the buyer perspective as the readers are taking on more of the financial burden.

10. Magazine Industry Response • While consumers may pay slightly more they are demanding more from the product. • With the “Martha/Real Simple effect” magazines of higher quality stock and bigger trim sizes are the trend. • Layouts have more white space and modern graphics • This is great news for advertisers as reproduction has become less of an issue. Even categories such as Women Service, which had historically low quality stock, has improved greatly (i.e.: the new Woman’s Day and LHJ).

11. Print Buyer Wish List • Clients are seeking ways of standing out among ad clutter thru impactful executions i.e.: • Barn Doors, French Doors off covers • Z-Gates • Cover Stickers • Popup Inserts • Cover Sleeves (Prevention) • Unfortunately many clients become risk averse to the costs associated with these units. • Sales reps should brainstorm more with their production teams to present new executions to clients (everyone wants to say they were the first)

12. Print Buyer Wish List • Reduce insert spoilage • Many titles, especially newsstand intensive ones, require a substantial overrun • While we can’t always anticipate sell-through is there a way to lesson inserts sent to the shredder and still buy full circ? • Reduce printing costs on pre-supplied inserts or BRCs • I.e. buying a “married” BRC in saddle-stitched books

13. Print Buyer Wish List • Eliminate bleed charges • Aren’t these antiquated production charges or is there still a production cost involved? • Why do many titles (i.e.:Inc.) not charge for bleed yet others do? • Copy-split stop press charges • With advancements in technology can these charges be minimized? • Share with us your selective binding capability. • Purchase by demo or even product category usage?

14. Print Buyer Wish List • Regional print buying is an issue • Publications define regions and do splits completely different • The CPM premium to do these buys is usually exorbitant (+25-30%) • There are no positioning guarantees, not even just full edit. The same can be said for most demographic editions. • Publish standard material closing dates which are not just the same as space closings. • This would eliminate numerous phone calls to production people • Longer extensions (ie: ship to the printer) would still be confirmed with the pub

15. Looking Forward • After two difficult years print advertising should see a rebound in 2003 • Monthlies thru Feb. +11% • Weeklies thru Feb.3 +3% • Coen’s latest prediction for 2003 +5.5% • Better quality products will continue to benefit both readers and advertisers • Our clients welcome any creative ideas that will help move their business