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Gourmet and the Bottom of the Magazine Market

Dan Gross is onto something with his most recent Slate column:

[T]he closing of Gourmet (along with Cookie, Elegant Bride, and Modern Bride) could also be a positive sign ...  [I]t reeks of capitulation. In investing terms, capitulation is that moment when, after a prolonged period of decline, nobody seems to want to be in a particular market—Internet stocks, real estate, CDOs. During down cycles, most players cut their losses or adjust to the new reality. But some people simply hang on—because they're oblivious and not paying attention, because they think they knew better, because they have some secret plan, because they were so well-capitalized they can withstand any amount of pain. And when those people throw up their hands and leave the table, it's usually a sign that the market has reached a bottom. These are the investors who endured—or ignored—a 7,000-point drop in the Dow Jones Industrial Average between October 2007 and March 2009 before deciding to put all their money into cash. That selling caused the market to lose another several hundred points. But at least it marked a trough.

For Condé Nast, the signs of trouble have been evident for several years. The Internet has been eating away at the circulation and margins of magazines for years. A consumer-led recession began in January 2008, hitting the ad budgets of the high-end retailers that populate Condé Nast magazines. The financial crisis put the brakes on advertising from the financial services and auto industries. Other magazine publishers took evasive action—cutting back staff and budgets sharply, reducing frequency, reimagining their business models. But Condé Nast, at least from my outside perspective, appeared to make few concessions to the new emerging reality. Publishers, who essentially ran their own businesses, apparently lacked the self-preservation instincts to come up with aggressive cost-reduction and survival programs. I mean, really: At some point, didn't the publishers of Elegant Bride and Modern Bride think of merging into Modern, Elegant Bride?

Of course, you have to wonder if this is an actual capitulation moment or just the next phase of a slow bleed (both for Conde Nast and print media as a whole). After all, these aren't the first titles Conde Nast has closed of late--it shuttered Portfolio and Domino earlier this year and threw in the towel on Men's Vogue last year. But Gourmet was such an established, iconic brand--and clearly painful for the company to part with--that the decision does feel like the end of a process. Particularly after the much ballyhooed McKinsey analysis that produced it. 

If nothing else, Conde Nast certainly feels that way. As the Times reported:

[CEO Charles] Townsend said each magazine was given a profit-margin goal, and it was up to the editor and publisher of each to figure out how to reach those goals. After that, he said, there will be no further cuts for a while. “Done. Done,” he said.