Interview with Cathie Black, Hearst Magazines

“We had a choice. We could sit back and let the negative discussion of our industry take its course, or we could take action.”

Despite one of the toughest periods in history for the magazine industry, Cathie Black, president of Hearst Magazines, sees a bright future for a much-misunderstood medium. Talking to THE FOCUS, she describes how her company came through the economic storm and how resilience can be about sticking to your convictions.

The Focus: According to Hearst Corporation’s 2009 Annual Review, the strategy for coping with the recent recession turned on innovation, a path that has been followed by some of the world’s most successful companies during tough economic times. To what extent was innovation responsible for Hearst’s resilience?

Cathie Black: Hearst has always been innovative. When the advent of television hurt the pillar of the company, its newspaper operations, Hearst expanded into magazines and television. The company got into cable when it was first emerging decades ago. Today we’re in interactive media and about 200 other businesses. Within the magazine division, we’ve really pushed technology, we’ve pushed efficiency, and – in terms of being resilient – we always have a couple of prospective magazine ideas in the petri dish that are being considered.

The Focus: During the downturn you launched a new publication, Food Network Magazine. That must have required courage.

Black: I just thought it was absolutely the right time to launch that particular magazine. We didn’t have a food magazine in our portfolio. We do have magazines like Good Housekeeping, Esquire, and House Beautiful that often touch on food, so we felt that we had the necessary expertise in editing and advertising. And there was a powerful tie-in with the Food Network, the immensely popular cable channel that is distributed to 96 million households in the U.S. and is seen in about a dozen other countries. So we cultivated Scripps, which owns the Food Network. They had never done a joint venture, but I think they were open to us because we had a long track record in joint ventures. They were excited and the power of the Food Network has been a fantastic driver for the magazine. It’s not even a year old, but we already have a circulation of 1.3 million and we’re probably the best-selling food magazine on newsstands, with 300,000 sales per issue. It has won numerous awards and will probably break even this year – which is really fast in the magazine business.

The Focus: When you made this decision there was worldwide financial turmoil and yet you were trying something new and making a new investment. Did you think differently? Did you have to get your team to think differently?

Black: Absolutely. We said that if we want to launch new magazines here they can’t have cost structures that won’t achieve break-even until five years down the road. We needed a new model – smaller in scale with a smaller ad team and smaller editorial team. We started with just five or six staffers. When Condé Nast, which is a wonderful company, closed its glossy business magazine Portfolio in the spring of 2009 after just two years of existence, I believe it had nearly 100 people on the editorial staff; Food Network Magazine now has about 25. We also shortened the amount of time spent developing the magazine. We decided to continue to develop it after the launch, as opposed to thinking it had to be perfect before it went out the door.

The Focus: How did you deal with the poor climate for advertising?

Black: Advertisers are relentless right now, especially when it comes to what they are willing to pay for advertising. So when we tested the magazine in the latter part of 2008 we tried something new. When you charge an advertiser a test rate – the price for an ad in a test issue of a new magazine – you pick a reasonable number with the understanding that the rate will be adjusted according to how well the magazine performs after it has been launched. If the magazine really succeeds and the ad rate turns out to be double or triple the test rate, advertisers balk. We figured that, in the grand scheme of things, the amount of money we would make on the test ads was negligible, so we decided not to charge for them. That allowed us to choose the kind of advertising we hoped would be in the magazine – not just food advertising but automotive, technology and so on. We were then able to create a beautiful package that we could take out to prospective advertisers and to the readers.

The Focus: Magazines still face a difficult advertising environment. The number of ad pages industry-wide fell by more than 9% in the first quarter of 2010 compared to the first quarter of 2009, when they had already fallen more than 25%. How will the industry bounce back?

Black: We’re starting by dispelling some myths about magazines – that the Internet is killing them, that readership is decreasing, that young people don’t read them… In fact, over the past five years, magazine readership has risen 4.3 percent. Last year, average paid subscriptions reached nearly 300 million. Adults in the 18-34 age group – that coveted demographic segment we hear so much about – are avid magazine readers. They read more issues and spend more time per issue than people over 34. Magazine effectiveness is growing. Ad recall has increased 13% over the past five years. People taking action based on their recall of specific ads increased by 10%. The evidence also shows that magazines outperform other media in driving positive shifts in purchase consideration and intent.

The Focus: What have you done to get the word out?

Black: Several years ago I began to worry that the relentless negative coverage about the bleak future of newspapers would bleed over into discussions about magazines. With the recession-driven decline in magazine advertising, that fear began to be realized. Jann Wenner, of Wenner Media, which publishes Rolling Stone and other magazines, wrote a powerful memorandum to Ann Moore, my counterpart at Time Inc., suggesting that we three come together and do an advertising campaign about the future of magazines. We started talking in August of 2009, and we were eventually joined by Charles H. Townsend of Condé Nast and Jack Griffin of Meredith Corporation. Together, we selected about a dozen potential ad agencies, gave them briefs, and ultimately chose Young and Rubicam (Y&R), New York.
The campaign they created – “Magazines, The Power of Print” – rolled out in the May issues of nearly 100 different magazines and will run for seven months in magazines and on the websites of the publications. It’s one of the largest print advertising campaigns ever created to promote the vitality of magazines as a medium, reaching a combined 112 million readers per month. With the full support of our industry’s trade association, the Magazine Publishers of America (MPA), it targets consumers, advertisers, shareholders, and industry influencers and it is designed to reshape the broader conversation about magazines.

The Focus: How so?

Black: For one thing, the ads themselves demonstrate the power of print. Y&R created a special “Magazines” logo for the campaign by combining the distinctive typographies of multiple magazine logos: “M” from Time, “A” from Vanity Fair, “G” from Rolling Stone, “A” from Entertainment Weekly, “Z” from Harper’s Bazaar, “I” from Marie Claire, “N” from Fortune, and “ES” from Esquire. The ads debuted as two-page color spreads in the publishers’ top titles with iconic photographs and headlines such as, “We Surf the Internet. We Swim in Magazines” and “Will the Internet Kill Magazines? Did Instant Coffee Kill Coffee?” The “swim in magazines” ad, for example, is accompanied by a picture of the world champion swimmer Michael Phelps taken from one of the participating magazines. The copy forcefully makes the point that a new medium doesn’t kill an existing one – during the twelve-year life of Google, for example, magazine readership has actually increased eleven percent. People don’t give up swimming just because they also enjoy surfing. Also, people skim the surface of the Internet, but they immerse themselves in their favorite magazines.

The Focus: Instead of avoiding the debate about magazines, you are jumping into it and trying to lead it.

Black: We had a choice. We could sit back and let the negative discussion of our industry take its course, or we could take action. Part of the agenda is to be absolutely truthful in dispelling the myths. We are injecting reality into the conversation instead of letting it drift along on the basis of uninformed speculation and unfounded opinions.

“You’ve got to have tough skin these days.
It’s not for the faint of heart right now.”

he Focus: So resilience is not only about changing or bouncing back, it can also be about sticking to your convictions, to your belief that magazines can be profitable.

Black: They can be hugely profitable when you get it right. Oprah Winfrey was flabbergasted to learn how much she was going to earn from The Oprah Magazine, a joint venture between Hearst and Harpo. The top 25 magazines reach more consumers than the top 25 tel­e­vision shows by a large margin. In fact, one issue of People magazine outsells by 25 percent the finale of the hugely popular television show American Idol. But you’ve got to have tough skin these days as you negotiate with big companies for advertising. It’s not for the faint of heart right now.

The Focus: One of Hearst’s most visible setbacks was the closing in 2001 after only 28 months of the highly anticipated Talk magazine, edited by Tina Brown, the celebrated former editor of Vanity Fair and the New Yorker. What did your organization learn from that?

Black: We certainly learned not to go into a joint venture after all of the business plans and editorial decisions have been made. Talk was a fifty-fifty joint venture between Hearst and Disney along with its Miramax film division, headed by legendary movie moguls Harvey and Bob Weinstein. By the time we got involved, its promised fusion of New York sophistication and Hollywood excitement already enjoyed tremendous buzz, and it was enormously appealing to us. But key decisions about the magazine’s target audience, its cost structure, and its editorial slant had already been made. After the first issue, which was a great success, circulation slowed and then began to fall along with newsstand sales. It turned out that editorial content that went over well in Manhattan didn’t do so well in Minneapolis or Memphis. And the cost of production was too high.

The Focus: How do you compute that cost?

Black: The math of the magazine business is relatively simple. It’s a combination of ad revenue, circulation growth and cost control. With a really successful magazine, ad revenue and circulation revenue move more or less in tandem. That’s what happens with Cosmopolitan, with Oprah, with Good Housekeeping, and now with Food Network.
Talk continued to attract ad pages, but we knew there was trouble ahead when the response rate to the insert subscription cards began to fall off. Most readers find those cards annoying but they’re a great barometer of success. If someone takes the trouble to fill out an insert card, it means they’ve read the magazine and liked it well enough to subscribe. The low return rate on the cards soon told us that the circulation wasn’t going to support the cost structure.
A really smart man at Hearst who’s retired now said that the only thing you’ll regret about a hard decision is that you didn’t do it sooner. So after 28 months we closed Talk. We learned a lot, but it was also a very high-profile mistake which I am still asked about after all these years.

“You need people who have courage and determination and who are willing to take a risk.”

The Focus: During your career, you’ve worked with many larger-than-life figures, including Al Neuharth when you were president of USAToday during its start-up years and Rupert Murdoch when you were publisher of New York magazine. In your book Basic Black: The Essential Guide for Getting Ahead at Work (and in Life) you wrote that Al Neuharth taught you: “Find a way to get it done. No excuses!”

Black: When I left New York magazine to go to USA Today many friends thought I was crazy. It was a start-up and many people thought that the idea of creating a national newspaper would never work. That did not deter Al, and he wouldn’t let it deter the rest of us. In terms of resilience, especially where start-ups are concerned, you need people like him; people who have courage and determination and who are willing to take a risk and put in a lot of hard work. He pushed us and we killed ourselves for seven years. Nothing I ever do will be harder than the work we put in flying around four days of every week trying to wrestle ads out of people. I think that experience prepared me for any eventuality, from dealing with Wall Street to giving speeches and presentations to exercising editorial involvement and figuring out ad strategies.

The Focus: You also wrote that Neuharth could sometimes push too hard.

Black: Early on, when the paper was hemorrhaging red ink and we were barely making any progress with ads, eight of us in Washington got voice mails on Saturday night summoning us to Al’s Florida home for a meeting on Sunday afternoon. We assembled in a conference room in his home. He appeared and ranted at us fiercely about the paper’s slow progress. He said, though he put it in far less genteel terms, “You can either have the most significant entry in the newspaper industry ever, or be forever remembered as the people who completely messed it up.” Then he abruptly ended the meeting and told us to join him later for dinner in the private dining room of a local restaurant. When I arrived I found one of the most extraordinary sights I’ve ever seen – Al Neuharth dressed in a robe, with a crown of thorns on his head, and steadying with his hand a giant wooden cross. His point was that he was giving his life’s blood for USA Today and we should, too.

The Focus: What effect did it have?

Black: It was an equal opportunity offense: It offended the Jewish people, the Catholics, the Baptists, everyone. And then he started laughing and we had a nice dinner, but the whole experience was like shock therapy.

The Focus: Rupert Murdoch is also a famously intimidating figure.

Black: He has laser focus. He would have all of his financial reports come in once a week on a long piece of paper so that they were all identical from around the world. And you knew that he was going to immediately identify the weakest part of your numbers.

The Focus: As a leader yourself, have you adopted any elements of the leadership style of Neuharth or Murdoch?

Black: I certainly learned things from them but leaders come in all sizes and varieties. I’ve always tried to be a good people person, to be inclusive, to listen and, as I say in the book, manage by empathy. You not only have to welcome and understand other points of view but also understand and empathize with the people themselves.

The Focus: In practice, how does that inclusiveness work in terms of the resilience of your organization?

Black: We periodically bring people together from all parts of the operation to participate in a visioning exercise – not about where we were this year, but about where we want to go. We usually have 15 to 20 people: a mix of editors, publishers, and marketers, ad people, and circulation people. With so many different points of view, you don’t necessarily reach agreement, but you get people involved in the thinking process. I am not at all hesitant about making decisions, but I do believe that if you hear different points of view, you’re going to make a more informed decision. We also do a lot of toasting and celebrating the accomplishments of our people. You can’t thank people enough. They’re the ones working until seven and eight o’clock at night to meet relentless production schedules. The last eigh­teen months have been brutal, but we’ve kept everyone’s spirits up and now the magazine division is doing better than it was a year ago.

“Everybody needs a sense of where we are going, and how we’re going to get there. That’s a lot of what leadership is about.”

The Focus: In your book you write “carry yourself as though you know where you’re going.” Could that apply to corporate leaders in general, especially during difficult times?

Black: Yes, and it’s easy to forget. When the going got rough, I said to two of my closest colleagues that we have to be aware that everyone is looking at our faces. We’re highly visible – most of our offices are glass; our conference room is glass. I said that we may not agree throughout a meeting, but when we walk out we’ve got to be aligned completely, because people will be looking at us to see whether we really do know where we’re going. It’s a message that you send out that can be verbal or non-verbal, but I think it’s really important, no matter how tough times are. We’ve been very open, pulling everybody together in the auditorium, and going through all of our statistics so they have a sense of where we are going, and how we’re going to get there. That’s a lot of what leadership and resilience are about.

The Focus: What about resilience in the board room? You are on boards of IBM and Coca-Cola, two of the most prestigious companies in America. When there is sweeping economic change, as there was with the recession, how does a director change, or how does the board change?

Black: I’m not on the audit committee at either company, but following the near collapse of the financial system, the audit committees have been deeply involved in risk and making sure that everybody on the board is comprehensively informed. Although some of the people on the boards might not be specialists in the businesses that the companies are in, we do stay highly focused on succession and on leadership development. At both companies we review very thoroughly, two to three levels down.

The Focus: Are board members asking tougher questions now? Are they more cautious?

Black: Both companies are sharply focused on the future. They’re not risk adverse and they’re moving forward intelligently. Coke thinks that this is a fantastic time to gain market share, to keep pushing. They are both huge organizations, so they’re not thinking only about the next couple of years; they’re looking out to 2020.

The Focus: From a board recruiting standpoint, what does the prototype of a director today look like in terms of resilience and the economy? Do directors need different qualities for the decade ahead?

Black: Prospective board members had better be sure they have the time available, because board meetings today are frequent and intense. The global expansion that companies have undertaken brings its own set of challenges in terms of time and commitment. I cannot imagine how someone who has an operating role can be on five boards. You try to balance the board commitment with your job, and you learn things that give you new perspectives on your own business.

The Focus: As you look toward 2020 in your business, do you see a time of opportunity not only to rebound but also to thrive, or do you see a period of trying to hold your own in an increasingly digital world?

Black: Our focus on digital is constant. We have approximately 150 to 175 people involved in digital activities. Every magazine has a website and we have two internal teams working on all our digital editions in terms of what they are going to become. The currency of the moment is the Apple iPad, and we will have products up there shortly. We have mobile ads for all of our magazines; we’re looking at companies in the digital space to acquire and considering whether is it easier to acquire or to start up. Frank Bennack, our vice chairman and CEO, is involved in all things digital. Another consortium, like the one for the Power of Print campaign, has been put together to try to think through the strategic issues related to digital. So whatever is going to happen, we’re going to be a part of it. It’s thrilling that however many iPads are sold this year and however many smart phones, Good Housekeeping will reach twenty million women per month. So I think it’s a very exciting time. We just have to make sure that we continue to attract talent to the magazine business, as we always have in the past, and to let them know that it has a bright future.

The interview with Cathie Black in New York was conducted by Chris Patrick, Egon Zehnder, Dallas, (left) and George Davis, Boston

RESUMÉ Cathie Black

Interview with Cathie Black, Hearst Magazines - Image 3

Dubbed “The First Lady of American Magazines” and “one of the leading figures in American publishing over the past two decades” by the Financial Times, Cathie Black heads Hearst Magazines, a division of Hearst Corporation and one of the world’s largest publishers of monthly magazines. She manages the financial performance and development of some of the industry’s best-known titles: Cosmopolitan, Esquire, Good Housekeeping, Harper’s Bazaar, Marie Claire, O, The Oprah Magazine, Popular Mechanics, Redbook, and Town & Country – 14 magazines in all. She also oversees nearly 200 international editions of those magazines in more than 100 countries.

Having begun her career in advertising sales with several magazines, including Holiday and Ms., she made publishing history in 1979 when she became the first woman publisher of a weekly consumer magazine: New York. She is widely credited for the success of USA Today, where for eight years starting in 1983, she was first president, then publisher, as well as a board member and executive vice president/marketing of Gannett, its parent company. In 1991 she became president and CEO of the Newspaper Association of America, the industry’s largest trade group, where she served for five years before joining Hearst.

A member of the boards of IBM and the Coca-Cola Company, she is also the author of the best-selling book BASIC BLACK: The Essential Guide for Getting Ahead at Work (and in Life), which draws on her four decades of experience in the media business.

THE HEARST CORPORATION From newspapers to new media

Interview with Cathie Black, Hearst Magazines - Image 4

On March 4, 1887, a young man named William Randolph Hearst first placed his name on the masthead of the San Francisco Examiner as “Proprietor.” It was, although no one realized it then, a historic event. Over the decades, Hearst experimented with every aspect of newspapering, from page layouts to editorial crusades. By the 1930s, he had built the largest newspaper chain in the United States. The interest Hearst and his managers had in communications extended beyond the printed word. Their involvement with the new technology of broadcasting led to the acquisition of radio stations in the 1920s and the ownership of one of the first U.S. commercial television stations in 1948.

William Randolph Hearst died in 1951, but his legacy, Hearst Corporation, has continued to grow and prosper. During the 30 years following his death, the company expanded its holdings in other fields of the communications industry, especially magazines and television. During the 1980s and 1990s the company’s scope shifted beyond print to encompass the whole spectrum of communications enterprises, including online media.

Today, under the leadership of Frank A. Bennack, Jr., Hearst’s current vice chairman and CEO, Hearst Corporation is one of the largest diversified media companies in the U.S. In 2008, with 20,000 employees, Hearst Corporation posted revenues of $4.8 billion.

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