LONDON, United Kingdom — Late last February in Istanbul’s upscale Etiler neighbourhood, an attractive crowd of men in slim-cut suits and their stylish companions gathered for the official opening party of the city’s first GQ Bar. That’s GQ as in Gentlemen’s Quarterly, the successful men’s style magazine with nearly 20 international editions. But at the event, the only identifiable sign of the publication was the name. Spread over two floors and featuring a gigantic retractable crystal chandelier suspended over its centre, the sparkling venue is a dining spot for the city’s moneyed, style-hungry elite. After midnight, the chandelier is retracted, as if by magic, and the space turns into a throbbing dance club.
Come June, a Vogue Club is set to open on the 45th and 46th floors of a Singapore skyscraper, comprising a restaurant and a lounge area that will feature live music and stay open late into the night, distilling the glamour of the famous fashion bible into an immersive environment for eating, drinking and socialising.
And that’s just the start. Following the success of an existing Vogue Café and GQ Bar in Moscow, over the next 12 months, GQ- and Vogue-themed bars, cafes and clubs will open in Singapore, Dubai and Bangkok. Similar ventures are planned in Latin America.
Meanwhile, in London, 45 students are getting ready to commence classes, next week, at the Condé Nast College of Fashion and Design, the publisher’s first foray into the business of education.
With these moves, Condé Nast International, the publisher of the non-American editions of Vogue, Wired, Vanity Fair and GQ, among other titles, is extending its most famous magazine brands — powerful lifestyle signifiers — into a number of new, non-publishing businesses.
“Our business can no longer be defined strictly as publishing, but takes the form of brand management,” Jonathan Newhouse, chairman and chief executive of Condé Nast International told BoF. “We want to bring the experience of the publishing brands to end users in new forms in order to strengthen the brands and their relevance. Of course, we aim to do so profitably.”
It’s no secret that traditional, ad-supported editorial outlets have been trying to diversify their revenue streams since the Great Recession caused dramatic slashing of advertising spending. In May of 2011, Condé Nast (US) chief executive Chuck Townsend acknowledged to The Wall Street Journal: “My eyes are wide open. I don’t consider [the traditional ad-revenue model] to be a perennially sustainable stream of revenue.”
While Condé Nast International was not as severely affected by the downturn as the company’s US business, according to Newhouse, the international arm did experience a drop in revenue in 2009. In some regions ad revenues fell by as much as 20 per cent between 2008 and 2009, a loss compounded by the continued shift away from print products — where Condé Nast still makes the majority its revenues — towards the Internet, where large volumes of media content are freely available to consumers.
Starting in 2010, advertising revenues began to recover. And, for 2011, despite wider trouble in the Eurozone, revenues at Condé Nast International rose 7.7 percent to £460 million, thanks to the steady return of luxury advertisers and the company’s ability to offset some of its losses through the growth of its online properties. But the fallout from the financial crisis clearly catalysed the company to focus on new revenue opportunities through brand extensions, a move that was met with a fair degree of skepticism from some industry observers.
Moscow has been something of a testing ground for Condé Nast’s hospitality ventures. A Vogue Café opened there back in 2004 and, following its success, the company opened two more establishments tied to its famous brands in the Russian capital, all of them run in partnership with local restaurant management companies through franchise deals.
“For several years now Condé Nast International has licensed a GQ Bar and Vogue Café in Moscow catering to glamorous, high-spending clientele,” Stuart Nielsen, director of Condé Nast International Restaurants, told BoF. “More recently a Tatler Club was opened, also in Moscow. The successful operations in Russia led to the consideration of opening further restaurants and bars under license partnerships around the world.”
Condé Nast’s first hospitality venture in the Middle East, a Vogue Café, is set to open at a high-end shopping mall in Dubai this month, followed by a GQ Bar at a luxury hotel in the same city later in the year.
As for the Condé Nast College, the two main courses offered by the fledgling institution, a year-long foundation course and a 10-week ‘certificate’ track, are strategically named after the company’s most influential brand, Vogue, and will cost each student £19,560 and £6,600 in tuition fees, respectively.
“Both Vogue courses are intended to provide a strong foundation course for anyone wishing to enter the fashion industry, whether their calling is styling, buying, merchandising, digital marketing, finance, PR and social media, journalism or working for a large luxury brand,” Nicholas Coleridge, managing director of Condé Nast Britain and president of Condé Nast International, explained. “The curriculum has been put together by professional education experts, and the main point of difference between us and other players in the field is that the Condé Nast College of Fashion & Design has a much fuller and more intense curriculum with up to sixteen hours of contact time (comprised of teaching and tutorials) per week. Four to five hours is the industry norm,” he added.
But while the school is accredited by the British Accreditation Council, for now, it will not confer official degrees and it remains to be seen if the Vogue name will carry any clout with prospective employers. Still, there does appear to be demand for such courses. Coleridge reported that the new academy received 200 applications from 40 countries for the 45 spots in its first certificate course, which begins next week.
But how are all these brand the extensions performing?
According to Newhouse, the new businesses are either already profitable or expected to be profitable in the near future. “Otherwise we would not pursue them,” he said, adding that non-core businesses, meaning neither print nor online publications, generated $18 million for Condé Nast International in 2010 and is set to drive $75 million in revenues this year, contributing approximately 10 percent of the company’s total revenues.
“These businesses are already having a significant impact,” continued Newhouse. “For instance, the restaurant business which began in earnest two years ago, outperforms many countries where we publish magazines.”
Interestingly, the company is limiting its hospitality ventures to new and emerging markets.
“There are no plans to extend operations to the US or Europe at this stage,” Nielsen told BoF, suggesting that these ventures have some risk of brand dilution, especially in markets where the brands are already well known. “We’re currently targeting the Asian, Middle Eastern and Latin American markets where there is a strong appetite for luxury brands in retail and hospitality,” he added.
According to brand strategy expert David Aaker, Disney offers an exemplary case of a company that has successsfully transferred its brand into new products, services and experiences without weakening its image. In fact, Aaker says, brand extensions can be a winning strategic option so long as certain pre-conditions are met. Critically, the extensions must enhance the core brand’s image, rather than dilute it.
Condé Nast International’s inroads into hospitality and education could well turn out to be a smart (and necessary) strategic move, provided adequate measures are taken to ensure that these ventures do not undermine the positive perception of the brands involved. But the moment a café-goer in Istanbul thinks of Vogue and GQ as food and drink establishments first, and glossy magazines that conjure up worlds of glamour, second, the brand extensions may become more of a liability than an asset.
Editor’s Note: This article was revised on 9 April, 2013. An earlier version of this article misstated that Condé Nast International’s revenues were £460 million for 2011. In fact, they surpassed $1 billion (or roughly £655 million at current exchange rate) for that year, meaning that non-core businesses accounted for approximately 7.5 percent of Condé Nast International’s overall turnover.