NEW YORK, United States — Condé Nast and Hearst Magazines, both global publishers of glossy fashion magazines and other special and general interest titles, are facing a major budget crunch. The coronavirus crisis is crippling its advertisers, who are tapping credit lines and minimising expenses as they ride out store closures.
Print publishers were already vulnerable: Readers have moved online and to social media, where they are harder to monetise, both via subscriptions (a competitive market) and advertising (a lower margin business), and there is more competition for their attention. Both Condé Nast and Hearst have responded in recent years by investing in video and events, and continuously trimming the costs associated with making magazines.
The coronavirus crisis and its economic fallout will only push fashion magazines to work harder to prove their value in a market where Instagram is the go-to for discovering new brands and hearing directly from celebrities. In many cases, brands continued to advertise with legacy publishers because of longstanding relationships and the promise of connecting with big-spending, highly educated readers. Now, it’s unlikely those intangible qualities will be enough to sustain partnerships at the same level.
The rival publishers have so far taken different approaches to managing what’s in front of them — and anticipating what’s to come, reflecting longstanding cultural differences in the way the businesses are operated.
In a memo to staff on Monday, Condé Nast Chief Executive Roger Lynch told employees that the publisher of Vogue, Vanity Fair and GQ is taking further cost-cutting steps than initially anticipated as it prepares for “substantial impact from [the coronavirus] crisis on our business.”
In addition to a hiring freeze and delaying some internal operational projects, Lynch announced furloughs and reduced working hours for some undisclosed roles that will be supported by government aid packages like those being developed in the UK and Europe. Lynch wrote that layoffs are a “last option,” and will be decided by the end of May.
Condé Nast employees who earn a base salary of more than $100,000 per year will have their salaries reduced by 10 to 20 percent, while Lynch and board members from outside the company will see salaries reduced by 50 percent. Other senior executives on the leadership team, which includes Vogue’s Anna Wintour, will have their base salaries reduced by 20 percent. These changes will go into effect May 1 and last at least five months.
“We aren’t alone in needing to take actions like this – companies around the world are all facing similar challenges and responding accordingly,” Lynch wrote. “I understand the impact this will have on many of our team members, and I appreciate all of you who will join me in taking temporary salary reductions, so we can limit that impact as much as possible.”
With a potentially expensive unionisation looming, Hearst’s coronavirus response has focused not on layoffs or furloughs, but added benefits. Employees with Covid-19 will be fully paid for up to 26 weeks, and those who are caring for someone with the virus can be paid fully for up to two weeks. Employees caring for kids who had school cancelled also receive an additional two weeks of 100 percent paid time off. No salary reductions are planned, according to a representative for Hearst.
The publisher and its employees are currently waiting on a decision from the National Labor Relations Board about different elements of the union’s bargaining units. Hearst staff announced their intentions to unionise in November, in what could be one of the largest in the country, seeking better benefits and transparency around salary increases. The process has been contentious, particularly in the first few months.
But while these recent steps reflect a reduction in revenue related directly to the pandemic, both Condé Nast and Hearst have been in reaction mode for years.
Condé Nast, which earned its reputation under former chairman Si Newhouse by making big investments in new titles, editors and editorial overhauls, has been more likely to shutter print editions or entire publications while keeping the main money-makers like Vogue and Vanity Fair on the monthly print schedule. It also still makes big bets on journalism: The New Yorker, which has a highly profitable subscription business, won a Pulitzer Prize in 2018 for Ronan Farrow’s reporting on the Harvey Weinstein misconduct allegations.
The strength of Condé Nast’s brands has sparked rumours that the Newhouse family, the owner of Condé Nast under parent Advance — which used to fuel the magazines with its newspaper and radio business — may put all of or some of its titles up for sale. (The company has denied this time and again.)
Hearst Magazines — part of the much larger Hearst Corporation, which has stakes in ESPN as well as business and medical data companies — makes fewer headlines for its journalism but has increasingly grown in reach, especially after the 2018 acquisition of Rodale, the publisher of titles like Men’s Health and Runner’s World. Hearst is known to be more conservative, frequently cutting costs in order to keep it in the black. It rarely closes magazines, for example, but is more likely to cut the number of issues they publish. Esquire, for example, went from eight issues per year in 2019 to six issues per year in 2020. Marie Claire went from 12 issues per year in 2017 to nine issues per year in 2020.
Regardless of the approach, both companies must now contend with the realities surfaced by the pandemic. Neither has grown an alternative revenue source to rival advertising, which means they must pivot fast or find new ways to convince brands that they remain worth the investment.