Not-So-Rosy Outlook for Hispanic Magazines
Media Life Magazine, Interview, Diego Vasquez Posted: Mar 05, 2010
In recent years what distinguished magazines targeting America's Hispanic population was a flush of advertising as more and more mainstream marketers shifted dollars to this growing market. And indeed from 2003 through 2008, Hispanic magazines outpaced their general-market counterparts in revenue gains. Then 2009 came and all that stopped. Hispanic titles saw roughly the same page declines as general-market titles, about 25 percent, but ad revenues took a far steeper dive. To learn just why, Media Life reached out to Carlos Pelay, founder of Media Economics Group, a research company that tracks advertising in Hispanic media. Pelay talks to Media Life about what was behind the ad revenue tumble, the effects of the cutbacks in automotive ad spending, and when the Hispanic titles might recover.
You note that Hispanic magazines have generally out-performed the general market, but your data for last year show ad revenue down even more than general market publications, minus 34 percent versus minus 17.8 percent. What happened?
Since 2003 ad revenue and ad page growth rates for Hispanic magazines have generally outpaced gains in the general market. The exception was in 2009. The decline in ad pages for Hispanic titles was pretty similar to general-market titles, but the revenue declines were much steeper.
One can point to a couple of factors behind why the percentage decline in ad dollars was more severe. One was the closure of Selecciones, one of the largest titles in terms of ad revenue, and another was the somewhat higher reliance on the automotive category in the Hispanic segment.
However, the main reason for the more severe revenue swings among Hispanic titles is that ad revenue in Hispanic magazines is concentrated in the largest titles, and much more so than ad pages, since the largest titles--Latina, People en Español, and Siempre Mujer, for example--command much higher page rates.
The top five Hispanic titles in 2009 accounted for 34.6 percent of ad pages but almost double that share in revenue, 62.9 percent. By comparison, the top five titles tracked by Publishers Information Bureau accounted for only 16.7 percent of revenue in 2009. Even the top 25 accounted for only 44.5 percent of ad revenue.
Why are the Hispanic titles suffering so? Are we talking simply about the forces hurting general-market titles, or are there other factors?
Ad revenue comparisons are worse in large part because the largest magazines--like Latina, People en Español, Siempre Mujer, and Ser Padres--have suffered double-digit declines, and their impact is felt across the segment. Virtually every title was in the red in 2009.
What brought about the closing of Selecciones, the largest title in the field? How much of its advertising went to other titles?
Revenue and pages at Selecciones had been under-performing for some time, beginning with a decline in 2005. The bankruptcy filing last year by Reader’s Digest, Selecciones’ parent company, indicates that the problems were more widespread at the company level, not just at Selecciones.
Top advertisers at Selecciones in 2008, the year prior to folding, were P&G, L’Oreal, Bookspan, State Farm, and Boehringer Ingelheim GmbH (Flomax).
The competitors benefiting from Selecciones' closing were primarily Spanish-language titles whose primary audience is women. For example, People en Español was one of the beneficiaries: Flomax (which had bought 12 pages in Selecciones in 2008) purchased 19 pages in PEE in 2009 (up from 0 in 2008).
P&G shifted ads for Head & Shoulders Dandruff Shampoo/Conditioner "Smooth & Silky" (the top P&G brand advertised in Selecciones in 2008) to several magazines in 2009, including Siempre Mujer, Latina, Cosmo en Español and TV Notas.
Several titles saw a significant increase in State Farm business in 2009 (even though State Farm reduced overall ad pages from 188.84 to 170.09): Vista gained 22.77 ad pages from State Farm in 2009, Ser Padres gained 20.65, and Vanidades gained 12.65.
However, Bookspan (Club Mosaico Book Club), which was Selecciones' second-largest advertiser in 2008 and which purchased 14 out of 102 ad pages in Selecciones in that year, almost completely stopped their advertising in 2009. They purchased only one page (in AARP Segunda Juventud) in all of 2009.
Why were the Hispanic titles hit so much harder by the collapse of auto advertising than general-market titles? You show carmakers down 68.8 percent versus 40.5 percent for general-market titles.
Auto advertising has historically accounted for a somewhat larger share of advertising activity in Hispanic magazines than in PIB titles. For example, automotive accounted for 14.8 percent of ad revenue for Hispanic titles in 2007, the most recent peak year for auto advertising in Hispanic magazines. The comparable share of auto in PIB titles was 7.8 percent.
Auto advertising in Hispanic magazines fell by 42.5 percent in 2008 and another 68.8 percent in 2009. Total auto advertising in 2009 was $7.2 million, down 78 percent overall from its recent peak of $32.1 million in 2007.
If you had to name one single factor, what most hurt Hispanic titles in 2009? Explain how that rippled through the market.
It’s tempting to pin the blame on a single factor like automotive but while that was the primary culprit behind 2008’s decline, in 2009 the decline was more broadly based. All 18 of our broad category groups posted declines, most by double-digits, in ad dollars in 2009
There’s some evidence that ad spending picked up in the fourth quarter for general-market media, even for magazines. Have you seen any such improvement in the Hispanic titles?
PIB’s fourth quarter press release valiantly tried to strike a positive note by pointing out that in the fourth quarter spending in the food category was up and there was “relative improvement in other areas, especially in automotive.” In other words, magazine advertising was less bad, although total ad pages still declined by 21.6 percent and ad revenue by 12.4 percent.
In the Hispanic segment, fourth-quarter ad pages declined by “just” 16.4 percent on a same-title basis, less than the 25.4 percent decline for the full-year, while ad dollars fell by 22 percent, which was somewhat improved from the full-year decline of 29.4 percent.
So through the “flat is the new up” looking glass, fourth quarter was less bad but still quite far from a real improvement, unfortunately.
In your report, you are reluctant to forecast how 2010 will go, but you do suggest it will do well to be flat and most likely down. The outlook for general-market titles isn’t that rosy either. Do you think the Hispanic titles will lag the general market? Or put another way, how do you see them performing as compared to general-market titles?
As an economist in my former life, and having seen the way forecasts are constructed, I am as wary of making them as I am of eating sausages, except when in Chicago and/or if chili is available.
I would expect, though, that when ad spending does begin to recover, Hispanic magazines will fare better than their general-market counterparts. For one, Hispanic advertising in general should fare better overall, as the demographics are driving continued shifts in share to that segment.
Moreover, this is a census year, which will bring additional attention to the size, growth, dispersion and hence opportunity in the Hispanic market.
While I do not think the Hispanic print market is immune to long-term systemic declines in readership, a buffering force will be the absence of over-saturation in the Hispanic market, whereas the general market is arguably over-saturated with titles.
There are segments like men and health, for instance, which are very much underserved and where opportunities may still exist when the advertising environment becomes more supportive.
Where do you first expect to see a revival of ad spending? What is your sense of auto and when it will come back?
I’m not an auto analyst so I don’t have any special insight into that. To some extent the recovery of ad spending in magazines will hinge on whether automotive can get back on its feet. The recent troubles at Toyota are not encouraging. Fourth-quarter automotive ad spending in Hispanic magazines was indeed less bad, but only marginally, a minus 61.1 percent.
A few other categories could help lead an ad spending recovery in Hispanic magazines. Personal care ad spending, especially cosmetics and hair care, has held up fairly well through the recession.
Two other categories, personal care-baby/children and food, are among the categories that hold the best promise for growth in 2010, particularly among Hispanics, who over-index in both categories.
Personal care-baby/children ranked seventh in total ad spending last year and was the fastest-growing among the top 10 categories. Food, though down 13.3 percent last year, is the largest in the consumer category and was among the fastest growing before the recession hit.
As you mentioned, we have a new census in the works. What do you think will the impact of that will be on Hispanic media and magazines in particular? Will it be anything like the last one, which had a huge impact in terms of waking marketers up to the size and wealth of the Hispanic population in this county?
It’s hard to believe that it will be as much of a whack on the side of the head as the last census was for most companies. More likely, it may have a larger impact on local and regional advertisers who may not be as aware of the extent to which the share of their customer base which is Hispanic has grown since 2000.
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