New York: At Conde Nast, it is consultants versus car service.
A three-month McKinsey and Co. project advising the publisher how to reduce costs is drawing to a close, and several magazines have been told to cut around 25% from their budgets. The company’s editors and publishers have already been under pressure to reduce costs this year, as advertising has plunged, and Conde Nast has closed two magazines in 2009, Domino and Conde Nast Portfolio.
But cost-cutting at Conde Nast is not quite like cost-cutting at other publishers. For example, on 13 October, the men’s magazine GQ will host a party in Washington to promote its list of powerful capital players, to appear in its November issue. The party is upscale: It will be held at the 701 Restaurant, known for its caviar and live piano music.
That is not the only expense involved. Several editorial employees will travel from New York for the evening. And they received an email message recently reminding them to limit their expenses for the night—to $1,000 or Rs48,000 a person.
Limiting expenditure: Conde Nast’s GQ magazine at a store in New Delhi. The firm has asked several magazines to reduce their budgets by 25%.Harikrishna Katragadda / Mint
That culture of spending at Conde Nast explains some of the fascination with the place, which incites a mix of envy and scorn among employees at other magazines. Conde Nast’s top editors and publishers have drivers on call, staff members can be reimbursed for $15 a day for lunches they order in, and even freelance writers stay at hotels such as the W when they are on assignment.
Those perks would be unremarkable at any investment bank or law firm, at least before the recession. But magazine companies other than Conde Nast have become grim places to work in recent years.
Time Inc. outlined layoffs of 600 employees last October, almost all of which were completed by the end of last year, Dawn Bridges, a spokeswoman for the company, said in an email. The company has also put strict limits on expense accounts.
Hearst Corp. laid off some employees at the end of last year. And BusinessWeek, as it tries to find a buyer, has proposed a 20% staff layoff, along with cutting costs on art and illustrations, research, marketing and events.
Now Conde Nast is finally making some serious changes to its business, and life inside the 4, Times Square headquarters is about to change—a little.
Teams of McKinsey consultants have been in the Conde Nast headquarters for the last three months, meeting editors, publishers and other executives to review how they spend their money. Their recommendations are in: In addition to the overall cost cuts of around 25%, budgets for 2010 must assume that sales will be flat, said several executives, who asked not to be identified because they were not authorized to discuss the issue. The magnitude of the cuts was first reported in The New York Observer.
Some magazines are subject to different rules, including The New Yorker, where the editorial side is exempt from cutbacks.
It is up to the publishers and editors how to reduce their budgets. It is unlikely that prominent editors such as Anna Wintour of Vogue or Graydon Carter of Vanity Fair will cancel their town-car service: their magazines sell luxury, and Wintour swiping her 30-day MetroCard and jostling with Times Square commuters would hardly enhance that position.
Executives said there were some obvious places where they could cut, such as contracts with contributors. (That is one explanation for the company’s letting details of the McKinsey process leak, one executive suggested—it allows Conde Nast to blame the consultants for budget reductions and renegotiate contracts with well-known photographers, writers and stylists without alienating them.)
Other cuts executives mentioned included magazine promotional items, photo shoots that stretch for several days, the high “kill fees” paid for photographs that do not make it into the magazines. Another obvious way to cut costs is through layoffs. While Conde Nast has been in a virtual hiring freeze for about a year, with most magazines declining to fill empty positions, no widespread layoffs have been announced.
Some magazines are considering reducing their frequency. But, Siegel cautioned, this could have long-term effects. “There are very few advertisers that buy 12 issues of a monthly, so does it matter to me that it might be 10? Not in the short term, but it might matter if it affects the overall readership,” for instance, if readers cancel subscriptions because they receive fewer issues.
Conde Nast is a private company and does not publicly report financial results. Maurie Perl, a Conde Nast spokeswoman, declined to comment on the reports.
But a look at some measures suggests how hard the company has been hit. For instance, while Conde Nast has been moving away from its dependence on newsstand sales, the high-price newsstand copies still bring in significant revenue. But Conde Nast’s newsstand sales brought in $2 million less in the first six months of this year than they did a year earlier, according to Audit Bureau of Circulations data.
That revenue is shared with distributors, and the drop was calculated using newsstand prices for the most recent period. However, every Conde Nast magazine except Bon Appetit increased its subscriptions in the same period.
Still, advertising, where Conde Nast makes most of its money, has been hammered. Conde Nast magazines have lost about 8,000 ad pages through the October issues compared with last year, according to Media Industry Newsletter. Those figures exclude the company’s bridal magazines. That is a decline of about one-third.
Siegel said some cost controls were appropriate but she hoped they would not affect the quality of the magazines.
“I love their magazines—I think they’re pretty, I like the way they feel, and I think the reproduction is lovely,” she said. “That’s why I would hope that one of the things their consultants will not tell them is to, in any way, diminish the quality of what they’re offering, because that is something that makes those titles valuable.”
©2009/THE NEW YORK TIMES