Here’s What Happened to Magazine Revenue in the Last Recession
“Truth is like poetry. And most people hate poetry.” — The Big Short
I remember well when the housing bubble burst. While dining with a veteran magazine publisher at the Performance Racing Industry (PRI) trade show in Orlando in December 2007, he shared that he had a grim feeling about what lay ahead. I made a mental note and stuck his comments in a memory nook.
A few days later, while flying home to Minnesota, I was seated next to a man in First Class who worked for the second largest realty firm in the U.S. We got to talking about the year ahead and he said it was going to be bad. For years banks had been pressured by the government to make housing loans to poorer people who were credit risks. He said it began under the Clinton administration but continued into the Bush era.
He said that things were going on that would not bode well for the country. He was evidently seeing the rot that would become the subprime mortgage crisis, which you can learn about by watching The Big Short (2015).
To catch a glimpse of the lending culture then, check out the quotes on this page at imdb.com
In July of 2008 I was following investment boards and studying the impact of the housing bubble and imminent collapse. I considered, for the first time in my life, shorting a security: Fannie Mae. But as I asked around, people said, “The government would never let Fannie Mae fail.”
Well, check out September 6, 2008 in your history books. Just one more domino, but it was a big one. According to a story in AmericanProgress.org, on that date…
the federal government took control of mortgage financiers Fannie Mae and Freddie Mac through a legal process called conservatorship. Since then, the two companies have required roughly $150 billion in taxpayer support to stay solvent, while the government has kept the housing market afloat by backing more than 95 percent of all home loans made in the United States.
The monetary crisis, the housing bubble and the subsequent recession had the following impact on the magazine industry.
In my role as an advertiser I had access to data that doesn’t generally show up in your morning papers. What I recall is this. Most of the magazines that were primarily subscription-based held their own. Subscribers are people who look forward to their favorite mags and only have to make a decision once every year or two. Subscriptions are discounted to keep these loyal readers coming back to the trough so they can sell expensive ads to ad agency middlemen.
On the other hand, the magazines you see on store shelves, like your local grocery store or Barnes & Noble, these get purchased with discretionary income. Discretionary income is what you are left with after taxes, other mandatory charges, and bills for necessary expenditures. In other words, your leftover change. How badly do you need it? A lot of people chose the liquor store and turned to social media for their fix.
On average, sales for many of your most popular in-store publications were down by 25% year over year. That’s a tough nut to swallow for an industry operating on thin margins, some of them top heavy with execs and boatloads of debt to begin with.
I’ve shared all this to put our current scenario into a historical perspective. I can’t say for certain what will be here and what will be washed out to sea, but for sure things will be different. As Mark Twain famously said, “History doesn’t repeat itself, but it rhymes.”