As ads dry up, Conde Nast wants readers to pay more

Condé Nast Is Changing Its Blueprint
By Jeremy W Peters/NYT
Is the era of the $12 magazine subscription coming to an end?
Conde Nast, publisher of titles like Vogue and Vanity Fair that are wildly expensive to produce yet cost subscribers as little as a dollar,
is betting its future that the answer is yes. The company said Friday that its consumer marketing chief, Robert A. Sauerberg, would become president, assuming a newly created second-in-command role to the chief executive, Charles H. Townsend.
The senior-level management shuffle signaled what executives said would be a fundamental overhaul of the advertising-based business model that has sustained the publishing giant since S I Newhouse Sr. bought it in 1959.
"We have been so overtly dependent on advertising as the turbine that runs this place, and that is a very, very risky model as we emerge from the recession," Mr. Townsend said on Friday. "In a company like ours where 70 percent of our margins are generated on the advertising side, we must develop a much, much more effective financial relationship with the consumer."The goal of the overhaul, is to transform Condé Nast into a business that relies less on advertising revenue and more on the income it makes from charging consumers to read its products on both digital and print platforms.
The announcement on Friday was unusual for Condé Nast, a company that relishes its status as a private enterprise, typically seeing little need to air its business to the outside world. It was equally unusual for what it revealed about succession within the company, a topic of much fascination in the gossipy magazine world.
Beyond succession, other questions remain about the company's future, namely whether it can wean itself from advertising dollars as much as it would like. Its transition to a more consumer-focused business model will be difficult for a company that now earns about 70 percent of its net profit from advertising.
Condé Nast has been slower than other magazine publishers to embrace the Internet, and some industry analysts have questioned whether its lateness in developing a digital strategy would harm the company in the long run.
The transition could be made all the more difficult because consumers have grown accustomed to paying so little for Condé Nast's magazines. A yearlong subscription to The New Yorker, a Condé Nast weekly, can cost as little as $39.95. Glamour's Web site advertises a two-year subscription for $15 (including a free handbag).
Mr. Townsend expressed confidence that the consumer would come around, noting, "They pay $180 a month for a cable bill." The company's goal is eventually to reach parity in profits from advertising and consumers, he said.
He said he envisioned eventually selling packages of content that included, for example, a print product, a mobile product and a digital product, all for one price.
"We're entering a period where the handcuffs are off in terms of our ability to monetize the content we deliver to our consumers. We've had handcuffs on us for years. We could not break the stigma of a $12 subscription," Mr. Townsend said. "I've got to morph out of that business."

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