The Big Shake-Out Begins

By STEPHEN POMPER

The overstuffed newsstands of the '80s told the story at a glance: the fast- money decade spawned a prodigious magazine boom, with titles crammed three deep into every trendy market niche. Some 2,800 new magazines flew off the presses in the past decade, 584 in the past year alone. Foreign media barons opened their wallets wide, and American entrepreneurs -- from Hartz Mountain pet-food magnate Leonard Stern to Frances Lear (ex-wife of TV producer Norman) -- rushed into the circulation game.

But now the shake-out is at hand. Magazines are going under or changing hands at a dizzying rate. Owen Lipstein's Psychology Today suspended publishing in February; struggling monthlies such as CMP's Long Island Monthly and Time Inc. Magazines' Southpoint went out of business; Rupert Murdoch's debt-ridden News Corp. sold the gossipy Star to the National Enquirer and delayed plans to launch its own weekly newsmagazine.

Last week Metrocorp's Manhattan, inc., which won a 1985 National Magazine Award for general excellence and critical acclaim for its lacerating exposes of the New York City business community, announced that its July issue would be the last. The magazine and its top editor will be subsumed by Fairchild Publications' M, a clothes-conscious men's periodical. The new title: M inc. Manhattan, inc. lost more than $8 million over six years, says publisher D. Herbert Lipson. Its ad base was crippled when New York's financial and real estate markets went dry. The 1987 stock-market crash stole the magazine's indispensable asset: high-flying Wall Street targets to shoot down. The magazine also lost some of its edge when founding editor Jane Amsterdam was replaced by Clay Felker.

Still, the main source of all this turbulence has been the advertising- indust ry slump -- attributed to soft markets in cigarettes and automobiles. The downturn has robbed the big consumer "books" of 3.5% of their ad pages in the first quarter of this year and underscored the glut of consumer magazines on the market. Even such industry stalwarts as Business Week, Newsweek, PEOPLE, SPORTS ILLUSTRATED, TIME and TV Guide have been affected, sharing in the ad-page losses for the first quarter, however healthy their circulations. (Circulation typically provides half of a magazine's revenues.)

The biggest threat appears to be to highly leveraged foreign investors. Diamandis Communications, a subsidiary of French-owned Hachette, is looking to sell Woman's Day to offset Hachette's estimated $400 million U.S. debt. Murdoch's News Corp., reportedly $6.5 billion in debt, will soon begin experimenting with the venerable but faltering TV Guide, adjusting the magazine's iconic size and format in an effort to become more accessible and compete with proliferating local cable guides. Leslie Hinton, president of Murdoch Magazines, rejects speculation that foreign investors want out of the U.S. altogether. "Things go up and down," he says. "It would be pretty shortsighted of us to abandon the market right now."

In New York City, where one-third of all U.S. magazines are launched, the slump has become a full-fledged recession. Thus the city's small, high-profile purveyors of the trendy and transient have less control over their own destinies. Details, a chronicle of downtown marginalia, was bought by S.I. Newhouse Jr.'s Conde Nast, and will be repositioned as a more mainstream men's fashion magazine. And Spy, a satirical magazine that proclaims itself "hip, but suspicious of hip," failed in a highly publicized capital drive, although it still posts slim profits. Spy hopes to hedge its bets by moving into partnership deals in TV and movies.

But the future may not be as bleak as the present. Thomas Ryder, president of American Express Publishing, predicts that the consumer-magazine industry will emerge from its slump during the next 18 months "shaken, but stronger for it." In the meantime, certain less glamorous market niches are flourishing: witness the success of highly targeted publications like Model Railroader and Golf Illustrated. Service and life-style magazines, meanwhile, , are attracting some keenly interested, well-financed investors. American Express recently acquired D (for Dallas) and Atlanta as part of a plan to expand into 20 city markets. And on June 1 Time Inc. Magazines paid approximately $215 million for the parent company of Sunset magazine, a West Coast life-style publication. Says Ryder: "The next twelve to 18 months represent one of the great buying opportunities of all time."

Unfortunately, as service-oriented publications are snatched up, some of the most incisive new voices in journalism may be lost. Abe Peck, chairman of the magazine group at Northwestern University's Medill School of Journalism, complains that while "there are plenty of magazines that tell you what to wear, where to eat and how to shop," publications that offer a more provocative editorial edge may be an endangered resource. Many analysts feel this editorial quality is more important than most advertisers realize, because it delivers more attentive readers. Some of yesterday's faddiest publications, like Rolling Stone, built on precisely that kind of approach to become today's prosperous graybeards. Many media watchers had recognized similar prospects for 7 Days, which in April won a National Magazine Award for general excellence. It was an ironic epitaph: the magazine had gone out of business one week earlier, citing low ad pages, a slack economy and a dearth of interested buyers.