MEDIA: FORUM - Can we learn any lessons from G&J’s UK retreat? As the National Magazine Company pounces on the UK publishing arm of Gruner & Jahr, Alasdair Reid asks what the German group’s shock withdrawal says about the indus

The high drama surrounding the National Magazine Company’s 11th hour snatch of Gruner & Jahr UK has ensured that the departure of the German publishing outfit will have as loud an impact as its arrival in the UK in 1986. Back then, the incumbent IPC chief executive, John Mellon, mused that the G&J ’invasion’ had rolled over his company ’like a Panzer division’. Now, the shock decision to sell G&J UK to the National Magazine Company rather than to hotly tipped IPC could have equally threatening consequences for IPC’s chief executive, Sly Bailey.

The high drama surrounding the National Magazine Company’s 11th

hour snatch of Gruner & Jahr UK has ensured that the departure of the

German publishing outfit will have as loud an impact as its arrival in

the UK in 1986. Back then, the incumbent IPC chief executive, John

Mellon, mused that the G&J ’invasion’ had rolled over his company ’like

a Panzer division’. Now, the shock decision to sell G&J UK to the

National Magazine Company rather than to hotly tipped IPC could have

equally threatening consequences for IPC’s chief executive, Sly

Bailey.



IPC’s deal, which was reported to be ’days away’ last week, had seemed a

shrewd move. The acquisition of G&J would have given IPC an intimidating

40 per cent share of the women’s market, reinforcing the group’s

position ahead of the launch of three major rival titles in the next

year. Instead, NatMags’ ambush leaves IPC far less well armoured against

the arrival of BBC Worldwide’s Eve, Time Inc’s InStyle and Conde Nast’s

Glamour. Acquiring G&J UK’s Best also gives NatMags a foothold from

which to begin attacking IPC’s domination of women’s weeklies.



Such a move would require considerable investment in G&J’s titles and

the jury is still out as to whether that is NatMags’ intention. The move

could seem to be as much a piece of well-timed spoiling as anything

else.



It seems that NatMags had first discussed the possibility of buying G&J

UK more than a year ago, and revived their interest suddenly once news

broke of IPC’s impending deal. The question must remain whether NatMags

has the will to drive a weekly, something absent from its stable, when

the weeklies market is shrinking. There are also doubts over the fit of

Your Home, which strikes a more downmarket tone than Good Housekeeping,

not to mention the difference of Prima’s appeal from Company and

Cosmopolitan.



However, a price tag of pounds 100 million is a lot of money to pay to

torpedo a rival’s bid. But it is clear if NatMags did intend to move

into women’s weeklies, then Best would provide a strong starting point.

G&J’s embryonic women’s title, Project Florence, would also have a

better fit in the NatMags stable, providing a more mature yet stylish

glossy to which Cosmopolitan readers could graduate.



NatMags is hardly anyone’s idea of an acquisitive company, and it is

certainly testament to the weight of G&J UK that the prospect of

snapping it up was enough to loosen the company’s purse strings. This

itself leads to a deeper question. What was it that persuaded

Bertelsmann’s publishing empire to ship out of the UK in the first

place? G&J UK arrived with enough force to shock Mellon into his World

War II analogies, spearheaded by Prima and strongly reinforced by Best.

However, while these titles established themselves as flagship brands,

G&J’s later efforts, such as Your Home and Prima Baby, were more

oriented towards niches and things appeared to fizzle.



Tim Kirkman, the press director of Carat, says: ’G&J came in strongly

then did nothing afterwards. There has been a lack of investment and now

it’s found it just too expensive to compete - it’s been propping up its

circulations with cover mounts for too long. I don’t think there’s a

magazine market as competitive as the UK’s, frankly, and the amount of

publishers competing for the same potential circulation in each sector

is incredible.’



These days, Kirkman adds, you need to compete on a number of levels:

’You need the scale to make sense of your cost base and to negotiate

effectively with your suppliers. You need to corner a market in

advertising terms.



Then there’s distribution. Front covers sell magazines, but if you

haven’t got much sway with WH Smith and you don’t get the shelf space

you need, you’re going to struggle.’



Simon Timlett, the head of press at Optimedia, says: ’G&J never reached

its full potential in this country and for the past couple of years it

has been very quiet. I think it found the market more competitive than

it expected and when it is deploying resources it must look to its home

territory first. It’s clear that investment was needed in Germany and it

wasn’t available for the UK - though it didn’t do too badly with the

launch of Your Home.’



Timlett believes that a new wave of consolidation is now under way: ’The

classic cycle in a mature market like this is consolidation at one end,

start-ups at the other. That’s usually very healthy because in the

normal course of events you’d expect all the true innovations to come

from the start-ups. Unfortunately, if recent experience is anything to

go by, that doesn’t seem to be happening either.’



G&J taught the UK thoroughness (it researched its ideas) and long-term

thinking. It established the settle-down circulation of a magazine

before it had even talked to advertisers. So what happened to that long

view?



Perhaps it was the strong pound, offers Tim McCloskey, a managing

partner of OMD UK. Or maybe G&J just lost its taste for the scrap. ’G&J

revolutionised the UK women’s magazine market in the mid-80s by

championing and appealing to ’everywoman’, while chi-chi publishers

turned up their noses. It has produced a small but high quality and

successful portfolio. It has researched much but launched little. I

suspect that its successful UK management has been frustrated by lack of

investment from G&J in Germany - and, ultimately, from Bertelsmann,’ he

says.



McCloskey agrees that G&J paid the penalty for not developing a broad

enough portfolio of titles - and that it lacked the scale and clout to

compete with the likes of IPC and Emap. But doesn’t this show that, in a

sophisticated business such as consumer magazines, a company will be

handicapped if it doesn’t have a profound understanding of the culture

of the country in which it’s working?



Absolute nonsense, Iain Jacob, the executive director of client services

at Starcom Motive, counters. He states: ’Foreign publishers will be as

successful as their brands allow them to be, regardless of market. Some

parochial publishers would like you to believe otherwise but you can

succeed outside your home market. Look at Bauer or Emap.’ Or, you could

add, perhaps perversely, G&J - its French subsidiary continues to be

highly successful.



Jacob also believes that considerations of scale are sometimes

overplayed.



’Publishers are highly expert at finding the right distribution deals,’

he says. ’It all comes down to the strength of your brand and your

products. Bertelsmann certainly has the resources to carry on the fight.

The magazine market, though, is pretty brutal.’



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