Moving the needle7th June

# 1 - Compendium magazineThe £7million opportunity

Compendium – THE new launch

What is it?•The new quality magazine for men•NOT cover girl led

Compendium – THE new launchVital Stats?•Target audience: 25 to 45•Frequency: Monthly•Pagination: circa 300 - 350 (between men’s health and GQ)•Price: Launch £4.00 rising to £4.50 after first year •High production values•Run on cost: £0.38•Target sale: 150,000 per issue •Print: 250,000

Compendium – Low risk productionHow it works•The magazine is a joint venture between frontline partners•Managed by Haymarket customer magazine division but drawing on various editorial stock from across frontline titles (see over leaf)•A full time editorial staff member based at BBC, BM London, BM Peterborough, Haymarket to work along side established editorial teams to identify and repurpose content. •All articles reference the donor title to drive awareness and could even run occasional money off vouchers to be redeemed against the next issue of the donor title.•Subjects outside of current partner editorial pool could be syndicated, either free of charge with a reference or paid for without. •Advertising is sold by the existing male related teams across the partnership i.e. no dedicated advertising cost. Each partner gets 100% of any revenue raised.•P&L is managed by Haymarket, profit is apportioned back to partners at the end of the year based on editorial content share.

Compendium – Low risk launch

The launch:•Launch costs are kept to a minimum – all male related partner titles to feature compendium in mag, online, emails radio, TV etc.•All male related partner titles feature an exclusive reader only offer whereby the reader can call a number or register online to get the first issue for £1 (Data can be captured and used to issue follow up coms with further marketing offers).•We approach key retail partners (top 6) by engaging with them early under a non disclosure agreement.•Concept / conditions explained to retail – frontline driven / funded launch, we can only make it work if we de-risk the launch costs. Space will only be paid for once they reach their proportion of the 150,000 volume. POS etc will be funded by FL.•First 6 issue trade marketing budget = £100,000 •Second 6 issue trade marketing budget (if 150,000 volume achieved 200,000)

Compendium – Risk into opportunity

The launch:•In the face of the mums net pressure: we can use this to our advantage at retail, it would be more awkward for them not to support it than support it.•We might even be able to get the mums net people on board (suggest we are launching as a result of their concerns), if we could get them to be a tenth of active with viral marketing this concept as they have been with the lads mags then it will be a great marketing push.

Section Subject Title Partner

Food Food Olive BBCSport Football 442 Haymarket

Formula 1 F1R HaymarketGolf Todays golfer Bauer Media

Fitness Outdoor fitness Bauer MediaFitness 220 Triathlon Origin

Tech Gadgets Stuff Haymarket Science Focus BBC

Science BBC Knowledge BBCFinance Home finance N/A BBCMotoring Aspriational cars Car Bauer Media

Aspriational cars Autocar HaymarketTravel Travel Lonely planet BBCMusic Music reviews Q Bauer MediaFilm Film reviews Empire Bauer Media

Heal

thW

ealth

Happ

ines

sCompendium – The content

Compendium – £7m RSV, £2.5m Net

P&L Assumptions Per month Per Annum

Print 250,000 3,000,000

Cost Run on cost 55p £137,500 £1,650,000

Sale vol 150,000 1,800,000

RSV At £4.00 price £600,000 £7,200,000

Gross Margin 62% £372,000 £4,464,000

Editorial Editor, Deputy, 3 implants, 2 designers, 4 execs £37,600 £451,200

Net Margin £196,900 £2,362,800

Topline P&L

#2 - Mission management

Meal DealWhat is it?•Simply adding a magazine as part of the meal deal bundle•Possible retailers: M&S, Tesco, Sainsbury, Boots – (Sainsbury transact 300,000 per week)•Boots meal deal is £3.29 – consumer could include a magazine for £4•Sainsbury meal deal is £3 – consumer could include a magazine for £4•Supplied direct on a firm sale, at 50 and 75p per copy respectively (different barcode to prevent returns)•Not run every week to prevent training the customer •Wouldn’t generate any significant profit but good way to bolster ABC / sampling•Cost of executing a multi pack for BM = £200,000 each time (Bagging and TV Ad)

Travel solutionWhat is it?• Heat, closer, grazia, bella – bagged together for £4 or• Heat, closer, grazia, bella – bagged together, add a bottle of water for

£5• Airports only to minimise cannibalisation

• Delivery and invoice options:1. Supply it as a bookazine direct to airports at 50% margin Firm sale

• No wholesale cost, incentivises WHS to actively sell, marking down as the week goes to ensure sell out

• No loss in publisher margin as extra retail margin is netted off by no wholesale cost or cost of waste

• Can off set the extra margin against bookazine target2. Supply through wholesale in the normal way

• Pay WHS a bonus payment to actively sell / only if they hit certain volumes

Travel solution• BM currently spend £85,000 for bagging every time they run a bumper pack (2 titles) and

they then spend a further £120,000 on TV to advertise it.• Bagging cost can be spread across 4 titles, all 4 titles can include volume in ABC• It doesn’t canabilse sales as they would only go through airports so no training the

customer or devaluing brand• WHS process XX customers a week through airports in the summer• WHS process xx “news and” promotions per week in airports in the summer• Assuming 50% of WHS airport summer customers are female the potential audience is

xxx• Assuming 50% are aged between 20 and 40 the audience is xxx• Through active selling and prominent display if WHS convert 5% of customers to

purchasing this product the volume would be xxx per week.

• Full price of bundled product (£1.20 + £1.65 + £1.95 + £1.10?) = £5.90• Pub profit from the sale of 1 single @ full price = £0.66 (62% margin – 2 time 25 per copy

run on cost)• Pub profit from the sale of 1 bumper pack = £1.48 (62% margin – 4 time 25p run on cost)

# 3 - Following the consumer

Follow the consumer•20 Years ago magazines we purchased almost exclusively from CTN type outlets, High street and Travel locations.•At the same time larger more dominant supermarkets emerged in the UK changing the way people shop and spend.•Magazines successfully followed this change in shopper traffic with the extra penetration and retailing standards fuelling market growth for circa 15 years.•Supermarket growth has now almost ceased as available sites become few and far between.•Now 20 years on technology and fuel prices are encouraging customers to adopt their purchase behaviour once again, question is are we geared up to follow?•Convenience is the new battle ground for multiples to open as many stores as the OFT and finance will allow.•Customers are increasingly looking at getting the bulk of groceries delivered at home and then using convenience stores to top up on fresh.• There is also a second wave of investment in delivering entertainment direct to the home by passing brick and mortar stores where we are stocked.•We have grown to understand supermarket shopping and how it relates to magazines and the propensity to buy is relatively high •However that propensity drops dramatically in convenience, online and in the digital arena, is this this the perfect storm or a great chance to steal share from our competitors through first mover advantage?

Convenience – follow the consumer

What is it?•Develop an Improved magazine solution•Promotional offer for magazines (38% of all volume in conv now sold on offer)•Fixtures•Title density •Secondary sitting•Simple store execution•Link magazines to high volume items in-store•Invest in research to understand the customer, choice, price expectation, good, better best or just better and best, fixtures, promotional mechanics – become the standard bearer for convenience

Example reason for visit in convenience: Top-up 43%, Newsagent 31%,Food-to-go 20%, Food for tonight 4%, Other 2%

Online – follow the consumer

What is it?•Develop an improved magazine experience when shopping on line•Home shopping expected to grow by 36% in the next 18 months vs. 1% in store•It is predicted that 42% of us will order grocers at home by 2020•Participation on line is significantly less than in store – threat to total RSV, opportunity to grow market-share if we can dominate in the future•The range of magazine SKU’s is likely to be smaller than in-store, hence an opportunity for frontline to grow marketshare.•Favourites drives frequency of purchase and loyalty•Partners need to move to a subscription Investment and marketing model

E-booksBackground and current situation - Extracts from trade press this week:Liberty bids for Barnes + Noble •Liberty Media has tabled a $1bn (£617m) offer for US book and magazine retailers, Barnes + Noble which operates 720 bookstores as well as a chain of campus stores and is a major US outlet for UK magazines •The Financial Times is seeing its website subscription continuing to rise. For the first quarter of this year, registered users (who have free, but limited access to the site) are 60% up year-on-year at 3.5m. Paying subscribers are 50% up at 224,000, or 6.4% of the free registered user base. The FT paywall model is still the one which most publishers look at when considering paid access to their web-sites, so its progress is being monitored with great interest. • In the USA, the New York Times claims that more than 100,000 had paid for online access to the newspapers‘ website since it started charging a month ago. The site receives over 30m unique visitors a month. Of this total contact pool, 85% have registered to allow free, but limited (20 article per month) access to the site. The number of paying subscribers (costs range from $15-35 per month dependent on usage levels) has just cleared 100,000. Print subscribers receive free access to the site as part of their main subscription. • Future Publishing claims that sales of digital replicas of its print titles have increased more than tenfold year-on-year, exceeding £100,000 in revenue. • News International claims that an average of 25,000 downloads of the iPad edition of The Times are made every day and an average of 22,000 for the Sunday Times each week.

E-booksExtracts from trade press this week:• In the USA, Amazon has been selling 105 digital books for every 100 print products since the start of April • According to the Publishers Association, UK book sales rose by +2% in 2010 to £3.1bn. Digital books are rising very quickly, but from a small base with sales totalling £16m, only 0.5% of the total book market. The UK is well behind the USA in ebook penetration, but the PR-worthy snippets (see Ama-zon above) tend to exaggerate the actual scale of digital reading when looking at the total consumer market. • Just under 20% of smartphone users bought items through mobile apps over the last year. The total spend was £581m or an average of £33.46 per month per person. Highest spenders are grocery buyers with an average monthly spend of £75.69. • Next Issue Media, the consortium of five leading US publishers, has moved on to the next stage of its plans with the launch of an online newsstand selling digital editions. The first move is releasing app editions of seven magazines for the Samsung Galaxy Tab on a ―preview‖ area within a dedicated section of Verizon Wirelesses' VCAST app store. The preview is a rough outline of the final version to be released in the autumn, when Next Issue plans to roll out a single app with a virtual newsstand containing several magazines. At full launch, the newsstand will offer about 40 to 50 publications.

E-booksYudu‘s new subscription system •Digital publishing company Yudu Media has launched a ―dual subscriptions‖ system, which it claims is the first alternative subscription system compliant with Apple. •The system enables magazine publishers to sell sub-scriptions through their own websites as well as through Apple's App Store. The Yudu technology is integrated into the back end of the publisher‘s •website. When a publication is sold and payment is taken through the website, the Yudu system recognises the purchase and allows the user to download the pub-lication on to their Apple device through the App Store. •The Yudu dual subscriptions system provides publish-ers with an additional route to market that avoids the 30% commission payable to Apple. Instead, the pub-lishers will be able to glean 100% of all revenue con-verted •through their own marketing efforts and sales channels, as long as the consumer is offered the subscription at the same prices or cheaper on the App Store. The dual subscription system has been recognised by Apple as a system that complies with all of its terms and conditions in the selling and downloading of publications through the App Store.

E-booksHigh ad engagement with iPad editions •Research carried out for Sweden's Bonnier has found that readers look at more advertising on the iPad than in a print magazine. An eye-tracking survey carried out by MRC International found that readers looked at ads 21% more on the iPad than in print. They also devoted 63% more time to ads on an iPad versus in print. The differences are even greater in comparisons of how readers look and interact with traditional online ads. 58% of the respondents felt that the iPad edition added value to the newspaper or magazine as a whole. •———————————————————————–— Smiths News gearing up for acquisition •As it pushes ahead with its strategic diversification, wholesaler Smiths News has built up £70m to make acquisitions in other areas of specialist distribution. The management‘s commentary on its latest interim figures (see page 14 for a detailed analysis) make it clear that it is well progressed with its hit-list of acquisi-tion targets. •Circulation briefing No.153 (June 2011) Page 10

E-books – what is my point?•As the technology improves and becomes more widely penetrated and the possability of digital magazines become more mass market the industry has an opportunity to co-ordinate efforts to talk and trade direct to the consumer.•If we do not fill this space it is likely that it will be filled by a retailer (Tesco / WHS), by an established E trader (Amazon / Apple) or even a new entrant (Smiths News or AN Other).•Customers will want a one stop shop, a fractured parochial model (ALA subscription sites) is unlikely to work. •If Marketforce or Comag and Frontline combined efforts could we build and promote a solution that would produce enough gravity to pull the others in, but on our terms?

Tesco Still to be completedTesco magazine issues / wants:•Grow volume•Grow Marketshare•Plug Income hole•Reflect Clubcard offer to promote / drive loyalty•SMART – Sell more and returns terminated•Dissatisfied with RASCAL – escalating costs•Lack of consumer focus amongst magazine publishers•Digital – future role •Blinkbox