Do Conde Nast's Closures Mark a Bottom For Media?

Monday, Oct. 5, 2009, is a date that will live in infamy in the Gross household: It is the day that Condé Nast announced it would close Gourmet, my favorite magazine. Why couldn't Condé Nast have put Gourmet on the block, or given it a few months to clean up its act, or charted an aggressive turnaround strategy? Instead, the magazine will simply fold, freeing editor Ruth Reichl to write another memoir—this one about her years at Condé Nast. (Slate's Emily Yoffe suggests the title Comfort Me With Town Cars.) (Click here to follow Daniel Gross)

But the closing of Gourmet (along with Cookie, Elegant Bride, and Modern Bride) could also be a positive sign—for two reasons. First, Condé Nast in recent years has been something of a contrary indicator with its business moves. It launched glossy business book Portfolio in the spring of 2007, right at the height of the private-equity/hedge-fund credit madness. It launched Domino in the spring of 2005, just as the housing market was about to peak. It launched Men's Vogue later that year, after the metrosexual bubble had clearly burst. (Sex and the City had already gone off the air.)

Second, it reeks of capitulation. In investing terms, capitulation is that moment when, after a prolonged period of decline, nobody seems to want to be in a particular market—Internet stocks, real estate, CDOs. During down cycles, most players cut their losses or adjust to the new reality. But some people simply hang on—because they're oblivious and not paying attention, because they think they knew better, because they have some secret plan, because they were so well-capitalized they can withstand any amount of pain. And when those people throw up their hands and leave the table, it's usually a sign that the market has reached a bottom. These are the investors who endured—or ignored—a 7,000-point drop in the Dow Jones Industrial Average between October 2007 and March 2009 before deciding to put all their money into cash. That selling caused the market to lose another several hundred points. But at least it marked a trough.

For Condé Nast, the signs of trouble have been evident for several years. The Internet has been eating away at the circulation and margins of magazines for years. A consumer-led recession began in January 2008, hitting the ad budgets of the high-end retailers that populate Condé Nast magazines. The financial crisis put the brakes on advertising from the financial services and auto industries. Other magazine publishers took evasive action—cutting back staff and budgets sharply, reducing frequency, reimagining their business models. But Condé Nast, at least from my outside perspective, appeared to make few concessions to the new emerging reality. Publishers, who essentially ran their own businesses, apparently lacked the self-preservation instincts to come up with aggressive cost-reduction and survival programs. I mean, really: At some point, didn't the publishers of Elegant Bride and Modern Bride think of merging into Modern, Elegant Bride? And so Condé Nast needed to hire McKinsey to tell it that cutting costs by 25 percent during the worst ad market in recent memory might be a smart move. The cost-cutting and closures strike me as the belated actions of a slow-moving, entrenched giant. (Slate's Jack Shafer has aptly compared Condé Nast to General Motors.) Closing Gourmet now, after the recession has ended, after what may be the worst of the decline in ad pages, is a little like deciding to close Saturn after car sales have fallen 40 percent.

I realize, of course, that Condé Nast didn't close all its magazines—just my favorite one. And those who have called a bottom for print publications in recent years have repeatedly been proved wrong. I further concede that there may be an element of wishful thinking here. (I'm an employee of a news magazine and have contributed to a few Condé Nast publications.) But for all the chatter of the demise of print—check out Gawker's depressing collage of dead magazines—there are still an awful lot of magazines around (7,383 in 2008, according to the Magazine Publishers of America). Connoisseurs of excessive bullishness—I once ate a chapter of Dow 36,000—also tend to be gourmands when it comes to excessive bearishness. And in recent months, I've noticed signs of an irrational depression surrounding print. Last spring, it seemed as if all newspapers and magazines were going bust imminently, and newspaper stocks were priced for bankruptcy. But that's precisely when the stocks of Gannett and the New York Times hit bottom and began to rally. When McGraw-Hill put Business Week on the block, Twitter was atwitter with reports that the magazine would sell for $1. Well, it turns out that several parties are interested in buying and operating Business Week, and my guess is that it will sell for a seven-figure sum.

The media investment bank Veronis Suhler forecasts that magazine ad revenues will stabilize in 2013 at $9.8 billion. That's about 25 percent below the 2008 level, but it should be enough to sustain lots of magazines. If I'm wrong, I may have to eat my words. And I'll be doubly sad because I won't have Gourmet to tell me what wine goes best with them.