Hearst U.S. Digital Biz ‘Solidly Profitable For The First Time’ In ‘11

Posted on January 4, 2012

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In a New Year letter to employees, Hearst president David Carey reiterated that the company’s target this year is to reach over 1 million paid digital subscribers per month.

The full letter:

SEE ALSO: Hearst’s Carey: We Will Have One Million Paying Digital Subscribers In 2012

January 3, 2012

Dear Colleagues,

Welcome to 2012!

I hope your holiday season was happy and that you either enjoyed some personal time off or found the Hearst offices peaceful and productive at a relatively quieter pace. And now, we’re recharged and back in the exciting world of magazines UNBOUND.

The economic climate for the year ahead presents an admittedly confusing picture, judging from commentators’ and experts’ predictions in just the last week: The U.S. economy is poised for a higher level of growth than the less-than-satisfactory 2011…or the debt crisis in Europe represents a threat to our economic growth. The election season will lift media and advertising…or the gridlock in Washington will further impede economic progress…

While it’s hard to make sense of these conflicting reports, and no one has a crystal ball, one thing you can be certain of this year: Our company’s growth and success, its continued innovation and creative excellence, and our ability to engage audiences and outpace our competitors remains firmly in our hands—irrespective of the Dow, the euro or the professional pundits.

As a company, we achieved an enormous amount in 2011 and set the stage for a very important 2012.

You stretched your capabilities and broadened the definition of what the magazine company of the future can and should be. By embracing the future, and all that goes along with it—the capital investment, the expansion into new geographies, the risk taking, the rethinking of long-held orthodoxies—we remain the leader in our industry.

We have much to be proud of. Our magazine company has nearly doubled in size in the past 18 months. We can thank organic growth, new products and acquisitions for that. While the scale of progress is important, the areas where we expanded are even more important: key international markets; digital marketing services (iCrossing just acquired Red Aril, a data management company); digital media, generally; fulfillment services (CDS Global acquired PayDQ to accelerate its entry into online billing); and our core U.S. print operations, which saw the continued growth of Food Network Magazine and strengthening of a number of our established properties.

Our efforts have resulted in a broadly diversified business—today, roughly 40 percent of our revenues are U.S. print and digital, 40 percent international print and digital, and 20 percent are services (iCrossing and CDS Global).

Our core print businesses in the U.S. gained share in a tough market. We successfully merged the U.S. and U.K. Hachette organizations into our existing companies and are able to realize significant cost synergies through the extraordinary work of our service departments, particularly our production, IT and consumer marketing teams. Our U.S. digital media businesses were solidly profitable for the first time, and we are excited by the performance and growth potential of Jumpstart, our online auto network. We established an enviable position in the fast-growing e-reading space and are now selling more than 400,000 digital editions every month. More than 40 of our book titles are in e-format, with dozens more coming soon. And you continue to work with partners to find opportunities not apparent to others—the promising early test results from HGTV Magazine, produced in partnership with Scripps Networks (NYSE: SNI), is just the latest example.

Collectively, we are leading the way forward for all of the magazine industry, and I am so proud of the approach you are taking in response to the enormous shifts underway in technology, distribution and consumer preferences.

Now it is time to focus on our objectives for 2012.

Our challenge this year will be to maximize the value of the tremendous investment, creativity and dedication that has been marshaled so quickly and broadly throughout our company.

This will be the first full year of operations with the recently acquired Hachette titles in 14 countries, and we’re fortunate to have added such impressive talent to our company. Our greater global reach can only benefit us as we navigate a world that will likely see strong economic growth in some regions, and less in others. We will see significant digital growth in both the Web and e-reading areas. Though overall U.S. industry print revenue is expected to show modest gains, we’ll invest in product innovations to satisfy our readers, thanks to new efficiencies in our overall structure. And, like 2011, we will fund new editorial projects, both print and digital.

A number of our titles will introduce fresh designs and reimagined editorial formats—starting with a new look and increased trim size for Harper’s Bazaar next month. Brand extensions like Marie Claire @Work and Cosmopolitan Latina are a major push to attract new readers and advertisers. Our close relationship with Mark Burnett is already providing dividends for our magazine brands, less than a year after Hearst acquired a 50 percent stake in his company. We will invest in emerging e-commerce initiatives, and look forward to the upcoming launch of our two branded YouTube (NSDQ: GOOG) channels. We will continue to create pathways to bring the very best ideas from our nearly 300 international editions to the U.S.—and vice versa.

Our target is to reach more than one million paid digital subscribers per month via iTunes, Zinio, Nook, Amazon (NSDQ: AMZN) and Next Issue Media. We will fast-track the transition to HTML5 for all our sites, which allows for a far better user experience on mobile devices. iCrossing’s “connected brands” strategy, now bolstered with a more robust data platform, positions Hearst to grow its leadership position in digital marketing services. And CDS Global, our second largest business in the U.S., will continue to add more technology solutions to serve its increasingly diversified client base.

These are very ambitious objectives. With your help, we will meet them.

As with every advance at Hearst, our people are the key to our success. We will continue to stretch ourselves in our roles, examining—and, perhaps, reinterpreting—what each of us does and how we do it. We will push the boundaries of our brands and products…and hopefully break a few rules along the way.

There’s an old African saying that perfectly describes how to navigate the media industry today: “If you want to go fast, go alone. If you want to go far, go together.” What an apt description of the approach for growing our company—reach across units in the Magazines Group, across divisions in Hearst Corporation and partner with other media companies around the globe.

Our goals for 2012 are clear: create new opportunities independent of the macroeconomic trends, further diversify our established businesses, streamline our processes and operations, and empower our people.

I’m grateful for your contributions—past, present and future. And, by extension, grateful for the “team” that surrounds every Hearst colleague: your family, friends and loved ones. Being part of transformational change in the media business is incredibly exciting and satisfying, but I know the days can be long and often stretch late into the nights and weekends, and I’m appreciative of the support they give you.

I look forward to another year of seeing our amazing talent, our unique culture and our world-class assets rise to meet the future head on. If we work together with the energy and vision we showed in 2011, I have no doubt that we can continue to engineer the historic shifts that will drive Hearst Magazines’ growth in the coming years.

My best wishes to all of you for 2012.

Sincerely,

David

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