Franchising the candy store: split-run magazines and a new international regime for trade in culture.

• Author: Magder, Ted

Ted Madger is the director of communication studies and an associate professor of media ecology at New York University. Prior to that he was the director of the mass communication program at York University. He is the author of Canada's Hollywood: the Canadian State and Feature Films (1993) and numerous articles on Canada's cultural industries and the political economy of communication. E-mail: ted.magder@nyu.edu

1. INTRODUCTION

   In early April 1993, baseball enthusiasts across Canada were treated to an unusual sight. Larry Walker, the Montreal Expo's gold-glove, left-fielder graced the cover of U.S.-based Sports Illustrated magazine. While Walker himself may have enough star power to merit a cover shot, this was Sports Illustrated's baseball preview issue and the Expos are hardly a popular draw in most U.S. baseball markets. Walker was in one of those familiar baseball poses: right hand grasping the belt above his pinstripe pants, left arm raised to the shoulder, a Rawling's glove slung over the butt end of his Louisville slugger ... hockey stick. As it happens, Walker is Canadian: born in Maple Ridge, British Columbia, about 35 kilometres (or 20 miles) outside of Vancouver. An aspiring goaltender for his hometown hockey team, Walker realized at the age of sixteen that he had no future as a professional hockey player. He turned to baseball and saw his first quality curveball playing

   * A list of acronyms used in this article is provided on page 51. for the Utica Blue Sox, an independent baseball team in upstate New York. The Expos signed him for $1,500. The same edition of Sports Illustrated contains a profile of Cito Gaston, the Toronto Blue Jay's manager, and an article on the possibility of an all-Canadian baseball World Series. The issue begins with a lengthy feature on American college basketball and ends with two profiles of European hockey players now playing for Canadian teams in the National Hockey League. One of the profiles bears the easily translatable title "Pas de Probleme."

   This was the first of six special issues to be published in 1993 by Time Canada, a subsidiary of U.S.-based Time Warner, the world's largest media conglomerate. These issues would bear the name Sports Illustrated Canada (SI Canada) and would replace the regular, weekly issues of Sports Illustrated that have a circulation in Canada of roughly 150,000. The April 5th issue contained about 30 percent Canadian content and scooped up 40 pages of Canadian advertising worth roughly $250,000. (1) It included full-page placements for Canadian Airlines, Sony Canada, Tourism Quebec, Black Velvet Canadian Whisky, and Volkswagen's new Golf ("In Canada, we briefly considered calling it the Hockey"). Although one of the profiles was written by a Canadian journalist, all of the editorial content was assembled at Time Inc.'s New York office and then transferred electronically via a Crosfield page fax system to a printing plant north of Toronto owned by Quebecor Printing, a Canadian company.

   Time Inc., the magazine publishing arm of Time Warner, leads all U.S.-based magazine publishers in terms of both circulation and revenue. In 1996 its top three publications, People, Sports Illustrated and Time, helped Time Inc. earn more than $500 million in operating income on more than $4 billion in revenue. (2) Magazines account for close to 25 percent of Time Warner's total revenue stream; they provide the company with a reliable source of income as it undertakes new acquistions and new media ventures. Indeed, while the magazine industry's share of total advertising in the U.S. has remained fairly constant over the past decade (at roughly 8 percent), Time Inc. is on something of a roll, reporting annual double-digit growth between 1991 and 1997. Some of Time Inc.'s recent success can be attributed to a general increase in advertising expenditures during the 1990s, but Time Inc., like other magazine publishers, has also aggressively pursued new revenue streams. The introduction of new magazines is one of the tactics employed. In 1996, over 900 new magazines were pitched to American readers; that year, Time Inc. published 28 titles, up from 12 a decade before. For publishers of already successful magazines such as Sports Illustrated, other tactics can reap dividends. In 1996, for example, Time Inc. began publication of Sports Illustrated for Kids. A separate edition of Sports Illustrated for Women is in the works. Sports Illustrated Classics, on the other hand, recycles and repackages old editorial material into special annual issues and commoratives. In a partnership with CNN (itself part of the Time Warner stable) since December, 1996, the magazine has operated CNN/SI, a 24 hour sports-news cable channel. Spin-off publications and broadcasting ventures such as these are part of a more general strategy to use established magazines as brand-names for a host of consumer goods and services. `Brand extension' includes everything from clothing and calendars to plumbing supplies and cake-decorating kits, marketed under a magazine's moniker. Brand extension now accounts for more than 10 percent of total industry earnings and some analysts believe it may be the industry's most lucrative growth market. (3)

   No less important, new printing and distribution techniques have made it possible for publishers to expand the production of regional editions. These offer advertisers the opportunity to reach a more precisely targeted audience; they either use the same editorial content or, in some cases, modify some of the content to reach a well-defined set of readers. The region can be the size of a neighborhood, a city, or the whole of the American northwest. Whatever the case, geography is less of a variable than demographics and markets. The objective is to maximize readership and, more precisely, to maximize the value of readers to advertisers. For example, advertisers that might balk at the price of reaching a nation-wide audience (or have no interest in doing so) might be attracted by the opportunity to reach readers in the San Francisco Bay area only. The trend is evident in Canada as well: Maclean's, the country's leading current-affairs weekly, offers advertisers 21 distinct editions, including a "platinum" edition directed at more than 80,000 readers who earn more than $75,000 a year. (4)

   And in the search for readers that can be sold to advertisers, national borders too have become anachronistic. On this front Time magazine has led the way: it has been inserting a modest amount of Canadian content into its standard U.S. edition since the 1950s to service Canadian advertisers and readers. But for most magazines and most publishers, the possiblity of maximizing sales in foreign markets is a rather new phenomenon. "As recently as a decade ago, only a handful of U.S. titles had a significant publishing presence abroad." (5) But now, as an editorial in the Magazine Publishers of America 1996 annual report noted, everyone is "going global," applying the same publishing techniques and business logic that have made domestic regional editions so popular in the international marketplace. And SI Canada nicely illustrates the emerging strategy: to produce just enough local (or national) content to attract new readers and new advertisers -- a regional edition with global ambitions. It is also perfectly situated to capitalize on the staggering growth of sports as a global media product.

   In introducing SI Canada, Donald Elliman, its president and publisher, noted that since the 1976 Olympics in Montreal, Canada has attained a newfound prominence in sports. As evidence he pointed to the recent expansion of the Canadian Football League into the United States, the World Series victory by the Toronto Blue Jays, and the expansion franchises of the National Basketball Association in Toronto and Vancouver. Prominence, for Elliman, is measured in terms of a North American presence, and undoubtedly an end to hockey's dominance as Canada's national pastime. What Elliman didn't mention was that there was no general-interest Canadian sports magazine being published. SI Canada would neatly fill a gap in the marketplace. What possible objections could there be to its publication? Elliman concluded: "We hope you'll find a lot to cheer in the newest kid on the North American block, SI Canada." (6)

   Canada's magazine industry could find nothing to cheer about. Even before the first issue hit the newsstands, the Canadian Magazine Publishers Association (CMPA) made a compelling case that the publication of SI Canada violated the spirit of a 28-year-old federal regulation banning the importation of magazines of its type. For the CMPA and most other Canadian observers, SI Canada was a classic example of a `split-run' magazine: a spin-off edition that recycles content from its parent edition, adds some original content that appeals to a new market, and then sells new advertising space at a price often substantially lower than in the parent edition. The prohibition against such magazines is designed to ensure that Canadian advertising expenditures support Canadian magazines. The measure, known as Tariff Code 9958, is one of the crucial support mechanisms for Canadian magazines. A postal subsidy, and section 19 of the Income Tax Act which makes expenditures for advertising in non-Canadian magazines ineligible as a tax deduction, round out the basic instruments used to shore up the publication of Canadian magazines. (7) Even with these supports in place, most Canadian magazines eek out a precarious existence. Only six percent of Canadian magazine copies in circulation are sold on newsstands. And seven of ten Canadian magazines don't show up on Canadian newsstands at all. Dependent upon subscription sales, Canadian magazines have an average pre-tax profit of less than 3 percent. (8) For the CMPA, the publication of SI Canada jeopardized the economic foundations of Canada's magazine...