Mr. Magazine

Mr. Magazine™ Presents… Conversations With Magazine and Magazine Media Leaders…

Tom Quinlan, chairman/ CEO/ president of LSC Communications faces the future of printing with set goals in mind. While 2019 brought the company and Tom many challenges, he faced them the only way he knew how: straightforward and with a strong belief in the printed product.

Today, the cloud of uncertainty with the merger of LSC and Quad is over and Tom’s vision for the company has been refocused once again on the job at hand. Assessing what the New Year and the fresh decade will bring, Tom is determined to get the costs where they need to be to propel LSC forward and into a very bright future. And with his firm faith in the products he produces and the people he works with, both client and employee, Tom is positive things will be on the right path for the years ahead. But don’t take Mr. Magazine’s™ word, get it straight from the printer’s mouth.

And now the Mr. Magazine™ interview with Tom Quinlan, chairman/ CEO/ president, LSC Communications as Mr. Magazine™ continues his series with the magazine and magazine media executives that make the industry world go-round.

NOTE: The conversations with the magazine and magazine media executives are going to be published chronologically as they took place.

But first the sound-bites:

On how he would assess the future of magazine printing and print in general as we move toward 2020: I think magazines will continue to thrive. There are more titles out there than ever before, but the quantities of many of those titles are not what the industry is used to. By that I mean, it’s the high single-digit or low double-digit mean count runs, and those are few and far between today. The targeting and the specific customer focus has resulted in magazine publishers shifting to smaller runs, but to a more engaged audience, which translates into a more profitable audience.

On how he is positioning LSC to meet all of the changing demands of 2020: When you think about us, I could probably roll into what our accomplishments were. When you think about, what I’ll call, the innovations that we’ve brought forward in mailing, what we’ve made in cooperative mailing; we’ve brought dramatic changes, reductions, to postal costs, especially to our magazine and catalog customers. We’ve developed even better optimization tools within our call-mail, high density program. We want our magazine customers to achieve lower postal per piece cost than what they have in the past. And in this program magazine customers claim carrier route, high density piece discounts and carrier route pallet bundle and pallet discounts. Most magazine customers in the past have never seen such rates, because they haven’t had this service, so we’re excited about that.

On accomplishments the company has had for 2019: In 2019, staying focused on the needs of our customers during the Quad transaction, and then after the transaction was terminated, those were obviously, for the first seven months of the year, times of great change. Change that was supposed to take place, but which can cause individuals to get distracted. But our employees really stepped up and continued to deliver on behalf of our customers. So, I’m really grateful for all of their hard work, perseverance and continued pride in what they do. That was a big part of the first seven or eight months in 2019.

On whether he considers the failed merger with Quad the biggest challenge he faced in 2019 or he’s put it behind him: I would definitely not say it’s behind me. First of all, if the transaction had went forward, I wasn’t going to be a part of the combined company. I was going to be out of a job. And quite frankly, that uncertainty hung over every person at LSC, whether they would be employed going forward. And obviously when the transaction was terminated, that was lifted.

On whether he sees bookazines and specialty magazines impacting the printing business in a positive way: I think it’s a mixture of good and bad for a printing company, definitely not indifferent. We have to keep pace with the changing magazine media model. Our model is always changing as well. The bet is that the industry is losing the business of larger magazines that are folding as you said, and the tough decisions that we have to make internally to align and optimize our operations to remain competitive is there. The good is that the specialty magazines or niche/enthusiast, however you want to look at them, are a sweet spot for us. And they have been for years, so we have to continue to keep them a major focus.

On whether he sees social media and digital as friend or foe to print: It depends on how well the magazine is using social media and digital. If it’s used strategically, it’s a friend and enables such a thing as, to me, more hyper targeted content and the ability to adjust content based on feedback for deeper engagement with the reader. And the ability to expand that content with video and images, platforms to communicate directly with readers. However, if the magazine is simply using it to have a presence and not effectively to create an enhanced and unique experience for the reader, then it’s going to be a foe. To me, the rise of visual media has led magazines to have to overcome the challenges of just content saturations. In order for people to want to engage with magazine content, it needs to have the right balance of strategy and creative content to stand out from the competition since the competition is no longer limited to just magazines. All brands are now creators of content as well.

On whether he sees the magazine media cup fuller today than a few years ago: I would say as it relates to magazines, I didn’t see a significant drop  that came in 2019. I continued to believe that there would be a three to five percent down, from a volume standpoint as an industry. Obviously, there was a step-change in 2019 that has taken place, so I think that there’s a reset that’s taken place within the industry. And as we look forward into 2020 and 2021, is it going back to those types of numbers or is it going to be a continued elimination of printed products? Again, I think as some of the large ones go out to backfill those titles that had the number of copies that you indicated earlier, it’s going to be really difficult.

 On why he thinks that happened: I think technology right now is catching people’s attention. There’s chief marketing officers where the dollar is being spent on advertising on an electronic standpoint. And that is now well-above what is being spent on a physical standpoint. I believe there will be a balance there, but we as an industry, publishers and printers, have to prove to the CMOs that the printed product is a good product for them to get a return on. Again, people with good content , it helps with good brand, can make the argument that there are many successful titles out there that magazine publishers have.

On anything he’d like to add: The increased pace of the transition of the content from print to digital is going to continue. We’ll see how fast it continues to occur in this new decade coming up. I’m still a true believer in the power of print to deliver content in a convenient and engaging way. It’s up to us in our industry, the print industry, to make that paper as interactive as we can. And we have to continue to do that as we move forward.

On his upcoming acceptance of the 2020 Franklin Award for Distinguished Service: Thank you very much. I’m deeply honored and touched that I will be a recipient of the award.

On what keeps him up at night: Our balance sheet. I have to fix our balance sheet. As soon as I can fix the balance sheet, in my mind the stock price will react accordingly. Customers and vendors then won’t be asking us about our financial shape. It’s been a tough year from the standpoint of not being able to react as quickly as we wanted to on the cost side, so we have to make that up. And again, once we start to do that, once we start to see that, then I think our balance sheet will get more in line and we’ll be back to where we used to be. What keeps me up right now is just making sure that we get a balance sheet in the next decade that will allow us to continue to be around for many more decades to come.

On his plan to attack that balance sheet: Getting the cost infrastructure to match what the revenue base is will be key. As you can see, we unfortunately made the announcements already about our Reno facility during this time frame. Again, we have to continue to adjust our platform which was built for the days when those publications, each one that you mentioned, with the counts that they had were out there. We have to adjust our size to reflect more of what’s going on today. That, combined with having a tremendous distribution network is going to put us in a unique place within the industry to continue to serve the industry at the level they expect us to be at.

And now the lightly edited transcript of the Mr. Magazine™ interview with Tom Quinlan, chairman/CEO/president, LSC Communications.

Samir Husni: As we approach 2020, what’s your assessment of the future of magazine printing and print in general as we move toward a new year?

Tom Quinlan: I think magazines will continue to thrive. There are more titles out there than ever before, but the quantities of many of those titles are not what the industry is used to. By that I mean, it’s the high single-digit or low double-digit mean count runs, and those are few and far between today. The targeting and the specific customer focus has resulted in magazine publishers shifting to smaller runs, but to a more engaged audience, which translates into a more profitable audience.

These smaller runs could be a count of a few hundred thousand, so it’s not as if they’re 500, 600, or a 1,000, they’re large, but again, they’re not what we’re used to seeing out there. More and more content from magazine publishers falls under the heading “niche enthusiasts.” This type of content forces community and all of us want to be in a community, belong to a community, so we believe that there’s bright days ahead there. We all know that print has been impacted by technology, but that disruptive technology is now starting to assist the printed product as opposed to destroying it. People want a break from the addictive screens and iPhones.

The point is we have to continue to do some vibrant products that differentiates the physical content from the electronic content. I think when you see brands and retailers that are started purely online that are now looking to include print in their engagement with customers, the magazine bodes well for the future in 2020.

The book market is what I would call “choppy,” from that standpoint. I think in education, book publishers are managing their inventory differently than they have in the past. I still think K-12 physical content will lead the way. Higher-read electronic content will lead the way, with physical content following.

The trade is going great. The demise of the book market because of the E-Reader a number of years ago has not occurred, will not occur. As long as the content is out there, the book market will continue to do well. And I also believe catalogs will continue to be a main part of retailers. Our job is for printers to continue to lower their distribution costs as they look to enter the marketplace.

Samir Husni: How are you positioning LSC to meet all of these new changing demands in 2020?

Tom Quinlan: When you think about us, I could probably roll into what our accomplishments were. When you think about, what I’ll call, the innovations that we’ve brought forward in mailing, what we’ve made in cooperative mailing; we’ve brought dramatic changes, reductions, to postal costs, especially to our magazine and catalog customers. We’ve developed even better optimization tools within our call-mail, high density program. We want our magazine customers to achieve lower postal per piece cost than what they have in the past. And in this program magazine customers claim carrier route, high density piece discounts and carrier route pallet bundle and pallet discounts. Most magazine customers in the past have never seen such rates, because they haven’t had this service, so we’re excited about that.

We’re excited about our cooperative mailing program to include inline polybagging, which is going to enable magazine customers to polybag inline during the actual call-mail process. Customers can now receive advertisement onserts that legacy call-mail services would traditionally not accept.

As I think about what we have to offer to the marketplace that differentiates LSC from others is what we can do, savings-wise, for people on the distribution side.

Samir Husni: What other accomplishments have you had in 2019?

Tom Quinlan: In 2019, staying focused on the needs of our customers during the Quad transaction, and then after the transaction was terminated, those were obviously, for the first seven months of the year, times of great change. Change that was supposed to take place, but which can cause individuals to get distracted. But our employees really stepped up and continued to deliver on behalf of our customers. So, I’m really grateful for all of their hard work, perseverance and continued pride in what they do. That was a big part of the first seven or eight months in 2019.

We’re square in the niche/enthusiast magazines. I’ve eliminated the name short-run/long-run from our vocabulary here at LSC. You know, we’re the largest printer of such titles. And we’re winning in key verticals, the universities, the co-ops; those are just two verticals that we’re making a pretty big impact on.

And then I would say, again, I think we’ve taken distribution to another level. We’ve integrated Farrington, Clark Group and R.R. Donnelley’s logistic business into LSC and I think we’re just starting to see the benefits of that as we move toward 2020.

Samir Husni: Any residuals left from that merger with Quad or lack of merger with Quad? Do you consider that your biggest challenge that you failed to overcome in 2019, or you’ve put it behind you?

Tom Quinlan: I would definitely not say it’s behind me. First of all, if the transaction had went forward, I wasn’t going to be a part of the combined company. I was going to be out of a job. And quite frankly, that uncertainty hung over every person at LSC, whether they would be employed going forward. And obviously when the transaction was terminated, that was lifted.

Having clarity is always a good thing and from October 2018 through when the deal was terminated in July 2019, we operated underneath the interim operating covenant of the purchase agreement, so we were limited in the actions that we could freely take.  Once those restrictions were lifted, we commenced taking the actions that you’ve seen and continue to see to get the company’s cost structure in line with the environment that we’re operating in.

Nine months is a long time to run any business, especially one in our industry, under such conditions. But again, it’s our customers and the dedication and attitude from our loyal employees during this time that was tremendous. Again, I can’t thank the employees enough for continuing to provide exceptional quality and service to our clients as all of this was unfolding during 2019.

Basically, as the magazine market was getting hit harder this year than any other year past based on declines, we weren’t able to act as quickly as we normally would have, so we’re making up for that now and getting ahead of it.

Samir Husni: You mentioned that you’ve eliminated short-run/long-run terminology from your vocabulary at LSC, but you’re seeing a lot of specialty magazines and bookazines. And while we do still have AARP with 23 million copies, the giants such as the TV Guide of yesterday with 18 million and National Geographic with 11 million, those days are gone. Do you see that new business model impacting printing companies in a positive way? Is your source of revenue going to change?

Tom Quinlan: I think it’s a mixture of good and bad for a printing company, definitely not indifferent. We have to keep pace with the changing magazine media model. Our model is always changing as well. The bet is that the industry is losing the business of larger magazines that are folding as you said, and the tough decisions that we have to make internally to align and optimize our operations to remain competitive is there. The good is that the specialty magazines or niche/enthusiast, however you want to look at them, are a sweet spot for us. And they have been for years, so we have to continue to keep them a major focus.

Brands have been built overtime with a consistency of presence in front of loyal subscribers, so we’d like to keep strong brands front and center regularly and consistently, that’s very important. Again, the bookazines and the SIPs have been healthy for the business, but having those core products, those core brands out there on a consistent basis is also important for us.

In addition to our platform being a perfect fit for those specialty magazines, there’s absolutions that satisfy the more holistic needs of the industry, which services video and photography and services through our internal creative agency, Hudson Yards, and again, going back to our highly differentiated logistics offering.

Samir Husni: Do you think all of these new technologies, including social media, are friend or foe to print?

Tom Quinlan: It depends on how well the magazine is using social media and digital. If it’s used strategically, it’s a friend and enables such a thing as, to me, more hyper targeted content and the ability to adjust content based on feedback for deeper engagement with the reader. And the ability to expand that content with video and images, platforms to communicate directly with readers. However, if the magazine is simply using it to have a presence and not effectively to create an enhanced and unique experience for the reader, then it’s going to be a foe. To me, the rise of visual media has led magazines to have to overcome the challenges of just content saturations. In order for people to want to engage with magazine content, it needs to have the right balance of strategy and creative content to stand out from the competition since the competition is no longer limited to just magazines. All brands are now creators of content as well.

From a business perspective, we’re always looking at new ways to seamlessly connect the printed page to the digital world and vice versa. The magazine publishers have so much data themselves, to me, that as soon as they can unlock that powerful tool that they have, they know their customers better than anybody else. They know what their likes are, they have the interaction with them. So again, I do echo probably what some of the other people that you’ve spoken to have said, that using technology can be of greater assistance than harm.

Samir Husni: If you look at the last three or four years of the print industry as a whole, do you see the magazine media cup fuller today than then?

Tom Quinlan: I would say as it relates to magazines, I didn’t see a significant drop  that came in 2019. I continued to believe that there would be a three to five percent down, from a volume standpoint as an industry. Obviously, there was a step-change in 2019 that has taken place, so I think that there’s a reset that’s taken place within the industry. And as we look forward into 2020 and 2021, is it going back to those types of numbers or is it going to be a continued elimination of printed products? Again, I think as some of the large ones go out to backfill those titles that had the number of copies that you indicated earlier, it’s going to be really difficult.

On the flipside, I do think that people are more apt to start out something that may have 100,000 subscribers or 50,000 subscribers and then try and see if they can work their way up as they go through it. But at the same time, our industry has to be ready from an equipment standpoint; from a distribution standpoint, to adjust to the new volumes that are going to be for magazine publishers.

Samir Husni: Why do you think that happened?

Tom Quinlan: I think technology right now is catching people’s attention. There’s chief marketing officers where the dollar is being spent on advertising on an electronic standpoint. And that is now well-above what is being spent on a physical standpoint. I believe there will be a balance there, but we as an industry, publishers and printers, have to prove to the CMOs that the printed product is a good product for them to get a return on. Again, people with good content , it helps with good brand, can make the argument that there are many successful titles out there that magazine publishers have.

Our industry like every other industry in media like to talk about the downfall and how bad things are, but on the flipside there are still a lot of successful content out there, which ranges from all sizes of magazine publishers.

Samir Husni: Is there anything you’d like to add?

Tom Quinlan: The increased pace of the transition of the content from print to digital is going to continue. We’ll see how fast it continues to occur in this new decade coming up. I’m still a true believer in the power of print to deliver content in a convenient and engaging way. It’s up to us in our industry, the print industry, to make that paper as interactive as we can. And we have to continue to do that as we move forward.

Samir Husni: And I’d like to congratulate you on the 2020 Franklin Award for Distinguished Service that you will soon receive. It’s very well-deserved.

Tom Quinlan: Thank you very much. I’m deeply honored and touched that I will be a recipient of the award.

Samir Husni: What keeps you up at night?

Tom Quinlan: Our balance sheet. I have to fix our balance sheet. As soon as I can fix the balance sheet, in my mind the stock price will react accordingly. Customers and vendors then won’t be asking us about our financial shape. It’s been a tough year from the standpoint of not being able to react as quickly as we wanted to on the cost side, so we have to make that up. And again, once we start to do that, once we start to see that, then I think our balance sheet will get more in line and we’ll be back to where we used to be. What keeps me up right now is just making sure that we get a balance sheet in the next decade that will allow us to continue to be around for many more decades to come.

Samir Husni: Does that mean there will be some bitter pills that you have to swallow or they’ll be sugarcoated? What’s your plan to attack that balance sheet?

Tom Quinlan: Getting the cost infrastructure to match what the revenue base is will be key. As you can see, we unfortunately made the announcements already about our Reno facility during this time frame. Again, we have to continue to adjust our platform which was built for the days when those publications, each one that you mentioned, with the counts that they had were out there. We have to adjust our size to reflect more of what’s going on today. That, combined with having a tremendous distribution network is going to put us in a unique place within the industry to continue to serve the industry at the level they expect us to be at.

Samir Husni: Thank you.  

Next up, Roger Lynch, global CEO, Condé Nast.

Editor’s Note:  Wishing you a very happy holiday season and looking forward to a prosperous new year.  Mr. Magazine™ Conversations will resume after Christmas.