Meredith Corporation Business Information, Profile, and History

Company Perspectives:

We are Meredith Corporation, a publicly held media company founded upon service to our customers. Our cornerstone is knowledge and understanding of the home and family market. From that, we have built businesses that serve well-defined readers and viewers, deliver the messages of our advertisers, and extend our franchises and related expertise to other special markets. Our products and services distinguish themselves on the basis of quality, customer service, and value that can be trusted.

History of Meredith Corporation

Meredith Corporation is a leading media company, focused primarily on magazines and broadcasting. The company is best known for publishing two of America's most popular magazines: Better Homes and Gardens, with a circulation of 7.6 million, and Ladies' Home Journal, with a circulation of 4.5 million. About 85 percent of the diversified media company's revenues comes from its magazine business, which publishes 21 subscription magazines, more than 40 special interest publications, and a number of custom publications. The company also publishes close to 300 books, including the best-selling, red-and-white checkerboard-covered Better Homes and Gardens Cookbook and a line of do-it-yourself titles it produces in conjunction with the Home Depot chain of stores. In addition, the company owns and operates 11 television stations, primarily in smaller markets such as Flint, Michigan and Ocala, Florida. As of 1999 the company was in the process of buying Atlanta's CBS affiliate KGNX-TV, giving Meredith an entry into the nation's tenth largest television market. Meredith's diverse media projects focus for the most part on home and family. It maintains a database of some 60 million customer names, the largest such database among U.S. media companies. Approximately one-third of the U.S. population, or 65 million people, read a Meredith magazine each year.

Early History

The seeds that started the Meredith Corporation were given to Edwin Thomas (E. T.) Meredith as a wedding present. On E. T. Meredith's wedding day, his grandfather gave him several gold pieces, the controlling interest in his newspaper, and a note that said, "Sink or swim." After returning his grandfather's newspaper to profitability, Meredith sold it for a profit and began publishing a service-oriented farm magazine called Successful Farming in 1902. The magazine grew quickly, from a starting circulation of 500 to more than half a million subscribers by 1914. The company had grown proportionally, from five employees in 1902 to almost 200 in 1912. In 1999 the company had more than 2,500 employees and still occupied the same building that was established as company headquarters in 1912. The building went through some expansion as well, including an $18 million renovation completed in 1980.

After serving a year as Woodrow Wilson's Secretary of Agriculture, E. T. Meredith returned to his company in 1920 and decided to publish more magazines. In 1922 the company purchased one magazine, Dairy Farmer, and launched another, Fruit, Garden and Home. Meredith tried to make Dairy Farmer a national success for five years before merging it with Successful Farming. Unable to make a profit until 1927, Fruit, Garden and Home, a magazine similar to Successful Farming for the home and family, had start-up difficulties as well. At first, advertisers paid $450 per black-and-white page in Fruit, Garden and Home, as opposed to Successful Farming's rate of $1,800 per black-and-white page. After a name change in 1924 to Better Homes & Gardens, the magazine's fortunes turned around, allowing it to command $1,800 per black-and-white page of advertising by 1925.

By the time of E. T. Meredith's death in 1928, the year he was considered a candidate for the presidency, Better Homes and Gardens and Successful Farming had reached a combined circulation of 2.5 million. After World War II, Better Homes and Gardens had surpassed McCall's, Good Housekeeping, and Ladies' Home Journal to become the leading monthly magazine. Holding a circulation of about eight million for more than two decades, Better Homes and Gardens remained a powerful magazine into the 1990s, when it ranked third largest in the United States, behind only Reader's Digest and National Geographic.

Meredith capitalized on the success of Better Homes and Gardens magazine and began publishing the Better Homes and Gardens Cook Book in 1930. Magazine subscribers received complimentary copies of the first edition, and book sales grew rapidly. The cookbook became one of the best-selling hardback books in America, with more than 29 million copies sold by its eleventh edition in 1995. The company has since used the Better Homes and Gardens name to further its profits, using it to sell special interest publications starting in 1937, to open a real estate service in 1978, and to offer garden tools at 2,000 Wal-Mart stores starting in 1994.

Diversification in the Postwar Years

To raise the capital necessary to diversify its interests, the company began offering stock to the public in 1946. Over the next ten years, Meredith bought three television stations and opened a commercial printing business. By 1965, the company was listed on the New York Stock Exchange. By 1969, the company had formed a printing partnership with the Burda family of West Germany, which would grow into one of the largest printing businesses in the United States.

In 1978 Meredith began a franchise-operated real estate business under the Better Homes and Gardens name. "It's a natural extension of the product franchise," Meredith chairperson Robert Burnett told Advertising Age. By 1985, the business challenged established realtors like Century 21 and Coldwell Banker, according to Advertising Age. The real estate business had grown to include about 700 firms, which owned and operated about 1,300 offices and had 24,000 sales associates by 1994. Company headquarters supplied the franchisees with marketing, management, and sales training information.

Growth in the 1980s

Although Meredith was publicly owned, it had a long history of only cautiously seeking investors. In 1985, however, it turned into "a very different kind of company," Paine Webber analyst J. Kendrick Noble told Advertising Age. At that time, Meredith began welcoming interest in its operations. Meredith started sponsoring art exhibits in New York and giving presentations to security analysts. The change occurred to fuel a growth strategy, which helped make it a Fortune 500 company.

At the beginning of the 1980s, Meredith's interests included a printing business, a fulfillment system, a real estate franchise, four television stations, and three magazines: Better Homes and Gardens, Metropolitan Home, and Successful Farming. The company expanded quickly during the 1980s, entering the video market with Meredith Video Publishing, purchasing three television stations, launching seven new magazines, publishing a Korean edition of Better Homes and Gardens magazine (an Australian edition had been published since 1978), and purchasing Ladies' Home Journal, the sixth largest women's service magazine when ranked by circulation at the time of the purchase in 1986. Despite its acquisitions and expansion, however, the company soon floundered. In 1992 Meredith had a net loss of $6.3 million.

In response, management decided to streamline Meredith, ridding the company of ancillary businesses. To soften the blow of a nationwide advertising slump it felt in its magazines and television stations, Meredith sold its 50 percent interest in the Meredith/Burda printing partnership to R. R. Donnelley & Sons Company of Chicago in 1990. Given the high costs of remaining competitive in the printing business, Meredith president Jack Rehm felt the sale was smart, telling Business Record that "we had to make a choice to either get bigger or else to get out. We felt we could better use our resources in our other businesses and depart the printing business." To further streamline, Meredith sold its fulfillment business to Neodata of Boulder, Colorado, in 1991, and two television stations were sold off in 1993. Moreover, the company's work force was cut by seven percent, to 2,000, between 1992 and 1994.

Meredith's cuts and investments allowed it to focus on what it did best. E. T. Meredith III told Business Week in 1994, "We're going back to what we were: a successful magazine and broadcasting company." Meredith planned to add three or four magazines per year. Realizing that advertising profits might never be as high as they were during the lucrative 1980s, the company earmarked $400 million for additional TV and magazine acquisitions, according to Business Week. In addition, the company developed customized marketing programs, which could create tailored packages of Meredith's magazine and book publishing, real estate service, and television stations for advertisers' specific needs. By 1994, company profits had started to climb again, jumping 23 percent over 1993 to $22.9 million on revenues of $799 million.

Meredith's streamlining helped the company take advantage of its unique niche, the home and family. Meredith sold its chic magazine, Metropolitan Home, to Hachette Filipacchi Magazines, the publishers of Elle, and introduced several new titles that targeted different domestic topics, such as Country Home, Country America, WOOD, Midwest Living, and Better Homes and Gardens American Patchwork & Quilting. Meredith's new magazines met with significant success, with growing circulations of 200,000 to one million. Shari Wall, senior vice-president at J. Walter Thompson in Chicago, noted Meredith's fortuitous position in the market, telling Business Week that "their thrust of family and home is the hot thing for the 1990s." Meredith, too, eagerly publicized its area of focus. The company launched an advertising campaign for its magazine group in 1993, which asserted, "If it has to do with home and family, it has to be in Meredith." The campaign featured black-and-white pictures of real families having fun together.

Although Meredith promoted itself aggressively to advertisers, it relied most heavily on its subscribers, who fueled the company's rebound. Circulation for most of the company's magazines was up in 1993, but company president Jack Rehm told the New York Times that "the reason we have succeeded with so many magazine titles in the last several years is that we are able to get readers to really pay for the magazines. We must count much more on the reader to generate the revenue stream than the advertiser. Historically, that has not been true, and magazines who were overly dependent on advertising were the ones who really suffered." In 1993 Meredith's magazine subscription and newsstand revenues accounted for 32.2 percent of the company revenues, or $257.45 million, and magazine advertising revenues made up 29.6 percent, with $236.81 million.

Meredith's Better Homes and Gardens magazine proved a good example of the company's success in managing large publications. Better Homes and Gardens led the shelter magazine industry in ad revenues and pages in 1988, offering its advertisers an audience four times the size of its next competitor, according to Marketing and Media Decisions. A four-color page cost $103,480 in Better Homes and Gardens; in Architectural Digest, Better Homes and Gardens' closest competitor in shelter magazines, a similar advertisement cost $28,490. According to some analysts, Better Homes and Gardens' fortunes can be traced to the trend toward home and hearth that started in the late 1980s and early 1990s; the magazine benefited because it bridged the home and women's service categories.

Meredith took a conservative approach to changing its flagship magazine, refusing to bow to the shifting winds of publishing fashion. For example, when faced with "single, disenfranchised dropouts" at advertising agencies in the 1960s who were "insulted that we would continue to publish [Better Homes and Gardens] when [they] didn't think it should exist," Burnett told Advertising Age, "it was tempting to say, 'We've got to change Better Homes and Gardens and get with it."' Meredith remained committed, however, to the magazine's focus on home and family.

To keep the magazine contemporary, Meredith continually made subtle changes, rather than doing major redesigns every five years like other magazines. According to Burnett, in an article in Advertising Age, rapid change was likely to alienate readers; Burnett commented that "the worst thing that could happen is for your best friend to show up with a changed personality; it's a shock and a negative." The magazine's enhancements for 1994 included the addition of puzzles and games for parents and their children. The company's strategy paid off, as Better Homes and Gardens continued to be a leader in its category.

In 1994 Meredith's several large circulation magazines and book clubs generated a subscriber database of 63 million, the largest database in the United States. Meredith began exploiting this database for profit in 1992, as the company's marketing department began using the database to give editors valuable feedback on their magazine's readership, as well as to cross-promote books and magazine spin-offs, target direct mail programs for advertisers, research new markets, and test new products. The company also used the database to aid in the launch of a new magazine called Crayola Kids, to insert specialized ads in targeted magazines for an auto advertiser, and to put in targeted editorials in Better Homes and Gardens issues. The database also helped to turn around the fortunes of Meredith's book division. Despite its more than 30 years of experience in database marketing, during which it had also used rented lists, Meredith did not consider itself a very sophisticated user of its own resource. Clem Svede, vice-president and director of consumer marketing, noted in Direct that "when someone asks how our database is doing, we say 'We think we're at the top of our class--but we're only in the first grade."'

In 1993 the company faced a challenge in the form of a natural disaster. Massive flooding in the Midwest that year, particularly in Iowa, reached the company's Des Moines headquarters, ruining the company's mainframe computer system. As a result, the company was forced to install a new desktop publishing network about eight months earlier than planned. Under the guidance of Robert Furstenau, director of production and technology for Meredith's magazines, the company converted to the new system in about two days. Meredith immediately purchased $400,000 worth of Macintosh computers and peripheral equipment, installed them in a rented space, and flew in software specialists from around the country to give 103 editorial employees two weeks of training information in a few hours. Despite the chaotic atmosphere, no deadlines were missed, and in the long run the desktop system has reduced the company's prepress production costs. Furstenau told the Des Moines Register that the flood "has got to be one of the better things that has happened to magazine production at Meredith in a long time."

Changes in the Late 1990s

The company had floundered in the early 1990s, with erratic earnings, a rather staid image, and thin operating margins well below the publishing industry average. Yet it had great assets, particularly in its under-exploited customer database and in its Better Homes and Gardens brand name recognition. In 1994 the company announced ambitious plans to launch new magazine titles, buy more television stations, swing lucrative licensing deals, and expand its book publishing division. The book division ultimately did not pay off, and in 1995 the company sold its book club to Book of the Month Club and reduced its commitment to book publishing. But in other areas Meredith was right on track. It managed to launch new magazine titles with great skill, primarily because it learned to target audiences using its existing customer database. Although other media companies such as Hearst and Time Warner also had massive databases, Meredith's was singular in that its customers were very similar, described in a December 4, 1994 Forbes article as "nesters--people who are interested in their homes and in spending money to make them better." Thus it was not too difficult for Meredith to cull the list and find, for example, people with older homes: a good market for its Traditional Home magazine and the related Renovation Style. Other new titles in the mid-1990s were American Patchwork & Quilting and homegarden. The company managed to hold costs for new magazines down to $2 million to $3 million, considered impressively low in the publishing industry, and most turned a profit within two to three years. The company also embarked on a successful licensing deal in 1994, letting mass-marketer Wal-Mart open Better Homes and Gardens Garden Centers in more than 2,000 stores. These sold gardening equipment marked with the Better Homes and Gardens name, as well as the magazine itself and other Meredith gardening titles. The deal with Wal-Mart led to minimum royalties of $3 million for each of the first three years and $5 million for the next two years. Meredith also brokered the Better Homes and Gardens name by publishing small booklets for sale at checkout counters, with titles like Garden, Deck & Landscape Planner. The company had 40 such books by 1995 and printed a total of 35 million copies. By the mid-1990s, such brand extensions were leading to impressive earnings: the company told Forbes in 1995 that it derived $1.05 in income from brand extensions for every dollar of revenue the magazine Better Homes and Gardens earned.

In its broadcasting segment, Meredith also performed as planned. By 1996, the company had seven stations, and these contributed more than 40 percent of the firm's profit. In 1997 the company purchased three more television stations, picking them up for $435 million from First Media Television. This acquisition gave Meredith stations in Orlando, Florida, Greeneville, South Carolina, and Bend, Oregon. They were small markets, but increased Meredith's share of the nation's television market from five percent to eight percent. By 1998, Meredith owned 11 stations, and these accounted for about 18 percent of the company's total revenue. Its stations were all in small markets, yet most of them were predicted to be strong growth areas. In late 1998 Meredith negotiated to buy its first station in a top ten market, Atlanta's WGNX. Not only was Atlanta a major market, but it was one of the country's fastest growing TV markets.

By 1999, Meredith seemed to be in very good shape. Its big advantage was that its core product--home-related publications and products--was more and more the "in" thing. The number of people aged 45 to 54 was increasing as the baby-boomers aged, and this demographic tended to spend the most on home-related goods. The old-fashioned appeal of Better Homes and Gardens and the other Meredith publications seemed likely to be back in style with a vengeance in the coming decade. The company had managed to shed unprofitable businesses such as its real estate venture and much of its book publishing and concentrate on what it knew best. In addition, Meredith was able to make useful cross-connections between its publishing and broadcasting sectors, for example, launching a syndicated "Better Homes and Gardens" television show. Financially, the company was in record shape, with sales topping $1 billion for the first time in fiscal 1998.

Principal Subsidiaries: Meredith Cable, Inc. (70%); Meredith Video Publishing Corporation; Meredith International, Ltd.