Publishing
The Publishing Group posted another year of record revenues, operating profit and operating margins in fiscal 2000. Better Homes and Gardens magazine maintained an impressive leadership position in its field.

Our success stories extend well beyond our largest title. Nearly all of our magazine brands continue to improve their performance, particularly Traditional Home, Country Home and Midwest Living. Our book publishing business and our lineup of Special Interest Publications are showing very strong growth. Emerging brands such as MORE, Renovation Style and Hometown Cooking are also key contributors to our revenue improvement.

To continue our strong operating profit and margin growth, as well as accelerate revenue growth, our strategies include:

• Continuing to broaden our advertising base.

• Developing new and emerging brands.

• Building multi-platform marketing programs.

• Enhancing our circulation activities.

Our editorial strength provides the core of our content expertise in decorating, food, home improvement and remodeling, as well as gardening, health, family finance, crafts and other hobbies and interests. Consumers recognize and value the unique editorial voice of Meredith brands. Our service journalism approach is focused on our readers and how they can redecorate their master bedrooms, plan quick but elegant meals or remodel their family rooms. From this editorial foundation, we have built – and will continue to build – numerous advertising and circulation successes. We fiercely protect our reputation for providing the best home and family content.

Broadening our advertising base
One of the Publishing Group’s key strategies is to continue expanding our advertising base. Our top advertising clients include home, food and auto companies that market their products and services to a broad segment of American families. At the same time, many of our products serve very upscale and targeted audiences that attract a new set of advertisers – especially in the technology, luxury goods, financial services and travel categories.

Developing emerging brands
Our commitment to building new brands also fuels the Publishing Group’s success.

We launched MORE magazine in the fall of 1998 as a bimonthly magazine with a rate base of 320,000. The magazine, one of our strongest emerging titles, is increasing to a frequency of 10 times annually with a rate base of 600,000. MORE has also developed a Web presence through an alliance with ThirdAge Media, resulting in a branded beauty and style channel targeting women over 40.

Family Money, launched as a quarterly magazine, has grown to a bimonthly with a rate base of 525,000. The magazine is also significantly enhancing its Web offerings on familymoney.com. Additionally, we are applying the tax and financial planning content from Family Money to custom publications for The Principal Financial Group and to marketing promotions sold by our television stations.

In fiscal 2000, we launched Hometown Cooking and Antiques Extra as our newest subscription magazines. Hometown Cooking, a spin-off of the Better Homes and Gardens brand, features recipes from regional and local cookbooks across the country that are first tested in the Better Homes and Gardens Test Kitchen. The magazine has a unique editorial and design premise, and readers have responded enthusiastically to it. Antiques Extra, a spin-off of the Country Home brand, helps antique collectors identify the hottest trends and buying locations. The initial success of both titles demonstrates our ability to extend existing brands and efficiently cross-market additional products to our existing customers.

Note our emphasis on developing new brands – not just magazines. The difference is subtle, but critical for success in the new media and marketing environment. As we continue to develop new products to serve evolving consumer needs, we expect the content to be distributed through numerous media outlets to generate multiple revenue and profit streams.

Building multi-platform marketing programs
Another driver of Meredith’s publishing success is the creation of unique multi-platform marketing programs. For example, in early fiscal 2000 we created “Blueprint 2000–America’s Home for the New Millennium.” Intel Corporation was a lead sponsor of the program, which was marketed through the full array of Better Homes and Gardens properties – including the Web site, television show, magazine, and a 20-city mall tour that included eight of our television markets.

For the summer and fall of calendar 2000, we created a similar program highlighting the Better Homes and Gardens “Intelligent Kitchen.” Sponsors include a diverse lineup of advertisers, such as Microsoft, Armstrong Residential Flooring, 3Com and KitchenAid. (See THE INTELLIGENT KITCHEN below for more details.)

Enhancing our circulation activities
We have stepped up our consumer marketing initiatives to further boost the profit margin of our circulation efforts, sell more subscriptions through the Internet and increase revenues from single-copy sales.

To accomplish this, we have been increasing the volume and accelerating the timing of our direct-mail marketing efforts. The shift to more direct mail has a short-term accounting impact, because we are required to record costs at the time of the mailing but realize revenues over the life of a subscription. However, our direct-mail marketing efforts generally yield higher response rates, pay-up rates and renewal rates than other subscription sources or the industry averages. This success reflects the editorial strength of our products and the growing sophistication of our consumer database. As a result, we are confident that increasing our direct mail efforts will improve long-term circulation economics.

Another circulation initiative involves expanding our Internet-based programs that encourage more consumers to subscribe to and renew Meredith magazines online. Generating subscriptions through the Internet can dramatically increase circulation margins by reducing mailing costs related to our subscription acquisition efforts.

By increasing the number of subscribers gained through both direct mail and the Internet, we ultimately increase the quality of our circulation base and create more opportunities for cross-selling and renewals.

Also regarding circulation, we are boosting single-copy sales. While most large magazine companies have experienced declines, Meredith has increased revenues from single-copy sales over each of the past several years. We remain strong for several reasons. First, we have retail powerhouse titles – particularly our lineup of Special Interest Publications, as well as Traditional Home magazine and Country Home magazine. For example, the Capel Circulation Report recognized Traditional Home for having one of the greatest newsstand growth rates and the most consistent newsstand growth of the past decade. In addition, the display of our magazines at book superstores and large retailers – including home improvement, home decorating and mass retailers – results in tens of thousands of new premium outlets for sales. These will be important sources of continued circulation revenue and margin growth.

Our Publishing Group’s editorial, advertising and circulation strategies have served us well. The ability to apply our core strengths and extend our expertise to new initiatives and opportunities will continue to drive financial growth.

THE INTELLIGENT KITCHEN — MULTI-MEDIA MARKETING IN ACTION
The Intelligent Kitchen, a studio set created by the editors of Better Homes and Gardens, illustrates how Meredith can combine its editorial and marketing expertise to create unique multi-platform programs that generate new revenues. The Intelligent Kitchen showcases a variety of the latest appliances currently available to consumers – in a techno-savvy yet accessible and livable environment. The kitchen’s features include a halogen oven that doubles as a microwave, a warming drawer for storing food between cooking and serving, and Internet access through the phone, television and computer.

Sponsors of the Intelligent Kitchen include Microsoft Corporation, Armstrong Residential Flooring, 3Com and KitchenAid. The sponsors and editorial content are promoted through our full array of print, broadcast and interactive properties. These include:

• In-depth editorial sections in the November 2000 issue of Better Homes and Gardens magazine.

• A special Web section within the Better Homes and Gardens site, bhg.com, including a blueprint of the design and step-by-step animated instructions for creating the kitchen.

• A full episode of nationally syndicated Better Homes and Gardens Television, airing in October 2000.

• Customized television news segments and printed editorial supplements, which include marketing sponsorships sold by our television stations.

• A virtual video tour of the kitchen presented through the Better Homes and Gardens Mall Show at 20 major locations across the country, including eight of our television markets.