Founded in 1901 as Istituto Geografico De Agostini by Geographer Giovanni de Agostini, the publisher is one of the oldest in Italy. Starting out as cartographer and, a little later, an encyclopaedia publisher, the company still has a strong core business in soft education. The children’s market – which thrives on learning and collectable models and figurines – is a leading sector for De Agostini.
The real acceleration in publishing activities started in 1985, says Alessandro Belloni, CEO De Agostini Amministratore Delegato. “It became one of the biggest European publishing houses. Not only with partwork magazines. There were many years of publishing activity until 2002-2003, when the company really started to diversity the businesss into different fields.”
De Agostini has interests in other media – TV, gaming and financial investments—but partworks very much dominates the publishing arm. This is hardly surprising, given the company is the global market leader, with 56per cent of the 1.2 BLN global partworks market.
According to Belloni, the internationalisation of the company is an important factor. “Our Shareholders started building up subsidiaries very early – opening up legal entities and subsidiaries in Europe. Today we manage the business out of Novara, near Milan, while we run the business through subsidiaries.” The company has several key satellites, like the London and Tokyo offices and the 50/50 joint venture with Spanish company Planeta, which manages Latin America and Iberia (Spain and Portugal). But offices in Moscow and Kiev are key for the company; Ukraine, which is in crisis, is a major market as is Russia and other parts of Eastern Europe. There is also a New York subsidiary, which opened in 2012, as well as offices in, Hamburg, Warsaw and Athens.
“Our [business] model is pretty simple. We develop the partwork products out of the creative centres – Novara (the largest), London and Tokyo – and we roll them out rapidly into the different countries.
“We usually make the content concept in English, and each country produces adaptations in local languages. It’s a mix between global and local products. But we are increasingly developing international products.”
A huge amount of investment goes into developing the products – which not only provide magazine content but have the essential collectable or “build-up” item too.
“We invest €20m per year in concept development and research, testing our products in the various countries before launching them,” says Belloni.
“When I joined the company in 2008 we were strongly dependent on licensing deals. We were partners of companies like Disney and Warner – developing products inspired by them. What we are doing now is developing our own properties. Some of them are becoming more than magazines – becoming merchandising and TV programmes.”
The launches get the backing of a €40m global TV campaign.
Although partworks have a real tactile and physical appeal, digital – has had an important and beneficial impact on the company. “It’s becoming a crucial part of the marketing mix. Today we are investing 20-25 per cent of the media spend on digital – research, web investment and social media (which is becoming very important). We are starting to offer digital conversions as an alternative to print.”
But it’s not just digital versions that are attracting interest. The web has become a lucrative shop window for De Agostini. Says Belloni: “Retail is very important – newsstands and, to a much lesser extent, supermarkets are still outlets, but subscriptions are becoming more and more important. Today around 60 per cent of our revenue is based on subscription. And 70-80 per cent of subscribers are coming from the web. So the internet is becoming a powerful tool and platform for us to acquire customers. This is also very important in terms of organisational changes. We are not only training internal people, but looking for additional talent.”
Figurines and models
The company does still publish traditional print magazines. “For instance, in countries like Japan and Russia we cover local cultural topics through paper only products. Successful ones have featured Japanese temples and monasteries in Russia or history in Asia and Russia. But, of course, the physical component is very important.”
And it’s not just children’s character figurines that are designed for manufacture in Asia. The “Build Up” market (where readers create their own models from partwork kits) is flourishing. Says Belloni: “Readers can be passionate about Formula One, or model cars, etc, but they also really enjoy the process of creating and assembling their own products.” This is made more enjoyable via De Agostini’s online customer support. “Readers can upload their creations – and talk to each other, because, quite often, model building is a pretty technical process. They can discuss technical solutions and innovations.”
Although popular De Agostini models are cars and galleons, new age technology has also had its impact. An example is Robi – first sold in Japan and then globally – whereby customers assemble real robots.
Clearly ecommerce offers huge revenue potential for the company. And it is an opportunity already being exploited. An ecommerce destination called Model Space has been set up in the UK, US, Germany and also some of the Asian countries. “It’s a club,” says Belloni, “where all the readers and fans speak to each other. We are also launching soon in Italy and Russia and aim to get to 12-15 countries quickly. Ecommerce is one of our most important marketing areas. And it is one of the main fields in which we are investing.”
Robot and galleon making clearly have a masculine appeal, but there are also “How To” products and services with a more universal bias: Cake Decorating, Photography and Foreign Languages courses – soft education courses in general. These are specialised areas where social media plays a big part – testing products and concepts and generating interest and subscriptions.
Clearly these new avenues are working. “The company has grown in the last five years,” says Belloni. “Revenue is €400m, and we are seeing good profitability. We have enjoyed good Eastern European business, in particular in Russia and the Ukraine. Despite the deep crisis [in Ukraine], we still have big business in Russia and the rest of East Europe, accounting for €150m revenue. Asia and Japan represent €150m, with €100m in Western Europe, which has restarted to grow following the development of the web.”
Further growth is pinned on ecommerce. “And we are counting on extending the most important brands in our portfolio. All of the kids products and also cake decorating – which has become a TV series, in partnership with Discovery Channel – and Robi, which is an important merchandising product in Japan.
“So our future is mostly in line with the thinking of other publishers. We are picking up the best brands, and working with a 360 degree perspective. Our business model is solid and it allows us to develop strong brands. We are very launch intensive; doing 90 product launches a year. We need to come up with 30 new products a year. That requires a huge R&D effort.”
Advertising isn’t a major revenue earner at the moment. De Agostini currently gets some sponsorship and some revenue on the website. But growth is firmly rooted in the company’s core partworks offerings and the growing ecommerce business. Children’s partworks series Animal Farm and Cake Decorating and Robi – each produce €100m in retail, becoming much more than partworks.
This business emphasis looks unlikely to change much in the future. Says Belloni: “In five years’ time, I think the key will be to maintain a strong position in partworks – with a balance in the regions. Also, to accelerate ecommerce and brand extensions – partnering with merchandising licensees or TV companies, to develop big businesses out of the brands.”