‘Change is hard’: Consumer Reports restructures to survive in the digital era

Consumer Reports is struggling to change as it faces new competition. Can it reverse this downward trend?

A memo to Consumer Reports top managers in February of 2012 was blunt: “CR is not growing revenues or subscribers, and we are losing money. We must right the ship.”

The ship began veering off course in 2011 after many blockbuster years.

Consumer Reports and Consumers Union, the policy and action division of the magazine, showed a hefty profit of $21,414,103 for the fiscal year ending May 31, 2008. The next two years were profitable, too — $6.9 million and $912,031 — but the declines caused concern.

The bad news came in June of 2011, when Consumer Reports reported a fiscal year loss of $3,502,757. A new chief operating officer, Laurence Bunin, was brought on board five months later to try to fix things.

“He was there to shake things up,” says an employee who, like most people interviewed for this story, requested anonymity.

Jim Guest, chief executive since 2001, “realized he had real problems with the business, and for the first time, he turned the reins over to someone in a way I’d never seen him do before,” says a longtime employee. “With Bunin, he really handed over the keys to the kingdom and said, ‘Go for it!'”

“We need to get used to living with change,” Bunin wrote in a memo shortly after taking the CR job. “Change is never easy – and we don’t expect this to be easy.”

The memo, titled “Next Steps,” outlined the nonprofit company’s goals, including: “Build a more compelling and differentiated brand,” “right-size and realign staff levels across the organization,” and “return to healthy operating finances, meaning positive, growing margins.”

He warned that there would be layoffs at a place that rarely let people go.

“We are currently losing money,” Bunin wrote his senior managers. “This is not acceptable going forward and we are going to have to reduce expenses. The lion’s share of our expenses are staff.”

Consumer Reports doesn’t sell advertising and relies on print and web subscriptions ($29 and $30, respectively) and fundraising to pay the bills at its offices in Yonkers, New York. “CR magazine subscriptions [revenues] were $98 million in 2008,” Bunin’s memo reported, “and will be about $10 million less than that in 2012. In the same period, CR newsstand revenue has declined from $7.9 million to $4.5 million.”

Why the decline? “There are many more new competitors who are doing interesting things,” the memo said./CONTINUES

One of Consumer Reports’ problems is that its average reader is over 60 years old.

That’s always been the problem, says David Heim, a CR editor from 1977 to 2005.

“The age of the average subscriber was going up faster than the march of time,” he says. “Readers kept getting older and older. We could never seem to attract readers in their 20s and 30s, who I always thought should be our subscribers because they were getting married and setting up households.”

To attract younger readers back when he was with CR, “we started testing bicycles, we started testing running shoes and evaluating health-insurance plans and mutual funds.”

Heim recalls the magazine editors discovering digital cameras in early 1990s. They were in a meeting when the head of camera-testing proposed testing digital for the first time.

“The other 11 people in the room had never seen a digital camera,” says Heim. “It was uncharted territory.”

The camera-tester showed colleagues “a primitive one-megapixel camera” and the kind of images it produced. The editors were impressed.

“Everyone thought we should do it and within two years, digital cameras were the second most popular products tested,” says Heim. “Cars were always first.”

But even the digital cameras — and the bikes and mutual fund ratings — failed to bring in younger readers.

Young people were going to Amazon.com for product reviews, and many at CR started seeing Jeff Bezos & Co. as competition. One editor showed colleagues how dire the situation was by pointing to Google Trends; its Consumer Reports chart – the one on top of this post – showed interest in the brand sinking.

One problem was the website. “It was a very slow process for them to wake up to the notion that the website was more important than the print product,” says a CR veteran, and many old-timers were slow to embrace online reader reviews.

“There was the attitude, ‘Users don’t know anything; we’re the experts.'”

It was the old-timers who felt like they were targeted by Bunin and the managers he brought in.

“We’re famous for having people put in 20 or 25 years here. Now they’re making you feel ashamed for having put in many years,” says a longtime staffer.

An ex-employee who was pushed out says the thinking of the new regime was that “the old crowd was incompetent and we’ll bring in a new crew because we can.”

The Newspaper Guild of New York went public with its unhappiness with Bunin and his style.

“I still have not been formally introduced to the new COO, Laurence Bunin,” Consumer Reports Guild unit chairperson Anna Pierdiluca complained in writing in May of 2012 – six months after Bunin’s arrival. “During a recent discussion with a high-level CR executive, I painstakingly relayed the staff’s concerns and fears regarding the organization’s future. The response was, ‘They need to get over it.'”

The Guild rep continued in her letter to colleagues: “While we recognize that the organization needs to change, the cavalier and dismissive attitude expressed by management is appalling …We urge management to cease its ‘let-them-eat-cake’ mentality.”

Consumer Reports editorial director Kevin McKean lost his job in September of 2012, after seven years with the magazine.

“I think for their next chapter, so to speak, it’s actually better that I’m out of there and it’s a good thing for me and a good thing for them,” he told Folio magazine.

Nine months later, editor-in chief Kim Kleman realized the new regime wanted her out, too. She had been with Consumer Reports for 16 years — six of them as top editor — and, I’m told, “was well-loved by the editorial people.”

One CR survivor says: “She had been the heart and soul of Consumer Reports for years, everyone’s nurturer and best friend, and scores of staffers were traumatized at her beheading.”

Kleman wrote in her June 24, 2013, farewell letter: “Editors, of course, serve at the pleasure of their VPs. That’s as it should be. In conversations that [recently hired Magazines and Newsletter Products Vice-President] Brent Diamond and I have had over the past few months, it has become clear to me that he’s looking for a different partner to shepherd Consumer Reports magazine, its tablet and digital editions, and home and electronics special publications, which I currently oversee.”

She told her staff:

You’ve helped me learn about irradiated meat and gotcha fees. Adult diapers and big-ass TVs. Details behind Ratings, surveys, and statistical models. How to successfully publish important, bullet-proof, prize-winning investigations. And the magic of the words “best & worst.”

I will miss wild and crazy brainstorming with our reporters, editors and designers; crunching abs with my svelte friends in the Fitness Center; devouring fresh-baked sugar cookies from the range testers; and being (as so many of you are) an unofficial ambassador for CR to friends, family, clubs, students, and, for me, a curious collection of 65+-year-old groupie readers who somehow have my extension and like to chat me up about stories. Most of all, I’ll miss watching you grow your skills and talents into what you’ve become today: an impossibly accomplished staff.

Like many of you, I’ve heard or witnessed over the years incredible stories about how Consumer Reports and you, its staff, have saved the day. Here’s my favorite:

In 1970, a reader whose 7-year-old son was kidnapped asked us for help. After his release, the boy had provided details about the kidnapper’s car, but police couldn’t identify the make from his description. Using the clues—”bigger than a VW, smaller than a Mercedes,” an upholstery pattern with “small crosses or X’s,” and a “sort of rectangle with a round thing on it” under the vent window—our auto engineers identified the car as a Toyota Corona made between April 1968 and April 1969. Police quickly tracked down a suspect.

Which goes to show, you never know how your expertise as consummate journalists, testers, advocates, or researchers will be needed, and just how much the world counts on the national treasure that is Consumer Reports. You can bet I’ll always be rooting for you.

Kleman’s last day at Consumer Reports was July 3. The company is still looking for a new editor-in-chief “to help infuse new ideas for more engaging content” and “bring innovation and fresh thinking to the magazine.” That person will be working with former Prevention editor-in-chief Diane Salvatore, who was hired earlier this year as CR’s senior director of content strategy.

(Kleman, who is now teaching at Columbia j-school, sent this email when I asked for comment: “I’m very proud of the work the staff did while I was there, and I wish everyone the best. The editorial mission of Consumer Reports is a crucial one, and the current leadership has got to ‘think big.’ Sure, cover news-you-can-use, like which snowblower to buy. But CR has unique reporting, testing and survey resources to engage and inform readers about major consumer issues of the day like no one else can. Run with that.”)

Ironically, chief operating officer Bunin — the man behind the restructuring and dismissals — was dismissed by CEO Jim Guest about the same time that Kleman was forced out of the company. Several people told me that Bunin’s abrasive style did him in — but only after he offended some top-level managers. (Bunin didn’t respond to my interview request. His profile on LinkedIn says he’s self-employed as a consultant.)

Why was Bunin fired? I asked Consumer Reports spokesperson Lauren Hackett. She didn’t acknowledge his dismissal in her emailed reply: “Laurence was brought in as a change-agent. He brought a new level of strategic thinking and disciplined execution that really kick-started some of our transformation work. We were ready to move into the next phase and needed to focus on moving the organization to the next stage of development.”

Spokesperson Hackett tells me that, yes, change is hard but the restructuring is working. She writes in an email:

“On the business side things are starting to level out: subscriptions to ConsumerReports.org are just about even (<1% lower) than last year, and the magazine subs are only 3.2% lower than last year. Fundraising efforts are ahead of last year by almost 13%. Overall operating revenue is up over 2% year to date." The company's workforce, she adds, has been reduced by 13 percent since February of 2012. "We are still in the midst of organizational transformation," writes Hackett. "It's really more than just changing the magazine. As an organization, we recognize that the way that consumers receive and process information has changed. Our information products are a manifestation of our mission, and we have done some deep self-examination to ensure that we are meeting consumer needs in the best possible way that we can. This involves looking externally as well as taking a close look at our staff, structure, processes, inputs, and outputs and making some changes and adjustments to ensure that Consumer Reports is well positioned to effectively fulfill our mission in a way that is impacting the most consumers possible." Bunin is gone, but the “industry elites” he hired remain and Consumer Reports is a changed place. An employee who is nostalgic for the old days writes in an email:

“Up until a few years ago, CR was a treasure unique in the world, a thriving and influential not-for-profit institution, founded by socialists/scientists, that would not cave to the dictates of the commercial world. It was an idiosyncratic place that valued intellect, reason, conscience, and independence. Its readers loved it for all its quirkiness. Senior management was always inept, making all kinds of blunders over the years, but the outstanding journalists, scientists, and middle managers were always able to put out a first-class product in spite of that.”