Hearing the Net's Footsteps

Traditional magazines won't reveal their Web-inflicted wounds, but they're still feeling the Internet squeeze.
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Bricks-and-mortar guys are quaking in every industry, but you never hear about it. They hear the Net's footsteps, but they remain helpless. The only thing they know to do is deny. That is something, however, they are excellent at.

Take this morning's

New York Post

. The paper reveals that

Conde Nast

-- the primo magazine buzz merchant chain in America -- is having a disastrous first half, with ad pages down in double digits. A few weeks ago we read in

The New York Times

that magazine circulation in general is on the decline. And last month

Encore Books

unceremoniously folded.

The Web was never mentioned in any of these stories. But believe me, it is the elephant in the room that no one wants to talk about. The


article blames the magazine problem on the American people finally waking up to the evil ways of the stamping houses -- you know, those guys who send bogus checks to the elderly, telling them they may have already won if they would just buy some magazines! (Subtext: That million-dollar check will have your name on it, unless you chose not to subscribe to every magazine featured.) The

Conde Nast

folk are puzzled. The Encore people blame management.


We are in the greatest economy of all time. This economy is just flat-out booming. Circulation at magazines in other times when the economy was this strong was flying off the charts. Rate bases were climbing almost quarterly. Encore Books should have been expanding and bathing in the discretionary income that Americans have come to expect and have in spades. Advertising for magazines should be thicker and more expensive than ever.

But the Web is skimming the cream. Soon you will read about better-capitalized retailers having problems. The magazine business will soon have to own up to its circulation declines and

slash its rate base

. (Those are the four dirtiest words in that business, and I am a veteran of it.) All because of the Web.

I had thought the financial monthly segment was vulnerable simply because the stuff people write for those sits in a can for months. (I know my stuff did, and I was always pushing to be last in the magazine. Freshness-date those things, and nobody would eat them.) I had figured these guys could continue to live high for a couple of more years.

Nope, things will be evident by the second half. The business is moving faster than I thought.

The mainstream dead-tree press will not reveal the true culprit of the decline until it is too late. But it is clear to me. The Web companies, now all with deep war chests courtesy the stock market, are stealing eyeballs from old media and old stores at a pace that will soon make even the most hard-line bricks-and-mortar people wake up to the revolution.

Nevertheless, it will be too late for them to do anything about it. To which I say, hallelujah.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at