Mineshaft Gap

The Wiggly World of Publishing

The single greatest misconception people have about periodicals concerns the issue of "product." For the sake of this discussion, let us define "product" as that which yields profit. Most people assume, logically enough, that a publisher makes a profit through revenues generated by retail and subscription sales of its magazine. Hence the magazine is the "product."

This is most assuredly not the case. For the vast majority of commercial periodicals (i.e., ones that accept advertising), direct profits from magazine sales are almost nonexistent. If this is true, what exactly is a magazine's product?

You are.

Before elaborating, let's first consider how periodicals are sold in this country. There are two basic ways you can purchase a magazine; buy it at retail outlets (newsstands, book stores, supermarkets, etc.), or buy a subscription and have it mailed to your home. Retail sales are unprofitable because the publisher must share his profit margin with both the distributor (who sells the magazine to retail outlets) and the retailer (who, of course, sells the magazine to the public).

Special-interest publications, for example, typically sell magazines to their distributors at 50% off cover price. In short, one half of the cover price goes to the publisher, and the other half is split between the distributor and retailer. For a small magazine, with its inherently high production costs, it is not uncommon for the distributor and retailer to both make more profit per copy than the publisher.

From the publisher's point of view, retail sales are a bust. Their only saving grace is that they might generate new subscriptions.

Subscription sales certainly look more promising, and are indeed more profitable for a magazine. Here the publisher sells directly to the public, and thus keeps all of the profit generated by the sale. Of course, subscriptions entail additional costs for mailing (envelopes, labor to stuff and sort, postage), but subscriptions still end up being more lucrative than retail sales.

Unfortunately, though, not as much as you might think. The public expects subscriptions to be sold at a substantial discount relative to single-copy retail prices. Given that subscribers prepay for the full term of subscriptions (and thus compensate publishers for some issues that won't be mailed for months), moderate discounts certainly seem to be in order.

The key word here is "moderate." Discounts should never reach the point where publishers can't earn a reasonable profit from subscriptions.

Yet one need only glance at a newsstand, or flip on the TV, to see that publishers are offering ludicrous discounts and incentives in order to garner new subscribers. Sports Illustrated offers extremely low subscription rates, and as a bonus throws in idiotic telephones or banal videocassettes, Time and Newsweek offer as come-ons sad little clock-radios and other equally useless dreck, Life promises to include their special Life Celebrates the Nipple retrospective issue, and on and on. One British audio magazine promised a free cell phone with every two-year subscription order!

How can these chuckleheads make any money on subscriptions? They can't, and guess what—they don't care. Why? Because the serious money, the real elephant dollars (as Nick Lowe so eloquently put it), the oh-my-God-I'm-finally-going-to-get-my Porsche (invariably pronounced "Porsh") money, the hey-baby-want-to-see-my-new Jacuzzi? money, comes from advertising.

Your subscription payments help keep the office lounge stocked with Evian. Period.

Now let's get back to the remark about you being a magazine's product. Advertisers need your attention so they can persuade you to buy their products.

The first problem advertisers face in this noble quest is determining who you are, and how to find you. Companies spend millions of dollars on demographic surveys to learn what sort of person is most likely to purchase their products. Once that's accomplished, they next have to gain access to the desired target audience. Special-interest publications are an obvious choice in terms of desirable reader demographics; automobile manufacturers advertise in car magazines, athletic equipment makers feature products in sports magazines, audio companies run ads in stereo magazines, etc.

Advertising rates are fundamentally based on a magazine's paid circulation—the more warm bodies a publication can deliver to an advertiser, the more the magazine can charge for its ads. (And make no mistake, these rates can be astounding; some popular titles ask six figures for a single, full-page color ad.)

You, dear reader, are one of those warm bodies.

If advertising is key to a publication's profitability, some interesting questions naturally arise. Can a magazine serve equally well both the interests of its readers and its advertisers? To what extent do those interests coincide? If circulation is crucial in setting ad rates (and thus determining profits), might a magazine compromise or dilute editorial content in hopes of broadening its sales appeal, and thus increasing readership?

The answers are "No," "Very little," and "You bet your ass, Sparky!," respectively.

Which is why 90% of the magazines on the market are utter crap.

And why publishing on the Web has the potential to change everything. Stay tuned...