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Is There An Opportunity in Magazines?

With the speed at which information can be obtained from anywhere in the world, the world of archaic magazines should be long behind us. Why subscribe to a magazine when you can get a story the second it is published and read it on the same device we carry in our pockets all the time?

It's mostly a rhetorical question. Readers have made their decision and we've seen magazine subscriptions continue to taper down for years. Advertisers have followed, but also, better options to target readers have become available. Suffice it to say, the magazine world just hasn't been that inspiring.

But that doesn't mean that there aren't some large magazines out there. According to the Alliance for Audited Media, the largest consumer magazines are:

• AARP: 22.8 million subscribers
• AARP Bulletin: 22.5 million subscribers
• Costco Connection: 15.5 million subscribers
• Better Homes and Gardens: 7.6 million subscribers
• People: 3.4 million subscribers

Not included in that list is Game Informer, which has a self-reported 6 million subscribers. What do the first three and Game Informer have in common? They're all a piece of a larger membership product. If you're part of AARP, Costco, or Gamestop's PowerUp membership, you automatically get their respective magazines. These are passive products being billed as subscription magazines.

If we look beyond that, there are Better Homes and Gardens and People, both of which are now owned by Dotdash, which just closed on its very large deal with Meredith. Despite this, Dotdash doesn't sound overly optimistic about the magazine brands they acquired. According to The New York Times:

IAC executives said there were no immediate plans to scrap the print editions of the Meredith magazines but they expected print media’s broad decline to continue. “We’re going to carefully manage the print business,” Tim Quinn, Dotdash’s chief financial officer, said on the investors’ call. “We think there’s an opportunity to focus on the top titles and quality subscribers.”

In other words, the magazine business is probably still profitable. However, it continues to shrink and they need to manage it so that it doesn't torpedo the entire business, especially since IAC will likely want to spin out Dotdash at some point in the next few years.

So, this returns to the question: is there an opportunity in magazines?

I think there is. But we need to flip the script on how magazine publishers have historically built their businesses. For example, if I subscribe to Vogue, I can get 12 issues for $12. Even at renewal, I'll only be charged $25. And that includes shipping.

If it's not clear, there really isn't much of any profit in that. But that was alright because the advertising more than made up for it. Essentially, if Vogue could offset some of the cost of the magazine, then it was happy because it made so much money delivering ads to you.

It's even worse for newsstands. Craig Fuller, Founder of FreightWaves, recently bought Flying Magazine. And when he dug into the newsstand business, saying he was shocked would probably be an understatement. He wrote:

The other thing I’ve discovered is just how broken the newsstand supply chain is. Distributing magazines through newsstands is a loser for publishers. To give you some context, for every issue Flying distributes through the newsstand, it generates $.11 in revenue. Yet, it costs $1.10 to print and fulfil. If issues aren’t sold at retail, the magazines are thrown away and the retailer is not out of money, but the publisher is.

So, it would cost Flying $1.10 to print and fulfill its magazine, but it would only see $0.11 in revenue from the newsstand. What an abysmal business. But in an era prior to the internet, how else were magazines able to get subscribers? This is why they would jam 4-5 of those little postcards into the magazine, hoping you'd fill it out and send it in so it could try and generate that $1.10 in revenue.

So, the current model just doesn't work. Selling magazines as close to cost as possible just doesn't make sense when there are fewer companies looking to throw money into magazine ads.

What model makes sense then?

I know I preach a lot about how great advertising is, but when it comes to magazines, we have to take a subscription first approach. We have to price the magazine at a point where it actually becomes profitable.

But that means you have to actually make a product that looks incredible. Gone are the days where you can create a cheap product full of ads. The magazine is not just a vehicle for ads. It is the product that you are trying to sell. Here's Fuller on what they're doing:

But one of the rules I have in running a business is that if you are going to offer a product, you must aim for excellence. With that, we plan to upgrade the print edition at the end of the year, with the finest paper and covers available to magazine publishers. Additionally, we’ll double down on photography and evergreen content. We are also planning to get rid of the ads in the back of the magazine which have nothing to do with aviation. (You know the ones I am talking about.)

A subscription used to cost $14 for eight issues per year. They've cut the frequency in half so now subscribers can expect to only receive an issue once a quarter. On top of that, they increased the price to $30 for the first year ($50 after that). This means that they're generating $12.50 for every issue of the magazine. That is a dramatic difference from the $1-$2 that most magazine publishers get.

But because of this, the product will be different. Rather than matte, cheap-feeling paper, I imagine it'll be glossy with a ton of money invested in photography. I love airplanes. I'm sure it'll be incredible seeing a centerfold of a plane. That costs money, but at $12.50 per issue, it's worth it.

Naturally, this means there will be fewer subscribers. But that's okay because you're creating a product for a more niche, dedicated audience. A subscriber is likely to stick around for years because someone forking over $12.50 for an issue is clearly an enthusiast.

Now, you'll notice that he says, "we are also planning to get rid of the ads in the back of the magazine." He qualified "the back of the magazine" because they're not getting rid of ads entirely. Why would they?

Generating additional revenue from contextually related advertising (stuff your readers will actually appreciate seeing) is a good idea. Here's a good example... If you've ever gotten married, you either purchased or watched as five to six wedding magazines were purchased. And then they were devoured. The interesting thing is that the bulk of those magazines are advertisements. People literally pay because they want to see the ads.

When it comes to magazines, we have to make the ads a part of the experience. I imagine Flying has a very wealthy audience (if they can afford any sort of non-commercial flying). Therefore, let's get beautiful luxury ads in there and avoid the cheap pharmaceutical advertisements. The audience will like it and it's a nice secondary revenue stream.

Ultimately, I think the play for magazines is for them to become much smaller and of a far higher quality. In many respects, the model will look similar to sustainable digital media. Cheap, gotcha offers will show high subscriber rates, but result in horrible churn when the cost goes up. Build for the audience you want and magazines could be a nice addition to the media equation. As great as websites look, there really is nothing like reading a magazine.

Thanks for reading today's AMO. If you have thoughts, join the Slack community or hit reply. Otherwise, have a great weekend and see you on Tuesday.