Serial Launchers

Folio: The Magazine for Magazine Management, Feb, 2001 by Jullian Ambroz

A BEHIND-THE-SCENES LOOK AT WHAT IT TAKES TO PUT A MAGAZINE INTO ORBIT--AND KEEP IT THERE--FROM THREE VETERANS OF THE START-UP PROCESS.

THE POWER OF PARTNERSHIP

GREAT IDEAS FROM COMMITTED PEOPLE CAN FLY HIGH WHEN BOOSTED BY A SEASONED PUBLISHER. BY JO ROSLER

Launching magazines requires so many different skills that are partly contradictory--and that's one of the many reasons why it's usually a team sport. You must find a way to combine rational market analysis with passion, craftsmanship and an affection for your readers. But the key to launching a magazine, and one of the many joys, is to understand that you're creating a living product--and to realize that this same viewpoint applies to maintaining the publication.

Discovering Archaeology, which I've mentored since 1998, is one of my favorite launches. As a business model, this launch was unique. We found a way to launch a magazine with much less than the usual $20 million, which would have been challenging for a valid but narrow special-interest title with limited advertising potential.

I already knew, from reader research, that archaeology was the single most attractive spin-off topic for scientifically interested readers. I took note, therefore, of the imminent launch of a promising archaeology magazine by an outside group of fanatic entrepreneurs who were highly committed and qualified archaeologists, but who at that point did not have much of a publishing record. Entirely self-financed and based in a low-cost area in Texas, this group agreed to a deal with us in which we would provide publishing know-how and cross-promotional opportunities in Scientific American in return for equity in the new venture. The launch also had the potential to generate international licenses.

The bottom line: A viable niche magazine has the chance to be established with minimal costs, and the supporting publisher will enjoy favorable options and much reduced up-front risk.

A launch that became problematic was Scientific American Presents, a series of monothematic specials that began as annual specials of Scientific American. They sold very well, and it seemed we had an obvious opportunity to do more than one per year. The magazine developed from a once-a-year incremental profit to a four-times-a-year separate magazine that required some investment and commitment to develop its own critical mass.

While the demand on the reader side for the special issues developed as expected, the necessary additional advertising proved very difficult to sell into this series of one-shots. In hindsight, anticipating the lack of advertising, we could base the magazine on a lower cost structure and put more emphasis on developing effective direct mail packages very early. And I would probably allow more than one year to raise the frequency from two to four per year.

The Funding Hurdle

Independent publishers that are just starting out need to beg and pray for funding, especially since bank debt and venture capital are rarely available options. Even a modest magazine, very targeted and bootstrapped, takes $5 million to $10 million to break even--too much to be raised from friends and family. The independent entrepreneur with limited resources must focus on magazines that generate substantial revenues quickly and reliably, which usually excludes models that require building a substantial circulation volume first to enjoy a good advertising business later. If you identify a niche where real cash revenue streams flow early and serve the market well, you may still be able to grow organically from a modest beginning.

In general, any launch requires substantial amounts of cash up front, and not many assets are left if it doesn't work out. The publisher has no equipment to sell, no real estate, and no contracts that would make good collateral. Most of the money goes into marketing, promotion, paper and printing. The only thing with significant worth is the mailing list, and that's worth a fraction of what is usually spent to build it.

But as a business, once they work, consumer magazines with healthy circulation contributions are not only relatively stable, they also produce a very attractive cashflow stream and can be nicely profitable. Advertising-driven models can be more profitable in boom years, but they are guaranteed to be more of a roller-coaster ride over time. They also come with the built-in temptation to grow the ratebase beyond its natural size.

Trade magazines are quite different animals, of course. If you do the right thing at the right time, profitability should come more quickly.

Newsstand distribution remains one of the more difficult challenges to launching a magazine, especially for the small to midsize publisher. Without significant investments into shelf space and retail promotion, slow and organic growth is the only option. In that regard, magazines are becoming, unfortunately, more and more like a new soft drink.

Launching a magazine 20 years ago probably wasn't any easier. We have seen the barriers to entry come down in the past 10 or 15 years, following the availability of cheap and decentralized computer processing power, most notably in the form of desktop publishing. As documented well by Samir Husni, head of the magazine program at the University of Mississippi, this has led to an amazing number of magazine launches in recent years.