A Dot-Com In Every Corner

Folio: The Magazine for Magazine Management, March 1, 2001 by Jane E. Zarem

IT'S AN EMERGING BUSINESS MODEL FOR MAGAZINES--AN INTEGRATED MULTIMEDIA PLATFORM WITH MULTIPLE WEB SITES THAT GRAB SHARE OF MIND AND GENERATE REVENUE BY OFFERING A FULL RANGE OF PRODUCTS AND SERVICES.

New times and new media require consideration of new business models.

"In print publishing, two distinct business models are currently in play," explains Gordon Hughes, president and CEO of American Business Media. In the older model, a publisher has a foot in many camps; if one area gets in trouble, the others pull the weight. In the newer model, developed in the 1990s, a publisher with the power title in a category "owns" the niche; but if the category goes down, well--."

There's another alternative. Clayton Hall, president of Tempe, Arizona-based Empire West Studios, has devised an integrated multimedia business concept. Called the A&R Multi-Media Publishing System (patent pending), it is designed to target recording artists seeking to have their music heard by both the public and the big players in the recording industry. But the concept can be applied effectively to other niche markets.

The core of Hall's publishing system is one print magazine, combined with several separate (but co-branded) revenue-producing Web sites that offer a full range of products and services to address all the needs of the niche market represented by the magazine audience. A&R's ancillary elements include a proactive marketing site, an Internet radio station, a CD-replication and promotional products site, a DSL and Internet TV site, and a licensing and consulting information site. Some of those sites are exclusively targeted to the readership; others appeal to the general public. For either group, locating products on different sites makes it simpler to find what they need.

Once the system is set up, the publisher can cross-market any or all of the products and services, along with magazine subscriptions, across all sites. "It creates a synergy," Hall suggests, "that allows significantly higher revenues than what might be generated from a single corporate portal or stand-alone magazine-branded site that simply regurgitates content for free or promotes weakly products other than the magazine itself."

That's tough talk, but follow the thought. A single magazine with a single Web site offering primarily free content, for instance, has overhead, yet nothing much to buy. So it generates little, if any, revenue to offset its cost. "It's a burden," says Hall. "It should be product-based, providing a substantial positive cashflow of its own. That's the goal."

Large corporate portals harboring many magazine brands simply multiply the effects of the single-magazine model. "Although each magazine on the site may have the same theme, it appeals to a totally different niche," explains Hall. "But the top publications in the group support the slow starters until they're self-sufficient, minimizing risk. That's a traditional, proven model. Cross-marketing is almost nonexistent, however, since each magazine has a different readership--and the overhead is astronomical, since each magazine site has a separate staff. If each of the magazine-branded sites were product-based, offering items that readers of the respective magazines might need, instead of being free content-based," he suggests, "the corporation would still benefit from sharing the risk--and a whole world of new revenue streams would open up."

"In my mind, the idea of establishing an integrated multimedia platform makes common sense," says David Foster, president of EnterServ Inc. (ESI), a Denver-based IT consultancy. "It allows a publisher to grab share of mind of its audience by providing relevant products and services, and to earn money instead of spending it."

Foster believes this model could be the future of niche marketing. "The smarter publishers are trying to find ways to dominate a niche market. The idea is to be all things to that audience, no matter how broadly or narrowly the niche is defined."

Larger publishers can also learn to treat mass audiences in a niche fashion, Foster suggests. Hearst, he points out, is doing that with its portfolio of women's magazines and related product lines, broadcast channels, and so forth. And huge profits result from that kind of synergy.

"Hearst is a great example" agrees Hughes, citing the fact that the mega-publisher earns a bundle of money each year from product sales both online and through the pages of its various magazines. "But," he adds, "it's also tricky. It won't work unless you have, in the first place, a recognized brand."

There are lots of other risks, according to Foster. Management must be skilled in managing multiple disciplines, each of which is a business unto itself; and that, he says, is often difficult to accomplish. There's also a risk that market competitors may try to chip away at one segment or another, he cautions, "so you've got to have a critical mass of delivery in order to succeed. That's branding, but it's also an investment--and the money isn't trivial. So the expertise required to pull it off is vast."