Publishing for profit: launching a magazine is a risky venture. Navigating the pitfalls requires sufficient advertising, circulation, content—and a bit of luck
Marcia A. Wade
Dana Powell’s career in publishing began in the early 1990s when her father, Gary, asked her to go magazine shopping before her senior prom. “At that time, my father–he’s a firefighter now, but he used to design clothes back in the day–sent me out to find samples of dresses that I wanted,” recalls Powell. “So I went to various bookstores for a bridal magazine featuring women of color because I wanted to see colors on skin tones like mine and I just couldn’t find it.”
After she returned empty-handed, Powell’s father recommended that she do something about it. So the 16-year-old Powell promised her father that she would start one herself should there be no black bridal magazine by the time she completed college.
Serious about her publishing ambitions. Powell immersed herself in the industry, majoring in mass communication at Illinois State University, where she met Shannon Bonner in 1996. At the time, Bonner held a bachelor’s degree in mass communication and was working toward a master’s degree in marketing communication, all the while learning everything possible about the magazine publishing business. Powell was impressed with Bonner’s business expertise, and the two would soon become partners.
Some six years later, Powell, 28, would keep her promise to her father when she and Bonner, 31, launched Brides Noir from their Chicago home office. Catering to an underserved black consumer group, Brides Noir officially debuted in 2002 throughout 43 states. The test copy even caught the eye of a CBS producer, who asked to use one as a set prop on the hit sitcom Everybody Loves Baymond. The 116-page premiere issue was distributed it] over 40,000 retail stores nationwide.
The duo raised some $80,000 for startup costs by pooling personal savings, loans from family and friends, and a $20,000 award from the Miller Urban Entrepreneurs Series Business Grant Competition they won in 2001. “We were able to use that as seed money along with our personal assets and money from friends and family to launch our first issue,” recalls Powell. They spent 25% of their seed capital on promotions and total selling expenses, such as bridal expos throughout Chicago, sales commissions, and advertising through their Website; 32% on administrative costs such as utilities, legal fees, and editorial outsourcing; 35% on printing and distribution: and another 8% on miscellaneous expenses.
They also produced 15,000 test copies of the publication, but ran into a roadblock when they could not find a distributor. “We had all of this money and work on the line, but the book wasn’t going to be anywhere,” Powell says. Fortunately, Circulation Specialist West, a Colorado-based circulation consulting company, contacted Powell and Bonner after reading an article in The Wall Street Journal about their winning the business plan competition. Working with the firm, they were able to get a distribution company to deliver their test copies to several stores, including Barnes & Noble bookstores, in 2002. By the following year, the publishing duo would secure a contract with Anderson News Co. L.L.C (ANCO), a major wholesaler.
The publishing process has been rewarding for Powell and Bonner, who expect the magazine to generate some $250,000 this year. But they aren’t the only ones who have successfully launched a magazine. More than 6,000 consumer magazines are produced each year in the U.S., over 700 of which are audited by the Audit Bureau of Circulations. ABC-audited magazines generated more than $16 billion in advertising sales and more than $10 billion in circulation revenue in 2002, according to Magazine Publishers of America. ABC is the leading third party auditing organization in the U.S. Being audited by ABC is crucial to measuring circulation, and therefore to determining how much a magazine can charge for advertising space. Powell, who says the circulation of Brides Noir is roughly 50,000, intends to become ABC-audited by the end of the year.
But with the financial perks of publishing come many pitfalls that publishers must navigate if they are to not only get their magazines off the ground, but also sustain them for years while remaining competitive. It’s a difficult task to master in a market where 60% of magazines fail their first year in business, only two out of 10 new magazines remain it, business after four years, and just one out of 10 makes it past its 10-year anniversary.
It’s even more arduous in an industry where longevity is predicated on obtaining a successful balance among circulation, advertising, and editorial, but which offers no foolproof system for helping you achieve that balance. “Magazine publishing is not a science,” says Samir A. Husni, professor of journalism at the University of Mississippi and author of Launch Your Own Magazine: A Guide for Succeeding in Today,’s Marketplace (Hamblett House Inc.: $26.95). “There is no formula. It is a know-how,” he says.
That know-how starts with securing sufficient financing. Powell and Bonnet launched Brides Noir with less than $100,000, but it can cost a lot more to get a magazine off the ground. To avoid a cash crunch, Husni suggests that independent publishers operate on a budget of four times their estimated startup costs–that generally ranges from $1 million to $4 million a year.
DOWN THE REVENUE STREAM
In most businesses, identifying multiple revenue streams is essential. In magazine publishing, there are two such streams: advertising and circulation. When soliciting advertisers, publishers typically produce a rate card that details the cost of advertising in their magazine. Rates vary and are typically based on the publication’s circulation and on what the competition charges.
When Powell and Bonner began their search for advertisers, they encountered their share of obstacles. The vice president of marketing at one national bridal gown retailer they were trying to woo told them that their company didn’t cater to such specialty groups as African Americans, even though a year prior to their meeting Powell and Bonnet had participated in three African American weddings where the bridal party purchased gowns from that same retailer.
Powell and Bonner were able to win advertisers in a variety of wedding and post-wedding categories including catering, photography, bridal registries, gown designers, and jewelry. Word of mouth played a great part in attracting advertisers, but they were also able to lock in advertisements because they presented a professional product and, through their research, showed that African Americans spend billions on weddings.
To convince advertisers to purchase space in your publication. determine your magazine’s rate base. Rate base represents the guaranteed circulation advertisers expect the magazine to maintain. The higher your magazine’s rate base, the more attractive your magazine will be to potential advertisers. An established magazine is considered successful if it reaches 10% of its total universe, which is the number of people who fit the magazine’s target audience.
To maintain your rate base and guarantee advertisers that the magazine will continue to sustain its audience, nurture renewed subscriptions and establish new ones. One way that you can do this is through a direct mail marketing campaign to members of your magazine’s total universe. Powell and Banner used their Website to attract new subscribers. In fact, they averaged about 20,000 hits a month on the Website before they launched the test issue. After its release, they got over 50,000 hits in one week’s time. To date, Brides Noir has more than 3,000 subscribers.
“[Our Website] was the most powerful tool we had in terms of getting subscribers,” says Bonner, who expects 12% of Brides Noir’s sales to come from subscriptions.
Circulation revenue comes from subscriptions, newsstand sales, and other venues in which a publication is sold. Generally, subscriptions account for about 83% of an established magazine’s sales and newsstand sales make up 17%. With startups, the opposite is true: New magazines depend more on newsstand sales.
When considering potential readership, keep it mind that total circulation is the number of magazine copies printed multiplied by that magazine’s pass-along rate. The pass-along rate is the number of times one copy of a magazine is read and then passed to a new reader.
Bridal magazines have high pass-along rates, so Powell and Bonner are confident that Brides Noir will fare well, creating opportunities for them to expand into other offerings. “I want to truly maintain our position as being experts in the bridal market for brides of color, [but] our goal is to own our market in more ways than one,” Powell says. “We want to expand further beyond the magazine and build an enterprise.”
7 STEPS TO A SUCCESSFUL MAGAZINE
According to publishing experts, the first things to do when starting a magazine are to:
1 Generate an idea and secure a target audience. To make your magazine concept a reality, first research the idea to determine if there is an audience that will support it. “People who tell me. ‘This magazine is for everybody, about everything, reaching every age’ [are wrong],” Husni says. “There is no such thing anymore. We are in the era of laser targeting.” Brides Noir successfully identified and targeted the underserved African American bridal market.
2 Find advertisers and identify your audience. According to Cheryl Woodard’s Starting & Running a Successful Newsletter or Magazine (Nolo Press; $29.99), the key is identifying an audience that is interested in purchasing a particular publication. Holding focus groups or conducting surveys can gather this information.
3 Find a distributor. More often than not, this requires the use of a circulation consulting company to get periodicals from the printer to bookstores and other retail outlets. These companies have contacts with national distributors and wholesalers. They generally charge $1,000 to $3,000 per month but can shop your magazine idea around to national distributors.
4 Monitor costs at all times. When calculating costs, keep in mind that a healthy, established magazine spends one-third of its budget on printing and production, one-third on editorial expenses, and another third on distribution. Also, in the beginning stages of starting a magazine, 60% to 70% of the startup budget will go toward or printing.
Starting and operating a magazine can be expensive, so publishers must prepare themselves for the possibility of negative revenue. “You have to plan on zero revenue for the first year.” Husni warns. “Do you have enough money to publish a magazine for a whole year without getting a penny back?” If the answer is no, Husni says you may want to rethink starting a magazine, otherwise you could become one of the many publications that never make it to a second issue. To get your magazine past its freshman effort, create a five-year budget that outlines your costs.
5 Manage printing and postage. Printing is the largest expense of starting a magazine. Depending on the paper’s quality and weight, printing costs generally range from 75 cents to $1.50 per copy, with the amount decreasing as the number of copies increases. New publishers are usually required to pay up front, until a printer-publisher rapport has been established. after which a payment plan is granted.
The cost of postage fluctuates regularly but is generally one-third of the magazine’s production costs. Periodical rate postage can decrease your costs significantly, but requires a complex application process. The appropriate forms and statements for periodical rate applications can be found at www.usps.com/forms/periodical.htm.
6 Create editorial and design. Magazines require a staff that can produce compelling content and design. Graphic designers can cost $35 to $50 per hour. In-house writers are generally salaried positions and their pay should be in line with industry standards. Freelance writers often set their own fees, with some charging at least $1 per word and others charging a flat fee per article. Costs for equipment vary depending on the type used, but desktop publishing programs required for the design of magazines can run upward of $1,000 per program.
7 Become a knowledgeable publisher. Successful publishers understand how the magazine process works from editorial to advertising to printing to circulation and everything in between.
RESOURCES FOR STARTING A MAGAZINE
* Magazine Handbook(Magazine Publishers of America, www.magazine.org) is a comprehensive guide for advertisers, advertising agencies, and consumer magazine marketers.
* Folio magazine (www.foliomag.com) publishes 16 times a year for $96, and Circulation Management magazine (www.circman.com) costs $39 for a one-year subscription. Folio features news and advice about the magazine marketing and management industries and CM covers trends for circulation professionals.
* Starting & Running a Successful Newsletter or Magazine, 3rd ed., by Cheryl Woodard (Nolo Press; $29.99) gives strategic advice lathe would-be-publisher about every aspect of building a thriving publishing business, from raising startup capital to managing staff. Woodard is co-founder of PC Magazine, PC World, and Macworld.
* The Magazine from Cover to Cover: Inside a Dynamic Industry, by Sammye Johnson and Patricia Prijatel (McGraw-Hill/Contemporary Books; $21.95) gives the reader a thorough look into the jobs that construct a magazine’s framework.
* How to Write a Business Plan, 6th ed., by Mike McKeever (Nolo Press; $34.99) provides step-by-step instructions for preparing a first-rate business plan and loan application.
COPYRIGHT 2004 Earl G. Graves Publishing Co., Inc.
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