The Deteriorating Economics of Small Magazines

The ongoing debate about the future of media, the potential for legacy media and the viability of content models on the Web incorporate two different issues: whether content-creating institutions can survive and how content-creators can earn a living.

The issues are fundamentally different. I’m a lifelong consumer of newspapers and magazines: the romance of the printed page was a big factor in what I decided to do with my life. I love the smell of printer’s ink, the organic process that occurs when the inks mix and are then absorbed into the paper to create an indelible, high quality experience.

But, I’m also a huge consumer of information—about just about anything that captures my interest and that seems to relate, however tangentially, to one of my passions.

My allegiance, ultimately, is to people who can gather, process and clearly communicate new things about complex information. Those are the content creators, the people who have the interest, passion and need to spend many hours of their life gaining expertise and insight into specialized topics.

Let’s take a look at the economics of the content-creator and the economics of the institutions that give them haven. Then let’s postulate a little about what the next generation of content creation might look like.

Specialty Magazine Economics

Of the thousands of magazines that exist, the vast majority have revenue of less than $3 million a year.

The primary source of revenue is advertising; a secondary source of revenue for most is subscriber payments. There are also all sorts of ancillary revenue that comes from being a creator of content in the market: books, seminars, products, internet advertising and sponsorship at events.

On a $3 million magazine, cash profits will run between $300,000 and $600,000 on average. So, it takes something like $2.4 million to $2.7 million to produce and distribute the product that will generate $3 million in revenue.

Those costs are in printing, distribution and compensation to the people who create the content, sell the advertising, put the magazine together and run the business.

At the core of a great magazine is great content. Yet, on a $3 million magazine, around 8 percent to 15 percent of the total revenue is likely to be spent on content generation.

What Content Creators Make

For the past 20 years, I’ve been involved with various different companies that have employed talented specialty journalists. The common thread among the people who worked at these publications was their passion for the industry they covered.

As a manager, one of my biggest concerns was how to keep the social quality of these people’s work whole in the face of any change. It wasn’t always possible, and sometimes what felt like solid business decisions were horrible social decisions, but it was always a consideration.

The most engaged, embedded and passionate participants in the community were the content creators—the editorial staff.

So, when we look at the disruption in the market and think about the future of content, we have to acknowledge that these people, these content creators, are driven as much by passion as the desire for a job. If they can earn a fair and living wage, they are going to find a way to keep working at their passion. The best of them (and these are the ones who drive quality content) will find a way.

So it’s useful to look at what wages they need to replace, and what the other opportunities are for them.

An editor at a consumer magazine makes an average of $60,800 a year, while a senior editor or managing editor will make $57,100, according to FOLIO:. In my experience, a staff writer will make between $30,000 to $40,000 a year on a specialty publication. FOLIO:’s research shows business-to-business editors make $60,800, while a senior editor will make $50,700. For magazines under $3 million in revenue, the average salary for an editor is $57,800 and for a senior editor it’s $52,200. That’s the cost of content creation for the magazine: the cost of an editorial team to generate the pages, along with the fringe expense of benefits and offices and supplies (typically another 30 percent) above the salary of the staffer.

What does the content creator need to replace, if they are making a shift? For the senior editor or specialty writer (who, despite their lower compensation are typically generating the most unique and long-lasting content) they need to take home about $3,000 to $3,500 a month, after solving the problem of health care.

What They Make on the Web

When you look around the Web, there’s no shortage of specialty content and a large audience ready to consume it. According to Comscore, more than 10 billion videos were watched online in 2008. According to eMarketer, 94 million people read 22.6 million blogs in 2007.

The challenge for a writer in this broadly distributed environment is to find a large enough audience on the right kind of platform to make a living.

According to a survey by Problogger, 16 percent of the respondents made $2,500 or more a month, or better than $30,000 a year, from their blog. There were even 495 respondents who claim to be making more than $240,000 per year from their blog platform. (Who knows how reliable that number is, but they reported it!)

This is a viable and alternative economy that has developed to support creators of special interest content. These individuals have spawned blogging networks that exist to aggregate and leverage audience against a broader sector of advertisers. And they’re doing it with significantly less overhead than traditional special interest media. And many are likely doing it with a much higher level of profit — both financial and personal—than they would in a more traditional content job.

The impact is an erosion of the traditional hegemony of the special interest media brand. The drain has been an inexorable force in the deteriorating economics of small magazines.

The business of small magazines isn’t over by a long shot, but a much greater premium is being placed on finding out ways to use the power of the brand to bring together advertisers and consumers in order to justify the strength of the platform.

[EDITOR’S NOTE: You can read a longer version of this post on McCarthy’s blog here …]