The REAL Niche Publishing: Operating as an Independent Magazine in 2010
Small publishers share how they’re operating and adapting in 2010.
The Hearst’s and Time Inc.’s may get the headlines but the majority of companies in the $40 billion magazine industry are small, independent publishers targeting a specific niche. Most of these magazines go unheralded beyond their target audience but have some of the best content, most loyal readers, and most enduring business models.
“It’s hard to relate to larger publishers,” says Daniel Bradford, publisher of All About Beer, a Durham, North Carolina-based magazine dedicated to America’s favorite beverage. “So much of our life is personal and relationship-driven. The woes of the major publishers aren’t exactly relevant to us, especially since we broke down the silos of what we actually do. We are no longer in the magazine publishing business, but the information packaging business.”
Being a small publisher carries a unique set of challenges, and even opportunities. In this article we take a look at how small, independent publishers are breaking into the industry, building their business, and navigating the precarious proposition of publishing a magazine in 2010.
Some larger publishers like Active Interest Media, Aspire and F+W are filled with small titles dedicated to a specific topic, and almost by definition, b-to-b publishers are niche. But for this article, we’ve tried to limit the focus to consumer enthusiast publishers of $5 million or less (in some cases, much less) in annual revenue.
Many independent niche publishers are startups that are still struggling for a toehold. All About Beer is more than 30 years old, founded in the late 1970 (it’s headquartered in an office that overlooks the ballpark where the movie “Bull Durham” was filmed).
Bradford started writing for the magazine in 1983, when he was the marketing director for the Association of Brewers. When he left the AOB, All About Beer asked if Bradford would run the title. When he eventually bought it in 1992, the magazine was far below its potential, he says.
Today, All About Beer is 26,000 paid circ. with total distribution of 37,000 copies per issue. It’s published six times annually with two annual issues and four festivals. Annual revenues are in the “$2 million to $3 million range” and split one-third circ, one-third advertising, and one-third events.
Critical to the success of a niche publication is the incredible value and impact of each staff position. Running companies this small means every individual player has a significant role to play in the overall success of the corporation.
At All About Beer, each team member has P/L responsibility necessitating extensive management processes. “We simply can’t afford a B player in such a lean organization,” says Bradford. “In addition, every team member has quite a broad reach of responsibilities. Again, the value of the horizontal organizational system over the vertical, or silo, approach can be seen in the validation individuals get for their overall performance and the challenges faced in managing.”
Bradford follows a strict management structure in which employees must pay for themselves within 18 months. “Virtually everyone has a budget, usually created by themselves and approved by me and the vice president, which covers their areas of expertise,” says Bradford. “They are also given goals based on the previous year’s performance with the next year’s expectations.”
The events department has its own budget and the team shares a bonus pool if they exceed revenue and margin expectations. The marketing team has numerical goals and qualitative goals, with bonuses split between both of them. Sales and production share numerical and qualitative goals, vesting each other in the successful execution of the two core information packaging channels.
The horizontal approach, while sounding very elegant, does pose some management issues when working across areas, according to Bradford. For example; the “beer wrangler”—who is in charge of discovering trends and new brands—shares in the success of various areas, requiring more management attention to goal setting and evaluation.
“Again, the really tricky bit for a niche publication of relatively small size is keeping the support process to a minimum, but making sure it is effective in guiding people toward their goals,” says Bradford. “It’s not an easy balancing act.”
Building Business Savvy
Many would-be magazine entrepreneurs look at their venture the same way some people look at running a restaurant—as a lifestyle, not a business. But developing business savvy around publishing economics, not to mention advertising and newsstand distribution, is essential for any magazine to survive beyond its first few issues.
Crawl, a magazine dedicated to off-road enthusiasts, launched in 2005 by three guys with a passion for the sport but not much magazine business sense. They quickly ran into financial troubles and in April 2008 hired John Herrick, a financial services veteran, to turn the operation around.
“I came out of 25 years of financial services and I didn’t know diddly about the magazine business,” Herrick says. “But I loved the sport, took a 65 percent pay cut and thought I’d get a piece of the action.”
The problems were readily apparent: Crawl was billed as a bi-monthly but didn’t put its first issue of 2008 out until March 31. Many vendor relationships had been severed due to lack of payment. “We reworked the banking relationships and renewed our relationship with the printer, who hadn’t been paid,” says Herrick. “We started answering the phone and talking to customers. We reworked advertising deals—one-third of our ads had been trade or barter.”
Then in December 2008, the CEO changed the locks and ceased operations. “After all that work, it just stopped,” Herrick says. “They owed me for wages, I sued and ended up settling with the publishing company for the title, distribution agreements and subscription list. I was already in deep to begin with, I might as well see what would happen if it was mine.”
Herrick reached an agreement with his former partners in June 2009 and put an issue out by the end of August. Subscribers didn’t know it was coming. “From a viral standpoint, a lot of people started talking,” says Herrick.
Getting costs under control was key. The budget for the January 2010 issue was about $26,000. To manage production costs, Herrick cut the average folio from 180 pages to 148 pages. All newsstand distribution was relegated to 50 percent sell-through based on historical patterns.
“We had driven the newsstand cost to the point that if we were at 48 percent sell-through, we were just breaking even,” says Herrick, who claims sell-through today is in the 60 percent range. “We had to overcome that frustration of, ‘Should I send these guys $24 and just hope? Or do I spend $6 at Barnes & Noble and know I have at least that one?’”
In the last 90 days, Crawl’s circulation has grown 6.5 percent, with 16,500 copies on the newsstand and 8,200 going out in subscriptions. The fastest growing area is in the southeast and Herrick is looking at distribution on military bases.
Crawl also had to woo back advertisers. “Trying to launch at the end of the year, we knew it would be January before we got companies to commit to coming back,” he says.
Herrick implemented an across-the-board 35 percent rate cut but is still getting about a $90 CPM. Ad revenue increased 50 percent from issue 18 to issue 20. “Our overhead is close to nothing,” says Herrick. “We’re not paying rent for an office, we’re not supporting three full-time staff people, we’re not paying for warehouse space. I work out of my home and a contractor does layout and design.
While Herrick projected Crawl wouldn’t make any money until 2010, the magazine turned a profit with its second issue back. “I don’t believe that Crawl will ever sell more than 30,000 to 35,000 copies per issue,” he adds. “For 2.5 employees, this a $300,000 year net profit operation. This magazine seems to have weathered the biggest storm you could imagine—self-implosion. If I don’t screw it up, it should be fine. There is every indication that people want it in print and are willing to pay for it.”
Learning from Past Mistakes
Justin Heister and Mike Mazur, founders of Focus Skateboarding Magazine, also learned the hard way from an owner without much savvy. The two had met at another publication, where Heister was in charge of art design and Mazur headed up editorial. “The most valuable lessons learned, for better or worse, were how NOT to run a magazine,” says Heister.
Lesson One: Don’t give away advertising. “That’s something the founder was all about—getting big name advertisers in hopes of bringing in other advertisers,” says Heister. “Ultimately, that really cheapened the product. When it came time for people to honor that year of free ads, they never signed up. With Focus, we stayed true to not giving handouts. We’re not going to trade you for product, we need money to publish the magazine.”
Lesson Two: Figure out your distribution. “The magazine we worked for was freely distributed,” says Heister. “Everything went out through the Post Office as bound printed matter—and it never went where it needed to go. It would have been cost effective if it actually made it to its destination but it was such a lousy way to mail, half the magazines that went out wouldn’t make it to their destination. The owner wouldn’t use Fedex, which you could actually track, because of the expense.”
For Focus, FedEx became the cheapest method after getting multiple line discounts. “We found a printer who would supply the boxes for free and FedEx supplied the labels and we saved thousands of dollars on shipping in the end by switching to FedEx,” says Heister.
After that experience, Heister and Mazur launched Focus in 2005. “When we started Focus, we were basically homeless, living rent-free in an apartment with no windows and no heat in the frigid Philadelphia winter,” says Heister. “Between the two of us, we had a single computer, some camera gear, and the ambition to make something happen.”
They had no real funding and focused on getting attention with a profile on MySpace and leveraging their reputations in the skateboarding community.
Heister says carving out market share wasn’t too difficult because most of the larger skateboarding publications are focused on the West Coast and distribution of those magazines in East Coast shops is typically limited to two or three copies. Focus opted for free distribution, placing 30 or more copies—the magazine prints 16,500 copies per issue—in those shops. “We filled a niche that has been completely overlooked by the skateboard industry,” says Heister.
Focus has tried to phase out subscriptions, without luck. “Fulfilling subscriptions is so time consuming,” says Heister. “We raised the subscription price to $25 for six issues per year, but more people started subscribing. We’re up to 400 subscribers right now. Our efforts to steer people away from subscriptions didn’t work at all.”
At the beginning of 2009, ad sales took a dive but otherwise stayed steady for the remainder of the year. Focus did around $140,000 in ad sales in 2008 and about $110,000 in 2009.
In January, Focus will host its first trade show, The Focus Show, in Philadelphia. According to Heister, it’s the first show of its kind on the East Coast. “Most of industry is in California and they have road reps for the East Coast,” he adds. “We’re offering those reps a chance to meet the East Coast vendors in one place, rather than take a few weeks to visit them one at a time.”
Heister says Focus will offer some incentives reps haven’t seen at other shows. “For exhibitors, we’re raffling a free booth—if you bought a booth, you get a refund,” he adds. “There are only 40 booths at the show, so the odds are pretty good.”
The Focus Show will also feature a ramp contest that requires shop buyers to attend with their sponsored rider. Prize money goes to the winning riders but the sponsoring shops will also get money to spend at the show courtesy of Focus.
The magazine is selling booths for $500 and expects about $20,000 in revenue. “This is our first show and we’re trying to make this a great experience,” says Heister. “We’re not looking to make a profit with this one and we’re putting the majority of the money back into the show.”
The Focus Show has received notice from some of the bigger media players in skateboarding, including a write-up in Transworld Business and live, on-site coverage from Fuel TV, which is coming out from California to be at the show.
InPark, a magazine dedicated to the theme park business, started publishing four issues a year in 2005. In 2008 they published five print and one digital-only issue and in 2009 published five print issues and eliminated the digital issue since it was not a big moneymaker and didn’t fit in with the schedule.
The magazine has gone from 2,000 to about 4,500 subscribers, and now is split 50/50 between digital subscriptions and print. Each issue brings in around $7,000-$10,000 in ad revenue, with a “very seasonal market,” says publisher Martin J. Palicki. “Our tradeshows almost all take place in the fall, so advertisers focus on that period.” Each issue costs around $6,000 to produce and mail.
Palicki advises publishers to estimate quantities conservatively. “I printed about 10,000 more copies of my first issue than I actually needed. Now my basement is filled with back issues. I now only print about 200 copies more than my distribution list, and 1,000-1,500 for any tradeshow distribution.”
From a $25 Classified Ad to a $5 Million Business
Countryside Publications is a niche publisher of four country-living and livestock-related titles located in Medford Wisconsin. Its flagship title, Countryside & Small Stock Journal (commonly referred to as Countryside) was launched in 1969 by Jerry Belanger with a $25 classified ad in Rodale’s Organic Gardening. The cost of a subscription then was $1 plus a letter with either a question, or an answer to a previous question, about self-sufficient living.
The result became a magazine that was, and largely still is, written by its readers. Over the next 30 years Countryside grew and evolved but never strayed from the core premise; in 2000 Belanger retired and son Dave Belanger and daughter Anne-Marie bought the business in 2001.
Today, Countryside is a lean operation approaching $5 million dollars in revenues with 13 full time employees plus two off-site editors, publishing four magazines in Countryside, Dairy Goat Journal, Backyard Poultry and sheep! (While Countryside and Reiman Publications were started about the same time with similar business models in towns just 70 miles away, the two companies have always been separate (although as Belanger says, “If they want to make an offer…”)
Countryside Publications has always grown organically and has never used outside investors, a bank loan, or any other source of external funding. Revenue growth has averaged more than 20 percent annually for the past eight or nine years. “We’ll grow less in 2009 due mainly to a slight reduction in direct mail, but our margins will improve,” says Belanger.
When Belanger took over the business in 2001, very little focus was placed on subscriber acquisition. In spite of this, renewal rates at the time were at 90 percent-plus, Belanger says.
“But what we really had was a platform,” he adds. “In short order, we acquired Dairy Goat Journal and then sheep!” Both were being published in a tabloid newspaper format for fewer than 5,000 subscribers. Belanger converted the magazines to saddle-stitched 8 ½ x 11 and dropped the frequency to six issues a year. The subscription price is $21 per year.
“Meanwhile, we embarked on an aggressive direct mail subscription acquisition campaign for Countryside,” he says. “We doubled circulation, and then doubled it again.”
Today there are roughly 100,000 Countryside subscribers paying $18 per year with another 40,000 copies on newsstands.
Because 85 percent of the people reading Countryside also had chickens, the publisher launched Backyard Poultry in 2006 “not having any idea if it would meet our projections,” Belanger says. “We enlisted my wife to the role of editor, announced the debut in the pages of our other titles, and spent $50,000 to get 150,000 double postcards in the mail. We sent that first issue to the printer with a 150,000 press run and held our breath.”
It took only a few days for the initial 15,000 copies to sell out, so they printed 15,000 more and shipped them out in a matter of weeks. “We ended up printing another 15,000 copies before it was time for the second issue to appear,” says Belanger.
Because the initial mailing was a relatively small 150,000 pieces, Belanger was able to cherry-pick the lists to mail, mostly from their growing in-house database. One outside list they used pulled a whopping 42 percent response rate and over 80 percent paid the invoice. Overall the response came in at 17 percent with a 45 percent pay-up.
“We leveraged the revenue into more mailings including the use of card decks, which had never been a great source for us but worked well for Backyard Poultry, and tested different formats and offers.” says Belanger. Their current control is a self-mailer folded to 5 ½ x 8 ½ offering a free issue and an invoice. Today, Backyard Poultry has 60,000 subscribers paying $21 per year, with 35,000 copies on newsstands across the country which “sell well despite our wholesalers’ initial reservations on the subject matter,” says Belanger.
Countryside’s main subscription source is DTP direct mail, and their control piece is the free issue offer (return the card and they will send readers a magazine and an invoice). Overall payup runs around 40-50 percent, but they have an upfront response of 5 percent-plus. This, combined with their low production costs, makes them happy.
Another important source of revenue for the publisher is derived from book sales. While Countryside publishes a few anthologies of previous issues, most are titles from other publishers that they resell to subscribers using ad space in the magazines and an annual catalog. “Assuming the cost of advertising space is zero (which we do) net margins run north of 50 percent,” says Belanger, with total contribution to the top line around 7 percent.
All back office operations are handled in Medford, Wisconsin. Fulfillment is done in-house including generating, inserting and mailing invoices, renewals, and supplemental issues. While they have used outside fulfillment vendors in the past, Belanger says they have found that they have more control over the process in house, and do it spending a lot less money.
“My personal pet peeve is magazines that tell customers to wait 6-10 weeks for their first issue,” he adds. “At Countryside Publications we do weekly supplemental mailings. A new sub comes on board on Monday and their first issue is at our local post office on Thursday. If it’s a free issue, their invoice isn’t far behind.”
Countryside outsources printing, larger direct mail campaigns and the creation and maintenance of their four Web sites. While Belanger says Web subscriptions are an efficient source of revenue, they make up only 5 percent of total revenues to date.
“We’re consumer circulation driven. From our point of view, giving away magazines for less than the cost of production with the hope of attracting a large audience we can sell to advertisers has never been a viable business model, as a number of advertising-driven publishers have begun to discover in recent years,” says Belanger. “We love our advertisers, but we don’t want to pin our future on the vagaries of advertising economics. Advertising receipts represent only about 15 percent of our total revenue, and while some titles are down a bit, overall ad sales were up roughly 7 percent in 2009.”
Niche and Online: Opportunity or Too Late To Catch Up?
Many niche publishers remain primarily print publishers. They typically have Web sites dedicated to customer service and magazine content, with more sophisticated publishers offering a Facebook page or Twitter feed.
Larger publishers have always contended that online is a mass market game and some smaller publishers don’t think a dedicated Web approach is worth it. “We’re focused on print for now,” says Crawl’s Herrick. “The Web site is just a portal to answer questions. I don’t know if I could go into that area and compete or if I could monetize it enough to make it worthwhile.”
However, the low barrier to entry with starting an online business is spawning a stream of new online-only publishers. FordMuscle.com caters to Ford performance enthusiasts (and competes for the same automotive aftermarket performance advertising dollars as Source Interlink’s Hot Rod and Car Craft). The site generates about 160,000 unique visitors per month and broke $500,000 in revenue in 2009.
While many publishers struggle with implementing a paid content model, FordMuscle.com is succeeding with one. The site introduced a forum category called “Tech Exchange” in which members can submit graphic how-tos.
FordMuscle.com staff edits outside content before it’s made available to readers and contributors are rewarded for their submissions. The site receives between three to five submissions (which can range from five pages to 50 photos) per week. If a member submits one tutorial, FordMuscle.com sends a t-shirt. If they do two, they get a hat. If a member does six, they receive $100. “If someone is especially enthusiastic we may bring them on as a freelancer,” says co-founder Jon Mikelonis.
Parts manufacturers can also be highlighted throughout, although ads are not sold directly against it. Mikelonis says advertisers haven’t tried to influence the tutorials.
FordMuscle sells an annual online subscription for $19.95 per year and is considering a pay-per-article model for the future (subscriptions account for about 40 percent of revenue, while advertising accounts for 60 percent).
Wend, a Portland, Oregon-based outdoor adventure magazine, is building a digital subscription base for online content, getting 50 to 70 new sign-ups per day. “We went with free subscriptions online—the platform doesn’t cost anything,” says editor Stiv Wilson. “We had a model for $5 online subscriptions but that will never be real revenue for us.”
While Wend’s initial online content was just PDFs of the print magazine, it adds 10 to 15 pieces of new online content per day. In 2010, the site will undergo a redesign, adding a green gear store as well as a new business model in which eco-adventurers can find funding for projects.
Offering digital subscriptions has actually helped the print product as well. “We’ve doubled the amount of print subscriptions because people who haven’t found it on their newsstand can now see the digital version,” says Wilson. “We make a decent margin on subscriptions. It’s not a big one but we’re not underwater with it like some other publishers are today.”
Wilson says Wend is having a lot of success getting registrations and driving participation with online and newsletter-driven contests.
“Nobody has figured out how to monetize the Web to the degree that you’re getting for a print page,” says Wilson. “To me, that’s because of brands not understanding the landscape media is performing in. A lot of ad agencies are way behind the times. You do a contest on Twitter to give away one clean canteen bottle and you get a thousand entries in a day. That kind of branding is worth its weight in gold.”
Wilson says Wend has doubled revenue every year and expects $600,000 for 2009 and just under $1 million in 2010.
“It’s not a giant leap, it’s a steady-as-you-go increase,” he adds. “Anything that quadruples overnight is bad—it’s hard on your staff and it’s hard on your business model if it stops performing.”
In 2009, 80 percent of Wend’s revenue came from print. In 2010, Wilson thinks print will drop to 60 percent, with the remaining 40 percent coming from a mix of online contests, social media and brand consulting.
“We’re seeing the media company become the partner rather than the ad agency be the go-between,” says Wilson. “I would expect by 2011, that revenue model will be 50/50. As the subscription portal goes up, print will go down. We’re not going to sell our magazines on newsstands unless its exceptionally high sell-through. It’s not worth it to us.”
The magazine landscape is changing, according to Wilson, who cites 625,000-circ. National Geographic Adventure folding (that magazine will continue to live on in a multi-platform approach).
“We’re friends with the folks over there and I don’t want to saying anything bad but when you look at the big overhead model and then look to us, we only need to make enough money for six or seven people,” he says. “That shows us our gamble has paid off.”