Saturday, April 22, 2006
About Magazines, Free Issues, (Online) Bills, and more...
Here's a bit of insider information from the magazine business: Magazines (especially trade magazines like our CoDe Magazine) get a lot of their business from selling subscriptions. Advertisement plays a big role too, but subscriptions are extremely important. This may not be a great revelation, but I would like to give you an insight in some of the behind-the-scenes aspects.
A magazine subscription sells for a usually modest fee (less than 30 bucks in our case). These 30 bucks have to cover the production of the magazine, creation of articles, editing, layout, art production, and of course printing and shipping, which is a huge part these days. (Note: Publishers are in the business of buying and selling paper... and paper has become very expensive...). In the case of CoDe Magazine, the subscription fee covers 6 regular issues a year, plus whatever special CoDe Focus issues we produce, as well as other services such as online content and electronic-only articles. At the end of the day, things work very similar as in any other business: Ideally, there is a little bit of a profit margin that makes it worthwhile to do it all. However, there are a few unusual catches in the business of publishing magazines...
What really makes publishing a magazine "interesting" is the issue of collecting one's money. When we sell software to someone, things are much easier: There is a contract and bills are paid with a fair degree of certainty and predictability. With magazines, things are different! Many subscribers just get out their credit card, but many do not. They choose the "bill-me" option instead, indicating that they want a bill at a later point. This is a standard thing to do in the magazine industry, but I sometimes think it might be the downfall of the industry. The problem is that it is very time consuming and expensive to collect on those invoices. Let's assume that a subscription has a $5-$8 profit margin. For a new subscription, the profit margin is perhaps between $0 and $3 (sometimes it is a loss, actually). Generally, due to the cost of producing a new subscriber by advertising to them (by sending free issues or trial issues for instance), publishers do not make money on the initial subscription but only on renewals. But that is a different subject, and I digress...
So let's say for argument's sake, that a subscription makes a theoretic profit of $5 (which is a best-case scenario in almost all cases), but we have not collected our money yet. What publishers do is they create "billing series". This means that there are several steps of trying to collect the money. This usually goes on for up to 6 months, which is defined by audit regulations. (Note: I blogged about magazine auditing before... you can check it out here). What this means is that a publisher may send a number of reminders and statements to the subscriber. Perhaps as many as 6 to 10. Now mull that over in your mind for a moment. If one sends 10 letters at say 50 cents each (counting all the labor it is usually more expensive than that... especially for a small publisher like us), then that is 5 bucks. And that eats the best-case profit margin! And sometimes, subscribers still don't pay! Take one such subscriber and your are 35 bucks in the hole! This takes a lot of other subscribers to just make up the loss.
This is the classical challenge of magazine publishing. This is also the reason why we try to work with email reminders and online statements as much as we can at CoDe Magazine. It simply is not sustainable for a small publisher like us to do all of the traditional paper trail. But what do people think about it? I don't know, and I am hoping some people will send us feedback. Of course, there always are a few people who sign up for a bill-me subscription and then when they get an email bill, claim it is spam! But I am not sure that is an accurate representation of the market. So let m know what you think, either by posting a comment on this post, or by sending me an email.
BTW: If you wonder where all that electronic stuff is for CoDe Magazine, check out the My Account section on the web site, where you can see the status of your subscription, renew it, and even pay an open bill and save a tree or two in the process... ;-)
Posted @ 5:23 PM by Egger, Markus (markus@code-magazine.com)