The Entroporium

As an old print hand, the collapse of the magazine business model has been a sad thing to observe and play a small part in.� The typical big US title � think something you�d pick up at the airport or (tellingly) from a waiting area �has staked its business for decades on printing & distributing tens of thousands of unprofitable copies with the assurance that an attractive audience would be worth CPMs of $30 and up to advertisers.� The very largest titles could afford lower CPMs approaching television so long as there was enough demand for copies.

As anyone who follows media knows by now, magazines have been hit with a triple-witching the last few years: collapsing CPMs for even the most difficult-to-target audiences (in light of the targeting capabilities of the Internet) and plus collapsing advertising page sales; slackening demand; and rising distribution costs.

The big bellwether is now upon us.� Conde Nast, really the last of the big-spending believers in magazine, first quietly packed off Domino and a few other titles and, more dramatically, this week closed Portfolio, for which the company had reportedly spent over $100mm to launch.� (Portfolio was a poorly-timed entry – a well-written glamor magazine about business caught up in, well, now.� But it was also schizophrenic.� Despite being targeted at business elite, it was also weirdly basic; a column in the first issue, for example, explained how interest rates work[?!?!].)

While most attention has been paid to falling ad pages, it�s really the CPM problem that most fundamentally egs the question of whether the magazine industry will get anywhere close to its old business model ever again.� Publishers formerly charged $30-100 to reach a hard-to-reach passionate target � say, ukulele players � while now that CPM on AdWords is not just catastrophically lower but also available by auction.� In other words, not just the price is better; it�s the buying process, too, with better information creating a more efficient market.

So what for magazines to do?� The most obvious choice is simply to start charging readers, which is what many of the newsweeklies are now trying to do.� Any subscriber to Wired can see that they are getting their magazines at a steep unprofitable discount.� ($12 for 12 issues written, designed, printed and mailed?� Probably more like $30.� Printing and postage alone is probably well more than $1.25 per copy.� I�ve long said that Conde Nast magazines are one of the great bargains of American life, like home plumbing and the US mail.)

But the reality is that it�s going to be a very hard road to convince readers to pay after being trained into receiving content for free (the Internet) or near-free (magazines) for their entire lives, no matter how great the reporting or photography.� In the face of low demand, we�ll see massive changes in how these magazines work in the next few years � maybe months.

Another possible answer could come from the manufacturing side.� The biggest challenge with magazine business models as they stand stems from their battleship-turning nature.� It takes a long time to build circulation to get to a saleable advertising proposition; it takes an equally long time to deflate that unprofitable circulation when the ads dry up.� (This is why you’ll see big circ magazines like George suddenly disappear.)

HP recently debuted a service called MagCloud that could potentially democratize the industry by allowing easy creation of micro-targeted magazines � for example, not just for the ukulele player but for left-handed ukulele players living in the Midwest. A more nimble manufacturing process could allow more short-term plays; imagine for example �100 Days� magazine to follow the excitement around the new President, killing it just as readers start to tire of it.� Magazines may survive in fact by forgetting about brand-building and going after hot content.� In short, a return to the tabloid times of our Founding Fathers.�� More on this in a coming post.