Who Funds Magazine Startups?
by Cheryl Woodard, Posted March 2000 [PRINT
Samir Husni and I wrote the two most widely distributed books
about starting new magazines. Mr. Husni is a journalism professor
at the University of Mississippi. I am a co-founder of three
computer magazines and a full-time publishing consultant. His
book is called, Launch Your Own Magazine and Hamblett House
in Nashville, Tennessee published it in 1998. My book is called,
Starting and Running a Successful Newsletter or Magazine, published
first in 1997 by Nolo Press, and constantly updated in new
editions. Both of us have web sites offering tips and advice
to startups . Between us, Professor Husni and I get about 6
or 7 emails or phone calls every day from people asking how
they can raise the money to start a new magazine. Adding all
those calls together, we talk to about 1500 people per year
more than 7,000 since our books were published.
Everybody wants to know how much money it takes to get a magazine
off the ground, and where he or she can get startup money. Most people
hope they can sell their idea to one of the big media companies.
Of course, that never happens. In a private conversation with John
Mack Carter, former president of the Hearst Corporation, I learned
why his company never finances new publications launched by outsiders.
Here's what Mr. Carter told me:
Opportunity costs: Hearst can earn a 50% or better return
on investment by creating a new foreign edition of Cosmo, or by expanding
one of their other franchises. They simply have no incentive to invest
money on magazines with lower potential return.
Operating scale: Hearst spends money standing still. They
can't afford to bother with a small-scale business, which means that
to interest Mr. Carter, a new magazine needs at least a million potential
readers and multi-million dollar advertising revenue potential. Only
a handful of magazines have the potential to be blockbusters.
Risks: With so much entrenched overhead and a track record
to protect, Hearst avoids risk in every possible way. Thus, they
prefer partners like Oprah who have 33 million television viewers
and extremely favorable odds of successfully launching a magazine.
According to Mr. Husni's 2000 annual report on magazine startups
there were 864 magazines launched in 1999 and he projected 874
for 2000. Entrepreneurs, usually with credit cards, home equity
loans, or personal savings funded many of those startups. Some
are able to raise money from friends and family, but few people
have access to substantial loans or investments, even from friends.
As a result, most independents start out very small and grow
Read about more recent launches at Husni's website www.mrmagazine.com
As i write this article, I don't yet know what will happen to the 1999 startups
and so I looked back at the magazines launched in 1993 to analyze the funding
question. Mr. Husni reports that fewer than 21% of the 1993 startups are still
alive today. Husni reported a total of 789 new consumer magazines launched
in 1993. Notable launches that year included Wired, Fast Company, Filipinas,
and Rodale’s Heart and Soul.Table One shows the top 1993 categories
by number of titles.
TABLE ONE: Magazines Launched in 1993
Number of Titles
Percent of Total
|Lifestyle & Service
|Crafts, Games & Hobbies
More than 50% of the 1993 launches were newsstand test launches
or spin-offs from established publications. For example the Hearst
Corporation floated Good Housekeeping Editors Entertain as a
one-time, newsstand title. Recent consolidations on the newsstand
have nearly shut down the whole business of one-shots and newsstand
tests because it has become so hard to get shelf space for new
titles. We see far fewer one-shots and newsstand test launches
In 1993, established publishing companies only launched about 200 magazines
with a frequency greater than 4. Nearly all of the quarterly, bimonthly,
or monthly titles came from smaller, niche publishing companies. For
example, Thrust Industry Inc launched 8 different bimonthly gay and
lesbian titles. Only two of the biggest media companies launched new
periodicals in 1993. Hearst launched Country Living Gardener as a spin-off
from their successful Country Living title. And Sunset tested a quarterly
called Sunset's Garden Guide. The Hearst title is still going strong
today, but the Sunset quarterly is defunct.
Independent, grassroots publishers accounted for about a quarter of
the startups in 1993, generally launching specialized, small-scale
titles. For example, there was a magazine for tattoo artists, a holistic
health magazine for cats, and one called Ancient Americans written
by and for amateur archaeologists. All told, there were 180 new magazines
launched by small, first-time publishers in 1993, and I could find
only 9 of them still publishing today. Table two summarizes the 1993
startups by funding source.
TABLE TWO: 1993 Magazine launches by type of publisher
Type of Launch
Percent of Total
|One-time, stand alone newsstand
|Periodicals from established
|Periodicals from independent,
|Total, all magazines
Wondering how the 1993 independent publishers got funded, I
interviewed Nancy Gruver who, with her husband, launched a magazine
that year called New Moon. New Moon is "the magazine for
girls and their dreams." It is a lively magazine, largely
written and edited by pre-teen girls. The Gruvers are typical
of the grassroots publishers I meet every day in my consulting
practice Δ they had no publishing experience of any kind
before deciding to launch their magazine. They spent $10,000
from their own pockets to get a first issue designed and printed,
never wrote a business plan, and never accepted any financial
support from outside investors.
The Gruvers have been publishing their bimonthly magazine continually
since September 1993. These days, there are 8 employees on staff,
plus two freelance contributors on contract. Subscriptions cost $29
per year, and there are 24,000 paid subscribers. The magazine still
accepts no ads. It's been profitable, more or less, since the second
year, and given the odds, New Moon is a huge success. Nancy Gruver
attributes their success to many factors, but especially the following:
Motivation: the Gruvers started New Moon to accomplish a mission,
not to make money. Nancy says that since money was never the motivation,
they've been comfortable without it. What's more, they've been free
to focus on their mission because they've never had to answer to investors.
Volunteer support: New Moon has benefited from countless hours of volunteer,
unpaid labor donated by people who believe in their mission as strongly as
the Gruvers do. They published for more than a year before paying any salaries,
including their own, and for the first two years no writers or illustrators
were paid either. Now they pay competitive rates for employees, writers, and
artists Δ and take decent salaries for themselves. Even so, volunteers
are still regularly contributing in many different ways.
Humility: knowing that they knew nothing about publishing, the
Gruvers were not afraid to seek advice from more experienced people.
During their first year, Nancy contacted Eric Utne, founder of the
Utne Reader for advice. She also sought and found a publishing consultant
very early on. Both advisors have provided substantial help.
Discipline: lacking money, the Gruvers work continually to improve
their business. They have a thorough budget and they monitor it closely,
always looking for ways to accomplish the same ends with less money.
For example, their annual direct mail campaign always makes money for
them because they cannot afford to use marginal mailing lists. Another
example: after paying outsiders to run their web site, the Gruvers
transferred the site in-house, and trained everyone on their staff
to post new pages. Now their site is much more lively and current,
but less expensive.
The Internet has been an important resource for New Moon since
1995 when a volunteer created their first site. They use the
web to communicate with readers and contributors all over the
world, and email has been one of its most valuable functions.
The Gruvers also transferred their print catalog to the web site,
instantly transforming it into a profitable venture that currently
generates about 12% of their revenues. And all along, the web
site has been a much more significant source of new subscriptions
than direct mail. Nancy Gruver suggests that the Internet helps
grassroots publishers like her build successful publishing companies
for substantially less money.
So, what do Mr. Husni and I say to all those callers? I can't speak
for him, but I find myself asking callers more about love than money. "Do
you love your idea enough to devote the next ten years to it, money
or no?" If not, I tell them to forget about it. I also tell them
about publishers like the Gruvers who are able to have a life they
love, enough money to live on, and a business that makes a difference
in the world. That's about as good as it gets for most startup publishers,
funded or not.
I encourage you to read my book, Starting
and Running a Successful Newsletter or Magazine if you're
thinking about starting a publication. You can find it
in bookstores and libraries,
or order it from Amazon.com. I wish this book had been
available when we launched PC Magazine back in 1981. You can
read our startup story here.
If you are working on a publication and you need specific advice,
feel free to email
Cheryl Woodard at The Publishing Business Group. We work
with newsletter, magazine, and book publishers of every variety.
The chances are good that we can help you, too.