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Investment banker notes how better off newsletters are than business magazines.

After describing the recent NEPA conference to Richard Mead, managing director at The Jordan, Edmiston Group Inc., we received his thoughts following the American Business Media Association's Top Management meeting in Chicago.

"The private equity firms, their CEOs in waiting, and the debt providers were there in great numbers and for the first time out-numbered the investment bankers like me.

"But, to your point, magazine publishers have a very different scenario from your newsletter publisher colleagues. Virtually all of the B2B magazines (probably 99 percent at least) are controlled circulation with minimal subscription revenues.

"Therefore, they are entirely dependent upon advertising revenues and to a lesser extent ancillary revenues-e.g., lists, conferences, and so on. But it is the advertising component that makes or breaks the bottom line.

"Typically, B2B magazine publishers have a contribution level before G&A of somewhere in the 30-40 percent range--obviously it varies by size, and there are lots below the bottom end of this range and a few above the top end. Given this contribution level, lost revenue drops very quickly to the bottom line, which is what has been happening in 2001 and 2002, particularly in sectors such as IT or manufacturing.

"There is little that B2B magazine publishers can do to protect their bottom line against the current onslaught from their advertisers. They can't do much to cut their print run--they need to deliver their circulation numbers or else face BPA's wrath. They can't do much in the short run in relation to their external vendors-print, paper, and distribution costs. So they have to cut staff, which is what has been happening.

"Plus, in the B2B magazine world, most markets are served by three or four, and sometimes more, magazines. The number 1 and 2 magazines are hurting, but it has to be hell for the others--to the point that some of them will disappear before this recession is over.

"On the newsletter front, you have the converse--a subscriber base that pays for the product for as long as it wants to; a subscription price that for the most part is modest and so not likely to feature high on the list of budget cuts; a low-cost base with the internet beginning to play an increasing role in cost efficiences; but with few opportunities to cut staff because newsletter publishers typically don't have the same organizational structure that B2B magazines have."

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Publication:The Newsletter on Newsletters
Date:Dec 15, 2002
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