Thursday 24 June 2010

Business Models - Trade Magazines

Over the last few decades, the magazine industry has seen huge fragmentation as readers are looking for more specialized magazines. There was a time people read a sports magazine. Today, people want to read about snowboarding, or even snowboarding in the rockies. Trade magazines are caught between a market that is looking for very specialised information with low circulation but very valuable eyeballs, and a mass market with low resonance with readers. Magazines in general suffer from a business model where in the short run, they lose money as more copies are sold, as the printing cost exceeds the revenue from the individual copy. Advertising makes up much of the revenues. So as more specialized magazines spring up, the generalist (rather the not-so-specialist) is caught in a vicious circle of falling circulation leading to lower advertising rates leading to fewer journalists leading to weaker content. So how does one respond ?

Let's take the example of a trade magazine for K-12 teachers. This is a large market, but given how low pay is in India, its unlikely to get a lot of subscriptions from individual teachers. However, teachers are an important influencer in the spending decisions of schools and children, so there is value in reaching teachers. So what does a owner of a trade magazine for teachers do ?

There are a few general responses that I've seen. If the owner has a journalist or publishing background, the most likely response is to build up a portfolio of trade magazines, with a few being launched each year in more niche areas, while the generalist ones being treated as a cash cow and gradually squeezed to death. For instance, they can launch trade magazines aimed at school principals, school administrators, school owners, at students of schools, parents of school going children. They can niche it down into kindergarten, play school, junior, middle and high school. They can expand into colleges, vocational institutions, franchisee areas. However, each of these will need some specialized journalists / marketing people to produce or source high quality content. And the fixed costs remain high, so the risks of the business remains high.

If the owner comes from the industry, say is an ex-teacher with a journalistic bent, then they have the opportunity to do a few different things. Firstly, they can move completely on-line. Getting people to pay for content online is very very hard, so survival on niche advertising with very high value per eyeball is necessary. However, the fixed costs are much lower and getting to profitability easier.

An expansion of this would be to try and create a platform for teachers to meet each other and discuss each others' concerns. This really is a sort of outsourcing of content, and if done well, can create hugely valuable properties. Think or in the general world. In India, some successful examples are or Users are active in these forums, and the owner is essentially a trusted opinion leader who is highly regarded by the community. Of course, this status takes time to build up, but building up a reputation always takes time. Its usually easier to do this by working on it as a hobby, and if it takes off, then to move into it full time. This whole concept is explored in Seth Godin's book "Tribes". This is a must read.

A fuller response would be to expand services into related areas. Simple examples would include an online bookshop of books on how to teach, podcasts and audiobooks for those with long commutes in crowded public transport, detailed lesson plans for various ICSE / CBSE / SSC courses. Newsletters would be another add-on, though unlikely to have much of a paid subscription base in this example, given the low ability of teachers to pay. Other areas could include HR services (recruitment of top quality teachers), ongoing training (teachers need training also), teacher certification (ideally with an overseas certification that is licenced), salary surveys, special offers for teachers (laptop manufacturers, financial services companies), or even funny T-Shirts and Refrigerator magnets (for a maths teacher - "there are 10 kinds of people, those who get binary and those who don't" (10 in binary is 2 in decimal.)) You can read more on this in a related post.

Most of this would need to be paid for by vendors as the spend available to most teachers is pitifully low. One opportunity is for physical content to be sold on subscription basis to schools for their staff rooms. Ideally, the staff room should have internet access, and hopefully they would go this site for teachers often.

Part of the strategy needs to become a defacto opinion leader for teachers and teaching in general. Hence there would be a need to be associated with NCERT or UGC in some capacity or even the various school boards. On the non-profit side, being associated with initiatives like Teach For India or Pratham's work on ASER or being on the advisory board of corporate social responsibility initiatives such as Dr. Reddy's Foundation would add to the overall credibility.

If this needs to be done in an ownership framework, some thought needs to go into the appropriate owner. I would suggest that instead of a magazine house owning such an entity, it would be better to be aligned with another service provider to the same industry so that there is a shared passion for the niche area. Some examples could be a teacher training institute or an advisory firm specialised in education.

Finally, there needs to be an understanding that passion and profit are not incompatible. There is nothing wrong in improving the quality of teachers in the country while making a very comfortable living. Yes, it would be nice to raise the salaries of all the teachers in the country, but we need to recognize which battles we should fight.

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