24/7 Wall St.

BusinessWeek, which has been losing advertising pages at the rate of 15% or 20% for well over a year had a total of 24 ad pages it its most current issue. It is the summer, but that is not really the problem.

BusinessWeek has about 150 editorial staff members, based on a count of its masthead. There are probably another 75 people on the publishing side. Since the publication is part of McGraw-Hill’s (MGP) magazine operations, it may be hard to break out all of the discrete costs of operating BusinessWeek. It is safe to say that the print version of the publication is up against insurmountable odds if it ever wants to make money like it did a decade ago.

Many magazine do not make money on their circulations, which includes subscription and newsstand sales. Getting new subscribers often involves expensive direct mail. The offer to new BW subscribers is as low as $20 for 26 issues. It is probably tough to make money on that. Renewing subscribers may be tempted to cancel their print editions and get more of their financial news from the internet, including visits to BusinessWeek.com. The majority of the content on websites which compete with print business magazines is free.

The distribution costs of publications is only going to rise. Gas prices will move postage and trucking prices up. Paper mills are pushing up their charges to offset increasing costs. The business of moving paper magazines around the country, and the world, is a losing game.

Advertising revenue has made up for the fact that the circulation end of publishing is a P&L drain. Circulation brought in the bodies and the advertising sales staff used them as the basis of their pricing. But, between the slowing of the economy and the migration of marketing dollars to the internet, that part of the publishing model is failing as well. BusinessWeek may get back some of its advertisers when the economy improves, but, over time, more and more ad revenue will move to online sites.

BusinessWeek has the opportunity to move completely to the interenet and take out all of its circulation acquisition costs along with printing and distribution expenses. The publication would give up a significant amount of print ad revenue, but most of that is likely to disappear in the next few years anyway.

Based on comScore data, BusinessWeek.com’s unique monthly user base, at 2.5 million a month, is smaller that those at Forbes, CNNMoney, Reuters, TheStreet.com, and The Wall Street Journal’s online edition. BusinessWeek would free up a fair amount of money by eliminating its circulation promotion programs. Some of those marketing dollars could be pushed online to increase the internet audience.

According to Keith Kelly at The New York Post, BusinessWeek lost money last year. That means it will probably lose money this year as well. Moving totally online might change that, perhaps not in the first year, but relatively soon.

Could BusinessWeek keep 150 people on its editorial staff if it existed only on the internet? The answer to that actually may be "yes", if the online property is properly promoted and run. Recent media reports indicate that the magazine is already cutting people to save money. A "digital only" model might save some of the current people their jobs.

A reader going through the current magazine will notice that a good portion of the content is "news". Much of that is old before it reaches subscribers. That problem does not exist online. Longer pieces probably play just as well in either format. And, the internet allows readers to get a huge amount of information on a subject that the print medium cannot offer. And, that makes the digital product even more attractive to readers and advertisers. 

Douglas A, McIntyre