Two years ago this month, my wife and I applied to acquire Crown Jewels of the Wire magazine. Linda is a nurse. I'm a police officer. Previously, I spent 14 years as a radio and television news reporter. But apart from having a journalism degree, I had no experience with the print medium. Neither had my wife.

Now, with a full year's ownership of Crown Jewels under our belts, we wanted to report to you, our readers, on the health of the magazine.

The patient is in stable condition. We start out 2004 with more subscribers than we had in mid-2003. And although the number is fewer than the previous owners had at the end of 2002, we are pleased that an initial slide in readership seems to have bottomed out.

Financially, we expected to take a loss in our first year. Our expectations were fully met. I know enough about newspapers and magazines to be aware that most publications earn the bulk of their revenue from advertising. We knew going in that Crown Jewels received most of its revenue from subscriptions. That condition is generally considered to be unhealthy for a publication.

In 2003, only 12 percent of the revenue for Crown Jewels came from advertising. Compare that to 20-percent from a grant; three percent from the sale of back issues or related products; and a whopping 65 percent from subscriptions. Ouch! This patient is hurting. The condition isn't terminal. But some treatment is needed.

To help readers understand their magazine, we are listing the income and expenses for the first 12 issues under our ownership.

Please note there was no compensation whatsoever for the many hundreds of hours spent by my wife, myself and my family in writing, design, layout, mailing or any of the other requirements of producing the magazine. In addition to the month to month production expenses listed above, there were also the expenses of going into the business of publishing a magazine. 

Business Start Up Costs: Licensing, McIntosh computer purchase, McIntosh laptop purchase, monitor, printer, scanner, digital camera, photo light panel, fax machine, commercial software products, computer accessories, professional services, etc.    $12,389

As you can see from the sub-total of expenses, production expenses alone for the first 12 issues exceeded income by $2,042. The loss was consistent with our expectations for the first year. Start up costs were more than we expected, but commercial computer products remain quite expensive compared to personal computers.

HONEST TALK ABOUT SUBSCRIPTIONS AND ADVERTISEMENTS:

Each magazine containing a color insert costs about $2.05 to print. If it is mailed first class, postage runs $1.06 and the mailing envelope costs another 7-cents. That's $3.18 cents in expenses for each magazine. We charge $32 per year for 12 issues. Our income, then, is just $ 2.67 for every issue mailed first class. Considering subscription income only, that's a loss of 51 cents each time we mail out a magazine first class.

For second class subscriptions, postage runs about 40-cents an issue. The issues still cost $2.05 to print, for a total cost per issue of $2.45 cents. We charge $24 per year for 2nd class mailings... or $2.00 per issue. We only lose 45 cents per issue on subscriptions mailed 2nd class. 

For almost all publications, subscription charges only cover a portion of the publication costs. Generally, for a magazine or newspaper to be financially successful, a significant portion of its incomes has to come from advertising. However, as already pointed out, that is not the case with Crown Jewels. We inherited advertising rates that have not increased since 1995. In fact, if someone purchased a full page ad for all of 2003, they paid $385, or $32 per page for EACH of the twelve issues. That is approximately $4 per page LESS than it cost for us to print that advertisement! Yes, we lost $48 per year ($4 times 12 issues) on full page ads.

At the same time the discounted advertising rates were sold below cost, the rates were not in pace with the success of the ads themselves. One advertiser told us he received 90 responses to his ad seeking to purchase insulators. Another sold 25 of 27 insulators advertised in just three weeks. In my own ads for the months of November and December, 36 of 38 insulators sold. That's 95% of everything advertised! Advertisements in Crown Jewels have proven themselves to be profitable to our customers. 

Now, with a year's experience behind us, we are taking steps to get our patient back on its feet. Staring with the March 2004 issue of Crown Jewels, the follow actions will occur. 

1) Advertising rates will increase to realistic levels. 
2) The single issue rate (over the counter sale price) will increase to $5.00 per copy. 
3) Subscription rates will NOT increase.

ADVERTISING RATES: The new rates reflect the cold, hard fact that it takes time to create ads and prepare them for print. That said, we'll offer a 10-percent discount if the ad runs for three months; a 15-percent discount if the ad runs for six months; and a 20% discount if the ad runs for a full year. Here's a chart showing the new rates:

SINGLE ISSUE RATE: As we noted above, it costs us $3.18 to mail out a single copy of Crown Jewels at the first class rate. Yet, single issues have been priced at just $3.00. We don't sell the magazine at newsstands, but frequently we do receive requests for single issues. When that happens, we can't see a reason for losing money in so doing.

SUBSCRIPTION RATES: Just to be clear on this point, we do NOT plan any increases in subscription rates. We firmly believe subscribers are paying their fair share already. Only with a hike in postage rates would we consider the need to raise rates accordingly for subscribers.

WHY DID WE WAIT? Some may wonder why we waited a whole year to raise advertising rates if it appeared we were losing money on them. Well, we wanted to be able to present actual income and expense figures for an entire year, not just "projections". We already suspected we'd lose money for the first few years, we just didn't know how much. We didn't want to publish statements without factual information.

WHAT ARE OUR GOALS? Our financial goals for Crown Jewels are as follows:

1) Bring advertising revenue into balance.
2) Break even on production costs and expenses in 2004. 
3) Begin making a profit in 2005 that will start to pay back expenses of going into business.
4) In the long run, compensate those who work on the magazine for their efforts. 

Achieving those goals will require us to be vigilant at finding ways to keep costs down and revenue sources equitable, while continuing to publish a magazine worth reading. Crown Jewels, the patient, is in stable 3.18*12 condition. But we won't be content until the patient is healthy in terms not only of being a readable publication, but also a financially sound one.

FINAL THOUGHTS: As we've written a lot about advertisements here, let us give some hints to potential advertisers. Our readers are eager to buy insulators. We constantly get calls from subscribers wanting to know if the next month's issue will contain advertisements offering individual insulators for sale. A full 50% of our readers do NOT have an email address. They do not use computers to search for insulator lists; they do not visit ebay; they do not shop on line; and many tell us they don't even own a computer. 

If you are content to advertise your insulators at on-line sites, your message is not getting to 50% of your potential buyers. Think about it! And call us today to place your ad.

Howard & Linda Banks