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Back in Black

How Paste, a small independent music magazine, went from an operating loss to profits during one of the toughest years the magazine industry has ever seen.

We’ve all heard the dramatic stories of shutdowns and layoffs over the last year as publishers across the industry buckled down as plummeting advertising revenues, spiraling costs and a penny-pinching populace conspired to revive the ‘print is dead’ meme.

Big, mass-market brands with equally large budgets were closed in what seemed to be almost a tragically perfunctory fashion. Yet as large publishers struggled to balance scale and contribution, smaller publishers felt the shockwaves just as acutely, if not more. Tighter margins and budgets and the absence of war chests full of capital hit small publications hard.

During all of this, Paste , an eight-year-old, 205,000-circulation music and entertainment magazine quietly rolled out a series of dramatic cost cuts bolstered by an array of product and pricing enhancements that enabled it to not only survive, but close out 2009 with a small profit.

All of the strategic moves orbited around a core initiative that simultaneously saved the magazine and revealed just how committed the magazine’s audience is: A donation campaign launched in May 2009 raised $275,000, effectively keeping the magazine operational for the year.

But subscribers didn’t give something and get nothing. Costs and materials were certainly cut, but the team at Paste attempted to do it in a way that maintained quality and value.

  • Instead of lopping off frequency, Paste supplemented digest-sized issues
  • Instead of simply shutting down, the magazine solicited donations in a transparent, honest way
  • Instead of herding readers into a suddenly pricier subscription plan, they offered a customizable plan that allowed customers to receive the magazine, along with an array of bonus products, in a variety of formats.

So even as Paste was contracting financially, it plowed ahead with innovative solutions that maintained brand integrity and, importantly, continued to offer new ideas and products to their readership.

Paste’s three co-owners—president Tim Regan-Porter, publisher Nick Purdy and editor-in-chief Josh Jackson—spoke with AD about their experiences over the last year.

AD: Talk about the magazine’s financial position at the end of 2008.

Tim [pictured right]: Even though 2008 was obviously a recession year, it was pretty good for us. It was a record time for us in print ad sales, but things started falling off pretty precipitously in the fourth quarter. And in the first quarter of 2009 the bottom fell out in terms of advertising.

So, we had weak cash collections from the fourth quarter and then not much new activity in the first quarter. We’re a small independent magazine that Nick, Josh and I own, and we don’t have a lot of cash reserves. Subscriber revenue is usually pretty slow after that Christmas rush. We had normal subscription revenue but a slow time just in the cycle.

As we came in to 2009, subscriber cash was a little low, online ads were doing ok, but those typically pay slowly, and so everything came together. People were paying slowly even on what we were selling because of the economy, and so we were looking at our next issue and payroll and realized we couldn’t pay everything. After about six months of bad sales, we thought ‘is this the end?’

How bad was your ad revenue situation?

Nick: Ad revenue was down 48 percent in first-quarter 2009 versus first-quarter 2008, which is only two issues worth—we don’t do a January issue, so only February and March.

How did the donation campaign idea come about?

Tim: Toward the end of 2008 we had received some subscriber letters that said, ‘We know what’s going on in the economy, some music magazines have folded this year, you guys are a little thinner, if it ever starts to get dicey, let us know because we would pay a lot more for our subscriptions and we would even donate to help keep you guys around.’ After we got a few of those and we started looking at the harsh realities of closing, we realized we have a very dedicated fan base.

We had a big enough subscriber base that was direct to publisher and a really engaged audience. It wouldn’t take a lot. Basically, $1 from everyone on our mailing list would have gotten us through that shortfall. Or, if just 10 percent of them gave $10 that would get us through the crunch.

Nick: The three of us made the decision to hold hands and jump off the cliff together. We had no expectations really of how this would go. We just knew it was the right thing to do and we owed it to both our employees and our readers to give it a shot. But to go a step beyond just asking for money for nothing, we went to all the record labels and artists and managers who have been working with us over the years and said to them, ‘Here’s the situation, here’s what we’re going to do, will you help? Would you donate a song that’s not available any other way?’ We had an incredible response—150 songs donated by different artists to help with the campaign.

Tim: That’s what put me over the edge in terms of trying this—the idea of getting the artists involved. There was an outpouring of support from these artists—a few of them went into the studios specifically to record a song that they could give away that was completely separate from anything else they had.

So all of a sudden for our readers, with a donation of any amount, they were getting this incredible library of music.

What surprised me most was that even though a donation of a dollar would have gotten you access to all this music, the average donation was around $25. The amount that people gave was what shocked me more than anything.

The other thing that helped us have a great launch was it was just a good time in the zeitgeist. Facebook and Twitter became more important than our own email list. The amount of viral spread was huge and helped us raise $100,000 in the first two days. We were just stunned by that, and the Twitter traffic was astonishing.

We also decided to be up front and as transparent as we could be about everything. Giving away the songs helped us feel like we weren’t just going out and begging, but we also were straightforward in asking for help.

One publisher recommended we sell life-time subscriptions, but we didn’t want to trick people out of their money in a last-ditch effort. We wanted to say, ‘Hey, we’re in trouble, you might not continue to get the magazine, we can’t guarantee that, but we can at least give you some free songs.’

What were the results of the campaign?

Nick [pictured right]: About 12,000 people contributed, and we raised just north of $275,000. It wasn’t just individual donations, people had benefit concerts.

Josh: We also had in-kind donations. We were behind on paying writers, and a bunch of them sent me an email saying, ‘My contribution is you don’t have to pay me the money, I just want to see you guys continue on.’ We had a couple say they’d write for free for a while.

While you’d never want to go through anything like this, and it’s not something we went into wanting to do it, but going through the whole thing has been incredibly affirming just to see the support from our readers, the artists and the people we’ve worked with. Even in the media, we were surprised to see so many people cheering for us to exist.

People were getting tired of seeing things they loved go away. A lot of people felt powerless to change that, and all of a sudden we were presenting them with an opportunity to help fix it, and our readers literally helped save Paste.

Where did the money from the donations go?

Tim: It helped us get the next issue out, first of all. We didn’t think we were going to be able to print the June issue.

That let us continue almost uninterrupted in terms of just the print cycle. That was the first big use of the money. Then that stabilized us and let us continue on printing and making payroll and all of that.

Josh: The campaign also unearthed several potential financial investors to help out the company. We’ve actually received some investment since then.

Are these angel investors?

Nick: The one bit of investment we’ve gotten so far is definitely angel. But we’re in a position where we might see some bigger, growth-type capital.

How much has been invested so far, and how much do you want to raise?

Tim: It is significant, and would put us on sound financial footing and let us invest in things like circulation again.

How did the remaining advertisers react to your plans?

Nick: Advertisers immediately became concerned. Fortunately the campaign was so successful so quickly that I was able to begin to tell a story whether somebody was asking or not. One advertiser, as soon as they heard about the campaign, called up and asked to buy an additional ad. Another said they liked us, but they’d be back when things stabilized—and they’re back now.

We want our advertisers to know that we have this chapter because it demonstrates a level of engagement we don’t think many other magazines could talk about.

The good news is the sales activity is very strong right now, we’re getting lots of RFPs and it appears as if it’s not really an issue, we’re publishing the magazine and it’s great and we’re here and advertisers want to hear about our creative ideas that we’ve got going forward. In the last week I’ve gotten inquiries from four or five advertisers we’ve never had before. All non-endemic—liquor, fashion, consumer electronics, across the board.

Josh [pictured right]: The music category has been suffering through all of this even before the recession, that’s been a dwindling category for us anyway. So, it’s really important to us for non-endemic advertisers to be a big part of each issue.

Talk about the digest-sized issues. What was the plan for those?

Nick: We did three mini-additions in 2009. Our plan was to make them every other month. We ended up doing them in June, August and October. It was a really interesting model for us, it was a way to give something valuable to our readers every month. And we found out through a survey that only three percent of our readers would have thought of unsubscribing just because of these minis, and 97 percent of our readers were satisfied in some way.

It was ask forgiveness, not permission in terms of how we dealt with our subscribers and fortunately they were very forgiving and they said it was acceptable for a time, but not forever.

On the other hand, it didn’t give us the ability to do everything we wanted editorially, and it’s not quite the platform advertisers would like. But fortunately there’s enough sales activity now that we’ve gone back to planning to do full-sized issues for 2010.

It was part of making it through this incredibly lean time and our readers understood that it was economically driven and it may not be ideal, but it beats the alternative. It was a way to do something good for our readers and keep everything going.

What was the cost savings of producing the smaller issues?

Tim: It cut the printing and mailing bill by over 50 percent.

Do you have plans to use the digest size for other initiatives?

Nick: There’s been some interest from advertisers to use the mini as a custom platform or a branded content platform, so we’ve got proposals out to different brands now to use that format again, but to co-brand it for special distribution—festivals, and so on.

It’s been a great piece of learning and it’s become part of our toolbelt as something that we will use in the future. It may or may not ever appear again in our regular publishing schedule.

How did you handle newsstand sales during 2009?

Nick: Our focus in the last year has been on efficiency, so obviously we’ve narrowed our print runs and our draws as part of the cash conservation and now we’re relatively efficient which for us is largely bookstores and record stores.

Josh: One thing that we did—we started this a few years back—was to deal directly with independent record stores and we created a Paste Recommends program with about 60 of the best record stores in the country. We had a nice big display with the magazine and some CD selections as well. That’s been a way to find some alternative distribution.

How have you moved business forward in terms of subscriptions? I’m thinking of the VIP and custom subscriber programs.

Tim: Given that we were moving in to a year when we didn’t have a budget to do new subscription acquisition, we knew we had loyal subscribers who would pay more than the $19.99 a year, so we created the VIP program. It’s for the really dedicated subscriber who’s not that cost conscious. There’s very little incremental cost to us because it’s almost all digital. You get the magazine in digital form, CD downloads—instead of a physical CD sampler—an archive of the old editions, and two albums of the month. If you pay for it up front you get a tshirt, all for $2.99 a month. That’s still less than the newsstand. It’s $36 to $50, depending what they add to it.

We’ve received 5,000 subscriptions so far, which is good, because the revenue is higher and cost is lower.

It opened our eyes to how we sell subscriptions. In the summer we relaunched how we sell subscriptions. We’ve put a value on digital. Now, you can get the digital edition and also the downloads sampler. That costs 99 cents a month. And then we’ve layered everything on top of that. We’re agnostic about how people subscribe to the magazine. Now, no matter what you do, you get the digital edition, then you start adding.

If you add it to the VIP program it’s an additional $1.99 a month. You can pick any or all of those options, but it all starts with Paste digital.

If they just want print that’s fine, we’ve made the pricing logical. It’s however the consumer wants to consume it. The print magazine subscription becomes $36 instead of $19.95. Effectively, we’ve raised the subscription price on the print magazine and the CD by around 75 percent.

In hindsight, did the pay-your-own subscription price [launched in late 2007] help or hurt you going into 2009?

Nick: That’s a good question. If I had to do it all over again I would do the same thing. It paid for itself because we had enough new subscriptions and advertising. The PR value alone was worth doing it. As a sustainable model, I think there is some valid criticism that you undervalue your product—and it obviously doesn’t work when the ad revenue is not there.

For a young magazine that had not reached market saturation it was a fantastic way to get the word out about Paste. We got 30,000 subscribers out of that and they’re still with us. We would have needed 2 million pieces of direct mail to get that response.

We used it for only that one time as a subscription push, but for all of 2008 we continued to use it as a strategy at live events.

We’ve learned that people won’t subscribe at a festival, but they’ll come over to our table and pay what they want and take their first issue with them. It had a strange mystical power. And the shame factor drives the subscription price higher—the average Internet order was $7, versus $10 face-to-face. For a while it became a core strategy at festivals. We gained a few thousand more subscribers that way.

A Timeline to Profits

Over the last couple years, Paste launched a series of initiatives that, like many enthusiast publishers, created a very close bond with readers, attracted immeasurable PR exposure, and, ultimately, saved the publication from having to shut down.

November 2007
Name-Your-Price Subscriptions.
Subscribers are given a chance to name their price for a year-long subscription. 30,000 did so. 

January 2009
Spin-off site Obamicon.me lets users create an icon based on the popular “Hope” poster by Shepard Fairey. More than a million icons have been created.

May 2009
“Save Paste” donation campaign is launched. $275,000 is raised, enough to keep the magazine in production.

June 2009
Digest-sized editions are subbed for 3 full-sized issues, saving 50 percent in postage and printing.

Nov. 2009
Build-Your-Own Subscription.
Paste allows readers to choose from an array of products—print or digital—to customize their subscription and pricing. 

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