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Barnes & Noble rethinks magazine

Production costs force retailer to trim subscribers

Barnes & Noble, the nation's largest book retailing chain, does not usually do things on a small scale. But the chain's sobering experience as a co-owner of Book magazine has prompted it to embrace, at least in this case, the less-is-more school of publishing economics.

Book, a magazine filled with book reviews, author interviews and effusive features like "Anita Shreve's Secret Passions" and "Hype! Hype! Hype! Wild Publicity Stunts," grew so fast under Barnes & Noble's patronage that production costs soon overwhelmed any added revenues.

Now, Book and Barnes & Noble have restructured their partnership to cut costs and more closely integrate the magazine with the chain. Starting with the May/June issue, the magazine will be called Barnes & Noble Presents Book. The circulation promised advertisers will be cut to 150,000 from 750,000, and the magazine will be more prominently displayed in the chain's more than 600 stores.

The new name and marketing approach is the latest evolution for the magazine, begun five years ago by Mark Gleason, its publisher, and James V. Kramer, its editor in chief. Their concept for an Entertainment Weekly-like magazine about the book world burned through $700,000 in the first two years as it struggled to find readers and advertisers. But in November 2000, Barnes & Noble invested slightly more than $4.2 million for a 50 percent share in the company, West Egg Communications.

The retailer then began distributing Book free to members of its Readers' Advantage customer loyalty program. Over the next 18 months, circulation of Book rose to 1.2 million from 100,000.

But Barnes & Noble's support has been, in some ways, too much of a good thing. The retailer had agreed to give the magazine to new program members only for a year. After that, it was up to Book to keep them as paying subscribers. But the recipients of the magazine only renewed at a disappointing 5 percent rate.

Although advertising revenue tripled to $1.5 million from 2001 to 2002, Gleason said, skyrocketing production and mailing costs meant that survival was even more difficult for the large-circulation Book than it had been when the magazine had fewer readers.

Last year, Barnes & Noble decided that giving Book away free was not a necessary incentive to get customers to pay an annual fee of $25 for its Advantage club.

"It was an expensive proposition," said Stephen Riggio, Barnes & Noble's chief executive. In the latest publicly available financial results, Barnes & Noble reported a $2.5 million loss on its investment in Book for 2001.

Now Book does not just want readers; it wants the right readers, and only about 150,000 of them.

Moving Book from the magazine racks to display tables in Barnes & Noble stores should increase the magazine's sales, both Gleason and Riggio said.

"We're taking a chance that throwing our weight behind our B&N channel will be a faster route to profitability for us," Gleason said of his one-year renewable deal with the retailer. "Out there in the world of consumer magazines, we're not known. But we're piggybacking on a brand that's very well-known."

But Book's more public connection to Barnes & Noble is already having some unpleasant repercussions. Borders, the nation's second-largest chain bookseller, has decided not to carry Book after the current issue, and Gleason expects that independent booksellers will follow suit.

Though Gleason acknowledged that his original goal was "to have the magazine everywhere books are available," the probable loss of bookstore outlets other than Barnes & Noble may hurt pride more than the pocketbook. According to Riggio, about 70 percent of the magazine's current newsstand sales are at Barnes & Noble.

Sales at B&N doubled last year, Gleason said, and fluctuated between 10,000 and 15,000 copies. "We didn't see that growth in other channels."

The partners will also face suspicions that the books and authors being profiled in the magazine are the result of promotional deals with publishers, said Michael Zibart, president of BookPage, a 14-year-old newsletter about books, distributed free in independent bookstores and about 3,000 public libraries.

"When I walk into a Barnes & Noble store, I know there's a reason why those books are in the front," Zibart said, referring to the co-op payments from publishers that determine the prominent placement of many books in chain stores.

Riggio said that the magazine would continue to be edited independently. And the chain's presence in the magazine will be limited to advertorial inserts, Gleason said.

"I have assurances from Barnes & Noble," Gleason said. "They are on the same page as we are that an independent voice is key to the magazine's success."

"Some will remain skeptical," he added. "I can tell them a dozen times, but the first few issues out of the gate will convince them."