Rolling Stone's Big Gamble

I have been fascinated by the response to Rolling Stone's magazine cover of the Boston Bomber in a rockstar-like depiction. It evoked strong negative feelings for me, as it did for so many others, which got me wondering — is all publicity 'good' publicity? Apparently Rolling Stone thinks so.

Make no mistake, this was a calculated gamble by Rolling Stone. With ad revenues falling from over $221M in 2006 to around $167M in 2012, it could be they felt this would jolt them back into cultural relevance, along with the rest of Jann Wenner's print media empire. Either way, the effects won't be felt for some time. Rolling Stone circulates 95% of their magazines through subscriptions. That means that sales lost through the boycott will be a drop in the bucket in the grand scheme of things. In fact, the issue is already selling on eBay for 2X-3X the cover price and many journalists have cited a 20% jump in sales of the issue.

It remains to be seen in the coming months what happens to their subscriber base. Initially, the monetary impact of all this seemed simple to assess: I estimate that the average subscriber is worth around $100/year in ad profit to the magazine. Assuming subscription costs cover overhead, then if 50,000 people said 'goodbye' to Rolling Stone as a result of all this, are we looking at a $5 million mistake? A relative drop in the bucket. But not so fast. I now realize It is more complicated than that. When I looked at the magazine’s subscriber base along with the drop in ad revenue, clearly they do not align. In fact, by most accounts there are MORE subscribers today than in 2006. So in the same time that the subscriber base actually grew, ad revenue dropped 24%.

Make no mistake, this was a calculated gamble by Rolling Stone. With ad revenues falling from over $221M in 2006 to around $167M in 2012, it could be they felt this would jolt them back into cultural relevance, along with the rest of Jann Wenner's print media empire. Either way, the effects won't be felt for some time. Rolling Stone circulates 95% of their magazines through subscriptions. That means that sales lost through the boycott will be a drop in the bucket in the grand scheme of things. In fact, the issue is already selling on eBay for 2X-3X the cover price and many journalists have cited a 20% jump in sales of the issue.It remains to be seen in the coming months what happens to their subscriber base. Initially, the monetary impact of all this seemed simple to assess: I estimate that the average subscriber is worth around $100/year in ad profit to the magazine. Assuming subscription costs cover overhead, then if 50,000 people said 'goodbye' to Rolling Stone as a result of all this, are we looking at a $5 million mistake? A relative drop in the bucket. But not so fast. I now realize It is more complicated than that. When I looked at the magazine’s subscriber base along with the drop in ad revenue, clearly they do not align. In fact, by most accounts there are MORE subscribers today than in 2006. So in the same time that the subscriber base actually grew, ad revenue dropped 24%.
The real danger to Rolling Stone lies in the demand for their ad space. In an already weakened print advertising market, will advertiser demand drop so low that Rolling Stone has to significantly lower their rates to fill ad space? Or will they be lining up? I wonder if Rolling Stone reached out to some major sponsors before-hand. Seems like that would be the antithesis to their mode of operation. In any case, the risk seems far greater than just lost subscribers.

The real danger to Rolling Stone lies in the demand for their ad space. In an already weakened print advertising market, will advertiser demand drop so low that Rolling Stone has to significantly lower their rates to fill ad space? Or will they be lining up? I wonder if Rolling Stone reached out to some major sponsors before-hand. Seems like that would be the antithesis to their mode of operation. In any case, the risk seems far greater than just lost subscribers.

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