If you’ve never seen an income statement for a magazine it’s a very educational document to check out. It just so happens that JPG Magazine’s P&L was published recently over on Gawker/Valleywag (here) and I have it embedded here for you to see.  They are claiming that in part, the demise of the magazine was contributed to by CEO Mitch Fox and his $500,000 a year salary, the expensive salespeople he hired, launching a travel title called everywhere and preparing a fashion magazine. If that’s true, it’s simply run of the mill magazine making hubris where people assume something that works at one level can be scaled to the next. Maybe this is also the end of an era where a powerful sales staff with serious marketing dollars can bring in more advertising than great content and loyal readers on its own.

Back to the income statement. In May 08 here are the numbers:

The income:
$40,000 in advertising with online and print being nearly equal.
$19,000 in subscriptions
$50,000 in newsstand sales

The Expenses:
$23,000 paid in contributor fees ($100 a photo for the photographers)

$104,000 for paper and printing
$23,000 for subscription postage and newsstand shipping

$5,000 for website hosting

$10,000 in salaries for the circulation staff
$55,000 in salaries for the sales staff
$47,000 for the website staff
$58,000 for the magazine editorial staff
$18,000 for the marketing staff
$12,000 for marketing expense
$78,000 for executive salaries
$32,000 in general operating expenses
$17,000 for rent

For a grand total of -$375,000 in net income. Giant sucking hole.

You can obviously see why magazine making is a rich person’s game because $125,000 just to print and deliver the thing is a serious bill to pay every month.

Media Post is reporting that the magazine has been bought (here). I wonder if they can find any fat to trim. Apparently Mitch Fox is stepping down.

jpgmagnetincome – Get more Business Documents
Thanks, Joerg.

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  1. And an interview with Mitch Fox back in October of 2008 about his move to 8020 Media (JPG)…


    The community seems to be your magnet, but what about this business philosophy? What is your plan of linking the pixels on the screen with the ink on paper? Can you expand a little on that relationship?

    MF: “It is easy, because our community members interact with each other relative to the content that they have contributed and the content that their peers have contributed. We have this notion of self interest that all of the members have in playing this “game” to get themselves voted highly enough to become part of this fantastic end product, which is the magazine. The magazine is sold at Barnes & Noble, Borders, Whole Foods and Urban Outfitters, and really becomes a touchstone that all the members want to be a part of. Like I said, it is a very exciting notion for advanced amateurs of any kind to be able to be published in this beautiful magazine.”

  2. $100/ photo for a magazine called JPEG cracks me up.

    • @todd huffman, Why I don’t lament their demise.

  3. Thanks for posting this, there are a lot of interesting numbers that I had no idea about.

    For instance, I never would have guessed that any magazine would take in more $$$ from newsstand sales than from advertising. That just doesn’t sound right to me.

    • @Alex,
      Yes, the newsstand can bring in loads of cash for publishers but that number can be very deceiving as well.

      For example a good sell-through on the newsstand 30% so you have to print and ship 100,000 magazines just to sell 30,000. Also there are a lot of marketing costs associated with newsstand that go into the marketing budget but are really just paying for premium positioning.

      You may be right about the fishy numbers tho since I don’t think the circulation is audited there could be a check swap going on which is an old practice (may be still allowed for audited pubs too) where someone pays to buy x number of magazines then I pay you right back with a marketing expense(not sure if that’s exactly how it works I’d have to ask an expert).

  4. One more thing – everywhere you see “####” on that spreadsheet just means that the spreadsheet column is too narrow, not that they are withholding info. If you download the document and open it in excel, you can view all the numbers.

  5. A couple comments.

    1. The numbers you show simply can’t justify a $500k salary for the CEO. That goes beyond hubris — it’s bordering on criminal. The other numbers don’t look that out of whack for a start-up publication. I don’t know how much seed money they had initially, but they might have eventually been able to turn a profit.

    2. JPEG Magazine was another case of a publication that didn’t quite grasp the reality that the Internet is the dog and the print publication is the dog’s tale. They seemed to use their Web site mainly to promote the print magazine (which seemed to be WAY over priced — not surprising given the printing costs). Clearly they felt they were going to generate the greatest profit from print subscriptions/ad sales. They got it ass-backwards. It looks like the print/delivery costs killed them (in addition to the CEO sucking so much operating capital out of the business).

    You have to wonder whether things could have turned out differently if they used a Web-centric business model — charge a much smaller subscription/membership fee and deliver the majority of content exclusively via the Web. Maybe they could have done a quarterly (annual to start) print edition to properly highlight some top photos/photographers.

    3. I think the concept behind JPEG had merit. But the business seemed to have a multitude of flaws. Throw in a bad economy and there’s not much recovery room for bad decisions. The contributor fees line item is interesting. $100 per image adds up. But paying for quality was probably a good idea — that’s what seemed to separate JPEG from other ventures: good photography vs. the blurry cat shots that make up the majority of content of a lot of other sites.

    4. As for paying for sales talent, frankly you probably want to overpay for quality sales people when you are a start-up — that’s when it’s most difficult to get attention from advertisers. I’m not sure that was a bad decision. The decision to go print vs. Web seems like the fatal flaw (not to mention the poor economy).

    • @Tom,
      Very interesting and valid observations, however the print publication is essential to JPEG magazine brand. Without the print publication, JPEG MAG. does not have a strong selling point. It would be just another site where people can post images and talk about their images. And there are number of sites with “good photography” that offer that for free. So using your analogy the print publication is the dog in JPEG magazine case. They are selling the idea that advance amertuers can get published simply through meritocracy.

      • @David O.,

        I agree the print magazine offered decent photographers the opportunity to get published and that opportunity set JPEG Mag apart from other Web sites.

        Perhaps if they had started smaller — for instance publish an annual “Best of 20XX” printed edition which could have been used as a marketing giveaway with new subscriptions as well as a vehicle for publishing the work of photographers. Then, as subscriptions grew, they could publish something quarterly, then go monthly.

        As it stands the printing and distribution costs simply ate them alive. And they couldn’t get enough paid subscriptions (again because the price was too high) to offset the costs. Without the paid subscriptions, potential advertisers were probably cool to spending money on the publication. So it was probably an inevitable downward spiral.

        I also wonder whether if, instead of sinking so much money in printing, had JPEG Mag spent money on getting some recognized names in photography to contribute some commentary, it might have had similar benefit to photographers looking for some recognition.

        There’s this whole budding industry of “portfolio reviews” by people who at least claim to be successful photographers. I know Rob published something a few weeks back questioning the value of such things, and I’m a little skeptical myself. But there is a voracious demand for legitimate critical assessment of photographers’ work. I think there might have been some unique value JPEG could have added to a Web product that would have cost much, much less than monthly printing costs and still created a opportunity to give good photographers some recognition. Then, a more modest subscription fee might have been an easier sell.

        • @Tom,

          I totally agree.

          • @Tom
            I forgot to mentioned that what you mentioned has been done, and successfully done. For example Communication arts has an annual best of competition that is practically open to everyone, and provides great exposure, so does photo district news. So the question is there room for more. Moroever they need to do a better job marketing, I never heard of JPEG Magazine until they were in financial trouble.

            I know Digital SLR photography magazine, provides critical assessment. I think it’s important when developing skill, to have that. it’s something you experience when you go to school for photography or art school.

            • @David O.,

              Sure, I think there is room for a new venture focused on identifying up-and-coming photographers.

              There are various sites that tackle parts of the problem; but none (that I have seen) really pull the pieces together to be the industry influence leader. Getting the content mix right is a critical factor. You need to be able to attract quality photographers AND people who hire quality photographers (editors, ADs, etc.).

  6. can’t agree at all that the decission to go print only vs Web was a bad one. The whole concept seems to be one of so many which still can’t get the web thing right (= make money out of it) They tried something innovative and bless them for that. Pprob sounded more reasonable on paper though then it really was but still- I don’t feel blaming them for trying.

    The short- term conclusion to me really is actually NOT to look at the Web for new business models but to good old print and try to make that work (plus sell advertising via web if possible).

    How many magazines are there on the web who make really money. Nytimes? Wsj? You don’t call myspace or facebook a magazine , right? (well not yet)

    I don’t see the web as a realistic business solution short or mid term. Longterm yes, in 10-15 years maybe and I would call that a hope or a dream not a solution right now. It will happen earlier or later but a lot of new technology will have to put in place to make it happen and photography will prob have to change considerably in the process too.

    (…dont you love these times of crisis – predictions for free everywhere!)

  7. A rich persons game indeed. Every time I meet a magazine owner they are new to money and for some reason they think they can make a magazine work. Every time they fail I laugh my ass off. The first one to figure out how to make an online mag work will be rich truly. I doubt however it will be some rich fool. The future is probably being made right now in some small dark apt by college kids.

  8. I know what they can do… rather than paying the photographers an exorbitant $100 to run their photo in the magazine… they CHARGE the photographer $100 for the privilege of being in the magazine!

    I know I’d sign up for that and I’m sure there would be thousands of Flickr users clamoring to get in on that action.

    • @Jeff Singer,

      are you serious about that? That would turn any magazine into a stupid advertorial where only the ones with money can be published and these who want to. I dont think that any photographer on the planet should have to pay to show their work. The whole thought of JPEG would be destroyed then. Really not an option here and rather not thought through.

      What they could do, is just showing them, without any money involved, from no side. That would at least reduce the cost.

      • @Ailine, no, not serious. I guess I need to work on my sarcasm skills.

        • @Jeff Singer, ah well, I guess I should work on my understanding sarcasm in english skills then. :)
          It was just a thought which i’m pretty sure some people really have, thats why I wasnt so sure if youre one them. Glad youre not.

    • @Jeff Singer, Exactly! I got another idea: don’t guarantee they’d get published for $100 – make each photo go through a panel of “experts” so inclusion has some Cache to it. Oh! Wait ……

      • @Bruce DeBoer,
        Cachet, meaning prestige or standing.

    • @Jeff Singer, Sounds like this:


      Word on the street is that photographers/galleries pay top dollar for a spread in Focus. I know a photographer that shelled out over a thousand dollars for the “opportunity” that Focus provides…sucker.

      • @matt, Actually, I think they call it a “Source Book” in the Ad Biz.

  9. Dead model…abandon ship!!

    Print should be reserved for boutique publications that have the subscribers willing to pay for premium content…such as monocle/purple etc.

  10. Wow, those numbers are crazy. Especially the negative sign at the profit line. There were a lot of negatives near the profit parts…

    More importantly, I don’t think people subscribed because the content was pretty poor, and unless your image/article was in the magazine, why on earth would you purchase it? I mean, it was very clearly amateur, basically substandard.

  11. Their newsstand revenue was higher than their ad revenue because they had basically no ads.

    Forget about Mitchell Fox’s salary. Mitchell is worth whatever he can get someone to pay him. God bless him.

    What’s interesting to me is how Mitchell spent other people’s money. Start with $30k a month to the edit and design staff, plus another $20k a month to edit and design consultants. I’ll go out on a limb and say it could have been done with one editor, one managing editor, one print designer, and one web designer, and everyone would have had lots of time to be really creative. I just saved them over $300k a year before you include all of the office space they no longer need.

    I’ll go out on another limb and say they could have gotten away with one web developer and maybe $50k in Joomla or Drupal freelance help. Make it $100k. We just saved them another $350k or so plus who knows how many offices.

    $400k on ad sales staff to generate $400k in billlings? Plus another $280k on marketing? It must have been a lively office!

    • @Nigel Henson,
      It’s interesting because when working at a magazine the production of an issue is brutal and it seems like there’s never enough people to do all the work. But, that usually all stems from a couple things:

      1.The decision makers who either can’t make a decision or will not allow anyone but themselves to make all the decisions.

      2. The front of book garbage and packages.

      Remove those two items and you could have a very lean staff to put out a high quality product.

  12. >> $5,000 for website hosting

    That’s a MONTHLY number, right? Lavish.

    • @quirkyalone,
      Actually 1 high end server costs $1000 a month so that’s not unreasonable.

  13. i can’t agree that jpg’s content was substandard. it may not have been “professional” but that doesn’t mean it wasn’t good. not always good, but very often beautiful, and the print quality was excellent. what was frustrating, however, what how they sucked you into the idea that you might get published. they freely admitted that there would be no rhyme or reason to how one might earn the elusive $100 (and a free subscription) and there was at least on occasion where a guest “editor” did a pretty lousy job of sticking to the theme.

    anyhow, i hope they can make it work under new ownership because it was sort of a breath of fresh air among the normal photo rags, but i agree that their web presence needs some beefing up. not sure how they do it, but they have to figure out a way to create flickr-like community enthusiasm. but i also hate flickr….

  14. JPG Magazine, un’occhiata al bilancio…

    Recentemente JPG Magazine è stato rilevato e salvato dalla bancarotta.
    Una rivista con un certo seguito, ma che non è riuscita a tenere un bilancio positivo. Alcuni accusano il CEO ed il suo stipendio annuale di 500000$, ma se si guardano tutte le …

  15. I created a magazine from scratch in 2006. It was a regional glossy about art, fashion and design. It was called hipStyle (you can google it). It lasted a year.
    I made money on the first issue, but began to lose money because I couldn’t get good ad sales people. We relied on ad sales for profit. I learned a lot and I wrote, photographed and conceived the whole thing myself. I had a great time and quit right before the economy tanked.

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