System Crashing

Buying Wired magazine may align you with the digerati, but buying its stock might sink you into poverty

"Almost no magazines make money on books, especially magazines with a circulation of just 300,000," says veteran magazine consultant John Klingel. "The magazine companies that do make money -- Rodale Press, Meredith, Southern Progress -- have much higher circulations."

HardWired's own promotional materials indicate the company has a way to go before it can compete with big-name book peddlers. A pamphlet touting "Wired Style: Principals of English Usage in the Digital Age" by the Editors of Wired makes a reference to The Electric Kool-Aid Acid Test by Thomas Wolfe. It's hard to say whether Tom Wolfe would feel flattered by the confusion with the author of You Can't Go Home Again. But the mistake is American Lit 101.

Wired Ventures' plans for NetizenTV and the programming that follows are equally iffy. The magazine Martha Stewart Living has a circulation of more than 2 million, yet the Wundermaid's TV show still isn't turning a profit, according to Klingel. It's unlikely that Wired would fare any better.

If anything, Wired Ventures' plans to diversify into such unpromising realms actually weaken its prospects for profits in the near future. Instead of boldly going where no magazine has gone before, it's backpedaling into the past, weighing the company down with the "old media" it's so apt to downgrade in the pages of its magazine and on its Website, uh, cyberstation.

All that said, Wired remains miles ahead in covering the ongoing transformation to a technological society; it just has yet to download dependable, Internetine profits. Which makes its financial future, along with thousands of other on-line enterprises, unpredictable at best.

"All the Internet stocks are way overvalued because no one has shown how to make money on them yet," Klingel says. "Now we have a magazine like Wired that's remotely connected to the Internet because it has a Website and a search engine. A prudent investor would not exactly jump at the chance to buy into that operation."

Of course, Wired's franchise among the digerati gives it major chops in the magazine market. Or does it? Often obscured in all the media attention and hype surrounding the magazine is that nagging circulation of just 300,000. Again, the seemingly dissonant comparison to Martha Stewart Living is instructive. That lifestyle publication started shortly before Wired and now boasts a circulation of more than 2 million. To put it in even sharper perspective, a Berkeley-based mag called Cross Stitch topped 2 million in the late '80s before declining. Wired is trumpeting a fundamental change in the way we live our lives -- as Rossetto says so often, a revolution! -- yet it can't even attract half as many subscribers as a DIY mag or a fanzine for knitters.

"The media as a whole tends to exaggerate by a wide margin how popular the high-tech subject matter in Wired really is," says John Masterton of the Media Industry Newsletter, a trade publication devoted to publishing and electronic media. "Just because journalists get excited about Wired doesn't mean the guy in Dubuque knows or cares. It's inevitable that Wired's glow will fade. I don't see huge potential for circulation growth."

What's more, Wired's 300,000 aren't necessarily the country's most sophisticated Webheads. One veteran free-lancer for Wired who asked not to be identified declared that Wired's image as the bible for hip, young technophiles has never matched its true audience. The reader profile bears this out. The median Wired reader is a college-educated 37-year-old male with an average household income of $122,000 and a net worth of $603,000. The average HotWired member is younger (32 years old) and decidedly less affluent with a median household income of "just" $50,000.

"They position the magazine as being for the digerati," the writer says. "The real audience is middle-aged white boys who are young enough that they still want to try to be hip, but they are too old to install a Web browser on their computer without the help of a 15-year-old. So they use Wired as a kind of liar's guide to knowing enough about the digital revolution to be interesting at cocktail parties."

Again, fossil fuels such as Spy and National Lampoon come to mind.
Wired Ventures has approximately 285 employees, with 129 devoted solely to Wired magazine, not to mention a bevy of free-lancers. The large budget and staff size have raised more than a few eyebrows in publishing circles.

"As a person more interested in content than profits, I think what they're doing is great, but I sure wouldn't want to see Wired spending money as quickly as they are if I were an investor," says Folio's Russell. "I can't help but feel that if I had that kind of money to throw around, I could put out a magazine like Wired, too. It's the same feeling I get about Pamela Anderson; if I spent all that money, I could look like her, too."

But to flame Wired as merely profligate would be unfair. "Wired was the most notable new magazine of 1993, and it still has no real competitors," says Samir Husni, a University of Mississippi professor who publishes a yearly guide to new magazines. "It's stayed on top for a surprisingly long time for a magazine in a very competitive field."

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