Unsexy and unsuccessful

Aug 20th 2009
From The Economist print edition

How a once-mighty publisher fell, and why it may rise again

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A purpose-driven purchase

A FEW years ago it was feared that the investors scooping up one media company after another and loading them with debt would ruin their purchases. As it turns out, some have also ruined themselves. On August 17th the Reader’s Digest Association, publisher of America’s most widely read magazine, said it would seek bankruptcy protection to restructure $2.2 billion in debt. The consortium that bought the company two years ago, led by Ripplewood Holdings, a private-equity firm, would lose its investment under the plan. The future of Reader’s Digest, by contrast, looks brighter.

These days Reader’s Digest is a global business: it generates less than half of its revenue in America. Most of its money comes from direct marketing (that is, junk mail) and sales of things as varied as wine, vitamins and books. It also runs Allrecipes.com, a popular website. But the corporate brand is built on the magazine, and the company has not been helped by its epic decline.

Reader’s Digest began in the 1920s by summarising books and “articles of lasting interest” from other publications. Gradually it acquired its own editorial voice, and with it a somewhat stodgy image. The magazine emphasised homespun values and leaned to the right—Richard Nixon and Ronald Reagan were fans. In the 1970s it sold as many as 18m copies a month. The Wall Street Journal described it as the greatest publishing success since the Bible.

Yet cracks were appearing. The magazine came to depend on competitions and sweepstakes, particularly to lure younger subscribers. Forced out of that business by public and legal pressure, Reader’s Digest attempted to reinvent itself as a celebrity-heavy lifestyle magazine. Despite heroic (and expensive) efforts to keep up the numbers, circulation has fallen relentlessly. It now stands at 8.2m in America—not many more than Better Homes and Gardens.

These days Reader’s Digest is aiming for a circulation of about 5.5m, having dropped the notion of being all things to all readers. Instead it will emphasise the heartland values of family and practicality. Other initiatives point in a similar direction. In 2006 the firm successfully launched a magazine featuring Rachael Ray, a cheerful and uncomplicated television cook. Earlier this year it formed a publishing alliance with Rick Warren, an evangelical pastor whose book, “The Purpose-Driven Life”, has a more plausible claim to be the greatest publishing success since the Bible. Mr Warren is conservative but pointedly non-political.

This is wise. There are a lot of people in the heartland, and not just in America. Reader’s Digest’s talent for distilling complex arguments ought to be more valuable in an era of information overload. In the past year Every Day with Rachael Ray and the American edition of Reader’s Digest have lost less than a tenth of their advertising pages, according to Mediaweek—far less than the competition. If it can escape that troublesome debt, the least sexy of publishing companies ought to be around for a while yet.