A Heck of a Business Model

How's this for a business model for a magazine: no subscribers, no ads, use freelancers only, limited distribution? How can such a magazine make money? Sell your soul. That's what Consumers Digest does, at least when it comes to cars. The Wall Street Journal has the answer to that question in more practical terms: Sell your ratings! And, if they can make money using this business model with cars, why couldn't they use the same model with every item they "rate"?

The Digest allows car manufacturers, and one has to assume other companies, to use the Digest's evaluation in ads for a small fee. With GM the fee is $35,000 for the first car and $25,000 for additional cars. It's not chump change when you realize that GM is touting 15 cars as being best buys; that costs GM $385,000, or what used to be chump change to them. As you would expect, the editor of the Digest asserts that the fees do not influence the ratings, but, if you don't pay and are picked as a best buy, only your name is listed on the Digest web site, while those who pay a fee get a full spread.

The Digest approach is quite different from that of Consumer Reports, which does not allow its recommendations to be used in ads. You may recall that Consumer reports went so far as to announce that a Lexus model was so dangerous that it should not be sold. Another difference in approach is the way the magazines choose the models to evaluate. Consumer Digest gets its models direct from the manufacturer, Consumer Reports buys them from a dealer without indicating that the magazine is the buyer.

Even more important for profitability than selling one's soul is the choice of the title of the magazine. Who would not trust "Consumers Digest'?