The Digest's slow and painful death
What is the world's highest circulation magazine worth? About $1.50, apparently. On Monday, the UK edition of Reader's Digest was sold for just one £1.
The classic waiting room magazine was and still is part of a formidable empire. 10.5 million people worldwide subscribe to Reader's Digest, more than any other paid publication. Each issue reaches more than 40 million people. There are 49 editions in 21 languages, including braille, audio, digital and large type editions. To be clear, though, only the UK edition, which has a circulation of about 200,000, was sold on Monday. Reader's Digest is still owned by the RDA Holding Company and split into many different divisions around the world.
Many other once great publications have crashed and burned in recent years (Newsweek, Spin, US News and World Report), but Reader's Digest is unique. How can a piece of a service with 10 million subscribers be worth less than a cup of coffee?
To add another layer of complexity, Reader's Digest UK was worth millions just four years ago. The US Reader's Digest parent company was in dire financial straits in 2009 and filed for bankruptcy protection during a restructuring meant to reduce their $2 billion (yes, billion) debt burden. The UK arm of the company couldn't get approval for a buyout of their underfunded pension plan, so the magazine was put into administration.
Even then, the Guardian reported that the owners of RD received more than 100 'expressions of interest' in the ailing publication. It was eventually sold to Better Capital, a well-known private equity firm run by Jon Moulton, for £13 million. Moulton invested another £9 million into Reader's Digest, but it failed to turn a profit and he decided to take the £23 million loss, telling in the Guardian that restructured magazine was now "too small" for his business.
Perhaps the reason so many were willing to invest serious money in what looked like a doomed business was because of the long history and name recognition of Reader's Digest. It's one of the most defining publications, in the history of American media.
DeWitt Wallace and his wife Lila founded the magazine in 1922 while he was recovering from wounds sustained during WWI. Their first office was located under a Greenwich Village speakeasy during prohibition. The original format for Reader's Digest was 31 articles (one for every day of the month) compiled and often condensed from other publications and a few pages of funny stories and anecdotes sprinkled in between. It was wildly successful.
During the 1940's, only the Bible outsold Reader's Digest (and RD produced their own condensed version and presented it to Pope John Paul II in 1982). Wallace was editor for more than 40 years and his strong conservative, anti-communist political leanings made the publication so popular in mid century America. The Wallaces were heavily supportive of Richard Nixon, and Nixon repaid their campaign contributions and editorial support by presenting them with the Presidential Medal of Freedom in 1972.
Their magazine famously published the first article linking cancer and smoking. The Wallaces also had an impressive art collection. The man who made his fortunes condensing literature for the masses decorated his offices with Renoirs and van Goghs.
The UK Reader's Digest's new owner Mike Luckwell is a 71-year-old venture capitalist whose previous hits have included the production company responsible for "Bob the Builder." He says he will be targeting "frisky over-50's" with the restructured magazine. The Guardian quoted him and saying that he and his peers "all have fairly active and interesting lives and we're not a bunch of old fuddy-duddies."
Regardless, Reader's Digest will be hard to resurrect. The UK Reader's Digest is struggling with mismanagement and the legal mess of bankruptcy. Even though it has the highest number of subscribers of any magazine in the world, advertising has fallen. Subscriptions didn't usually generate the bulk of income for publications, and even though Reader's Digest still sells well in many countries, there are better places for advertisers to spend their money.
Reader's Digest has come a long way from their Cold War glory days, and it looks like their era is over. Tellingly, the highest circulation paper in the US is currently AARP The Magazine, a freebie that comes with AARP membership. No one, not even Luckwell's "frisky over 50's", pays for print publications anymore. Luckwell himself admitted he had never subscribed to the magazine and had last picked one up "in the doctor's surgery some years back", according to the Guardian.
Reader's Digest is a dinosaur and if Luckwell can get it to turn a profit, it will be a miracle, but it's probably already extinct and will soon be history.
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