New magazine

Information that can be shared on the interviewee’s inquiry:

Main revenue streams:

Retail sales Advertisement Subscriptions

To determine whether the client should launch the new magazine, the interviewee should first outline a structure to estimate the magazine’s potential first-year revenue. At this stage, the candidate should start with an issue tree rather than estimating numbers.

Information that is given: Percentage of men between 30 - 60 who buy magazines: 10% US population: 300 million

The total revenue is the sum of the revenues from

• Retail sales (1)
• Subscription sales (2)
• Advertisement sales (3)

37.5% (=30/80) of the population is between 30 and 60 years old. (Assumption: Uniform age distribution and a lifespan of 80 years)

After laying out a structure, the interviewee should consistently follow it. To calculate revenue, the interviewee should begin with the end-nodes (the nodes at the bottom of the tree) and estimate values to calculate the nodes’ values from the bottom to the top of the tree.

Since we need the total number of units sold to calculate the first two branches (retail and subscription sales) let’s start by branch number 3 (advertisement).

Based on the estimated first-year revenue alone, the CEO of the publishing company should launch the new magazine.

The estimated potential first-year revenue is 16% higher than the CEO’s targeted first-year revenue ($15 million).

However, before giving a firm recommendation, the following factors should be investigated.

• To verify whether 5% market share is a realistic first-year estimate, we should better study the competitive landscape.
• To verify whether 10% of men between 30 and 60 years old really buy magazines, we should further investigate our target demographic.
• Does the publishing company have competencies in this new market?
  1. Do we need to hire new writers for this magazine?
     1. We need writers who specialize in this target market
     2. We need more writers because of a higher workload
  2. ​Can we synergize with our current existing magazines?
     1. Selling advertisement across different magazines
     2. Featuring magazines across each other (advertising)
     3. Reporters working on different magazines
     4. Easier research for reporters due to bigger network