Business Newsletters Boom, Reach for On-Line Readers

Companies like the information they provide to help boost profits

HOT business advice: Launch a newsletter offering hot business advice.

With the dawning of the "information age," one of the most promising frontiers in information handling is for-profit newsletter publishing, industry experts say.

"In the history of publishing, there may be no greater nor, paradoxically, lesser-known success story than the newsletter industry's rapid evolution, market acceptance, and extreme profitability," states the recent findings of the first-ever survey of newsletter-publishing firms. It was conducted by Northwestern University's Medill School of Journalism in Evanston, Ill.

Biased coverage

Traditional journalists have criticized newsletters for providing information that lacks balance and tilts toward the interests of industry.

But newsletter publishers say they are expected to write with a slant. By definition, they offer a narrow focus aimed exclusively at industry interests and so differ from the broad-brush mainstream press that extols objectivity.

Experts say newsletter publishers are riding the trends sweeping publishing and other industries: steady fragmentation into specialties and the growing popularity of personal computers, the Internet, and other technology.

And the opportunities are rich. Total revenues for the 8,000 to 10,000 for-profit newsletters in North America exceed $2 billion, and average profit margins are roughly 30 percent, according to David Nelson, a Medill professor and director of the national survey. Newspaper profit margins run at about 15 percent.

Industry growth this decade should exceed that of even the record-setting 1980s, when 45 percent of the surveyed newsletters began publication, Professor Nelson says. The publications have thrived as industries grow increasingly complex and segmented.

"I don't see an end in sight" for the need and range of newsletters, says Jim Sinkinson, a former president of the Newsletter Publishers Association and the current publisher of eight newsletters in Emeryville, Calif. "For the economy, I see further fragmentation of markets, a greater degree of specialization, and a higher need for information."

Usually four to eight pages in length, newsletters focus on a kaleidoscope of topics ranging from electric vehicles to urban planning and public relations to health-care reform. "Their topics are as diverse as life itself," Nelson says.

They stake out a narrow industry niche and provide information to help businesses boost profits and efficiency. "Newsletters should tell audiences how to make money, how to be more efficient, and that's what people are paying a high price for; they're not paying for objectivity per se," Mr. Sinkinson says.

Moreover, newsletters are often compelled to publish critical articles, experts say. "If they just pandered to the audience, they would go out of business," Nelson says. "There is no reason to buy something that just tells you that you're great. You want a mirror that shows you the warts too."

For example, Defense Week newsletter, in a four-part series last year, revealed how the Navy allowed a squadron of jet fighters to fall to the lowest possible level of preparedness.

And the TJFR Business News Reporter detailed, in a 16-page report last year, internal workings at Business Week magazine. The story was based on findings of a task force formed to study how the magazine gathers and edits news.

Both articles won recognition recently from the Newsletter Publishers Foundation.

On average, the annual subscription rate of a newsletter is $283. Readership is comparatively small; half of the 253 surveyed newsletters have less than 2,000 subscribers each.

But readers seem to be satisfied, as 75 percent renew subscriptions, according to the survey. This rate is far higher than the average 50 percent renewal rate for mainstream newspapers and magazines.

Keeping competitive edge

Newsletters retain subscribers so well, in part, because businesses fear forgoing information their competitors might find profitable, industry experts say.

While the vast majority of newsletters are distributed through the mail, 1 in 4 firms obtain them on-line, the survey reports. Newsletters are well-suited to the Internet because they are small, nimble, and written for a narrow audience, says Shirley Alexander, president of the Newsletter Publishers Foundation in New York.

"The specialty-targeted newsletter seems poised for unprecedented success as it steadily winds its way toward cyber-distribution," according to the survey findings.

In contrast, newspapers and magazines are finding entry into cyberspace wrenching because of their large size, broad editorial content, and diverse readership, experts say.