MagWeb:
    Military History Magazine Web (5/2000)

    by Douglas Dixon

In the new wired economy, Internet E-companies explode like supernovas. They spend millions of dollars on one Super Bowl ad to establish their name, give away their product to win market share, and then quickly go public to cash in on the boom market for technology plays. So, what has Russ Lockwood been doing at Stockton, NJ-based MagWeb.com, spending four years building a military history web site, and then daring to charge for the content that he has developed? Doesn't he know that content should be free?

MagWeb (short for "Magazine Web") is a throwback to the idea that content is important. "Why do you think AOL bought Time Warner?" asks Lockwood. "It wasn't just for the cable systems, it was for CNN and the magazines -- the content."

So, what's the idea behind MagWeb? Well, imagine you are a military history buff, and you like reading about commanding the British Army in the Napoleonic Wars, or the uniforms of Spanish troops in Latin America, or early submarines and U-boats, or British Colonial warfare in the Sudan, or even reviews of tactical and strategic computer and war games. Where could you go to enjoy your hobby, to find articles in your area of interest, to discuss ideas with others who share your passion?

You could subscribe to magazines and newsletters in the field, but there are so many small and specialized publications, many that you may never even have heard of, and published all around the world. You might try to join military history organizations or attend conferences, but they may not be available in your area, or fit into your schedule. And even if you did all of this, how can you be sure that you would notice all the articles in your area of interest, or that you had not missed a great article that was published only a year or two ago?

This is where the promise of the Internet comes in. Imagine instead that you could connect to a Web site that offered articles from lots of different publications from all over the world. And since the articles include all the text and all the graphics from the original publications, you can easily do searches to find material of interest to you. And of course, the articles would accumulate over time, so that not only current publications, but also an archive of back issues, all are available for browsing.

MagWeb Site

This is the promise of Lockwood's MagWeb (www.magweb.com). As of mid-March, MagWeb hosted an archive of over 16,000 articles on military history from 81 magazines, plus book and game reviews, sample book chapters, other product reviews, and discussion areas. "MagWeb.com is the world's largest military history and product archive," says Lockwood, "and equal to a Fortune 500 company's site."

Contrary to the established Internet model, MagWeb charges for access to this material. A one-month subscription costs $19.95, 3 months costs $34.95, 6 months costs $49.95, and one year costs $59.95 (or $4.99 a month). And it has found people -- nearly 2,500 so far -- willing to pay for this content. Assuming that the average subscriber gravitates to the $5 a month plan, those numbers suggest an annual gross of over $120,000. While that might not excite the lords of high finance and IPOs, it's a promising revenue stream for a small, home-based business that's just a few years old. And it suggests that this venture might just last longer than some of those very hot Internet IPOs that recently came crashing down to earth in the recent stock market correction.

"There is a lot on the Web that is 'free' although the advertisements can get overwhelming at times," says Lockwood. "MagWeb has always been a 'premium' site. The Web is like broadcast TV with plenty of free programs supported by plenty of advertisements. But the best shows are on cable, and you pay for cable. MagWeb is the equivalent of a premium military history cable channel. We charge a fee for our premium content, and there are no advertisements."

Lockwood argues that "the equivalent in print subscriptions is over $1,000, not including the out-of-print magazines you can't find. $5 is the cover price of one issue, and you're getting 19 issues a month." The Web also provides much more timely access to foreign subscribers (over a third of its subscribers are from outside the U.S.), who avoid the long wait for surface mail delivery, and save on overseas postage.

To help new visitors decide whether to subscribe, MagWeb offers a free sample article from each of the publications that it hosts. It also hosts a virtual mall with historical art, books, games, miniatures, and other products offered by third parties.

"We find two main groups of members," says Lockwood. "One stops by every week or two and spends a full hour or two reading articles. The other group drops in every couple days. It's absolutely amazing, we put up articles two or three times a week, and these people are checking in at lunchtime to print and read them."

Free Web Content

Charging for content on the Web is a tough business, especially for magazine-like content (we'll ignore investment services and game sites and smut). Perhaps the most famous flame-out was by Slate magazine (slate.msn.com), a general-interest online magazine owned by Microsoft. Slate was started in June 1996, and started charging an annual subscription fee of $19.95 in March, 1998. By February, 1999, faced with competition from free sites like Salon magazine (www.salon.com), Slate threw in the towel and rejoined the Web mainstream. At the end, Slate had paying subscribers numbering in the "high twenty thousands."

Even a financial news service like TheStreet.com (www.thestreet.com) could not support charging $99.95 a year for access to its site. In January, 2000, TheStreet.com opened up its news services for free access. Again, this better matched its competitors like The Industry Standard, which supports its print publication with a free web site. While TheStreet.com was able to attract more than 100,000 subscribers to its old site, it has now shifted to charging subscription rates for specialized services including commentary and analysis and research. The hope is that while the number of subscribers will go down, the revenue will be replaced by higher prices for the more focused services.

By comparison, a well-established national publication like the Wall Street Journal has been able to develop a Web subscription service to complement its print publications. An annual subscription to the Wall Street Journal Interactive Edition (www.wsj.com), including Barron's Online, is $59, or $29 for subscribers to one of the print publications. The first two weeks of a new subscription are a free trial period. The Journal's Web subscriber base is now around 375,000.

Another approach is to offer free access to the current issue, but then continually develop more value in an on-line archive that can support fee-based access. The New York Times (www.nytimes.com) posts its current issue for free on-line, and offers free headline services by e-mail and even a wakeup call service. For access to previous editions, however, the Times offers its 365-day archive of articles at a flat rate of $2.50 per article for the full text (but not photos).

In New Jersey, the Star-Ledger and the Times of Trenton offer full-text archives on New Jersey Online (www.njo.com) for a flat fee of $6.95 for unlimited usage. The Star-Ledger archive dates back to May 1989, and the Times archive to 1993.

A similar shake-out has occurred with on-line references. The Encyclopaedia Britannica is now available for free on the Web at Britannica.com (www.britannica.com), along with selected articles from more than 70 of the "world's top magazines," world and U.S. news, and other database and searching services. This is a considerable price reduction from the full 32-volume print edition at $1,250, or even the CD-ROM or DVD editions for $69.95. Meanwhile, Microsoft continues to charge for an on-line subscription to accompany its Encarta Encyclopedia for $39.95 per year.

Another august name, the Oxford English Dictionary, also recently was made available on the Web to provide online access to the full text and searching capabilities. Individual subscriptions cost $550 per year, compared to $395 for the CD-ROM edition, $375 for the compact edition ("in slipcase with reading glass"), and $995 for the 20-volume printed set.

"The Web enables new content, but there are few ways to pay for it," says Peter Krasilovsky, vice president, local online commerce, for the Kelsey Group. "It makes sense for research, high value content, and special services."

The Kelsey Group (www.kelseygroup.com), based in Princeton, provides research and analysis focusing on local advertising and electronic commerce. "A couple years ago we believed premium services would have a big comeback," says Krasilovsky. "The Wall Street Journal shows you can have a truly successful service."

"Right now there are only a few ways to sell content. Newspapers can sell their archives and bring in some revenue. They have been under marketed, at $2 to $3 per item. Some have given up, there's not enough traffic for advertising. But the services need to be bundled with other applications, like a travel service, with articles and booking and calendar. It's a much more pragmatic approach."

Magazines

So, what can MagWeb offer to the magazines that it hosts? "We work licensing deals with the magazines," says Lockwood. "They use MagWeb.com as their electronic version, and for back issues. It's up to the magazines how much to share. Some are hip to this and promote the back issues to get royalties. Some magazines like the British "First Empire" are adamant about being posted close to the publication date. They get more newsstand sales as readers want to get a hard copy."

In addition, the magazines get worldwide exposure to the MagWeb subscribers that they could not gain individually, and that draws new subscribers and new advertisers. "They get exposure in a niche market," says Lockwood. "We have anecdotal evidence that magazines have picked up circulation. I can tell you that we have not lost any from MagWeb, and we haven't put any out of business."

Statistics

And it seems to be working. MagWeb was founded in 1996, and went on line with eight magazines on July 1, 1996. "We waited until we had at least five magazines," says Lockwood. "Some were quite forthcoming, and said they thought we would be dead within six months."

Lockwood promises his subscribers that MagWeb will post at least 10 new issues a month. He actually averaged over 22 in 1999, growing from over 19 in 1998, around 12 in 1997, and 5 to 6 while starting out in 1996. MagWeb posted 267 issues in 1999, with around 5300 articles, building the archive of around 15,075 articles and 12,624 images. That's a rate of 100 new articles a week.

"We have just under 2,500 paid subscribers, and are doubling every year," says Lockwood. "We hope to reach 5,000 by the end of this year as we build the archives. We're about on our five-year growth plan."

"Our original concern was that readers would subscribe for a month and then go away until the archive built up more. But we've found that approximately two thirds of our members subscribe for one year, like a magazine subscription. We retain around 75 to 80 percent of our members."

Lockwood

Lockwood's interest in military history began at an early age. "My father taught me chess at around age 6," he says, "with kings and queens and knights and castles. It was a thinking game, and I started reading up on medieval knights. I then graduated to World War II because the local library had more material on it."

"History is important to understand how things work, and who we are. Where we are today is the result of where we were before. And wars were distinct turning points in history. The more we understand them, we get into them less. But eventually we forget. Mass slaughters are not a good thing, and we don't want to repeat the mistakes of the previous millennium. Bosnia was a mess back in the Ottoman Empire. In Vietnam, the OSS helped the Vietnamese in their guerrilla war against Japan, which they then used against the French."

In high school, Lockwood wrote articles for community newspapers, covering events like town meetings, and for history magazines on topics including profiles of weaponry. After earning a BS in journalism with a minor in history from Syracuse University in 1981, he joined the New York Times Information Service as a financial staff writer preparing news summaries. "It was the perfect melding of writing and computers," he says. "A giant on-line database, charging $150 an hour in the early '80s to access summaries and full text. A pretty neat idea."

After the service was sold to Lexus/Nexus, Lockwood worked with several Ziff-Davis publications, including serving as assistant editor of the pioneering Creative Computing magazine. He then was a senior editor at Personal Computing magazine, which was then bought by Ziff-Davis. "We had over 500,000 circulation in the late '80s, and were in the finals of the National Magazine Awards against the likes of Newsweek, Esquire, and National Geographic. We did a lot of articles about how people used technology to actually do something."

In the '90s Lockwood freelanced for a variety of Ziff-Davis publications including PC Sources and Computer Shopper. He also wrote outside the computer field for Hotel Business and Restaurant Business magazines and Organic Farming.

For three years, Lockwood was a sysop for ZDNet, running the Compuserve forums AfterHours, Computer Gaming World, and PC Magazine. After AT&T bought the Ziff-Davis online service in 1995, he served as editorial director of AT&T's New Media Services web division, "I had a vision of media services online for small business and consumers," says Lockwood. "We had 300 people working on a vast on-line consumer project. But they shot the consumer side; I remember the quote: 'consumers don't want to be online.'"

Lockwood worked for a few months on the AT&T business site. "They were developing a portal, a 'phone book,' like Yahoo." He left in April of 1996 to start MagWeb

"We incorporated in May," he says, "stated coding in June, got our first pages up on July 1 (for free), and started paid subscriptions on July 16."

Business

MagWeb was founded by four partners, Lockwood, his wife Susan ("she said it was a great idea"), and two long-time friends and fellow history buffs, Tibor Vari and Bill Abernathy. "Like other Internet companies, everybody is a VP. We have 3 VP's, and they do everything, including trade shows. We outsource PR and marketing."

Lockwood is CEO, and works full-time on MagWeb doing the article scanning, page coding, and business development. The other three principals work part-time. Vari is VP Technology, and works a couple hours a day, and weekends, maintaining the database, memberships, and customer support. Abernathy is VP Programming, and provides the custom code behind the site, including the credit card handling and secure server. Susan Lockwood is VP Administration, and handles the paperwork, checks, and "administrivia". All three work in high-tech software sales at different companies.

Work

But scanning the magazines and updating the Web site is a lot of work. "Posting magazines can take quite a bit of time," says Lockwood. "The largest magazine is 192 pages and the smallest are some back issues which are one side of one sheet. The average is around 75 pages, which reduces to around 45 to 50 without the ads."

And the magazines come in all kinds of formats. "We do get electronic files from some of the publishers. But the back issues from the '60s, '70s and '80s need to be hand scanned. It's a 12-hour stretch with a lighted diode. And the character recognition rate can vary from 99% down to 12% with some of the tiny newsletters that were typewritten and then copied. The graphics is the toughest part; fiddling with PhotoShop to repair ugly pictures that are dark and faded."

"There's an art to crafting magazines to online," says Lockwood. "You need the pages to load quickly. On MagWeb, 80% of our pages average under 30 seconds on a 28.8 modem. The illustrations need to be cropped. Some period maps have very tiny type, so we scan them in two versions, a smaller version for the main page and a second at jumbo size to see all the detail."

The MagWeb pages for each magazine also share a common design theme. "We lay out all the pages with a colored bar down the left side of the pages, with a different color for each magazine. This gives you space for a three-hole punch if you print the pages. Studies have also shown that you read 5 to 7 percent faster on screen if there is a vertical bar on the left hand side of the text for your eyes to return to."

But Lockwood knew what he was getting into. "I chose military history because I was a history buff," he says. "Working 12 to 14 hours a day for 6 days a week, I must like what I'm doing." In his spare time, Lockwood also writes occasional book reviews for his site. "They allow me do a journalistic endeavor."

Conclusion

Lockwood is in for the long haul. "I want this to be a sustainable company," he says. "It would be nice to have a chunk of money to really develop the business. But you know what happen to the founder with VC's. The CEO gets maybe 3 to 4 percent, and then is forced out due to a difference in philosophy. I want to see this through."

"We started with a business plan in 1996 and are sticking to the timing," says Lockwood. "Last year we came within $314 and change of breaking even. We dumped it all back into P.R. and marketing. That's with no salaries, besides a part-timer helping with scanning. I know we'll do much better in 2000. Our first two months beat the last quarter of 99."

"We're building the number of magazines and the archive of back issues. Now the magazines are starting to call us. After four years of toil we're starting to get some notice. I'm a big fan of steady progress. We're reaching out to larger publishers."

MagWeb has also begun to pick up some visibility on the Internet and in the press. Computer Currents picked MagWeb.com as a "Link of the Week" in January, 2000, joining a "Hot Site Award" from USA Today newspaper in 1999. PC Gamer magazine also had a positive review as a research site in the March, 2000 issue. MagWeb also won a 1999 Internet Excellence Award in the Media category from Technology NJ.

"We're reaching the end of the incubatory period," says Lockwood. "We've figured out how this stuff works, how people use it and react to it. Information is infinite malleable. We're building the largest archive of military history that can be used in many ways."

But MagWeb is a larger vision. "We called it MagWeb for a reason, not Military History Web. We've figured out the back end of print to electronic media. We can do other niche areas in publishing, not big areas like sports or financial. We're also developing special projects this year to augment the military history focus."

"The first wave of the Web was the technology, hardware and software. The second wave was E-commerce, with Amazon.com and MotherNature.com and Pets.com just selling things as middlemen. The third wave is content. With my journalistic background we can provide content for a narrow niche, provide the expertise behind it, and build a community."

"We're getting recognized. It's like a strap-on booster rocket. The publishers think it a good idea. They're steadily increasing, and none are dropping out. It's gratifying building the awareness of the product out there."

References

Coalition Web, Inc.
      http://www.magweb.com