Sunday, September 7, 2008

Another bubble about to pop

At the beginning of the year, I gave up on the dead tree Wall Street Journal because it a) I thought I didn’t use it and b) it cost too much; to save money, I went online-only. A few weeks later, I quietly went back: it turned out I didn’t read the online version, so when I found the right discount code I reinstated the paper edition for $100/year (plus tax).

On Saturday, Dow Jones launched the first issue of its new luxury magazine called WSJ (originally intended to be called Pursuits). The cover used a clever photo in which a model was wearing the Wall Street Journal.

A copy was included with the newspaper delivered to my driveway Saturday. According to the NYT, not everyone got one:

The Journal starts with a major advantage in that it can offer advertisers the wealthiest readership of any American newspaper. An even more affluent subgroup of subscribers will receive the magazine, Mr. Rooney said, with an average household income of $265,000.

Out of The Journal’s domestic Saturday circulation of about 2 million, 800,000 copies — those sold by subscription or at newsstands in 17 large markets — will include WSJ. In addition, 160,000 copies will be distributed on Fridays overseas. The magazine begins as a quarterly, with plans to go monthly next year.
Apparently WSJ newspaper households have an average income of $253k, so this “more affluent subgroup” isn’t that much more affluent.

Still, whoever does their demographic targeting clearly needs to be demoted or fired. Our household is probably in the bottom income quartile for the newspaper; our middle class tract home might appear to be expensive, but it’s near the median for Santa Clara County. The last page of this month’s magazine talks about “Technologically advanced, great-looking watches,” but I don’t have any use for a $5,000 dive watch, let alone a $17,000 one.

Another dad from my daughter’s school brought his brand new Porsche Carrera to a pizza dinner we were at Saturday night, so I guess such income is in our neighborhood somewhere. Still, this shows the limits of targeting ads based on demographic averages; Amazon (or Comcast or the DMV) probably has a better idea of our income than the WSJ.

The new magazine also reminds me a lot of the Forbes FYI luxury insert (now called ForbesLife). Both the WSJ and Forbes tend to be more free market-oriented than Business Week or Fortune, so perhaps their readership skews Republican and have more plutocrats.

WSJ is also reminiscent of Forbes FYI in how it represented the surreal conspicuous consumption of the late 1990s, just as the dot-com wealth era was coming to an end. To me, such consumption is the sign of a market top, and apparently I’m not the only one.

Earlier this year, a blog about “the lives and culture of the wealthy” included an article about “The Luxury-Magazine Bubble”. Drawing an analogy to the ad-heavy tech magazines during the dot-com era, the blogger observed:
In the latest wealth boom, luxury magazines became the new Red Herrings. My desk is piled high with dozens of lush, glossy mags that serve as catalogs for the super-rich. …

I’ve said for months that the wealthy are getting hit by this recession just like everyone else. What financial markets giveth, they also taketh away. …

The luxury market and luxury magazines have been built on a myth: that there’s an endless supply of new jet-setters dying for glossy spreads telling them how to spend their millions. David Arnold, an exec at Robb’s parent company, is right to say in the Times article that “if you have assets of 30, 50, 100 million dollars, even a 5 percent loss doesn’t really impact their lifestyle.”

But how many Americans are worth that much? Maybe 50,000 at most? Surely not enough to support 20 new luxury magazines and all the mass-luxury companies that fund them. …

You can’t blame the luxury-magazine executives for putting on a happy face during the coming shakeout. That’s their job. But it doesn’t mean we have to believe them.
That blog entry was written back in March, but it clearly applies today. Who wrote it?
The blog is written by Robert Frank, a senior writer for the Wall Street Journal and the author of Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich, published in June.
The entire commentary can be found at

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