What's Love Got to Do with It?

EXECUTIVE SUMMARY

Company: Smug Inc., in New York City, founded by college honor student and dropout Shirley Halperin

Concept: Become the alternative-music information source for young people between Baltimore and Boston

Competitive advantage: Youth. Halperin, 23, is neither old, jaded, nor sedentary; she understands Smug's readership because she is her readership.

Hurdles: Youth

THE FOUNDER

Education: Dropped out of Rutgers University in fall 1994, one semester shy of graduation

Last jobs held: "Jack-of-all-trades" at independent record label in Manhattan, and Hebrew tutor

Salary: Less than $2,000 a month. ("It doesn't leave much for going to the opera.")

Equity: 50%; Dad holds other half

PROFILE OF SMUG'S READERSHIP

Age: 16Ñ30
Male: 58%
Female: 42%
Picks Up Smug --
On campus: 37%
At record or alternative store: 28%
At club or concert: 27%
Other 8%
Music Junkie: Buys music CDs weekly

Wired: Typical Smug reader goes on-line through a home computer

THE FINANCIALS

Where Smug Has Grown
To achieve the revenue levels Shirley Halperin has projected in Smug's business plan, the number of ad pages the magazine sells must increase by half from 1996 to 1998 -- from 200 to 300 pages. But the magazine's per-page advertising rates will have to grow by a factor of five -- from $600 to $3,000 per page.

WHAT THE EXPERTS SAY

Media observer
Dennis Giza
Associate publisher of Columbia Journalism Review, in New York City
In an industry where start-ups are increasingly dependent on marketing surveys, focus groups, direct-mail tests, editorial mock-ups, and, of course, five-year business plans, it's refreshing to hear of a magazine founded on a passion for the subject matter. Smug's unique editorial focus and alternative distribution -- and its being free -- have so far allowed it to succeed. However, I'd be more optimistic about Smug's continued success if it reached an agreement with a large music retailer like Tower or HMV. While I can't predict the magazine's future, I do predict we'll catch Halperin with a spreadsheet yet.

Industry observer
Jason Colton
Member of the Phish management team
For smaller bands, the ones covered under the "plus bands you haven't heard of yet" thing on Smug's cover, good press in Smug can have a priceless impact. For Phish, the Smug article was really cool because it gave the band a certain amount of underground credibility. It doesn't make us seem a lot bigger than we are.

Smug can't match the distribution, the circulation, the reputation, or the journalistic prestige of many larger music or general-interest magazines, but we decided to do the story with Smug because it stuck out. And Shirley stuck out. It was a great article.

Industry observer
Leslie Chinea
Vice-president of advertising and marketing at Compact Disc World, a nine-store chain based in South Plainfield, N.J.
About a year ago we were having trouble reaching the Generation X demographic, so I decided to try advertising in college papers. That was a nightmare. They were run by students, sometimes my ads never ran, the accounting was disastrous -- and I was at my wits' end. Then I got a call from Shirley Halperin; her timing couldn't have been better. I was dealing with someone with business savvy, who knew the importance of running my ads when they were supposed to run and of keeping the accounting in order. She promised and delivered.

It's tough to measure the effectiveness of our ads in Smug. I look at them as image advertising, because the publication has excellent design and superior editorial; its writers are on the cutting edge of music, and the writing is very good. Smug readers are savvy enough to know that whoever is advertising there is the kind of establishment they'd like to patronize.

Industry observer
Dennis Erokan
Founder and editor-in-chief of BAM magazine, based in Pleasant Hill, Calif.
Twenty years ago I was in exactly the same position as Halperin -- down to the same first-year revenues -- so I am tempted to try to tell her, "Don't do this, and don't do that."

That said, she must get a sense of what her magazine can do best and how to home in on that. She wants to run up and down the East Coast, but what does the world need? Some of her advertisers and readers are telling her, and she should make sure her plans match what they're saying.

In a year or two music is going to change -- meaning that alternative will no longer be the hippest thing in the world. She's got to be prepared to make the switch with her readers. When the switch happens, everything you thought you knew about the world changes. It happens in the music business about every four or five years.