Salon Magazine is about to go out of business, and I'm writing its obituary in advance.

The Early Days

Salon was launched in November 1995 under the URL www.salon1999.com (the salon.com URL was controlled by a group of beauty salons at the time). They established themselves early as a source of mid- to high-brow social commentary, literary review, and other articles. The politics of the magazine were slightly left of center, and it seemed a bit like an online version of Harper's Magazine or The Atlantic Monthly. Early investors included Adobe and Hambrecht & Quist.

The founding Editor and CEO was David Talbot. In December 1996 he brought on board Michael O'Donnell as President and Publisher. O'Donnell came from a software marketing background, and would later take Talbot's job. In the same month, the magazine was named "Best Web Site of 1996" by Time Magazine. They were generating 1.4 million page views per month at the time.

In early 1997, sex columnists Camille Paglia and Susie Bright began writing for Salon, increasing the focus on smut that distinguishes Salon from, for example, Slate.

They signed deals with other websites and other media channels, publishing their content through AOL, CNET, Netscape Communications Corporation, Desktop News, WebTV™ and Match.com. Salon also set up a channel on the shortlived PointCast network, and others. It is not clear to me who was paying whom in these deals but I suspect that Salon paid cash up-front in exchange for a cut of the banner advertising that ran over their articles on the other services. They also syndicated their content through the United Feature Syndicate.

They completed another round of private financing in December 1997, bringing in money from ASCII Corporation, one of Japan's largest publishing companies, and Borders Group Inc., the nation's second largest bookseller. Adobe Ventures and Hambrecht & Quist, Salon's initial investors, also participated. Page views were up to 6 million per month.

The Best of Times

In early 1998, Salon had what were probably its greatest political coups. They broke a number of stories in connection with the Bill Clinton blowjob and whitewater stories. In particular, the fact that key Whitewater witness David Hale received secret cash payments from Clinton-hating billionaire Richard Mellon Scaife. Salon also broke news about the marital infidelities of congressmen attacking Clinton for his intern-blowjobs.

In the summer of 1998, I was featured prominently in a Salon article. Perhaps I feel fondly towards the magazine as a result.

Anticipating an IPO, Salon bulked up their executive team in 1998. However, despite the heat in the online market at the time, investment bankers were more tentative about Salon, recognizing it to be basically a traditional magazine property, not worthy of the same jubilation occassioned by, for example, eToys.

The company expanded its content, continued to win awards (its third Webby in a row in 1999), did business development deals with DrKoop.com, TheStreet.com and others. In March 1999, Salon acquired the ancient online community The Well. This was the first Salon property to charge its participants a monthly subscription fee. In May, they jumped on the MP3 bandwagon by acquiring MP3Lit.com, a Web site that offered spoken word and audio literature recordings in the MP3 format. In April of 1999 Salon filed what was, I think, the first "open IPO" managed by W. R. Hambrecht & Co. They had hoped to sell 2,500,000 shares at a proposed price range of $10.50 to $13.50. The offering went off in June at the bottom of that range. The stock actually shot up to $15 or so for a few weeks before dropping to half that, in its long monotonic slide to nothingness.

Shortly before the IPO, they changed their name from Salon Magazine to Salon.com. In a year, when dotcoms tanked, they would change the name again, to Salon Media Group. However, at the end of 1999 that was still eons away. Salon had $27 million in the bank, and did a big deal with Cablevision whereby they gave stock to Cablevision and got a pile of advertising time in exchange.

However, the cash flow picture remained grim. The money coming in from banner advertising was nowhere near enough to cover their expenses, and the gap grew larger with every passing quarter. Their most direct competitor, Slate, tried charging for subscriptions and, when that failed, sold out to Microsoft.

In fiscal 1996 (which ended in March 1997), Salon had lost $2 million. In 1997, the number climbed to $3.9 million. In 1998, $6.3 million. In 1999, flush with proceeds from the IPO, they lost $23 million on operations. Worse still, they had issued convertible bonds to some early investors, and the dividends on those bonds came to over $11 million dollars in the 1999 fiscal year. It didn't take a rocket scientist to see that, with $27 million in assets and losses of $23 million a year, big changes were needed. (The convertible dividends were triggered by the IPO and were paid in stock; smaller payments of this sort were to continue).

On the plus side, they were up to 72 million monthly pageviews.

The Crash

2000 was a hard year for the online industry. NASDAQ began its crash in April of that year, and online advertising, which was substantially Salon's only revenue source, was hit hard. By the end of fiscal 2000, the magazine was down to $3.7 million in liquid assets. Liabilities were $3.4 million. Revenues had dropped 10% from the previous year ($8 million to $7.2 million). Expenses had been cut too, but they still lost $19 million for the year. With less than $4 million remaining, and a burn rate of over $1 million per month, death knells were sounding.

They fired a lot of people and started charging for more content. They launched Salon Premium, a paid subscription service, in April 2001. This cost $6 for a one-month subscription or $30 for one year. Subscribers got access to exclusive content and the option to view normal Salon content without advertising. Revenue from this and from The Well amounted to $1.2 million by the end of the year. Many of the marquee columnists had to go. Advertising was slashed. Many of their advertisers cut their ad budgets or went out of business. Revenues plummeted, but expenses dropped faster. Salon tried to make some money selling website management software, but the effort yielded little and was soon killed. For the 2001 fiscal year, they brought in $3.6 million and spent $11.6 million. They raised $3.5 million in outside money in August and September so they were able to finish the year with $1.5 million in liquid assets.

Adobe kicked in another $500,000 investment in March of 2002. The company followed this with a $715,000 bridge loan in July. By their burn rate at the time, each of these represented about a month's life. Salon generated a spike in readership in June when they promised they would reveal the true identity of Watergate informant Deep Throat, but they couldn't deliver. In November 2002, they warned investors that bankruptcy was likely, and were delisted from NASDAQ.

Death Spiral

In their most recent financial filings (December 31, 2002), Salon reports liquid assets of only $169,000. Thanks to increased subscriptions, revenue is up slightly and expenses down slightly from the year before, but nowhere near enough to close the gap. Advertising revenue has all but disappeared, as advertisers are afraid that Salon will soon go out of business. The company has refused to pay rent to its landlord, saying that it would destroy them to do so.

They continue to fight. Starting January 22, 2003, Salon began restricting access to substantially all of its content to either Salon Premium subscribers, or shows full-page advertisements to non-subscribers. They own about $5.5 million in prepaid advertising rights, which they could sell for some fraction of that amount. This might keep them running for another six months or so. They raise additional funds in dribs and drabs; the most recent round was $400,000 from people including the website's president's father. (That's about a month's burn rate.) The investors providing this "life saving financing" now own 84% of the company's stock.

As of this writing (April 2004), the stock is down to $0.14 per share. Could anything save them? Looking at the firm's income statement, advertising sales were flat from December 2002 to December 2003. Let's be generous and assume they increase it 10% in the next year; if so they'll make $4.5 million. With continued shaving of expenses, they'll spend $9 million in the same year. How do these expenses break down?

  • Production and content make up about half of it.
  • Sales and marketing make up about a third of it.
  • General and administrative expenses are about 10%
  • Research and development are about 5% of it.

A buyer who has access to less expensive content could save there. However, I don't know that a firm with an established salesforce would be able to save on sales and marketing. If salespeople are successfully selling other products, they will demand comparable compensation to sell Salon's advertising space instead. Salon believes that advertisers have abandoned them in part because they fear Salon is about to go out of business. If they are right, and they are acquired by a more stable company, advertising revenue would jump.

Imagine a fantasy world where production and content expenses get cut in half, sales and marketing expenses stay flat, and advertising revenues triple due to increased advertiser confidence in the brand's survival. They end up making $5.5 million in revenues while spending almost $7 million.

For Salon to survive, they are going to have to be purchased by somebody who is willing to lose millions of dollars a year on the brand indefinitely until there is a sharp improvement in the online advertising market. They have very little time to set this up, and I expect that they will fail.

It will be a shame when they go; the magazine was often fun to read. Lots of my high school and college friends had their first professional writing published in Salon. However, in its short lifetime, Salon has lost almost $100 million. They've certainly had a fair chance at success.

----

Sources:
Salon Media Group Press Releases, 1996-2003
Salon Media Group SEC filings, 1998-2003.
The San Francisco Chronicle, February 15, 2003
The San Francisco Chronicle, June 18, 2002
The San Francisco Chronicle, July 25, 2001

“The salons – exclusive gatherings held in the drawing rooms of the Parisian bourgeoisie – were sites for conversation. Men and women convened at these regular meetings to discuss politics, history, religion, literature, and philosophy.” (Susan Herbst) The invited individuals were scholars, statesmen, writers, businessmen, intellectuals, etc, and the people in charge of the meetings were women.

Jürgen Habermas calls the the era of the salons a refeudalization of society. This means that the public sphere and private sphere, ie the State and society, became involved in each others' spheres. This caused the private sphere to collapse into itself. It changed what would be called public debates into leisurely conversations. A salon can be visualized metaphorically as follows: A woman is bending over and talking into a man’s ear, while he signs a congress bill.

In most political situations, even to this day, women have been barred from operating to their full capacities in the public sphere. Because when a woman tries to operate in the public sphere - they end up taking on man like qualities. A prime example of this is Hillary Clinton and her "pants-suit." Additional evidence of that is Clinton did better with the men vote than the women! Women, however, dominate the private sphere. An example of this is the education system. "According to NEA research, just 24.9 percent of the nation's 3 million teachers are men. And over the last two decades, the ratio of males to females in teaching has steadily declined. The number of male teachers now stands at a 40-year low." (NEA)

Bourgeois Public Sphere

There was a disregard of status in the salons. The emergence of the salons is one of the first political atmospheres that women were able to operate in, without the pressure or consequences of being a woman in the public sphere. Women not had access to this parallel sphere because the boundaries between state and society blurred, but shared the domain of common concern. Although the salons were a public sphere they retained the qualities of a private sphere that allowed women to operate in it. One could call the salon a cross over sphere.

The salons were a place against the notion of exclusivity, instead they held an inclusivity for anyone who was educated. They were able to measure public opinion without pressure. Since anyone could come and state their opinion, without getting their head chopped off, any idea was expressed.

    The Salon
  • Disregard of status.
  • Domain of common concern.
  • Inclusivity

Clash was acceptable in these forums, to some extent, and was even delighted in for entertainment. Clearly some critical scholars have at least one distinction that sets them apart from each other, one idea or notion that other scholars don’t agree with. But at the same time this forum allowed open ended discussion without the public disarray of an enemy.

Women were the spotlight but the men thought it was shined on them. Salons were full of political dialogue, freedom of speech - even an open forum. Yet it was a private sphere in a home, a reception area divided into many alcoves for private conversations.

It may not be ironic we hold onto the symbolism of the salon even still today. In fact, there’s a website to fit that melding of the spheres online. www.salon.com. It won’t ever have the same privilege of intimacy. But it proves why salons were important.

Salons - Success or Failure?

Salons were successful in the sense that women got any opportunity to have political sway. They can be deemed a failure in the sense that women were never fully accepted into the public sphere in that time period. Even still, men would not even have the political sway women gained because of salons, in their own public sphere. Men wouldn’t get the leisurely night long regular basis chats that women created with salons. So this deemed success granted a medium for mutual benefit. It also allowed for these scholarly men to feel important in the private sphere, something that they may not have been respected in before.

There are also some successes to note in the women's political sphere. Never before had women organized so socially. Just like the monarchy is handed down through the blood line, so was critical thinking between grandmother to granddaughters, or even a salon's building was handed down generation to generation.

Today women speak in the public sphere and still have a double standard interfering with them. Hillary Clinton tried to convince the public to believe her capable of running a country, yet it was the women she most turned off because of her public image. There might have even been an underlying issue because of the scandal of her husband in his own administration, and that she seemingly ignored it publicly and instead stood by his side. That could have hurt her.


Sources:
Susan Herbst, Politics At the Margin, Historical Studies of Public Expression Outside the Mainstream. Chapter 2.
http://www.nea.org/teachershortage/03malefactsheet.html
Jürgen Habermas, from Herbst's book and various other sources.

Sa`lon" (?), n. [F. See Saloon.]

An apartment for the reception of company; hence, in the plural, fashionable parties; circles of fashionable society.

 

© Webster 1913


Sa`lon" (?), n.

An apartment for the reception and exhibition of works of art; hence, an annual exhibition of paintings, sculptures, etc., held in Paris by the Society of French Artists; -- sometimes called the Old Salon. New Salon is a popular name for an annual exhibition of paintings, sculptures, etc., held in Paris at the Champs de Mars, by the Société Nationale des Beaux- Arts (National Society of Fine Arts), a body of artists who, in 1890, seceded from the Société des Artistes Français (Society of French Artists).

 

© Webster 1913

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