Who says startups are dead? 'Budget Living' bucks odds

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I was in the lobby of the global headquarters of Budget Living magazine-the matching chairs and sofa were purchased from the Salvation Army for $200 and recovered in $1,000 of fabric ("still cheaper than buying new," one of the title's proprietors explained). A breathless young woman burst through the door carrying an exquisite chandelier. "I thought it was some fabulous vintage piece off eBay," said the woman, who turned out to be the editor, Sarah Gray Miller. "But it's not. It's just got these great light bulbs."

She sped into the inner office, past a shelf of antique books ("The Wedding Bargain," "The Budget Cookbook," "The Boys' Budget," etc.). Don Welsh, the experienced-though-not-quite-antique publisher of the startup periodical, glanced after her and said, in a near-shout that seemed equal parts glee and agony, "Either I'm the smartest guy in the world or the dumbest."

In October, the ad agencies and media companies around Welsh's Madison Avenue and East 42nd Street digs will render judgment. That is when Budget Living launches, the rare magazine startup in what may be the worst ad environment since World War II.

Welsh is the impresario of the borrowed-brand periodical. As head of Welsh Publishing for 14 years, he introduced Barbie, Muppets and Arthur Frommer's Budget Travel, selling the latter to Washington Post Co. in 2000 for an undisclosed sum.

His new title is a natural outgrowth of Arthur Frommer's, an extension into the broader lifestyle and financial-services space occupied partially but, he claims, not synergistically by Oprah, SmartMoney, Real Simple, Consumer Reports, Martha Stewart Living, Money and Elle Decor.

Welsh has gathered an extended enterprise with the look and feel of the Magnificent Seven-veterans all, a bit ragtag but ready for battle (or just a profitable party). Roger Black (who worked with Welsh at Rolling Stone) is lending a stylishly light touch to the design. Curtis Circulation Co., a longtime alliance partner, is handling distribution. Eric Rayman, former general counsel for The New Yorker (and a former partner of Welsh's) is president.

The strategy is equally tried and true. Although he's taking what is, for him, a rare risk in not affiliating his new title with an established brand, Welsh, as is his custom, is eschewing direct mail in favor of subscription agents, willingly sacrificing the first-year's income to forgo circulation's most costly and addictive drug. "We're starting the whole thing up with under $10 million. If this was Time Inc., the startup would cost $40 million, with $25 million in direct mail," he told me.

Welsh's wild eyes, mop of hair and marketplace obstacles notwithstanding, he may not be entirely crazy. Magazine distributors need new product; the periodicals industry, like all consumer categories, requires novelty as a magnet. The same is true of advertisers, who may depend on established brands but take great satisfaction in betting on an untested winner. The bigger risk would seem to be what we all pray for: a recovery. But Welsh has that contingency covered.

"It's like our grandparents-they always had a Depression mentality," he told me. "For the first time, baby boomers and Generation X are seeing their 401(k)s disappear. That will stay with us for a long, long time."

As I rose to leave, three young women entered, lugging large boxes. "Are those from Ikea?" Rayman asked. Yes, one grunted. "Parts of desks."

Randall Rothenberg, an author and longtime journalist, is chief marketing officer at consultancy Booz Allen Hamilton.

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