What Can Magazines Learn From an Air-Conditioner Company?

The other day I had a company come and remove two air conditioners from my office in order to clean them, store them for the winter, and return them in the spring. It wasn’t cheap: $269 for the first one and $249 for the second. But I like air conditioning, and I figured it was worthwhile to care for the units properly.

The surprising thing is that the company isn’t charging me a penny until they return the units in the spring. They are essentially floating me partial credit on a job of more than $500.

I wouldn’t have been at all surprised if they had asked for full payment up front; perhaps the most typical arrangement would have been to charge me some money up front and the rest upon reinstallation. The one option I wasn’t prepared for was the one they chose.

This company immediately joined our customer-service hall of fame.

This transaction reinforced for me the notion of how random our economic system can be. There have been some services I’ve paid for up front and waited weeks or months to receive. In other cases, I’ve been billed as things went along, and only in rare cases (and usually with small stakes, like dry cleaning) have I paid fully upon completion.

Here’s another example that illustrates the unpredictability of such things.

If you’re a journalist writing for a big magazine, you negotiate a fee up front but usually don’t get paid until the article is accepted or, in some cases, until it’s published. Expenses typically aren’t reimbursed until you’re done either. Which means that if you’re working on an extensive piece, which might take several months to report and write, you are working for free and laying out your own money for travel, etc., and you get paid only if/when the magazine accepts the piece.

If the magazine doesn’t accept the piece (for reasons that often lie well outside the writer’s control), you receive a “kill fee” of perhaps 25 percent of the agreed-upon rate. All around, this is a horrible deal for the journalist. When I used to work as a magazine editor, the worst part of the job by far was having to kill a piece, and it’s one of the reasons I stopped being an editor.

If that same journalist makes a deal to write a book, however, the contract is usually structured so that he gets 25 or 30 percent upon signing, with the remaining portions paid upon delivery of the manuscript (or sometimes even delivery of half the manuscript), the hardcover publication, and then the paperback publication. Also, book manuscripts are rarely “killed” as magazine pieces are.

When you write a book, the publisher is essentially serving as a venture-capital firm investing in your work. When you write a magazine article, the magazine is serving as a — well, I’m not sure what the analogy is, but it’s not so pretty. (Your suggestions are welcome.)

I never thought I’d suggest that magazines act a bit more like air-conditioner maintenance firms, but perhaps it’s time.

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  1. Alex says:

    There are two reasons why I like magazines’ approach:
    (1) This approach gives journalists STRONG motivation to do a good job and finish on time and under budget. What would their performance look like otherwise, I wonder.
    (2) By paying for product rather than investing ahead of time, publishers open the field to many many more small but talented fish. While I only have your description to go on, I’m guessing that if magazines paid up front, they would have to be risk averse and you would see most pay going to an established pool of well-known journalists.

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  2. jblog says:

    Frankly, I’d reserved judgment until you get the air conditioners back next spring and see what condition they’re in.

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  3. RobertSeattle says:

    Here’s an idea for your own newspaper – temporary delivery periods. I’m the father of young kids and just don’t have time for a NYT subscription, but when my parents visit, I go to the local Starbucks and pick up a NYT each morning for my Dad. But I’d prefer home delivery – but that would require an 8 week sign-up. Come on NYT – allow for very temporary delivery periods – you can charge more for it – it’s worth it! Or better yet, allow for my Dad to temporarily shift his NYT delivery from his Florida home to my Seattle home for the two weeks they are here – again – it’s OK to charge a couple bucks for this convenience.

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  4. fvreg says:

    While I don’t disagree with your analysis of the magazine industry, I think there is a huge difference between pre-paying for a story and pre-paying for a service like dry cleaning or air conditioner storage… namely, collateral.
    A dry cleaner can reasonably assume that your garments have more value than the bill and that you will be willing to pay to receive them.
    Similarly, the air conditioning company assumes that your air conditioning units are worth more than $500 to you… and should you decide to orphan the a/c units, they can sell them to cover costs.

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  5. Alistair says:

    What really gets me is that the cost of removal/storage/installation is more than the cost of a new window A/C!

    (Maybe these air conditioners are special in some way. But Sears charge $249 for a 10,000 BTU A/C, which will cool a lot of space.)

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  6. ogmb says:

    It’s not all that random. The AC cleaning company holds your air conditioners as hostages, so they can afford to wait with the payment. I’m sure there’s a term in the contract that allows them to take ownership if you fail to show up and pay in the spring. Regarding article vs. book, the unreclaimable upfront cost for the publisher of a book apart from paying the author are much higher if it doesn’t get published than those for the magazine editor, so the publisher has an incentive to filter early in the process while the editor can afford to filter late (filter = remove manuscripts that have little chance of getting published). It’s called relationship-specific investments or asset specificities, and is part of contracting and transaction cost economics.

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  7. James says:

    Why would you pay $500 to get two air conditioners cleaned and stored when you could sell them for $150 each and buy new ones for $300 each in the spring?

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  8. jimi says:

    Who owns the units?

    Sounds to me like you will be paying $500 up front to rent them next season.

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