I want to start a niche publication of my own and researching the business model of Readers Digest?

I am particularly interested in the legalities involved in identifying content in other magazines and reusing them in my publication after editing/condensing.

Should I get permission from them? Should I pay them? Should I share profits with them? How did Readers' Digest do all this? Are there any case studies that will provide details?

Thanks in advance for your help.

Yes you should always ask permission before using someone else's written product. And you should always give credit to the real writer's and/or publisher' s of the copied work. As copy right laws are real and can hurt.