thesis 2.0: publishing in a digital age

Premium Magazine Pricing

I’ve heard BoSacks talk about his belief that print magazines will become a luxury item people will pay top dollar to have, and I tend to agree. I make a lot of impulse newsstand purchases and I have already seen it making a bigger impact on my wallet thanks to increasing cover prices. 

As a consumer this really makes me rethink my purchase: do I have 100 or so back issues of other magazines at home with similar or better content? If not, how much of its content does this magazine’s publisher offer for free online? If the publisher doesn’t offer free content, does another publisher offer similar content free online? If the answer is no, I’m still not completely sold on the purchase until I decide if another print magazine currently on the newsstand has similar content at a cheaper cover price or better content at any price. If the answer is still no, I look to see how much money I have in the bank. Purchasing content, my favorite vice, is now a lengthier process.

But for the business of this thesis, we don’t care about my personal shopping habits or magazine addictions. No, really all I need to summarize here is how much are prices increasing & the reasoning behind it. 

So this initially I’m gathering from one article, and and building off a previous article I read here, and posted about here.

NYT article from April 13, 2009 “In Switch, Magazines Think About Raising Prices” Stephanie Clifford reports:

• Hearst Magazines raised cover prices on more than half of its magazines last year and plans to raise subscription prices this year. 

Advertising had always made up the difference for low subscription rates. 

• The Economist has been a successful leader in raising subscription prices. Cover price is $6.99 and a subscription is $100 on average. Despite price point, subscriptions are up 60 percent since 2004 and newsstand sales rose 50 percent.

“We get more money out of our readers than advertisers, and that’s a very different model,” said Alan Press, senior vice president for marketing in the Americas at the Economist Group. “We’ll never discount the kind of content we have.”

• One of the most popular and expensive mass magazines, People, has also successfully been raising prices. Subscription price has gone up 5 percent, to $104 a year, in the last four years. Cover price is up 21 percent to $4.09 issue (and special issues cost more). Still subscription and newsstand sales are both up, slightly.

At People the strategy is to maintain premium pricing on both sides of the equation, says Paul Caine, president and group publisher of TIme Inc.’s style and entertainment group.

• Prices have been raised for subscriptions to The New Yorker and Vanity Fair.
• VF also raised its cover price to $4.95 from $4.50.
• Real Simple raised its subscription prices 17 percent in the last four years, and had an 18 percent rise in subscribers.
• Cosmo raised its subscription rate 8 percent and orders have risen 19 percent (in past 4 years).

The article also notes that, "public-place readers who pay nothing are almost as engaged as those who pay."

So, is this the exception, not the rule? I’m not sure about that. 

Hoffman Media is one that charges a hefty newsstand price for it’s magazines: $7.99. I balked at the idea of spending eight dollars on a magazine, not a special issue, until I took a hard look at the content. After doing so, I had to agree these magazines were great products, not just in the quality of the look and feel, but the content itself offered recipes and ideas that seemed fresh and new — not replicated in the bazillion other women’s magazines with holiday themes. I did actually swallow hard and buy three magazines that day — but don’t tell my partner, he thinks I bought paper products and other sundries for the house.

Back on point, rising subscription costs and newsstand prices could be leading more people to look for content online. So I’m curious as to what is driving these companies to see an increase in sales despite raising their prices. Maybe content really is King.

A plan to save magazines

Al DiGuido should blog more frequently about the publishing industry. His “Alservations” postings may be infrequent, but they are eloquent and on point. Take his Aug. 7, 2009 post “No magazines have to die!” for example.

He argues a case for why digital publishing is the answer to the demise of printed publications, and he gives us more than just a passionate argument that makes complete sense to a non-stodgy, non-legacy print folk, he offers up a plan to save magazines! Yes an actual plan!

Ok, so the plan has a handful of well placed plugs for his company, but all the same the strategies he lists to build a bridge from the print world to the digital world are sound strategies. You can read the list here.

I particularly felt motivated by the following statements: 

That never before has a publisher had the depth of knowledge about how a reader consumes content and advertising in a real time basis. This knowledge can drive editorial decisions and can provide a sales team with tremendous power in quantifying to advertisers the power of your brand and content with its subscribers...

This is a much more intense and awake publishing industry. The idea that you print something and it has a shelf life is over.

The only suggestion that gives me pause is the second step of the plan - creating a digital replica of your print edition. I see that this is where you get people to opt in to a subscription and have it delivered to a desktop or laptop computer, or a mobile device, or eventually an e-reader that is magazine friendly. However, I think blog driven publishing platforms are already delivering real time publishing. Too bad we have yet to figure out how to get consumers to opt in and pay for this type of content. 

On a last note, I like DiGuido’s frank advice. No, he says, it will not be easy to recoup the advertising rates and revenues once enjoyed by the print publishing world.

No, I suppose it won’t. But, gee it is still an exciting time in publishing and digital innovations have given those of us in media a lot to embrace. We have a lot of new ideas to play with and figure out how to turn them into a new legacy of publishing. 

“Digital Publishing is the communications medium of 2009 and beyond.” writes DiGuido.

And New Media is about to become the Media, says Leo Laporte. 

And I say, blogs are the medium.

Misperceptions about Magazine Closings

I read the Aug. 2009 White Paper put out by the Magazine Publishers of America addressing which factors play a pivitol role in magazine closures. Basically: recession, recession recession; economy, economy, economy.

MPA offers stats from independent sources showing how closures were up in other recession years. 

But also, point to advertising revenue declines as the biggest factor in magazine closures. The MPA reports suggests that the recession is to blame for lagging ad revenue and I took that to imply that once the economy bounces back, the ad dollars will trickle back and all will be well with consumer print magazines. Um. I’m not so sure about that. I question whether ad dollars are not shifting to other mediums - ie. online. And, where did all the ad dollars for newspapers go? They are not just built on circulation and also rely on ad revenue. So am I faulty in my thinking if I consider that newspapers may be foreshadowing the challenges magazines face?

I’d like to take another listen to the radio program On Pointe had earlier this month that looks at the crumbling of Madison Avenue (as in, bye bye ad revenue?) and see what the magazine closure numbers are looking like this year from other sources. Still, good data here on how the economy effects publishing.

Summarizing MPA Circulation Report

Notes taken from an MPA White Paper published Sept. 2009


First off, the Magazine Publishing Association points out that newsstand sales are only 12% of the circulation pie. 





Numbers for the first six months of 2009 show newsstand sales overall declined compared to the first half of 2008, but MPA points out that the rise in subscription sales makes up for lagging newsstand and therefore the magazine industry’s total circulation is actually holding stable.




Challenges for newsstand sales noted include: 

• an economic downturn (consumers spending less on entertainment)
• a shift in where consumers shop (not grocery store but superstore)
• closing of Anderson News, accounting for 25% of distribution channel




What does this mean for the state of publishing today? If supercenters are not included in the retail space publishers distribute magazines to, then they are not going to be able to bank on the impulse purchases made in the check out line -- reportedly a revenue category that generates more than $4.5 million annually. It only makes sense to be where people are shopping and in a down economy that would be bargain stores.




Although MPA records a significant bump up in newsstand sales between May and July, the unusual rash of celebrity deaths including that of Michael Jackson (which generated $55 million in extra revenue for magazines) is not something to bank on as a sign of sustainable revenue. 




The closing of a key distributor certainly caused a loss in revenue due to challenges in delivering issues to the newsstand while current, but it’s an issue that has been sorted out. A discussion here of how online delivery means that the economic troubles of print distributors won’t trickle down to become your problem. Online delivery cuts out the time and cost of distribution, but perhaps raises its own set of challenges in being digitally up to date and cross-platform friendly.




So the upside of circulation in the first half of 2009 is subscription sales. According to MPA technology is driving efficiency in sales. Of note:




• More than 1 in 5 subscriptions will be sold online in 2009, up 70% compared to 2006.
• Subscriptions from amazon.com are on the rise, forecast at a 35% increase this year.
• Online sources do not cannibalize current subscription channels
• Online is easier and quicker for the consumer to navigate
• Selling online can be done with lower overhead than other channels







Interesting stats:

• Total magazine circulation is only down 1%

• Statistics from A 10-year Trend in Favorite Leisure time activity (1999-2008) conducted by Harris Interactive, shows reading as the most preferred activity. 

• A 5-year (2005-2009) trend in Media Usage report from Mediamark Research & Intelligence Spring 2009 shows a 4.8% increase in magazine use, a 2% decrease in newspaper use and a 20% increase in Internet use.




MediaDailyNews has a good news story giving the overview.




Magazine Publishers of America (MPA) is the industry association for consumer magazines. Established in 1919, the MPA represents approximately 225 domestic publishing companies with more than 1,000 titles, nearly 50 international companies and more than 100 associate members. Staffed by magazine industry specialists, the MPA is headquartered in New York City, with an office of government affairs in Washington, DC.

Advertisers: Show us the metrics

I read Lucia Moses’ article “Panel: Uphill Battle for Traditional Media” and the gist of the conversation is not new:

Advertisers to Publishers — Show us the metrics! Build a new model for measuring audiences and we’ll show you the money.

It’s true, as Moses points out, that traditional media are valued for quality content. However, the problem I see is that people are beginning to realize that quality content lives on the web as well. Content by professional journalists and experts in field are easily accessible. News breaks faster online and journalists follow stories longer than a 10 o’clock sound bite permits. Links expand the information flow right at the reader’s fingertips instantly, requiring less effort on the part of the reader to follow a topic online than it does in print.

And print can’t target its audience definitively. So, shouldn’t publishers be tripping over themselves to follow its advertising dollars online? If advertisers are going digital because that is where they can find and target their audience, then don’t publishers want to find a way to continue to be the matchmaker between advertiser and consumer? Obviously they do, but why is it we haven’t come up with a revenue model that works as efficiently as the old print advertising model? Was it efficient? It certainly seemed to help fund media operations, whereas now some newspapers, for example, are banking on a non-profit or Venture Capitalist business models for success...making the journalism profession truly a public service. Not to mention some also rely on community involvement in order to continue providing quality content, for free.

Will there be a tipping point somewhere in the timeline of publishing’s future at which point it will be too late for publishers to attract the lion-share of advertising dollars? Advertisers are already using alternative means to sell; they’re quickly adapting to new media and by the time publishers catch up, will the new business model be too little too late in recapturing their ad dollars?

In the article Mark Ford said that e-reader devices will transform how publications reach audiences. But, why does anyone have to purchase a dedicated digital reading device if content can already be found online via computer or mobile phones with web access? Why does one need a dedicated reader to download collections of magazines or newspapers if one can get content aggregated online, updates delivered in tweets and feeds posted in social networking communities? Most pressing is the question of distributing digital readers. It poses an economic barrier to entry for those of us who can’t afford to pay more than an old fashioned cup of joe or fancy frappuccino for newspaper and magazine content. E-readers will certainly transform publishers reach audiences. And economic factors will determine which echelon of technology audiences will have access to, in turn further quantifying who advertisers are reaching with any given platform.