Publishers Must Optimize Product, Price and Promotion to Succeed in the Digital Age

african american businessman...
african american businessman...

For the most part, the magazine industry has perceived digital publishing as a great unknown, unsure of whether the upheaval to their familiar way of life will be worth the effort, expense and re-engineering of their decades-old processes. While some have clung to the tired notion that digital is a threat and that they must figure out how to compete against it to remain relevant, most recognize there is tremendous opportunity--but also that they are ill-prepared to capitalize on it.

The digital discussion often results in more questions than answers: will we make more money going digital? How will going digital affect the business in the long run? What kind of impact will we see in circulation or advertising by going digital?

To fully leverage the digital opportunity, publishers must be confident they will be successful. Otherwise, a half-hearted, tentative effort will surely spell disaster. Fortunately, there is plenty of proof positive that going digital is a smart move.

First, there is a much higher gross margin available on digital subscriptions and unit sales, ranging from 60 to 85 percent. With zero print and dramatically lower distribution costs, digital publishing significantly reduces the cost of doing business.

While this is an excellent starting point, the next key factor is whether the publisher can generate sufficient sales. One-fourth of Americans now own a tablet, which is double the number of tablet owners in 2011, so the addressable market is growing to significance size and opportunity.

With attractive margins and a booming market, the focus shifts (ironically) to the same secret sauce the print model must address: product, price and promotion. In going digital, if the product is attractive, the price is set correctly and the promotion is effective, the money will flow and digital magazines can become very profitable. However, while the success factors are generally the same for print, the digital platform introduces interesting nuances. Let's explore those caveats.

The Product
Print technology shaped how magazines, newspapers and books were created and delivered, with weight, size, printing ink and paper stock being the limiting factors. These should have no relevance in the tablet experience, but they do.

Consumers of all ages like the familiarity of the print format for digital magazines, as clearly confirmed by recent Pew Research. A significant minority of 39 percent wanted interactivity, but most just wanted the reading experience. This is very convenient for publishers as they can save costs by simply repurposing the output of the existing print process to deliver a digital solution. While figuring out how to satisfy all readers' expectations to maximize the circulation is a challenge, but the technology is available to deliver both the reading experience and the interactivity.

It's critically significant that readers seem to have voted for fixed format over re-flowable content. But, I believe this is a tablet preference that does not apply to smartphones. While digital magazines have been with us since the late 1990s, tablets have moved them from the gentle tributary of reading on desktops to the roaring mainstream of mobile. Access to the web via mobile devices now exceeds access via desktops and the acceleration continues. The number of tablets sold in 2012 was just 20 percent of the number of smartphones sold, so there is a significant prize waiting for magazine publishers that can address smartphone users.

However, this small format crosses the size threshold where the reading experience suffers relative to tablets. Print magazines and newspapers provide a convenient way for readers to scan content and quickly find articles of interest. Their inherently large format is what makes this work.

To deliver that experience, smartphones need re-flowable HTML content with smart navigation systems to find and move between articles. Scrolling must replace page scanning and article headlines must become scrollable headlines and thumbnail images. The resulting product is still a magazine with the same great content, but delivered with new navigation to suit the reading device.

To maximize the opportunity, magazines must be delivered for tablets in fixed format and interactive fixed format and for smartphones in scrollable HTML. Again, fortunately the technology already exists to make this multi-format delivery not only possible, but actually efficient.

The Price
We all know that the consumer likes free stuff. The tough call is whether magazines should carry a cover price or be free and monetize via advertising or sponsorship. While tablet magazines are not currently attracting nearly the same traffic as websites, the quality of the visits is undoubtedly higher.

Advertising agencies have not been quick to agree on the rates warranted by tablet visits and clicks, but nor have publishers been keen to expose their data. However, this paradigm is changing, and we may see more free, advertising-supported magazines emerge in 2013. But for many, the subscription model will dominate, as it works for both consumers and publishers alike with single-copy purchases serving as a steppingstone to a subscription.

The Promotion
With more than 300 apps live on the YUDU platform, this breadth provides us with an interesting perspective on what works and what doesn't. We recently compared magazine downloads across two six-month periods spanning 2011 and 2012. It would be logical to conclude that downloads would be increasing inline with tablet sales. But, we found this was only true for titles supported by continuous rolling promotion, often making extensive use of social media. Those that did not promote saw little change in downloads between periods.
Looking at specific magazines, it became clear that while the tablet installed base was growing, so too was the number of competitive titles. The conclusion is that success requires constant gardening, not a plant, water and forget approach.

In the long term, publishing in the digital realm will not be much different in its core competences. It will still require informed, enthusiastic journalists to create outstanding and unique content, captivating images and great editorial. Certainly, the engine room that prepares, processes and distributes the content will be radically different, and the relationship with readers will be closer and social.

The big difference is that the industry could become massively profitable.