(E-)Reading the Tea Leaves of Digital Magazines
With ad sales continuing to spiral downward—a recent report from the Publishers Information Bureau found that U.S. magazine publishers posted an 18-percent decline in advertising revenue last year—publishers have been forced into action. At this point, evolution is necessary for survival. Digital magazines have emerged as one attempt at a solution.
Josh Gordon, president of Smarter Media Sales, a publishing consulting firm specializing in strategy for media sales and monetization, talked to Publishing Executive last week about the future of magazine publishing. In particular, digital magazines—and whether publishers can make money from them—were examined. (Editor's note: To hear more of Gordon's thoughts on the future of digital magazines in publishing, register for the Publishing Business Conference & Expo, where he's chairing the Digital Magazine Symposium on Tuesday, March 9.)
INBOX: What challenges confront traditional magazine publishers who are entering the digital magazine marketplace for the first time?
JOSH GORDON: The first thing editors have to do is stop thinking that this is going to be a print magazine. They have to stop looking at their print competitors and saying, "Print magazine competitor A, B and C are doing this; therefore, we should be thinking about doing this." Rather, they need to close all the print magazines, go on the Internet and decide who their editorial competition is. Depending on the industry, it could be blogs, Web sites, companies who have libraries of whitepapers or content used to attract people to their sites, etc. It really depends on where the content is on the Internet.
Once they figure out where the content that they're competing with is, they need to construct an editorial package to compete with it. This is a new point of view for an editor to take—to stop thinking of their editorial competition as other print magazines. But you just don't know where your competition is online. In the print world, there's a couple of magazines that compete. So understanding what your competition is is a relatively easy task. Online, your competition could be a social media network, content posted on Facebook, popular bloggers, e-mail newsletters from consulting companies, among others.
In print magazine publishing, very often the attitude is, "We have to create and control our own content." When you're competing with online content sources, it often pays to partner with online content sources and aggregate online content sources. Sometimes those are much more successful competing strategies, just from a content point of view. This is also a different way to look at leveraging content than what traditional print magazine editors are used to.
The way you present content needs to also compete with Web sites, blogs, etc. If you're competing with a Web site that has hosted videos or Flash animation, you'd do well to have those incorporated into your digital magazine, because you're competing against an online audience now. Think like an online content developer, who happens to be using a magazine format.
Most traditional magazine editors think, "I'm a magazine editor who's creating online content." That's the wrong mind-set. The right mind-set is, "I'm an online content provider who happens to utilize a magazine format."
INBOX: What steps do magazine publishers need to take within their own organizations to change that mind-set to online first?
GORDON: To be honest, I haven't seen a lot of publishing companies be that successful at it. I do know some that have, though, and I'll tell you some of the things that worked within their corporate cultures. First of all, I don't think that there are any rules. A lot of publishing companies are saying, "We have to do more online. We're going to be Web-first, and we're going to convert all of our content to online." But the problem with that is it's too big of a mind-set change.
Companies that have personnel who are using the Internet to personally communicate every day have a much higher success rate of making this transition [from print to digital magazines]. We all use the Internet, we all use e-mail, we all use Internet tools, but I know one publishing company where employees are required to have a Facebook page and Twitter account. A lot of the internal company correspondence happens via social media tools.
When people start using these tools personally, they have a change of perspective. If you don't use the tools personally, I don't know if you ever really quite understand how they work and why they're so important. To really be successful as a publishing company, you have to think like a digital native. And the only way that you can do that is to have everyone in your company using online tools to communicate.
And I don't mean just e-mail; e-mail is just regular mail with electronic efficiency. If you start a blog, that's a really different way to use the Internet. If you have a Facebook page, that's a different way to use the Internet. I've seen publishing companies encourage their sales staffs to reach out to customers through Facebook and LinkedIn. Take it the next step and make it part of your corporate culture.
INBOX: You've recently undertaken the Digital Magazine Ad Engagement report. What key findings did you take from the report, and what do those findings tell you about the digital magazine marketplace?
GORDON: I interviewed a lot of media buyers and publishers of digital magazines, and until recently there was a lot of skepticism that advertising could be a robust source of income. There's a lot of skepticism that still exists, but the arrival of all these e-readers and the launch of the iPad has changed the climate quite a bit. What really has to happen is for the media-buying community to recognize that this [digital magazines] is a legitimate advertising platform.
INBOX: What are some of the pros and cons of digital magazines?
GORDON: As circulation augmentation goes, digital replicas of print editions are a terrific tool. You get in the game and start to understand how an online version of your publication will function. As digital readers become more commonplace, and there becomes more of a market for digital magazines, you'll have learned a lot of lessons that your competition hasn't. There's an inevitable digital migration that the magazine format is going to go through.
On the negative side, no one should assume that doing a designed-for-digital magazine is going to be a huge cost savings. If you're embedding video and Flash animation, reformatting everything for a computer screen, embedding links and social media tools, and all of the other things that interactive digital magazines can have, that can get expensive. You certainly do save on distribution costs—printing, mailing, buying paper. So there's huge cost savings there, but some of those will be offset by increased production costs.
INBOX: How will the recent launch of Apple's iPad and the emerging e-reader marketplace affect traditional print magazine publishers?
GORDON: It's changed a lot. But it's not just that Steve Jobs stood up and introduced a new gadget. In fact, that's almost insignificant. What's hugely important is that others are heavily invested in this product category of development, including all of the big names. HP is releasing a reader; Google has demonstrated a prototype reader. When Steve Ballmer of Microsoft gave the opening keynote address at CES [Consumer Electronics Show], he featured a digital reader—the HP digital reader that runs on Microsoft software—as part of his keynote address.
You've got the biggest technology companies in the world all vying for a chunk of this yet-to-be-launched gadget market, and the Apple iPad is only a part of that. The gadgets themselves bring tremendous potential to the market, but what's much more important for publishers is the new dialog about business models that will result from them.
The dialog has just begun. There's consortia being created, there's a robust dialog about how publishers can make a buck. For example, the iPad. There's no question that Apple is going to to try and do what it did with the iPod with the iPad. Instead of music publishers, it's going to try and get book and magazine publishers. And it'll probably be a proprietary system, where a book or magazine you download through iTunes won't be playable on a Kindle.
What we're really facing is a renaissance in business models. From the publishers' point of view, the gadgets are certainly fascinating and grabbing a lot of technology headlines, but at the end of the day a reader is a reader. The real issue for publishers is working out the business models.
I'm excited to be chairing the Digital Magazine Symposium [at the Publishing Business Conference & Expo on March 9] at this pivotal point in magazine history. There's never been this much interest in it, nor has there been this much expectation that this is even a possibility—the idea that you could create robust ad sales in a digital magazine. The technology announcements that started this January at CES have really opened everybody's eyes to the possibilities.
INBOX: Do you see a marketplace for print magazines going forward?
GORDON: No one's really sure how soon the e-readers will come to market. The iPad launched at a $500 price point, but the Kindle and Sony Reader have been below that for some time. I've talked with some e-reader makers who say that in volume, their product could sell for as little as $80. But that's in volume, and no one knows how soon it'll get to those points.
There's so many wild cards that it's very hard to predict, but one thing that's easy to predict is that print ad revenue isn't coming back. Therefore, there will probably be fewer print magazines around. The online world will continue to grow and evolve and find ways to transmit content to people. The magazine industry has taken the approach, "If you can't fight em, join 'em."