Reading the E-Leaves: The future of magazines on digital devices is beginning to take shape.
Should publishers flip out over Flipboard? It's a question that's been on a lot of minds lately. The iPad app, called "The First Real iPad Magazine" by Gawker, gathers links, articles and photos recommended by your Facebook and Twitter friends into a visually appealing, magazine-style format. Essentially a sophisticated Web aggregator, Flipboard allows readers to click through to read articles chosen by people whose opinions and tastes are likely to mirror their own. While publishers can request to have content limited or hidden altogether, Flipboard represents only the latest example of a distribution platform capable of upstaging a magazine's own website or branded app.
Just when the foundation for building digital revenue begins to look more solid, the ground shifts again.
"Wired and Bon Appétit have made their content available on the Flipboard platform, and that is fine as a test, but over the long run, as an industry, we need to try and limit disintermediation, not enable it," says David Renard, partner at research and consulting firm mediaIDEAS. "If publishers are not the ones developing new types of paginated media, and new ways to interact with the digital page, smaller, digital-based competitors will."
This is precisely the warning given by Ashley Norris, CEO of branded content advisory firm Sutro Digital. With the price of producing iPad magazines falling and free content offerings for the device likely to increase, mainstream publishers need to act now or risk missing the opportunity to establish themselves as brands on tablet devices, he says. Waiting until the question of paid versus free resolves itself when independent publishers and app developers are already experimenting with new sponsorship and content models is, he believes, a risky course.
"I think we are at year zero, and no one knows where tablets will end up," he says. "So … it is a unique opportunity for old media brands. My worry for them is that these apps simply won't deliver the returns that they had enjoyed in the heyday of print."
The stakes, all agree, are enormous. Research firm Oliver Wyman—in a report created for Next Issue Media, "A New Digital Future for Publishers?"— predicts the publishing industry could generate $3 billion in revenue from "interactive periodicals" ($1.5 billion of that over and above any cannibalization of print revenue) by 2014.
There is much we still don't know about the future—even the immediate future—of digital media. Will consumers pay as much for digital subscriptions as they do for print, as the Oliver Wyman study predicts? Will slick aggregators such as Flipboard render format and functionality, rather than branding and editorial attributes, the key to success? Will there be an easy way to sell subscriptions for tablet devices? Will digital ad rates turn up? What will the effect be of an Android-based tablet?
"While digital content consumption habits on tethered devices are largely already formed, this is not the case for habits of those reading on these new devices where experimentation is the norm and uncertainty still surrounds any revenue models that may take hold," says Ned May, director and lead analyst at media research firm Outsell.
What we can know are current trends. In the year leading up to Apple's release of the iPad, according to May, smartphones outsold laptop computers worldwide, and sales of "untethered" devices (smartphones, tablets and e-readers) will exceed combined sales of laptops and desktop computers by 2012. A recent study by mediaIDEAS predicts the U.S. market for paid content on tablets, smartphones and e-readers will reach $1.6 billion by 2014 and more than $10.9 billion by 2020.
And what of that millennial mainstay, the laptop, which has defined portability for over a decade? "I believe, personally, the tablet's going to replace the laptop," Chris Anderson, Wired magazine editor-in-chief, recently told a roomful of publishers at the Mark Logic Digital Summit. "I love my laptop, but I think it may be the last one I ever buy."
Matching Revenue Models to Devices
Outsell believes transactional and subscription sales work best on e-readers, since these devices are not designed around continuous web-browsing and are used for consumption rather than communication. Smartphones, as communication devices involving frequent use of simple, interactive, location-enabled features, lend themselves well to an advertising model, May says. (Outsell surveys conducted in 2009 found that only 1.8 percent of smartphone users were willing to spend more than $5 for content on their mobile phones, and 93 percent were not willing to spend any money at all.)
With their ability to serve all forms of content, tablets lend themselves to all revenue models, he says, adding that "new, application-centric experiences combined with established purchase models on mobile phones like those via iTunes will serve paid content models well."
The Oliver Wyman report notes that younger consumers have proven willing to pay for texts, apps and other products on their mobile phones. "With 165 million and 65 million accounts, respectively, iTunes and Amazon have made consumers feel comfortable paying for quality products and services in the mobile world," the report states.
To the extent that all devices utilize some sort of advertising model, May believes e-reader devices will employ ads of the "if you liked that, you will like this" variety, as well as Google-style right-hand column links based on user preferences. Smartphones will leverage location-based and action-oriented promotions through direct marketing, while tablets will be able to utilize display advertising as well as other forms of digital advertising along with subscription models.
"We see three types of revenue models for magazine publishers on the tablet: app-based, content-based (the direct sales of content, primarily, through the tablet's main service providers), and ad-based," Renard says. "These are often intertwined (especially with advertising), but they are each going to be adopted at different times and for different reasons by publishers."
The Good App
Apps should combine audiences' favorite print features with tablet devices' interactive functionality, says Shawn Duffy, managing director of cross-media services provider WoodWing USA. "The iPad should represent the publisher's brand, but it should also be designed to take advantage of the aspect ratio, multimedia and interactive tools available on the iPad," he says. "The design of the iPad publication should be the responsibility of the traditional page designer or art director who understands the brand, typography, look and feel of the printed publication. Rather than converting print PDFs to the iPad, publishers should leverage tools to create an experience for the iPad consumer."
Chris Hercik, creative director at Time Inc.'s Sports Illustrated Group, says the Sports Illustrated app "reinforces the brand by extending the reach and timeliness of the print product.
"The app is essentially a trifecta," he says. "It's a combination of the traditional print product layered with SI's best digital assets topped off with iPad-exclusive content. The app experience is unlike anything else at SI. In one sitting, you can read the article, listen to a podcast of the writer and then watch an original documentary about that story. It truly is an 'experiential magazine.'"
The app allows users to link to breaking news and scores, and provides access to photos, video and archival materials from within the app environment. "It's the magazine with about 30 [percent] to 40 percent more content," Hercik says.
Successful app development required "good content management systems with processes that allow us to work on both print and digital products simultaneously," he says. The Sports Illustrated Group integrated everyone into the process rather than assigning a dedicated staff, which "allow[s] everyone to take ownership and share in the creative thinking. Everyone is encouraged to figure out digital enhancements and put their stamp on the final product," Hercik notes. "The process is intensive."
Wired magazine has adopted a similar approach to development. Anderson described an "authoring-centric" approach whereby photographers, writers and designers are involved throughout the process, allowing them to "conceptualize stories in an interactive mode from the beginning."
Selling the Public on Digital Content
While Apple currently does not sell subscriptions through its app store, alternatives are beginning to emerge, such as Zinio's recently announced subscription service through its online newsstand. As for pricing models, approaches range from utilizing apps as a value-add for print subscribers (Time Inc.'s approach thus far with its People magazine app) to charging more for a highly interactive app compared to a print version, to charging significantly less.
Renard believes that the days of looking at digital versions of magazines as adjuncts to lift circulation numbers are over. "We can and must look at this platform as a paying platform," he says.
Howie Fenton, senior consultant at The National Association for Printing Leadership (NAPL), believes tiered pricing can work across print, digital and combined print-digital subscriptions, but strongly advocates the position that digital subscriptions should cost less.
"Who's going to be looking at the electronic version alone? I suspect there will be two demographics: pioneers that are e-only people and young people," Fenton says. "Look at kids graduating high school now or college now. That … demographic is most likely to want the electronic version only and are not willing to spend more than the paper version. They are going to wait for the price to come down."
He says he subscribes to newspapers through his Kindle and is "willing to pay $10 to $20 a month to get the e-version. It seems like a no-brainer to charge a very reasonable price for the e-version alone."
Norris believes publishers with premium products will be able to get people to pay. "However," he notes, "they will not be able to match the [readership] figures of those who offer [iPad magazines] for free. … New companies and mags spinning off indie websites and blogs will either be ad-funded or charge a standard app price of [less than $2]." (See the article "Want to Charge for Digital Content?" for more on successful pricing strategies.)
A lot depends on the price of development coming down, which Norris expects to see soon, anticipating a "WordPress equivalent for the tablet mags." He points to Hewlett-Packard's MagCloud as a print template for the kind of one-stop self-publishing service we should expect to see for digital products. "If there is a huge explosion of mags on tablets," he says, "then I think we will see web-like CPM figures for these sites."
Anderson says the iPad offers an opportunity to experiment with prices. (For example, Wired debuted its app in June at $4.99, dropping the price to $3.99 a month later.) While he thinks lowered distribution costs argue for a lower price compared to single-issue print editions, he notes that enhanced features and the potential for building rich media (such as archives) into digital products mean consumers need to "reset their presumption of what they're buying."
On the other hand, increased engagement times on smartphones and tablets—Anderson said engagement rates for Condé Nast titles on these devices are, and will remain, as high or higher than print—may form the basis of a future discounted-price, mostly ad-based model.
The Oliver Wyman report states that current subscribers "value their existing relationships with magazine and newspaper brands and ... interactive publications are a powerful way to extend those relationships." The study finds that among device-owning subscribers, having digital versions of publications drives a 9-percent increase in overall subscription renewals compared to print, and therefore argues that already heavily discounted per-issue print subscription rates should not need to be discounted further in the digital realm.
The study also finds that periodical subscribers see print and digital as complementary, with 30 percent of renewing subscribers choosing to bundle print and interactive editions. If, as the study finds, bundled subscriptions can bring a price premium (a 33-percent premium to the stand-alone price of either); automatic renewal on digital platforms reduces churn; and cross-sell opportunities increase with interactive formats, circulation revenues from tablet, smartphone and netbook subscribers could increase dramatically, "by more than 50 percent relative to today's print-only world."
Tempering these rosy numbers is the possibility that publishers will find themselves unready for the next iteration of digital hardware, once again playing catch-up in the face of a new wave of devices.
Cheryl Goodman, director of publisher relations for the Mirasol Display Project at Qualcomm, says publishers must have a device strategy as well as a content strategy. This involves understanding where technology is going and how it will impact consumer engagement—in regards to, for instance, file sizes and the costs involved in sending data, battery life and screen size. If (as Qualcomm believes) the future of digital content delivery will be on four-plus-inch screen "superphone" devices that combine the best of what smartphones and tablets offer, then publishers should consider what that might mean for behavior—a "lean back" experience coupled with mobile connectivity.
"Get really savvy about not just the software side, but who the winners are going to be on the hardware side," she says. "What are consumers saying about what they are willing to do in a digital reading experience? What will reading in that experience look like?"
Technological enhancements, such as larger processor capacity and energy-saving, non-reflective displays, will allow for increasingly sophisticated mobile environments able to harness the best of what wide-open connectivity enables—including social media and transaction tools—within a branded environment.
"The question is how do publishers live up to this golden opportunity," Goodman poses. "For the first time, you have the ability for someone to read your content and directly access the ad there [and] make a transaction on the same device from within a fully immersive experience." This type of interface, she agrees, is what could finally allow the long-standing revenue disparity between digital and print advertising to shrink.
Embracing the Future
Anderson himself certainly seems ready to embrace what Flipboard-style social media functionality can bring to apps. "We do not [yet] have the social media layer that I want," he says, noting his dislike of website comments, where the most useful contributions are often buried under irrelevancy or "snark," and praising a feature on the Kindle app that allows readers, with the touch of a finger on an underlined line of text, to become aware of how others are reacting to the phrase they are reading.
"What I'd love is to create some sort of social media layer which is off by default, but if you choose to turn it on, what you see is smart commentary, real-time, surfaced by our [criteria], not by who can post first," he says. "And the tweets you see are the tweets that are most retweeted, in order, and the Facebook comments you see are based on reputation metrics or popularity metrics, and there are smart algorithms that surface smart debate and commentary outside the comment pages. Rather than you having to come to our site to leave a comment, … our software should be smart enough to find it [on a social media platform], surface it and display it in context when wanted."
Anderson also talks about a "one-click tweet-to-app experience" driving audiences to purchase apps or content, which is not possible today with the various steps and walls set up by online retailing. The goal, he says, is a "seamless in-medium connection between social media and purchase"—a way to bring audiences into, and keep them in, a particular curated context.
This may seem an ambitious dream, but forward-thinking publishers seem poised to accept—and deal with—trends exemplified by applications like Flipboard: the repurposing of digital content into customized streams, and the utilization of social media or sophisticated algorithms to tailor content offerings to audiences' desires. What content providers can't glean from your friends' actions, they will learn from your search history (a la Google's promised information services designed to anticipate your every whim) or volunteered personal information. Publishers not willing to ride this wave may find themselves wondering where all the eyes—and dollars—have gone. PE