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May 03 2012

14:55

The newsonomics of Pricing 101

When the price of your digital product is zero, that’s about how much you learn about customer pricing. Now, both the pricing and the learning is on the upswing.

The pay-for-digital content revolution is now fully upon us. Five years ago, only the music business had seen much rationalization, with Apple’s iTunes having bulled ahead with its new 99-cent order. Now, movies, TV shows, newspapers, and magazines are all embracing paid digital models, charging for single copies, pay-per-views, and subscriptions. From Hulu Plus to Netflix to Next Issue Media to Ongo to Press+ to The New York Times to Google Play to Amazon to Apple to Microsoft (buying into Nook this week), the move to paid media content is profound. The imperative to charge is clear, especially as legacy news and magazines see their share of the rapidly growing digital advertising pie (with that industry growing another 20 percent this year) actually decline.

Yes, it’s in part a 99-cent new world order as I wrote about last week (“The newsonomics of 99-cent media”), but there are wider lessons — some curiously counterintuitive — to be learned in the publishing world. Let’s call it the newsonomics of Pricing 101. The lessons here, gleaned from many conversations, are not definitive ones. In fact, they’re just pointers — with rich “how to” lessons found deeper in each.

Let’s not make any mistake this week, as the Audit Bureau of Circulation’s new numbers rolled out and confounded most everyone. Those ABC numbers wowed some with their high percentage growth rates. Let’s keep in mind that those growth numbers come on the heels of some of the worst newspaper quarterly reports issued in awhile. Not only is print advertising in a deepening tailspin, but digital advertising growth is stalled. Take all the ABC numbers you want and tell the world “We have astounding reach” — but if the audience can’t be monetized both with advertising and significant new circulation revenues, the numbers will be meaningless.

When it comes to dollars and sense, pricing matters a lot.

Let’s start with this basic principle: People won’t pay you for content if you don’t ask them to. That’s an inside-the-industry joke, but one with too much reality to sustain much laughter. It took the industry a long time to start testing offers and price points, as The Wall Street Journal and Walter Hussman’s Arkansas Democrat-Gazette provided lone wolf examples.

The corollary to that principle? If you don’t start to charge consumers — Warren Buffett on newspaper pricing: “You shouldn’t be giving away a product that you’re trying to sell.” — then you can’t learn how consumers respond to pricing. Once you start pricing, you can start learning, and adjust.

We can pick out at least nine emerging data points:

  • 33-45 percent of consumers who pay for digital subscriptions click to buy before they ever run into a paywall. That’s right — a third to a half of buyers just need to be told they will have to pay for continuing access, and they’re sold. As economists note that price is a signal of value, consumers understand the linkage. Assign what seems to be a fair price, and some readers pay up, especially if they are exposed to a “warning” screen, letting them know they’ve used up of critical number of “free” views. Maybe they want to avoid the bumping inconvenience — or maybe they just acknowledge the jig’s up.
  • If print readers are charged something extra for digital access, then non-print subscribers are more likely to buy a digital-only sub. Why pay for digital access is the other guys (the print subscribers) are getting it thrown in for “free”? Typically, Press+ sees a 20-percent-plus increase in signups on sites that charge print subscribers something extra. That extra may be just a third or so of the price digital-only subscribers pay (say, $2.95 instead of $6.95), but it makes a difference. Consequently, Press+ says 80-90 percent of its sites charge print subscribers for digital access. The company now powers 323 sites and thus has more access to collective data than any other news-selling source.
  • You can reverse the river, or at least channel it. The New York Times took a year, but figured it out righter than anyone expected. It bundled its Sunday print paper (still an ad behemoth) with digital, making that package $60 or so a year cheaper than digital alone. The result, of course, is that Sunday Times home delivery is up for first time since 2006. It’s not just NYT or the L.A. Times which have embraced Sunday/digital combos. In Minneapolis, the Star Tribune began a similar push in November. Now, of its 18,000 digital-only subscribers, 28 percent have agreed to an add on the Sunday paper, for just 30 cents a week, says CEO Mike Klingensmith (“A Twin Cities turnaround?”). So we see that consumers may well be more agnostic about platform than we thought. Given them an easy one-click way of buying even musty old print, and they will. Irony: If you hadn’t charged them for digital access, you probably wouldn’t have sold them on print.
  • New products create new markets. 70 percent of The Economist‘s digital subscribers are not former print subscribers, says Paul Rossi, managing director and executive vice president for the Americas. That’s surprising in one sense, but not in another. Newspaper company digital VPs will tell you that they’re surprised to see how little overlap there is between their print audience customer bases and their digital ones. The downside here: Many print customers seem not to value digital access that much. The Star Tribune is finding a low take rate of 3 percent of its Sunday-only print subscribers willing to take its digital-access upsell. One lesson: The building of a new digital-mainly audience won’t be easy and will require new product thinking; it’s not that easy just to port over established customers.
  • The all-access bundle must contain multiple consumer hooks. Sure, readers like to get mobile access as well as desktop and print, and maybe some video. Yet some may especially prize the special events or membership perks they are offered, as the L.A. Times is banking on (and start-ups Texas Tribune, MinnPost, and Global Post have applied outside the paywall model). Some will like the extras, like The Boston Globe telling its new 18,000 digital subscribers, as well as its print ones, that they now get “free” Sunday Supper ebooks (“The newsonomics of 100 products a year”). Sports fanatics or business data lovers will find other niches to value — and ones that make the whole bundle worthwhile. Archives — and the research riches they offer — will prove irresistible to some. In 2012, a bundle may offer a half dozen reasons to buy, casting a wide net, with the hope that at least one shiny lure will reel in the customers. By 2013, expect “dynamic, customized offers,” targeting would-be buyers by their specific interests to be more widely in use.
  • While pageviews may drop 10-15 percent with a paywall, unique visitors remain fairly constant. We see the phenomenon of those who do hit a paywall one month coming back in subsequent months, rather than fleeing forever. “It may be the second, third, or fourth month before someone says, ‘I guess I am a frequent visitor here, and I’ll play,’” says Press+’s Gordon Crovitz.
  • Archives find new life. Archives have lived in a corner of news and magazine websites for a long time. They’ve been used, but not highly used or highly monetized. Now, courtesy of the tablet, and a new way to charge, The Economist is finding that 20 percent of its single copy sales are of past issues. Readers will pay for the old in new wrappers, whether back e-issues, or niched ebooks. The all-access offer can be much wider than cross-platform, or multi-device. It can extend across time, from a century of yesterdays to alerts for tomorrow.
  • News media is probably underpriced. Take the high-end Economist. CEO Andrew Rashbass — speaking to MediaGuardian’s Changing Media Summit 2012, in a recommended video — said that a survey of its subscribers showed that a majority didn’t know how much they were paying for the Economist. When pressed to guess, most over-estimated the price. At the Columbia (Missouri) Daily Tribune, an early paywall leader in the middle of America, a recent price increase to $8.99 from $7.99 has so far resulted in no material loss of subscribers. At Europe’s Piano Media, early experience in Slovakia and Slovenia is that price isn’t a big factor, says Piano’s David Brauchli. “Payment for news on the web is really more a philosophical mindset rather than economic. People who are opposed to paying will always opposed to paying and those who see the value of paying don’t mind paying no matter what the price is.” That suggests pricing power. It makes sense that publishers, new to the pricing trade, have approached it gingerly. Yet the circulation revenue upside may well be substantial.
  • Bundle or unbundle — what’s the right way? Mainly, we don’t know yet, and the answer may be different for differing audience segments. The Economist started with print being a higher price than a separate digital sub. Then it raised the digital price to match that of print — to assert digital value. It now offers all-access: one price gets you both. Next up: You can buy either print or digital for the same price, but if you want both, you’ll pay more. It’s an evolution of testing, and so far, it’s been an upward one.

Overall, this is a revolution in more than pricing. It’s a revolution in thinking and, really, publisher identity.

The Boston Globe’s Jeff Moriarty sums it up well, as his company aims (as has the Financial Times before it: “The newsonomics of the FT as an internet retailer”) to emulate a little digital-first company called Amazon:

I think overall publishers have to start thinking more like e-commerce companies. More like Amazon. You can’t just throw up a wall or an app and expect it to just sell itself. We’re still building that muscle here at the Globe, and some of our colleagues in the industry are even farther along. We have extensive real-time and daily analytics and are employing multivariate testing to try offers and designs to refine the experience that works best for each type of user.

Photo by Jessica Wilson used under a Creative Commons license.

April 26 2012

13:30

January 03 2012

21:04

David Carey: Hearst's target is to reach more than 1m paid digital subscribers per month

paidContent :: In a New Year letter to employees, Hearst president David Carey reiterated that the company’s target this year is to reach over 1 million paid digital subscribers per month.

[David Carey, Hearst:] Our target is to reach more than one million paid digital subscribers per month via iTunes, Zinio, Nook, Amazon and Next Issue Media. We will fast-track the transition to HTML5 for all our sites, which allows for a far better user experience on mobile devices. ...

paidContent.org published the full letter online.

Continue to read Laura Hazard Owen, paidcontent.org

December 23 2010

17:47

iPads, Print-on-Demand Slowly Transform Magazines in 2010

birds 2010 small.jpg

This revolution is going to take its time.

It's been a year of high expectations but little fulfillment for those who thought 2010 might forever change the way we read magazines. We've seen that disappointing uses of new tools, limited audience interest, and small initial financial returns are going to result in a gradual shift, not a sudden transformation.

The iPad certainly hasn't made print magazines extinct, and in fact some of the early iPad efforts may even have discouraged readers a bit. Other developments in the magazine world -- such as the Cooks Source incident and the growing power of social media -- also suggest still more challenges and opportunities in the year to come.

The Challenges of Innovation for the iPad

The number of print magazines stayed steady in 2010, with 193 launches and 176 closures -- a great improvement over 2009's remarkable 596 casualties, as reported by Folio. In the meantime, readers began experimenting with digital magazines on the iPad following the device's April release. Zinio, a digital magazine provider, had its app in the App Store on the iPad's release day, meaning the digital replica-style magazines Zinio offered could immediately be read on the iPad.

Multiple magazines soon released their own dedicated apps for the iPad, such as Wired's much-touted app, which in June 2010 sold 105,000 copies, exceeding that month's newsstand sales. However, Wired's app didn't repeat that feat in later months, with sales dropping to 32,000 copies by September. Other magazines, such as People and Men's Health, have only achieved 1 to 2 percent of their newsstand sales with their iPad apps, according to Ad Age.

But how happy have users been with these digital magazines, and how rewarding have they been for publishers? A recent study by the Reynolds Journalism Institute found that users rated their reading experience only "somewhat better or about the same" than their use of print media or computers for reading. The users also said they would be most likely to buy news-related apps if the prices were lower than those for print subscriptions -- not the same or higher, as the prices generally now are for magazine apps.

project_ipad.jpg

Users of iPad magazines have also criticized what they see as a lack of creativity and technological savvy in designing usable, intriguing magazine apps for the iPad. Today's magazine apps tend to be dull, clunky replicas of print magazine pages that don't let readers share content via social media or even email. Despite being designed only for the iPad, even Project, the much-anticipated iPad-only magazine from Richard Branson's Virgin Digital Publishing, was disliked by some readers for its awkward interface and its insistence on re-creating the print page experience.

Perhaps some of the reluctance to experiment with new interface designs and multimedia integration comes from a fear of alienating iPad users who might expect a magazine-like experience, including the feel of "turning pages." However, with the iPad still in its early-adopter phase, this seems like the perfect time for experiments that demonstrate to readers that a digital magazine app can offer more than the printed page -- and that the experience can be worth a premium price.

Ads and Subscriptions on the iPad

Advertisers have seemed quite interested in buying space in digital magazines, and publishers are experimenting with new formats for ads. Though window-shopping is usually free, simulating the experience in a new iPad ad included in the forthcoming Cosmopolitan app will cost advertisers $50,000, according to Mediaweek. In the meantime, Apple has launched iAd for the iPad, building upon its use of the advertising tool on the iPhone. It plans to broaden the use of iAd in 2011. The first iAd on the iPad -- for Disney's movie "Tron: Legacy" -- will run in the TV Guide iPad app, among others. More magazine publishers could become involved in the iAd platform as well.

Finally, one of the biggest obstacles to activating and maintaining reader interest in digital magazines is the difficulty of locating an app for a favorite magazine and then somehow getting a subscription to it. So far, Apple charges its standard 30 percent commission on magazine app sales, and requires the use of external subscription management software, according to Folio.

Until Apple develops a more user- and publisher-friendly newsstand, digital magazine app subscriptions will likely be limited. In the meantime, five major publishers -- Conde Nast, Hearst, Meredith, News Corp., and Time -- are taking matters into their own hands and developing their own alternative in the form of Next Issue Media, which promises to provide "open standards for a new digital storefront" that will sell magazines and newspapers for a variety of e-reading tools, not just the iPad.

In addition to existing competition from the Kindle, Nook, and Android devices, those e-reading tools might include new tablet devices that run Windows 7. If Apple wants to maintain the loyalty of its early adopters, including many avid e-readers, offering easy access to high-quality magazine content will be important in the coming year.

Magazine Credibility Under Fire

The iPad is obviously the biggest story of the year in the magazine world, but other issues are playing out on the web and behind the scenes. Magazines are reshaping their content and strategies for the digital world, and this is causing a reconsideration of ethical issues that underly the production of content.

The Cooks Source incident this fall underscored the difficulty of maintaining authors' rights to their work in the digital age. The small magazine "for food lovers of Western New England" took a writer's piece on apple pie and reprinted it without her permission. When the blogger complained, the editor claimed that "the web is considered public domain and you should be happy we just didn't 'lift' your whole article and put someone else's name on it."

cooks_source_newFBpage.jpg

Soon after this incident, another small magazine, Dairy Goat Journal, was exposed for using a blogger's photo without permission or payment, or even her name. The bad publicity resulting from these ethical failures creates doubt among the public and even among fellow journalists about the credibility of journalistic content when everything in digital form seems -- but most definitely isn't -- free for the taking.

Likewise, new advertising techniques in both digital form and in print have raised concerns about ethics. Forbes' use of paid blogs from advertisers as part of its online redesign (described here on MediaShift) is just one of many efforts to develop sponsored content for magazines' digital formats. As financial pressures increase, and deals for advertorial and sponsored content online and in print become more appealing, magazines will have to be vigilant to maintain a clear line between editorial and advertising content.

Redefining Magazines

As these experiments continue -- on the iPad, other e-readers, the web, and in print -- magazines new and old continue to challenge the traditional definition of their medium. Juan Senor of Innovation Media Consulting, interviewed earlier this year here at MediaShift, described magazines today as "content propositions": Concepts that lead to collections of multimedia content, rather than strictly to the creation of bundles of paper. Even the Magazine Publishers of America, first established in 1919, acknowledged the changing industry by renaming itself this year to "MPA - The Association of Magazine Media."

Some exciting variations on "magazine media" that we've seen this year include the socially curated, customizable digital magazine and the rise of print-on-demand and web-based options for one-off and independently published magazines.

Flipboard, the iPad app that draws together customized content from a user's social streams and from various major providers, now also includes a few traditional print magazines through its new Flipboard Pages. Unlike most dedicated magazine iPad apps, Flipboard presents articles alongside relevant social media commentary and allows easy social sharing of content, making the content more engaging and participatory. The Flipboard Pages streams are presented first like any other Flipboard article, but then can be opened in a more magazine-like layout, including full-page ads.

Flipboard's combination of the social experience with the magazine experience is compelling, as demonstrated by its early struggles to keep its servers functional to meet demand. Its design suggests a possible path for the development of other magazine-related apps. Clearly, this approach exemplifies the "content proposition" model of magazine publishing.

In the coming year, we'll probably also see more experimentation with tools that are making magazine publishing more accessible to the public, such as print-on-demand and web-based digital magazines. The success of the crowdsourced, print-on-demand magazines 48 HR (now renamed Longshot) and Stranded, as well as the availability of HTML5 web distribution platforms like NoLayout, targeted to indie magazines and accessible on mobile devices, show that with ingenuity and the right tech, crafting and distributing a new magazine is entirely possible, even with limited time and money.

Although 2010 might not have yet delivered on the revolution in magazines that some hoped for and was disappointing in some ways, it certainly demonstrated that publishers big and small are creating innovations that -- slowly but surely -- will remake the industry.

Susan Currie Sivek, Ph.D., is an assistant professor in the Mass Communication and Journalism Department at California State University, Fresno. Her research focuses on magazines and media communities. She also blogs at sivekmedia.com, and is the magazine correspondent for MediaShift.

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