- United Kingdom
Malcolm Netburn, Chairman and CEO, CDS Global
The state of the magazine industry is changing, and with the change, publishers are finding themselves in a much different world than decades ago. Increased paper and postage costs and general pressures from a struggling economy are causing financial strain for many publishers, while traditional advertising revenues continue to decline. This loss of revenue has left some publishers experiencing consolidations, closures and rate base reductions, causing them to rethink their traditional business models.
These publishers have realized that the traditional print publishing model, which is ad-revenue dependent, cannot support their business needs in the 21st century. Therefore, these companies have begun to implement a much broader model that better reflects the changing climate of their industry, where the brand itself, not the medium by which it is delivered, becomes the key to customer interactions.
Executing a multichannel approach to customer interactions allows these publishers to meet consumers where they are and generate the revenue they need to remain successful in today’s world of wide-ranging media distribution. As a publisher’s audience becomes more diverse, new database technologies are allowing these publishers to track customer demographic and psychographic data like never before.
Expanding your brand into a multichannel, relational platform will allow you to make multiple contacts with an increasingly diverse audience, causing greater opportunities for establishing customer brand loyalty and generating revenue for your business.
In the years directly after WWII, industry was booming. As Samir Husni, professor of journalism and Hederman Lecturer at the University of Mississippi explained in the March 2009 edition of Publishing Executive, companies had new products to sell, and consumers had dollars to spend. The post-war economy was not only stable, but strong. Publishers became a benefactor of this economic scenario, as companies flocked to the printed page to build awareness of their products. This caused the magazine industry to adopt an ad-revenue dependent model, where advertisers, not consumers, financially supported publications.
When mass media expanded to include radio and later television, publishers found that these new broadcast methods began to compete with print publications for advertising dollars. Publishers no longer had the corner on advertising revenue, but because consumers continued to have discretionary income to spend, revenue from print ads continued to support the publishing industry as a whole.
However, when economic conditions worsened, consumers began to increase their savings and watch their spending habits more closely. According to the International Monetary Fund, in February 2009, the household saving rate rose to more than 4 percent, up from about
½ percent a year earlier. As consumers are less willing to part with their hard-earned dollars, businesses gain less revenue, and in turn, are less willing to allocate portions of their company budgets for advertising. In fact, according to American Business Media’s Business Information Network, trade magazine advertising pages fell 30.3 percent through the first half of 2009, while revenues were down 26.5 percent. Also, consumer titles saw a 27.9 percent decrease through the first half of 2009, according to the Magazine Publishers of America’s Publishers Information Bureau.
Publishers have also felt the effects of an increasing dependency on the Web for information and entertainment. Some companies, seeing the need to diversify their business, originally posted content to the Web for free, and are now seeing the need to monetize their Web-based business models in order to keep themselves financially stable. Consumers – those who are trying to be frugal and those who are not – have realized that they can go to these publishers’ Web sites for premium content without paying the price of a full subscription or newsstand copy. Also, the growth of blogs and other content produced by the average Web user has found these companies vying for the attention of Web-savvy consumers who are used to receiving content on their own time, in their own way.
These conditions – general economic instability, decreased rate bases, losses in ad revenue and increased media channels – have found publishers reconsidering the traditional publishing model to not only stabilize their bottom line, but boost their brand in the ever-growing, media-diversified world of the 21st century. The question that many of these publishers are asking is, “If the traditional model isn’t working, what model will work?” The challenge for publishers is to find the business model that will best fit the conditions that publishers are facing, while allowing them to continue to focus on the delivery of rich, editorial content for which publishers are known.
Printed magazines give consumers a wealth of specialized information in a tactile, engaging format. Consumers enjoy the experience they can have with printed magazines – they’re feature-rich, well-designed and easily portable. But this experience alone is not keeping consumers – especially those of the 12-24 age bracket – from engaging with other forms of media.
With the growth of blogs, social media and mobile devices, consumers can access information at any time, and in any format, they desire. Publishers who have traditionally focused on print are finding that they must expand into new venues to compete in an increasingly diverse media landscape. As Noelle Skodzinski, editor-in-chief of Publishing Executive stated in the March 2009 issue, “Publishers have a wealth of valuable assets, and while they’ve always managed to find ways to creatively package and sell those assets, the pressure to diversify is in full force today.”
This diversification is not simply the addition of new media channels to an existing magazine, but a completely new model that incorporates the magazines into a multichannel approach, with the magazine serving as one piece of a larger effort to provide rich, relevant content that is focused on the publisher’s brand. Thus, the magazine publisher adopts a “consumer connection” publishing model, transforming into a content provider who produces content in a variety of forms.
One of these forms is, of course, the Web. As publishers continue to move content to this form of media, they are finding that many consumers, who have embraced the “free access to information” philosophy of a number of Web users, expect to find content at no cost posted to Web sites (although they would expect to pay for this content in print form). Early on in this migration of content to the Web, some publishers were eager to provide this content in an effort to boost brand awareness, but are now realizing that this Web presence must be monetized in some way for the long-term sustainability of their business.
One way in which these publishers are generating the revenue they need is through the use of display ads on their Web sites. Although the staggering economy of 2008 caused a drop in spending for these ads (Nielsen Media research reported a 6.4 percent drop in 2008), this form of advertising remains effective. With the Interactive Advertising Bureau (IAB) working to standardize online advertising guidelines, this form of revenue generation is becoming even more appealing. In fact, the Interactive Advertising Bureau and PricewaterhouseCoopers, LLP, reported that display ad revenue rose 8 percent to $7.6 million in 2008. The same group estimates that overall online ad spending will reach $24.5 billion in 2009, a 4.5 percent increase over 2008.
Other publishers, realizing the power of premium content, have begun to offer specialized content for a premium price. For instance, a consumer may have free access to the articles posted to the Web site for a runner’s magazine, but is given the option to purchase specialized runner’s guides at an additional cost. Because this content goes deeper than the general article, the consumer sees a tangible return on investment, and is willing to pay for the premium content.
Another form of digital diversification that many publishers are utilizing is the digital magazine format – particularly appealing to consumers who prefer an eco-friendly publication, a searchable format, or a “high-tech” experience. With the growth of cutting-edge technology, the options available to publishers who choose this method of digital content delivery have become increasingly diverse. Although many publishers have found success with the traditional PDF format complete with linked ad pages, others are forming third-party partnerships to offer a complete multimedia experience to their readers that utilizes the latest in Web technology. This interactive format provides consumers with a “best of both worlds” approach, giving viewers a nicely packaged, editorially rich magazine that also offers digital enhancements such as zooming capabilities and video integration. These formats also link easily to advertiser’s sites and offer advertisers additional features like video and flash that go beyond the traditional static ad, with enhanced tracking and reporting features that provide advanced reader analysis. The expanded features allow publishers to provide more options to advertisers – from “basic” to “full-featured” – and can be presented to consumers with special introductory offers such as a low-cost first edition, or free edition in exchange for a consumer’s e-mail address.
Another important piece of the multichannel, “consumer connection” model is the utilization of social networking sites that offer users social utilities to connect with those who share common interests. As publishers seek to expand their brand awareness and find new methods of lead generation, many are leveraging the power of Web 2.0 technologies. Posting social sites online that reflect a particular brand helps publishers form deeper connections with their existing subscribers, as well as spark interest among those who are just becoming familiar with a brand. New offerings that allow users to easily post mini-blogs have also helped publishers establish relationships with consumers, who refer to themselves as “friends” of the publication. As readers follow these posts, publishers are able to point users to new online content, build excitement for an upcoming print edition or announce a special offer – and deepen brand loyalty in the process.
The growth of mobile devices is also giving publishers another channel by which to connect with consumers, and many publishers are recognizing this medium as another powerful tool in establishing brand loyalty. In a Sept. 2009 study by the Audit Bureau of Circulations titled “Going Mobile: How Publishers Are Preparing for the Burgeoning Digital Market,” eighty-five percent of respondents believed that more people will rely on mobile devices as a primary information source in the next three years. The study also states that 45 percent of business-to-business magazines surveyed are formatting their Web sites for mobile, with 42 percent of consumer magazine respondents making the mobile transition.
Also, many publishers are now offering both free and low-cost mobile applications that users can add to their mobile devices. A unique way to offer editorial content to consumers on the go, these applications also easily integrate a publisher’s brand with an advertiser’s product offerings. This creates a unique partnership that generates revenue that may have been lost with the decline of print ads in traditional publications.
With a wealth of media channels available to today’s consumers, many publishers are embracing digital technology, realizing that they must diversify their brand in order to remain profitable. Rather than seeing these new technologies as a threat to their survival, they have studied how to incorporate these channels into an expanded business model that will enhance awareness of their brand and ultimately, consumer loyalty with their brand.
However, as the channels for content distribution become more diverse, so does a publisher’s audience. Therefore, the publisher – turned content provider – must create meaningful, premium content, become distribution agnostic, and manage an increasingly complex set of customer relationships.
To help you manage these relationships, it is crucial to evaluate your economies of skill and scale and determine whether to insource, co-source, or outsource your data processing. Companies who have the capabilities to manage these relationships can become a key partner with you as you seek to know your customers on an increasingly personal level, determining not only the content they prefer, but the methods by which they prefer to receive it.
With so many relationships to manage, publishers must remain innovative and open to new ways of diversifying their brand and relating to a diverse set of consumers. As you seek to be innovative within your industry, it is important to partner with a provider who is focused on innovative solutions. The evolution of your business is the key to your success, and a company that is continually evaluating and expanding its services can best keep up with that change.
Malcolm Netburn
Chairman and CEO
CDS Global
515.246.6802
CDS Global is a leading provider of outsourced business solutions to publishers, direct marketers, financial institutions, insurance companies, municipalities, utilities and nonprofits.