What must the successful business model contain for today and tomorrow?
Is there room here for a Parallel Universe? (Print and electrons)
In a word: compelling content. Okay, that's two words, but you get my point. In the past, as publishers we tended to think in duals: editorial and advertising, print and digital.
However, there is only one mandatory asset for a successful publishing model: content that people want to read (or look at, or watch, or listen to). And for it to be a successful business model, it also must be compelling in a way that brings you back for the next installment.
As for a Parallel Universe, I think there are actually dozens of parallel universes. If we think only in terms of print vs. digital, we're missing the point.
Content is essentially the experience of the consumer. The delivery system can both alter and enhance that experience.
At August Home, we push content through a delivery sieve to get dozens of streams. Magazines, SIP's, books, (the print we're accustomed to) as well as web sites, email, blogs, apps, videos, live events, webcasts, TV shows.
The domain of publishing is vast - because there is not just one big group of consumers. There are many. Hence, many ways to reach them in a way they want to be reached.
At August Home we call it "surrounding our customers with service." It's not one customer, or one group of customers. There are many groups. Our job is to provide content the way each group of customers wants to receive it (each group's preferred delivery system).CLICK HERE FOR THE FULL INTERVIEW
You once wrote about how media is moving increasingly toward a greater technology dependence and you asked, "What's First, Technology or Content?" What is your answer to that question?
Technology is more important. We are inundated with information. There's no way we can absorb it all. There's simply no way to process it. I subscribed to the paper version of the New York Times just to see if I could wean myself off the firehose of Twitter, Slate, HuffPo, FB, YouTube, LinkedIn, Yahoo, New Republic, Politico, CNN, Time, New Yorker, Scientific American, The Atlantic, etc. Etc. Etc. Etc. I wanted to be able to spend a few quiet hours on a Sunday morning reading for leisure's sake. It's very hard. I mean, if I'm in Perth, Australia, and I want the latest news from Dayton, Ohio, I can do it, easily, at the hometown paper, with up-to-the-minute reports. So: Assuming that the content is mostly ALL good, then it's the framework-the technology that enables me to control the deluge-that's more important.
We constantly read about the long-term decline of the consumer magazine market and newsstand sales that have yet to find a bottom. This decline has seen publishers trying to reinvent their products and content delivery systems along with attempting to reinvent their revenue streams. What is your opinion of the current state of affairs?
The current state of affairs is not one of expansion, but decline and adjustment. There are some exceptions but that's the pattern. But great magazine brands that create an affinity with their readers will survive, in print and elsewhere. Print advertising in more sectors than not will not be a main revenue stream in the future. So print brands need to be able to radically reinvent their models-content and business-because Google, Facebook, Amazon, LinkedIn and the other great data-mining companies are doing it for them. I emphasize data mining, because that's what the Facebooks and Googles are, fundamentally. But magazine brands have a distinct advantage in that their customers know them and trust them. For some, that will prove to be a disadvantage, because complacency will kill them. Content delivery is an extraordinary challenge. Print magazines can still be a lot of fun as an experience, but the days of mass-circulation magazines are over. "Mass" is being redefined and we are watching it happen.FOR THE COMPLETE INTERVIEW CLICK HERE
For the last twenty years I have been publicly critical of the process and accountability—or lack thereof—of rate base, yet it never occurred to me to write an article about it. The truth is, I don't recall anyone writing an article about rate base from a positive or negative viewpoint.
From my perspective, rate base is a convoluted tool designed to produce distorted circulation figures. Yes, auditing is an attempt to verify with some precision and prove to the advertisers that a certain number of people may have picked up and read your magazine. But imbedded in this arcane system is a potential for trickery and a temptation to abuse the well-meaning audit results to achieve what amounts to some meaningless readership number.
Since I wanted to express more than just my opinion on this topic, I reached out to industry leaders from all segments of our noble franchise. Most of the people I spoke to in the research for this article focused their observations on the abundant abuse of rate base and its antiquated nature.
I spoke to magazine media pundit and Publishing Executive columnist D. Eadward Tree and started by asking, "What is the problem with rate base?" He says, "I think we should define the problem clearly: Is it circulation audits? Rate base in general? Or inflated rate bases? I don't see a problem with the concept of rate base in general: We make a promise to our advertisers about who will see their ads, then verify that they got their money's worth by having the circulation audited. What gets us into trouble is inflated rate bases, which force publishers to do desperate, stupid things like offering $5 annual subscriptions, using negative-remit agents, and getting into trouble with the Federal Trade Commission." FOR THE COMPLETE ARTICLE CLICK HERE
When it comes to the publishing world, Reed is an advisor to media kings, sometimes known as publishers, and is always worth listening to.
1) You once said, "Magazines are based on their profitability and that is how investors must look at it." In the last decade, from an investor's perspective what changes have you noticed about magazines profitability?
Yes, I said valuations of magazines today are based solely on how profitable they are. That is because the magazine industry is now a mature one and is on the cusp of a transition from print to digital. In the past decade, and particularly in the past five years, the profitability of magazines have come down, for the most part. The reasons for the decline are the recession that reduced advertising in many magazines by as much as 30%, the continuing decline in newsstand sales and the ongoing transition from print to digital.
2) It's pretty clear
that steady, recurring publishing revenue streams would be a very
important consideration to an investor. Have you noticed changes in
revenue streams in the publishing world? If so, have you changed your
criteria of where to invest?
The newsstand sales malaise continued in the second half of 2013, prolonging a trend that has now extended over five years.
Second half 2013 newsstand results mirrored first half numbers with units declining by 12% and dollar sales declining by 9.1%. In the first half of 2013, dollar sales were down 9.2% compared to the same period 2012, and unit sales were down 11.4%. The average cover price on an issue sold in the second half increased by nine cents to $4.99, compared to the first half average sales price, again illustrating the negative effect that the lower cover priced celebrity weeklies and the continual positive influence of higher priced specials had on total sales.
second half weekly celebrity title sales declined 14.7% in units and
13.1% in dollars, a little worse than their performance in the first
half, while the non-weekly titles performed slightly better during the
second half. Even though the number of copies distributed in the second
half declined by 6.7% compared to 2012, second half, overall sales
efficiency eroded by nearly two percentage points compared to the same
period last year. Total 2013 newsstand sales declined 11.7% in units
and 9.2% in dollars compared to 2012 numbers.
The perceived reasons for these continual sales declines have been communicated and discussed repeatedly by industry observers over the last five years or so...the economy, the effect of digital and social media on leisure time and as content delivery tools, a heavy emphasis on low price subscriptions offered by major publishers trying to prop up rate bases as newsstand sales decline and the lack of publishers' efforts on promoting newsstand sales as they concentrate on their digital businesses. Individually each of these reasons has had an impact on newsstand sales. Collectively, their effect has been disastrous, and it has created a very fragile distribution channel, with some wholesalers leaving the business and those remaining requiring additional help from publishers just to survive as the only economically feasible means of timely distribution for thousands of titles into more than 100,000 retail outlets. The positive truths about the newsstand business include the facts that magazine sales are a $3 billion business, and we deliver a high profit margin to our customers with little or no effort or investment on their part. Our customers sell over 12 million magazine units each and every week, and their customers continue to show that they are willing to pay good money in a tough economic environment for high quality publications, especially if they can't get those same publications more cheaply through subscriptions.MagNet will provide a deeper dive into the second half and total 2013 newsstand sales numbers in our next Business Insights newsletter.
What is the biggest challenge facing your company right now? How are you planning to address it?
BW - As ever, branded media must surprise and delight their audiences. Simply delivering useful content is not - and never has been - sufficient. So that's the biggest challenge we face today, and was the biggest challenge we faced 15 years ago. It is more critical today because there are many new sources of simple information that's not surprising or delightful.
What do you see as the biggest opportunity for media brands/companies right now?
BW - The social media give us the opportunity to have compelling, real-time conversations with our audiences and we think that's the biggest new opportunity we've seen in some time - an opportunity to deepen the audience relationship in valuable ways.
As a former editor do you think the relationship between the reader and the writer/editor is changing?
BW - It may not be changing enough. I notice a lot of editors still creating magazines that appeal more compellingly to their advertisers than to their audiences. Those editors should be gathering audience data, following the audience's instructions and helping their colleagues convince the advertisers that it's the quality of the audience, not the reach, that's most important to publishers and advertisers alike.
We also have new responsibilities to be present in the social media and available to our readers, on a personal level. That's a big opportunity too many publishers are missing. Media buyers need to be taught not to judge the media brand based on their own prejudices, unless it's a magazine for media buyers. . CLICK HERE FOR THE FULL ARTICLE
It is hard to imagine that any business could lose nearly 40% of it volume over a five year period and continue to function in an acceptable fashion, but that is what has happened to the mass market distribution channel over the five years between 2007 and 2012. The final numbers for 2013 are not complete, but there is absolutely no reason to expect anything better; in fact all the indications are that they may even be worse. On top of that, remember that the financial performance of the channel's wholesaler level had been shaky for more that a decade preceding the abysmal numbers of the most recent six years. Just considering these simple and unchallengeable facts, is it unimaginable that 2014 turns out to be the year that the channel collapses?
Consider how last year ended, and also how the new year is beginning. In November, TNG, the largest wholesaler group, unilaterally imposed a schedule of distribution surcharges, ranging from two cents to eight cents per copy on all but 135 of the thousands of magazine titles it distributes. No publisher was unaffected.
Aggressive competition among the major wholesalers for chain retailers reignited, even in some markets where it had rarely been the norm. No one expects it will make the business more profitable. The two other large wholesaler groups are widely expected to follow the lead of TNG and propose new charges. CLICK HERE FOR THE FULL ARTICLE
Say goodbye to the stigma associated with native advertising. Following The New York Times' official embrace of the once-controversial ad format, J.P. Morgan is predicting that native will take over digital channels in 2014.
"We believe native ads are quickly becoming the de facto ad format on mobile and increasingly moving into desktop," lead analyst Doug Anmuth wrote in J.P. Morgan's annual "Nothing But Net" report, released on Thursday.
It is significant that Anmuth and his colleagues are tying the success of native to mobile, considering that they expect ad dollars devoted to the channel to overtake desktop dollars this year.
As for what makes native ads so special, J.P. Morgan calculates that they deliver a huge bang for the buck. Indeed, according to the securities firm, native ads represented just 5%-to-10% of Facebook's impressions in 2013, but accounted for more than 60% of the company's revenue. FOR THE COMPLETE ARTICLE CLICK HERE
I think our publishing industry is at a crossroad and we have been approaching it for quite some time, at least since 2007 and surely since 2010, with the introduction of the iPad. Perhaps Mary Berner, CEO of the MPA, has it right when she now calls our former publishing houses Magazine Media.
In this day and age how would you define a magazine publisher? We are no longer what we once were, because our readers and, most importantly, our revenue streams are very different. And they, too, are continually becoming something else. What we are becoming is not less relevant, but is much harder to define and even more confusing as we proceed into the near future.
It seems to me we are suffering from a strong identity crisis. Pre-2007 if you were a publisher you were for the most part in the print business, and the bulk of your revenue was derived from print. Now a publisher can be called a publisher just by hosting a web page, sending out a newsletter, or a blog or, of course, a printed magazine.
The concept of magazine media does combine all the available platforms into one descriptive business type. But changing our business identity doesn’t solve the problems of lost revenue and shifting reading patterns of our current and former consumers.Even the understanding that there is a universe of multiple platforms beyond print doesn’t help most publishers. Sure the big guys have plenty of dough to throw at as many substrates as seems prudent, and they do just that. What about the moderate to small publishers? They don’t have the money or the internal infrastructure to be so omnipresent. HERE FOR THE FULL STORY
Assuming that we are all adults here, it is time for a frank and honest conversation about the future of print. Never in the pages of this newsletter have I proposed the death of print, not even its near death. That is not happening and will not happen any time soon. But, my goodness! we do need to collect our thoughts and maintain some sobriety. Both Samir and Mr. Dead Tree have published recent articles about this non-death. Samir calls it, "the amplification of print in a digital age." I can live with that. But in my judgment the exuberance needs to tempered just a bit with the flip side of reality.
Below in a chart produced by Dr. Joe Webb is the problem as I see it. Even with all this exciting "amplification," where is the MONEY? As an industry, printed books, magazines, and newspapers have been non-stop losing revenue year in and year out since 2007. I am fine with all the brouhaha that this title and that title went from the web to print. I am ecstatic that some titles are being revived, and I think it is wonderful that there are new titles each and every year. But the money, that revenue that feeds our children, is diminishing - maybe not for all, but clearly for many and maybe, according to the chart, for most.
I believe there is, in fact, a bottom line somewhere where printed products as an industry will do just fine, but we aren't there yet. I ask you, is this a chart to brag by? If you saw this chart at your Wall Street broker's office, would you buy this stock to secure your family's mortgage? I have stated many times in these pages that aggregated data doesn't reflect single titles and that there are many successes that we can and should brag about as an industry. But those are singular cases and NOT reflective of the industry as a whole. CLICK HERE FOR THE COMPLETE STORY