Study Projects Interactive Periodicals to Become $3 Billion Market in 3 Years

Posted on 8/23/2010 by Julia Dudnik Stern | Printable Version | Comments (0)

The dwindling magazine publishing industry may be in for a new digital future. A study by Next Issue Media forecasts that digital—mainly iPad and other tablet-based—versions of periodicals will bring in $3 billion in subscription revenue by 2014.

Next Issue Media is a consortium of five publishers: Condé Nast, Hearst, Meredith, News Corp. and Time Inc. The new entity, headed by former TiVo president Morgan Guenther, was founded to develop, market and deliver magazines and newspapers to consumers via digital devices.

Key study findings
  1. Among device-owning subscribers, the availability of interactive editions at the point of renewal, at the same price as today's print editions, drives a 9 point increase in the overall subscription renewal rate, from today's 55% industry average to 64%.
  2. Many subscribers perceive print and interactive formats to be complementary; 30% of renewing subscribers choose a bundled print and interactive edition, at a 33% premium to the stand-alone price of either.
  3. The interactive format enables effective cross-selling via recommendation engines and browsing features; 17% of current subscribers make additional purchases.
  4. Automatic renewals eliminate the traditional "bill-me later" model and greatly reduce churn, from an average of 45% today to 25%.
  5. The introduction of interactive editions in an online store setting, at the same price as today's print editions, triples uptake rates among device-owning non-subscribers, from 5% to 15%.
Conducted by management consulting firm Oliver Wyman, the study predicts high consumer interest for digital publications. The projections account for potential cannibalization of some print subscription dollars by new tablet-based editions, but says the $3 billion market will include $1.3 billion in incremental revenues nonetheless.

The study simulated expected revenues by quantifying expected demand across some 230 existing titles and surveying 1,800 U.S.-based consumers. In addition, the study focused solely on subscription products and did not address other potential tablet-based revenue streams, such as advertising, commerce or single-issue magazine sales.

iPad adoption rates are quite impressive. Apple has sold more than 1 million units per month, for a total of 4 million since launch. And this is only the beginning; tablet sales are likely to skyrocket as cheaper versions are introduced and holiday season approaches.

This information underscores the need for the photography industry to develop a pricing system for digital uses—if not specifically for periodicals, which are flocking to the tablet platform in droves. For the moment, many digital uses of images previously published in print magazines do not generate revenue for image owners or distributors. However, some agencies are trying to change this: X17 is currently involved in a legal dispute with People over its new iPad app’s use of celebrity images, according to The Hollywood Reporter.

In this climate, the scheduled keynote address at the upcoming conference of the Picture Archive Council of America is timely. Condé Nast vice president of editorial operations Richard Levine will discuss the impact of the iPad and the future use of content. Condé Nast currently publishes iPad versions of GQ, Vanity Fair and Wired, with interestingly mixed commercial results.

Copyright © Julia Dudnik Stern. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-461-7627, e-mail: wvz@fpcubgbf.pbz


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