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Sidebars & Backgrounders

Magazines
By the Project For Excellence In Journalism
Sidebars and Backgrounders

Sidebars

Digital Initiatives

Publishers have been active in trying to reach consumers through the growing number of smartphones and other handheld devices, and several planned to start seeking money from that in 2010.

In addition, several publishers looked to sell their publications through smartphones. The Audit Bureau of Circulations, an official arbiter of circulations that advertisers rely on, agreed to count each purchase of an issue through an app as circulation.

Hearst, for example, announced that, beginning with its January 2010 issue, Esquire would be available via the iPhone for $2.99 per issue. Users were to be able to browse the magazine and gain access to extra content, such as videos of interviews. They would also be able to click on ads and purchase products.1

Condé Nast began selling GQ on iTunes and via iPhone for $2.99.2 The publisher reported selling 6,614 copies of the December issue of GQ on iTunes, and 12,000 copies of the January issue. According to one estimate, that resulted in about $39,000 in revenue for the publisher after Apple took its share.3

The new applications and tablet developments come on the heels of several Web-based systems designed by publishers to sell e-editions or print issues one-at-a-time.
Zinio.com, which calls itself the world’s largest newsstand, rolled out a number of initiatives and said it had 50,000 magazines and books for sale. It offered gift cards for sale for the first time in 2009 and announced a joint venture with Target.com to create a co-branded digital newsstand. It also expanded its efforts to sell magazines on iPhone and iTouch devices. The company was founded in 2001.4

Zinio.com users access the digital editions from personal computers and handheld devices like the iPhone before magazines hit newsstands. Zinio.com gets a cut of sales as the online distributor. The site sells subscriptions, single issues and back issues.
The advantages for the publishers are clear: they save on paper, printing and distribution costs, and can embed Web-based features such as audio, video, links and other tools. The e-editions carry the advertising found in the print editions, too.

Time Inc.’s Maghound rolled out in 2009 and failed to make much of an impact in its first months, according to several publishers who had signed on for the Netflix-like service. Time said the volume was in line with expectation and that the company had held off a full marketing effort until it could work out the bugs in the system.5 Maghound sells digital editions of magazines on an a la carte basis or a monthly package of three or five publications. Maghound also sells subscriptions of print editions.

Publishers did seem to be making progress using the Web to sell traditional subscriptions. Hearst estimated that one-forth of its new subscriptions in 2008 came from the Web and that it was an economical way to sign up new customers. Chuck Cordray, the general manager of digital media for Hearst Magazines, told Mediaweek that the renewal rates are high. “The economics on the online subs are very strong,” he said.6

Tablet Devices

Amazon’s Kindle was a hit when introduced in 2007, chiefly as a way to download and read books. Amazon signed up various media outlets to provide news content as well, often for a monthly fee.

Kindle soon attracted competitors, including from Sony, and by late 2009 one estimate put the number of Americans owning tablet devices at 2.1 million with sales moving briskly.7And, in early 2010, Apple unveiled its entry: the iPad.

The advent of the devices attracted the attention of publishers who viewed it as an opportunity to get in on the ground floor of a new technology and a way to get consumers to pay for content they weren’t already receiving free on the Web. 

David Granger, editor in chief of Esquire, told the New York Times that the magazine industry has historically undersold its products, first in print and, later, online. The e-readers could alter that. “The situation’s changed. We all kind of regret that our ancestors gave away the magazine for too little money,” he said.8

Publishers bristled, however, at the share of the fees that device makers kept.
News Corp., for example, publisher of the Wall Street Journal, said it received only a third of the $14.99 monthly subscription fee Amazon.com was charging in 2009 for the newspaper on Kindle. News chief Rupert Murdoch said it was “not a great deal.” 9

The Skiff e-reader, by Hearst and Marvel. Photo: Hearst Corp.

In December 2009, News Corp. and four of the biggest magazine publishers announced plans to team up on their own device: Time Inc., Condé NastHearst and Meredith.

The publishers said the joint venture would emphasize visuals more than the text-focused Kindle and incorporate videos, games and social networking. The magazines would be in color and resemble their print editions, with readers flipping through pages with the touch of a finger.10

“It may help them reassert some, not just control, but reassert themselves and not be in the death spiral that some were in in the last years,” Ned May, director and lead analyst for the research firm Outsell, told the New York Times.11

The project also set out to devise standards for the publishers that would let consumers read the digital publications on other tablet computers, portable electronic readers and smartphones. In that sense it would build off of several existing operations, such as Zinio.com or Time Inc.’s Maghound.com that sell e-editions of magazines.

Analysts said the project would face a number of challenges, including generating enough revenue to pay for the cost of creating expensive, rich digital presentations of their content. Moreover, many of the publications were already giving the content away free on their own sites, raising the question of how the new product would affect that content and the ad revenues derived from it. 12

But e-readers offer possible advantages for magazine publishers. Advertising could also be included in a format that consumers may find less obtrusive than the pop-ups and banner ads now on the Web. And the time spent looking at an ad, consumer by consumer, could be measured.

There are doubters, too, such as Jeff Bercovici, the media columnist for AOL’s DailyFinance, who wrote: “Taken together, it’s a kind of Manhattan Project for magazines. Will it succeed in splitting the atom? Alas, probably not in the way publishers are hoping. Despite the wishful thinking… the tablet won’t be a broad bridge over which magazines will be able to skip en masse across the chasm they’re now toeing. Some of them will make it to the other side, yes, but in much diminished form, while others will get there and flourish but mutate so much in the process as to become unrecognizable.”13

Publishers, too, were developing their own devices apart from the industry consortium or other partnerships. Hearst, with the Marvell Technology Group, unveiled in January 2010 an e-reading platform called the Skiff Reader Development Kit that could be used on a variety of devices, both tablets and smartphones. It would offer consumers a variety of newspapers, magazines, books and other content from many publishers, the company said.14 Condé Nast was reportedly working with Adobe Systems and Hewlett-Packard to develop a touch-screen reader that could present news digitally.15

“You dare not be sitting back,” Condé Nast chief executive Chuck Townsend told the Wall Street Journal.16

And News Corp. struck a deal to sell digital subscriptions to some of its products on Sony’s newest electronic reader.17 Wired and Sports Illustrated were reported to have produced mockups of tablet versions of their print editions.18

“With the first tablet computers headed to the marketplace, it’s already late for the slow-poke media companies to begin thinking about how to leverage this new medium,” said media consultant and blogger Alan Mutter. “But starting late is better than not starting at all.” 19

Backgrounders

Rate Base

Some declines in circulation are by design. All three of the traditional news weeklies in the United States, for example, have been actively trying to reduce the minimum circulation the publications guarantee to advertisers in recent years.

Why would a magazine seek to reduce the number of copies it distributes?

The biggest share of revenue a magazine takes in comes from advertising, with a much smaller share from subscriptions and sales of individual copies. Advertising rates are based on a promised circulation number for each issue. This number is often lower than actual circulation.

If a magazine fails to deliver the promised circulation, a publisher has to refund advertisers a portion of the rate, based on how short circulation falls.

Publishers make certain that they meet the guaranteed circulation, or advertising rate base, mostly by attracting readers through incentives. And some offer steep discounts to subscribers to meet this goal, discounts that can cut into any profits.

With a slow erosion of ad sales at magazines since the mid-1990s—and significantly fewer ads bought in 2008—publishers have reconsidered the cost-effectiveness of trying to maintain high circulation bases. As Victor Navasky, the former publisher and editor of The Nation and now a journalism professor at Columbia University, sees it, reducing the rate base has become a strategy of necessity for news weeklies, “owing to higher mailing costs, paper costs and lower subscription returns, not to mention the growth of online.”

Ad Pages vs. Ad Dollars

Divining the financial health of a magazine is challenging.

Two of the biggest owners of magazines — Hearst and Advance (the owner of Condé Nast)— are privately held companies, and as such are not required to issue public financial reports. Even the publicly traded media companies that do issue reports generally do not break out revenue figures for specific magazines.

The Publishers Information Bureau offers estimates by combining ad rates and published pages. It multiplies the ad prices magazines list on their rate cards by the number of ad pages they published. The resulting estimate is an imprecise representation of actual ad revenue because advertisers often get discounted prices from the rate card. Because of various discounts and incentives, experts say that actual revenue is often half what the reported ad dollars would suggest.

For 2008, the collective discounts at Time Inc.’s two dozen American magazines, for example, amounted to 44% off the official rates, according to press accounts. And at Meredith, which owns 25 consumer magazines, reports put the collective discounts at an average of about 75% below official rates.

The figures for how many pages of advertising were published, on the other hand, are based on an actual count of ads in a publication.


Footnotes

1.MediaBuyerPlanner.com, “GQ,’ ‘Esquire’ Offer iPhone Editions,” December 20, 2009.

2. MediaBuyerPlanner.com, “GQ,’ ‘Esquire’ Offer iPhone Editions,” December 20, 2009.

3. Peter Kafka, “With an Eye on the iPad, Condé Nast Declares Its $39,000 iPhone Magazine a ‘Success,’” All Things Digital, January 21, 2010.

4. Zinio.com, press releases.

5. Lucia Moses, “Maghound still a pup: Time Inc.’s year-old circ service yet to post solid sale,”  Mediaweek, July 6, 2009.

6. Mediaweek, “Titles mine Web for subs: Hearst, Condé Nast and Rodale see gains via online,” May 11, 2009.

7. Erik Sass, “More E-Reader Deals, Courtesy ‘WSJ,’ Sony,” MediaDailyNews, December 18, 2009.

8. Stephanie Clifford, “Magazines Get Ready for Tablets,” New York Times, December 15, 2009.

9. Ryan Nakashima, “5 publishers plan rival to Kindle format,” Associated Press,  December 8, 2009. Accessed from washingtonpost.com on December 21, 2009.

10. Ryan Nakashima, “5 publishers plan rival to Kindle format,” Associated Press,  December 8, 2009. Accessed from washingtonpost.com on December 21, 2009.

11. Stephanie Clifford, “Magazines Get Ready for Tablets,” New York Times, December 15, 2009.

12. Ryan Nakashima, “5 publishers plan rival to Kindle format,” Associated Press,  December 8, 2009. Accessed from washingtonpost.com on December 21, 2009.

13. Jeff Bercovici, “Tablets From Above,” the New York Observer, January 5, 2010.

14.Hearst Corporation press release, “Skiff E-Reading Service To Launch In 2010,” December 4, 2009.

15. Stephanie Clifford, “Magazines Get Ready for Tablets,” New York Times, December 15, 2009.

16. Shira Ovide and Russell Adams, “Media Firms to Unveil Joint Venture for Digital Devices,” Wall Street Journal, December 7, 2009.

17. Erik Sass, “More E-Reader Deals, Courtesy ‘WSJ,’ Sony,” MediaDailyNews, December 18, 2009.

18. Stephanie Clifford, “Magazines Get Ready for Tablets,” New York Times, December 15, 2009.

19. Alan Mutter, “Holy Moses! Media need to gear up for tablets,” Reflections of a Newsosaur, January 8, 2010.