How The Magazine Industry Can Save Itself (Hint: Not iPad Apps)

18 Comments

Credit: EJ Press

The top priority for most magazine executives today seems to be building iPad apps. Yet the user experience of a print magazine is unmatchable: they’re cheap, never out of battery charge, not a target for thieves and they have twice the screen space when spread as an iPad screen. Magazines might have a place in our connected future, but they risk losing a generation if they don’t modernize their subscription systems instead of trying to compete with Angry Birds.

Consider my recent experience renewing my favorite magazine, The Week: My subscription was given to me as a gift. After a couple weeks of not receiving issues, I figured something was up. After looking into it, I found my subscription had expired. I’d have known this from their mailings, had I not gotten into the habit of throwing out all letters from magazines due to their high rate of silly offers. I went to TheWeek.com, clicked “Subscribe now”, which goes to a page that doesn’t match their design hosted by palmcoastd.com that asks me to pay $49.50 for the next year. I checked “Check here if you want us to bill you later” and they sent me an invoice, in the mail (you read that right, no “e”). Who does that anymore? So I had to type the code from the mailed invoice into a web form so I could pay by credit card.

In Japan you can buy a coke from a vending machine with your phone. The magazine industry’s still mailing invoices?

The Week isn’t unique in this regard. The vast majority of magazine subscription systems are woefully out of date. I recently bought a Groupon (NSDQ: GRPN) for a year’s print and digital subscription to The Economist. How long till I get the first issue? “Allow 5 weeks for delivery of 1st issue,” according to their fine print. When I bought a Groupon to Dos Toros I used it that very night for a delicious burrito. Amazon (NSDQ: AMZN) Prime will ship me a microwave in two days at no additional cost. Even the hottest new Apple (NSDQ: AAPL) products get only backed logged for a week or two. Why do those otherwise clever Brits at The Economist take 5 week to fill a new order for a product they’ve been making for over 150 years?

It’s time for the magazine industry to take a page from companies like Netflix (NSDQ: NFLX) and Spotify: charge by the month, require a credit card, auto-renew payments and let people cancel anytime.

Subscriptions in this modern style are fueling impressive revenue growth of companies serving a wide variety of consumers and corporate clients, including Dropbox, GigaOM, Birchbox, 37signals, JibJab and MailChimp. (My company recently adopted this model by introducing a professional version of Muck Rack.) Here’s why magazines should do it too:

Monthly fees appear lower than yearly fees. Even cable companies have figured this out. Time Warner Cable (NYSE: TWC) is offering me cable and internet for about $150/mo. Would you reconsider your cable package if they asked for $1,800 a year? You can buy a MacBook Air and iPad for that! Subscribing to The Week at $4.13/month, or even $5/month (which would more than cover the additional credit card fees), sounds pretty good.

More people will subscribe. If people know they can cancel anytime, they’ll be more likely to subscribe. Even better, offer a 30 day money back guarantee like we do.

You never have to ask people to renew: With monthly reoccurring billing, the default behavior is renewing. If you don’t yet appreciate the power of defaults just read AOL’s income statement.

Selling additional products is easy. If I want an additional DVD from Netflix, I don’t have to type in my credit card again. Magazines could let customers buy their books, tickets to their event and other new product with one click.

It will make you better. Once you’ve moved to a cancel anytime model, there’s a huge incentive to invest in your product and provide great customer service to lower your attrition rate. All they money and effort that you spent spamming your subscribers with begging letters and weird gift offers could go into figuring out what the future of magazines truly are.

Magazines need to pay attention to the frontier of technology. But it’s hard to successfully pioneer tomorrow’s media technology if today’s experience is arcane. Creating a better subscription system now is an investment that will lead to a great relationship with customers that can transcend paper and digital screens.

Gregory Galant is the CEO of Sawhorse Media, a network that includes the Shorty Awards, Muck Rack and Listorious. He blogs at Motivatr and can be followed on Twitter @Gregory.

This article originally appeared in Sawhorse Media.

18 Comments

Montgomery Kosma

Mr San Diego — that’s really interesting.  The operational challenges more resemble Netflix’s DVD business than their streaming business.

I’d bet that the more people are comfortable consuming their subscription magazines on iPad or Kindle, the more publishers can move away from those kinds of marginal-cost-driven challenges.  

Are there any reasonable projections for what % of magazines will be consumed in digital form over the next 3-5 years?  

Mr San Diego

@ Montgomery Kosma. In 3-5 years, I think we are more likely to be viewing content on Flipboard or something similar. In my opinion, Flipboard represents next steps towards the future of content distribution. Download it on your device and check out Surfer Magazine. All of the web content has been repurposed and reads like a digital magazine. I really don’t think the idea of having digital magazines, print magazines and web content is the final destination. It’s part of the journey and what we know of today; but I can’t imagine a future with all of the above. Just like print has evovled into digital, I see digital evolving as well and I don’t think we can even fathom how we will be viewing digital content in 5 years. In the near future, we will have digital versions of the magazine and they will make up 5 – 20% of the subscriber circulation for those magazines that aren’t giving digital away for free. Long term, I see the digital magazine falling into the same bucket as technologies like the  Flip Camera (it will come and go). It’s part of the journey. For now, I’m enjoying digital magazines such as Project and wondering how the average publisher can create something similar.

Mr San Diego

Here’s the explanation using a sample production schedule. Your magazine goes to press on Feb 1. Prior to going to press, you have to know how many copies to print. To determine the print run, you count the number of current subscribers on file and produce the labels. This all happens before Feb 1. As the magazine is going to press, the labels you ran the last week of January are being applied. Then, the magazines are co-mingled in a USPS pool and mailed out. From the time of the label run to the magazines arriving in the mailbox, 2 weeks have gone by. Meanwhile, if you’re the guy who subscribed on Feb 1, you’ve already missed the label run and print order. And, you’ll have to wait an entire month before your subscription shows up on the next label run and you receive a magazine. Most publishers aren’t printing more copies than they need. However, we do print over just a bit so that we can run a supplemental label run in between the 2 issues. This way, you will not have to wait an entire month for the next issue. Instead, your subscription will be on the mid-month supplemental label run. Then, your magazine is put in the co-mingle pool and delivered USPS; thus bringing you to the 4-5 week turn around before you receive your first magazine. The more label runs a magazine has, the quicker you will receive your first issue. Label runs are expensive and the reporting for each run is robust; so keeping them to 24  times per year for a monthly magazine is industry standard. Long story short, magazines are only printing enough copies for the number of subscribers on file at the point of the initial print run. It’s already an industry of waste so why print extra copies to shorten the delivery time to the subscriber when the subscriber can patiently wait for their first issue; being the most current off the press. Does this help a bit?

Montgomery Kosma

Gregory, 

Thanks for raising these fascinating questions.  I do think these two realms of content businesses have a ton to learn from each other.  (I’m working in the opposite direction, applying lessons from the magazine business to the world of online services.)

I’m interested to hear you peel the onion a bit further.  While there are potential advantages to monthly recurring billing, aren’t the typical SAAS business metrics something of a yellow flag?

For example — Netflix historically has had a churn north of 4% — i.e., 4% of all paying members cancel each month.  Over a four-year period, that’s roughly equivalent to a magazine with a blended annual renewal rate of about 45%.  Conversely, for Netflix to drive customer loyalty to the same level as a reasonably performing magazine would require pushing their monthly churn significantly below 3%.

They’ve never been close.  

So, this could be a risky prescription.  What gives you confidence that increased revenues from more subscribers and higher prices would likely offset the increased churn?

About time

There is a magazine fulfillment company working on just such a solution for the magazine industry. The system will provide magazine publishers a new opportunity to provide their digital customers an opportunity to pay monthly, yearly, and more. They system will be built for the digital world, now it’s just a matter of getting the publishers to leave behind tradition. It even solves for the earning and deferring of revenue. Stay tuned….

David Rae

Despite putting together a bloody good magazine, the Economist’s subscription process descends into comedy at times. Try linking up an iPad subscription to an already existing print subscription. I nearly threw the thing out of the window…

Kevin Horne

 OK, so who is going to step up and  explain that “5 week” thing….?

peter hobday

The guys at The Week are pretty good at marketing because they are allowed to be. But generally speaking in the UK, magazines and marketing don’t mix. So there are very few general or digital marketers running UK publishing operations. Most big publisher websites for example do not promote via email or home page or encourage visitors to register. Felix Dennis is unusual in that he is more a ‘business person’ than a ‘publisher’ and so follows the money. There is quite an attrition rate on monthly Direct Debits, and that is why The Week and others need to continually promote via the national press.

Mr San Diego

Another quirk of magazine publishing…you can only earn revenue once a copy is served. For example, a $12 subscription (paid in full) will earn a monthly magazine $1 per month. The remaining $11 is deferred revenue and can’t be earning until another copy is served. Forget about trying to match cash-flow to your monthly earnings unless you’re a CPA!

Ryan Biggs

Why would a person check “bill me later” when checking out at a website?  Either because they want a paper invoice, or because they want to delay payment.  Why would you check “bill me later” just to go directly to your email and pay the bill? 

Mr San Diego

Most publishers have eliminated the bill-me-later option from online order pages. Consumers are accustomed to making payments online so there is no reason to offer this option. Bill-me-later does continue to appear on insert cards and within direct mail offers.

Coppi

This idea is not new to the magazine industry.  Time Inc. launched MagHound a few years ago based on the notion of monthly billing and simple customer choice, even allowing consumers to flip their magazines month to month.  It was not supported sufficiently by either the industry or Time.

Dennis Publishing

It’s all been multivariate tested to find what works best.

Things are done differently in the UK, partly because there’s a ‘direct debit’ system, and because consumer behaviour differs – credit card take up, etc.

See http://subscription.theweek.co.uk/6-free-issues/?utm_source=WEK&utm_medium=BAC&utm_content=sec&utm_campaign=1616_6freeissues_ to compare and contrast UK and US for The Week magazine.

gregory

Paul, thanks for commenting and pointing out the differences between the US and UK markets. 

The Week is my favorite magazine and I immensely enjoyed Felix’s two books, so I have tremendous respect for your organization.

It’d be interesting to hear more about the testing you conducted on consumer behavior. Was month-to-month billing offered? If so, did you advertise both options on your web site, in print, or elsewhere? How’d you determine not to offer month-to-month in addition to the yearly option? Which cohort had a higher retention rate after a year had past?

private

Believe it or not the magazine business hangs on to a lot of these practices not because it wants to, but because it often makes economic sense (the 5 week delivery an exception). 

For example, if you are trying to manage to a guaranteed circ level, monthly billing may yield fewer paid subscribers on average at a higher cost than an annual term would over one year, factoring in the cost to replace business. And, a bill later option, which costs more for the publisher, is only offered because enough consumers still demand it. In fact a lot of these new tactics, such as monthly billing, have been deployed for years by the industry well before the likes of netflix.

The critical strategic question for publishers and media buyers is how the ad sales model will change in the digital app world. That is where the more fundamental shift will be and for most brands, the economist aside, that is what drives the bottom line.

Wewake Saynoy

I like where you are going with this. In my experience, yes publishers (newspapers, magazines, trade, etc.) are very much bound by their legacy operations – predominantly print. Making money online requires operating like a digital publisher – the mindset and attitude needs to change.

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