The PPA’s Customer Direct group commissioned Wessenden Marketing to write a report which was based on interviews with 16 publishers, both Consumer and B2B, in the UK and in other territories, as well as gathering insights from extensive research of what is going on around the globe – the report has an appendix of 26 case studies which highlight a wide range of issues and activities.
So, what are the key questions?...
Is the world really turning digital?
Yes; clearly, it is. Yet this broad trend carries a number of qualifications. Looking outside publishing itself at the broader Media & Entertainment (M&E) environment (the report compares publishing with radio, TV, books, newspapers, film, games, etc):
* Generally, revenues on digital products and services are lower on a per unit basis than the legacy physical products they replace. Digital activity does not always translate into digital revenue.
* The real speed of digital migration, in terms of the shift in revenues, is slower than many often assume. While digital delivery channels are cutting across every medium, digital will still account for only 38% of total global M&E revenues in five years’ time. That is rapid growth from the current 30%, but it is not explosive.
* The speed of the digital migration and the nature of that migration (in terms of such trends as mobile versus fixed media or the penetration of different devices) vary markedly from country to country around the world.
* The propensity of end-users to pay for digital products and services also varies from country to country, based on a range of cultural and historical factors. For example, Asia Pacific is the fastest changing region in terms of digital developments, but its inhabitants are the least used to paying sensible prices for digital services.
* The strength of the overall economy in each region is the single most important factor in forecasting the local growth rate of M&E sectors. The result of this is a general shift from the North and West to the South and East.
* Traditional publishing activities have a lasting place in the increasingly digital M&E world, but are lagging behind other media such as TV, games and radio in terms of their predicted revenues.
* Despite attempts to increase revenues derived from content, in order to reduce the dependence on advertising and sponsorship, the reliance on advertising remains relatively stable in both the Consumer and B2B publishing markets.
* The shift from fixed to mobile media is rapid and is actually faster than most had ever anticipated.
All this makes for a complex and fast-moving digital environment.
What is happening to publishers’ circulation revenues?
For Consumer Magazines, publishers are much more dependent on magazine circulation revenues than B2B publishers. The balance between advertising and circulation revenues varies from country to country which in turn impacts on general cover pricing strategies. Another key variable is the balance between retail and subscription sales which can also produce major differences in magazine pricing architecture. The UK is the world’s fifth largest Consumer Magazine economy (7.5% of global circulation sales), roughly the same size as Italy and just ahead of China which is by far the fastest expanding country, running at a +8% annual growth rate. The UK and the USA are the two most digital markets, yet even in the UK, digital still accounts for under 3% of total circulation revenues currently.
For B2B, the publishing revenue model is much more multi-channel. Print magazines themselves play a much smaller role and circulation revenues are a lower percentage of total magazine turnover. The result is that global B2B magazine circulation revenues are around 18% of those generated by Consumer Magazines. Here, the UK is the world’s largest B2B paid magazine economy (19% of global circulation sales), with Turkey, China and Malaysia being the fastest growing.
Yet across both Consumer and B2B, there are some common trends:
* Despite significant growth in digital activity, print will remain the core of circulation revenues for the foreseeable future.
* The established North and West are sluggish, but will continue to be the engine room of the global publishing business and the centre for creativity and innovation.
* Circulation is becoming increasingly international and cross-border.
Are magazine consumers the same around the world?
All the research from around the world shows that magazine readers are remarkably similar from country to country in terms of how they consume and interact with magazines in both print and digital formats.
There are a number of broad conclusions from the research…
* Print and digital media complement each other, offering different reading experiences.
* If forced to choose, many readers still prefer print magazines to digital products, but this does differ by age, gender and market sector. Currently, most magazine readers want both print and digital in their magazine repertoire.
* Readers trust digital brands which have a print parent.
* There is a net migration from print into digital. Yet digital editions stimulate total magazine reading and prompt consumers to become more open and experimental in their magazine consumption.
* Magazine readers are not all the same. There are distinct segments in the reader pool of any magazine.
* Multi-channel access to a magazine brand deepens the engagement with the magazine.
The over-riding conclusion is that there is a lasting, but diminishing role for print. Print will remain an important platform for the foreseeable future, but it will play a progressively less dominant role in the repertoire of the end-user.
What are publishers actually up to in their subscription marketing?
The channel management disciplines which have long been applied in the retail marketing of print product are now being transferred into digital activity. Yet digital developments have been taking place at such high speed, that a structured approach has often been missing.
A central issue is having a coherent pricing structure across multiple media, channels and devices. The delivery format (print or digital); the payment mechanism (one-off or pay-as-you-go); the content access (fixed number of issues, metered or all-you-can-eat); the level of commitment (single issues or subscription): all these factors feed into a logical pricing architecture which will vary according to the profile and the wants of discrete segments of the end-user audience.
Digital is opening up so many new opportunities to market and deliver content in a variety of ways across national borders. Yet it also presents many challenges in terms of data, customer insight and technical resource.
Yet the core issue is how to engage and lock in the end-user more comprehensively than ever before as their media options and time pressures grow exponentially: to move from a cold “subscription” to a warmer “membership” experience.
The report contains a number of detailed examples of multi-channel delivery and pricing, and how publishers are monetising digital through ecommerce.
And how are publishers themselves actually changing?
If the world of the end-user is changing rapidly, then that is being replicated in the internal structures of publishing operations.
Every publisher is on a journey into a more digital future, which ultimately is Digital First. What the interviews show is that a surprisingly high proportion of major publishers feel that they are still in the early stages of that journey, in the Print First phase. Generally, B2B operations are further down the digital road than Consumer and some Consumer companies do not feel that they will reach Digital First in the foreseeable future.
Yet the business models that lie behind the overall shift are very varied, not just from company to company, but from brand to brand. It is these brand-level dynamics that dominate over any local market conditions; and also over any over-arching company strategy. For example, a number of publishers have a strategic intent to increase their content and circulation revenues ahead of more volatile and cyclical advertising and sponsorship sales. Yet that strategy is not always working.
Profit margins vary markedly too. Also, there is no escaping the fact that it is easier to start a Digital First operation than it is to transform a legacy print business into a digital one. Yet, wherever each company is on their journey, constant change is the rule, across business models, organisational structures and the staff skills required to make it all happen; and at the centre lies the relationship with the end-user, however it is monetised.
So, what does it all mean?
There are some broad trends and issues. There are more similarities from country to country than ever before. This is seen in how people use and consume media products and how they pay for them. What end-users want from their magazines is remarkably consistent around the world. Yet there can still be some large differences - this shows itself in how much end-users are prepared to pay and what the business model of the local publishing industry actually is. These can still vary markedly.
What unites the digital world is the rapid speed of change. Mobile technology is driving through every region. Brand loyalty is decreasing as media choice becomes wider. A handful of major players, such as Apple and Amazon, are setting price and service expectations which can be very different to what has been the case historically in publishing. This is putting pressure on revenue streams, which are fragmenting and increasing in number, and publisher business models and organisational structures.
What is clear from the report is that the UK, along with the USA, even though they may remain sluggish markets in terms of revenue growth, they are very much at the leading edge of digital development and the source of much of the creativity and innovation which is being repeated around the magazine world.
Subscription Models across a Digital World is free to download for PPA members here.
