A recent Wall Street Journal article by Keach Hagey takes a look at trends in digital magazine pricing and finds a number of publishers charging more for tablet editions than print. As ad revenue declines, publishers are turning to digital magazines as a way to “become more leveraged toward consumer revenue and a little less dependent on advertising,” in the words of Hearst president David Carey. And here’s Condé Nast president Bob Sauerberg: “We’re using this new platform and the clear demand for all access to our content as a way to redefine our subscription offerings at a higher price. The industry is trying to take a step forward because we’re all trying to get more money from the consumer.”
But how long will these pricing strategies work? Digital still makes up only a tiny percentage of magazine publishers’ overall revenues: The Alliance for Audited Media (formerly the Audit Bureau of Circulations) reported in August that digital replica editions (which replicate most of a print magazine’s editorial and advertising content, and make up the vast majority of magazines’ digital versions) made up just 1.7 percent of overall circulation. The WSJ story says big magazine publishers think digital won’t hit 10 percent of circulation until 2015.
Pricing strategies that very early adopters appear to be accepting are not likely to work for a general population. Magazine publishers may need to adopt more nuanced digital pricing strategies as tablets take off. And they can look to book publishers — who are a lot further along in the digital revolution, with ebooks now making up over 20 percent of revenues at large publishing houses — for some help. Here are a few things they’ll have to think about:
The advertising conundrum
One of the biggest differences between the magazine and book publishing industries is that magazine publishers rely on advertising for revenue while book publishers don’t and never have. Print magazine subscription prices have plummeted, Hagey writes, because “magazine publishers have guaranteed advertisers their titles will reach a minimum number of readers and, to fulfill that pledge, they have long cut prices sharply for promotional subscriptions.” That’s why you can get an annual print magazine subscription for under $ 10. In tablet editions, magazine publishers see a chance to charge higher rates. Hagey notes that the average annual price of a digital subscription to a Hearst magazine is $ 19.99, “twice that of its average introductory print-subscription price of $ 10.”
At least for now, though, magazines’ digital editions bring the advertising from the print edition along for the ride. So digital readers aren’t getting an ad-free product in exchange for paying a higher price — magazine publishers are just charging more for the novelty of reading on a tablet. That’s a short-sighted strategy that probably won’t work as tablet adoption becomes widespread.
Will readers pay for enhancements?
The bells and whistles that magazine publishers are adding to digital magazines remind me of enhanced ebooks, which book publishers got very excited about a couple of years back. They hoped that by adding video and music to an ebook, they could charge more for it. Fast forward to 2013 and enhanced ebooks are widely considered a flop. So far, readers simply haven’t been interested in paying more for them. Book publishers have scaled efforts back and are no longer trying to charge higher prices for enhanced editions.
Magazines may be better suited to these enhancements than books are: E-commerce fits in well, for example, and videos and music may make more sense. But since a lot of this enhanced material is already available free online, readers may be reluctant to pay extra for it. The benefit for magazine publishers is that they can monetize those enhancements in other ways — through affiliate links to iTunes, for example, as Rolling Stone is doing. And Lucky is about to roll out a major e-commerce component that will likely rely on affiliate links as well.
Promotional pricing can work
Countless self-published authors have found that offering their books at initially very low prices is a great way to gain new readers: When the barrier to entry is low, readers are more likely to take a chance on an unknown name. This strategy is working less well as the ebook revolution progresses (and there’s a sea of self-published books out there), but magazine publishers, in the early stages of their digital era, can take advantage of it.
Magazine publishers already offer print subscribers discounts on other magazines they publish. Why not do the same thing with digital magazines? Or magazine publishers who sell print and digital editions separately could offer print readers a couple free digital issues or a discounted digital subscription for the first year. I also love the New Yorker‘s strategy of giving iPad subscribers free digital extras, like compilations of articles on a given topic and cartoon collections.
The good news for magazine publishers is that, with their digital revolution in the early stages, they can learn from those who came before them. The bad news is that many magazines are more threatened by free online content than most books are. As digital magazine reading moves from early adopters to a larger population, magazine publishers will have to find a way to give readers high-quality, no-substitute content at a reasonable price — or risk losing those readers to the internet.
Photo courtesy of Shutterstock / bernashafo
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