Friday, July 29, 2011

So What is the Business Model?

In looking to the promising digital future for magazines it is essential that publishers separate out two questions:

  1. What is the best consumer format for digital magazines?
  2. What is the appropriate economic model for the digital magazine business?
These are very different questions. But the answers that we come up with are going to have a bearing, the one on the other. And vice versa. The magazine publisher has to get both right!

Over-simplifying wildly, there are currently three views on the appropriate format for digital magazines battling for the attention of the consuming public.
  1. In some ways the simplest solution involves converting the magazines existing web site into an RSS feed which packages the contents of the web site for delivery in through a browser or an RSS aggregator. Many of the early magazine and newspaper apps were in effect re-packaged RSS feeds. In this view, digital magazines should aim at maximum topicality and a streaming delivery through which each story (or article) is delivered to the audience in a self-contained capsule, when it is ready and whenever it is updated, in a continuous flow. The RSS format has been leveraged and improved upon by Flipboard (Zite and Pulse are aggregators in the same category). This is a radical format change as a consequence of which the print magazine loses the 'rigidity' both of the 'issue' and of the 'page'.
  2. More of a 'half-way house' is the trend to develop digital magazines which although they drop the 'integrity/rigidity' of the printed page, maintain the edition-driven, periodical, grouping of the dated issue. Magazines which are delivered as digital editions to the Kindle have this re-flowable format and step away from the pagination of the print magazine, they probably also 'lose' the advertisements which form a part of the print version, but they continue to adhere to the serial clumping of the magazine associated with a publication date, and temporal sequence in the magazine archive. We can think of these re-flowable digital magazines as similar to ebooks. It is no accident that magazines delivered through Amazon's Kindle (a dedicated ebook reader) have this structure. But there are plenty of similar ebook-like apps in iTunes. The Economist's iOS app is a good example.
  3. The alternative model for digital magazine deployment, works from the supposition that consumers really want a virtual magazine. The digital magazine retains its print 'look and feel' with pages and settled issues, but the magazine becomes a virtualised object, at once familiar and flexible, browseable, searchable and linkable; a magazine which can be read on a mobile phone, a web-connected computer, or a tablet in analogous ways as the print magazine would be read as a physical product. Declaring an interest: this is the route to digitization employed by Exact Editions, but also by Zinio, and with some variations by Adobe. Commentators sometimes refer to these solutions as 'PDF magazines' or 'Page Turning' solutions/platforms, but such characterizations miss the point that virtualised digital magazines can be much more than mere replicas. Because they are virtualised replicas, they can have layers of additional purely digital functionality superimposed on the replicated structure. Obviously 'search', enhanced 'linkage' and integration with web services, multimedia elements and episodes can be stirred into the format and tablet-specific interactions work well on a digital object.
There really is no uniformity of opinion about which of these models for digital magazine delivery is the most suitable and attractive. Speaking for myself, as you might predict from my statement of interest, I have a strong preference for the virtual magazine model (type (3)), but I also enjoy Flipboard and can see why some readers may prefer an Economist-style app. We may also feel that the RSS magazine solution works better in the format constraints of a mobile phone, and in contrast the virtual magazine, which needs to handle fully designed pages, plays to its strengths within the scale of an iPad.

Consider this: if the best format for a digital magazine were a completely settled question, we should not be seeing so many experiments with differing formats and delivery services. It should also be noted that all three types of format are the subject of steady evolution and improvement: RSS-style, ebook-style, and virtualised page-based, digital magazine readers are all getting better. It is not as though the magazine industry has decided with a herd-like mentality that one digital format is clearly the winner -- whereas the book publishing industry, by contrast, appears to be reaching a consensus that ebook formats (such as for the Kindle or for ePub) are a settled choice.

Since there is a certain amount of confusion or disagreement about what digital format makes for the most pleasing and sustainable digital magazine experience, then it is hardly surprising that there is a lack of consensus about the appropriate business model around which magazine publishers should build their digital solutions. The problem here is that print magazine publishers (also printed newspaper publishers) have developed a twin track approach to revenue and profitability, through which advertising and sales (newsstand or subscription) both contribute. Magazine publishers are nervous about a digital future in which subscription sales would be the primary pillar of their magazine revenues. When a publisher looks at the digital distribution options for magazines in relation to actual or potential business models for a magazine business, the choices become rather constrained. The RSS model really has to be an advertising-led or even an exclusively advertising path for monetisation. The ebook approach clearly forces the pace on subscriptions, and since most ebook-style magazines actually drop the advertising component its actually inimical to the advertising revenue stream. Any play for digital magazines where ads and subs are driving the revenue line has to come up with a solution through which advertisements and subscriptions are working jointly through a digital medium. The virtual magazine looks as though it might carry this two track approach.

Ken Doctor, over at the Nieman Journalism Lab, has posted an intriguing analysis of the parallels between film distribution (as managed by Netflix) and the digital transition confronting newspaper and magazine publishers. In Doctor's view:
These economics of transition have a second, big piece for publishers that Netflix doesn’t have to worry about: advertising. With advertising accounting for 70 percent of newspaper revenues worldwide, the huge question for publishers is how much ad revenue they can make from purely digital customers. In the U.S, newspaper publishers know they make more than $500 a year on a Sunday print subscriber. With reduced digital product cost (like Netflix’s reduced cost of streaming), newspaper and magazine publishers won’t need the same level of revenue, but they will need a substantial part of what they are getting today. Those economics are just being modeled now in 2011, as the promise of higher-priced and higher-value tablet (and smartphone) advertising looks like it may be real and buildable.

Magazine and newspapers aren’t yet ready to more forcibly shift the audience in the direction of digital-only. The Newsonomics of Netflix and the Digital Shift.

Doctor reckons that the periodical business has perhaps one to three years to prepare for an accelerated shift to digital. I am not sure about the higher-priced and higher-value tablet advertising metrics that Doctor discerns, but from the rate at which iPad subscriptions are motoring there is a growing perception that the digital shift with magazines has certainly begun and it is subscription led, and iPad shaped.

Friday, July 22, 2011

Jazzwise a new app with Bonus Media

We have a new app in the iTunes app store with some cool bonus media. I have also been experimenting with Google+ and Webdoc (first impressions: very useful and cloud-based) to see how we can give a few glimpses of the magazine apps that are coming through from us in increasing profusion.....

Some screenshots from the Jazzwise app. There is some music in the magazine app, but I have used the Webdoc tool to grab a fragment of Archie Shepp and Joachim Kuhn.

Monday, July 18, 2011

Disruptive Paradigms

There is a fascinating confusion now reigning in the higher reaches of the Microsoft empire.

Steve Balmer and his team are convinced that tablets should be viewed as PCs, and that there is no need to put a mobile operating system on Windows tablets ("iPads and tablets are just a different form factor of PC"). They appear to have completely misread the reasons for the success of Apple's iOS and its iPhone and iPad devices. As Horace Dediu notes:

Summed up, the real challenge for Microsoft is whether they can keep their business model (selling OS licenses to hardware vendors) as PCs become more device-like. Not only is iOS setting the benchmark for performance but Android is potentially ready to take share if the market turns slightly more modular. Microsoft’s differentiation looks to be primarily its legacy of PC software. Asymco: is the tablet computer a new PC or Post PC?
Horace Dediu clearly thinks that Microsoft are completely missing the point of the shift to a Post PC model of computing: deep integrated development from hardware through system software to applications; a new model for developer engagement; and novel challenges for manufacturing and distribution in which incredibly high levels of device standardisation and reliability have to be met. All of this Apple gets, and Microsoft apparently does not get it. They are stuck with an outmoded paradigm and it is preventing them from engineering a competitive challenge. Microsoft will not build a competitor to the iPhone or the iPad because Microsoft thinks that its future lies, as its past successes have lain, in licensing its desktop operating system (and a separate mobile operating system) to manufacturers. Microsoft will not be competitive because Balmer does not want to be in that competition to build an integrated device that works across all device formats and layers media on applications, on transaction engine, on operating system and finely engineered and integrated device. And it may already be too late.

These shifting paradigms, are everywhere in the technological landscape. The shift from a PC oriented workstation to tablet and sundry mobile computing devices is just a particularly extreme and decisive example. I think we can see another disruptive paradigm shift working its way through the British newspaper industry this last week. The abrupt closure of the News Of the World was an extraordinary and rather shocking event. But as the ongoing fallout shows the real damage that is being done to the newspaper business is self-inflicted. The News of the World was paying bent investigators and cosying up to policemen because the business managers believed that it was only by delivering a stream of edgy/dodgy stories that they could persuade people to buy the paper. As the (mostly digital) competition got fiercer the methods became dodgier. Newspapers are hoping that their old business model can be replicated digitally, and they are not confronting the deeper problem which is that the package of business strategies and features that supported newspapers 10/15 years ago is no longer going to work (exclusives, classifieds, daily editions, ABC audits, bulk deals, tombstone ads, stock price listings).

Some magazine publishers are also desperate to hang on to the old business model in the hope that it will continue to work. Jan Wenner the founder, owner and publisher of Rolling Stone is such and had an alarming interview with AdAge a few weeks ago.

Ad Age: What's your take on selling magazines on the iPad and other tablets?

Mr. Wenner: It's the same pretty much as I've said about the web. The tablet itself is a really fun device. Some people are going to enjoy it a lot and use it. Some people aren't. On this plane one person's traveling with a tablet, one's not. There's a certain trendiness to the thing. And it's a great thing. But is it a good magazine thing?

It's a good magazine reading device, absolutely. And where it becomes more convenient to read the magazine on that, that's got the advantage. But that's more convenient only if you're traveling, if you're away from home. Otherwise it's still easier to read the physical magazine, which is widely available on newsstands, at airports, and everywhere. You can still subscribe to get it and get it on time. You still get all the value of the magazine.

I don't think that gives you much advantage as a magazine reader to read it on the tablet -- in fact less so. It's a little more difficult.

From the publisher's point of view I would think they're crazy to encourage it. They're going to get less money for it from advertisers. Right now it costs a fortune to convert your magazine, to program it, to get all the things you have to do on there. And they're not selling. You know, 5,000 copies there, 3,000 copies here, it's not worth it. You haven't put a dent in your R&D costs.

So I think that they're prematurely rushing and showing little confidence and faith in what they've really got, their real asset, which is the magazine itself, which is still a great commodity. It's a small additive; it's not the new business. (Jan Wenner interview with Nat Ives in AdAge, May 30)

Wenner is a smart publisher but he is too much like Steve Ballmer and he is failing to grasp the opportunity that a new paradigm will give him. He wants to carry on selling double page spreads for $60,000+ dollars to big brands ("They're going to get less money for it from advertisers."), as Ballmer wants to keep on selling $40 Windows licenses to laptop makers. But that may not be a feasible opportunity for a digital magazine. The iPad at least is shaping up to be a good proposition for selling subscriptions to magazines, but there is no guarantee that it will be as attractive to high-spending consumer brands and their advertising budgets.

I hope that Jann Wenner takes a closer look at the way iPad subs are working. Some magazines are making real progress on the iPad, and the simple truth is that you need to sell 3,000 copies, and then 5,000 copies before you can sell 50,000 and then 100,000 subscriptions. But selling copies is not the point, gathering iPad eye-balls is not really the point either, selling subscriptions is. Subscriptions can be and will be repeat business on the iPad. They will be a phenomenal business, outstandingly profitable for Apple and also a very good business for magazine publishers who have lots of advantages when it comes to selling subscriptions. Their product is a periodical (so repeat business is 'built in'), their product appeals to highly identifiable consumer niches, they already know how to sell direct to consumers (contrast with book publishers, music publishers and TV producers), their product can be delivered through multiple channels (including print). Consumer magazines are finding one part of their business (advertising) sorely disrupted by the internet and digital devices, but another strand to their business (subscriptions) appears to be ideally placed to work through the iPad and other tablets. Go for it!