Print Media’s Digital Malpractice
After struggling for years, print publishers seem to think that they have found a workable digital model with subscriptions. According to a recent Wall Street Journal article, Hearst has signed up over 800,000 digital subscribers, Conde Nast, 500,000 subscribers.
Thanks to the popularity of tablets, they are often charging more for digital than they did for print subscriptions. What they are losing in advertising sales, they often make up in distribution revenues.
Unfortunately, this does them little good. While traditional publishers have chosen to focus on signing up subscribers, digital media is booming, creating transformative business models and new media lifestyles. By staying in the same place, they are falling behind. To survive, they will need to abandon their old model and become true digital businesses.
The Big Lie
At the heart of the problem is the persistent myth that, before the Web, consumers were paying for media and publishers somehow got conned into giving their products away for free online. So, the thinking goes, the key to future success is to somehow reverse the process. The popularity of tablets and apps has given them their opening and they’re rushing towards it.
That is a gross misunderstanding of how media works. In truth, publishers have long subsidized print and distribution in order to win advertising dollars. This varies by country and by medium (the relationship is roughly inversely proportional to the strength of the TV market), but in the US, magazines lose up to 90% on copy sales.
Free content isn’t something new, but has been a standard practice for decades. So publishers need to stop whining. Free is actually a step up. They can reach more consumers at a negligible cost and focus on what they do best: creating content that informs, excites and inspires.
The Subscription Trap
To get an idea of how focusing on subscription revenue leads nowhere, let’s take a look at recent financial reports (3rd quarter 2012) from TheNew York Times and The Washington Post companies. The NY Times instituted a paywall, while WaPo did not.
So how did it turn out? The NY Times digital ad revenue declined by 2%(which was offset by a rise in subscriptions) while WaPo’s digital ad revenues increased by 13%. In other words, while the WaPO is building a business that will double in six years, the NY Times is merely treading water.
It’s not hard to see where things will go from here. As the NY times saturates it’s consumer base, growth in subscription revenues will slow and eventually reverse. They will be left with fewer readers (Mathew Ingram estimates that they have lost 15% of their audience since they instituted the paywall), a worsening financial position and a diminished brand.
WaPo, on the other hand, will increase revenues, gain readers and grow their business. I know who I’d rather be.
A World of New Opportunity
The implications are clear: business models no longer last, in media especially. Rather than try to fit new technology into an old model, publishers need to embrace the new reality and reinvent their business.
How to do that? It starts with a principle so pervasive, I’ve taken to calling it media’s golden rule: Marketers will pay more for consumers than consumers will pay for content.
Once you accept that, the possibilities are limitless. Here are three simple strategies:
Video: Instead of fretting about lost distribution revenues that were never really there, publishers should attack the TV market. Online video is a promising business that is growing like wildfire and fits nicely with existing print brands (magazines especially).
Affiliate Programs: One of the great tensions in media is the conflict between journalism and commerce. Clearly, a publication’s objectivity must be beyond reproach, so it’s important to have a clear separation between the editorial and ad sales functions.
Affiliate programs such as Amazon Associates alleviate this problem. Because they are vendor neutral, adding affiliate links to product reviews creates no conflict but can provide important incremental revenues.
Social Media Integration: While not long ago social media was seen as a threat to professional publishing, it has, in fact, been a great boon. Not only do sites like Twitter and Facebook provide a ton of audience, they are also becoming important extensions of the product itself that can be integrated into editorial and promotions.
This is not a comprehensive list, nor it is even original. However, if publishers are going to find success online, they’re going to have to think of themselves as digital businesses rather than publishers with a offshoot.
The Memetic Imperative
At the root of the problem is that many publishers seem confused about what business they’re in. After all, the function of media is not to build a subscriber base, but to spread ideas. In that sense, there is no digital threat, only enormous opportunity.
However, to take advantage of the new possibilities, publishers are going to have to reimagine how they create, deliver and capture value. Trying to merely reclaim what they feel they have lost with a business model based on subscription revenues and display advertising dangerously misses the point.
On the other hand, there is an entire universe opening up for publishers who can build cross-media content ecosystems that connect with consumers by informing, exciting and inspiring them.