In a post that appeared on ReadWrite last month, John Paul Titlow tried to address “Why magazines are using digital to boost prices, not bolster innovation”.
In his piece, Titlow does a good job of outlining why publishers are having a hard time making price increases stick:
- A belief that digital distribution is cheaper than physical;
- Consumer preferences for digital editions that are more than just a replica of print;
- Competition from low-cost and no-cost alternatives; and
- Growing acceptance of “subcompact” models like The Magazine.
I agree with Titlow that most magazines have yet to publish in ways that embrace a digital platform. Still, he appears to have undertaken a fairly limited survey of the field. The usual suspects (Wired, Technology Review, Financial Times) get mentioned, but not The Economist, an HTML5 implementation that is lightweight and bundled with a print subscription.
Of course, a subscription to the print version of The Economist is already top of the charts among weekly consumer publications. And that’s the lesson to be learned, even more than the issue of “legacy cost structures” that Titlow cites at the start of his post.
The problem many magazines face is less about cost and more about value. When advertising revenues for print publications were strong, maintaining higher rate bases made financial sense. The audiences gained at the margin paid little or nothing for their subscriptions. They were taught to wait for a cheaper offer.
In the United States, ad pages have declined every year since 2006. Magazines that had earned the majority of their revenues from advertising have been scrambling to fill the gap. The price of print subscriptions has gone up, often coupled with rate base reductions. In the case of publications like Newsweek, which could not grow either ad revenue or its subscription price, the next (and last) stop was digital.
The current (March 2013) issue of Harvard Business Review gives this environmental change a name: “big-bang disruption”. Larry Downs and Paul Nunes, both with the Accenture Institute for High Performance, describe “innovations that offer customers both a better experience and a much lower price, right out of the gate.”
The authors suggest that “incumbents need to develop new tools to detect radical change in the offing”. Unfortunately, many low-priced periodical publishers will find that ship has already sailed.