The publishing industry is at a real crossroads when it comes to digital media, and the success or failure of the iPad could have a huge impact on its development going forward. So says a new report from eMarketer, which examines paid e-publishing content for books, magazines and newspapers. It concludes that while e-books will continue to show strong growth over the next few years, the digital future is murkier for newspapers and magazines, which are still trying to figure out how to monetize themselves online. Many have embraced Apple's soon-to-debut iPad as the publishing industry's savior, but it remains to be seen whether consumers will be as keen on the device. Still, having seen how Apple's iPod revolutionized the music industry a decade ago, publishers are trying to keep some control of how their e-content is developed. In the meantime, newspapers are grappling with whether to wall off their content, and magazines are watching newspapers' decisions closely while developing their own digital newsstand consortium. Paul Verna, senior analyst at eMarketer, talks to Media Life about the iPad, its potential for advertising, and the future of newspaper paywalls.
What's the most interesting or surprising thing you learned from this report?
I’d say the big takeaway is that the book, newspaper and magazine industries are all facing formidable challenges in the transition from print to digital.
Each industry is idiosyncratic, and each is in a different phase of the transition, but the common denominator is the question of whether consumers will be willing to pay for access to digital media, and if so, how much and under what terms.
What's the most important thing media buyers and planners can take from it?
Media buyers should be aware of the opportunity the transition will present, in particular, the ability to make ads more informative, more interactive and more fun.
That will go a long way toward giving the consumers a value-added experience. I’d go as far as saying compelling advertising could be the secret weapon in selling the whole e-magazine and newspaper experience to consumers.
Many have cast the iPad as the savior of magazines and newspapers who have had difficulty monetizing online. What will its true impact be?
We won’t know the true impact for at least a few months, but it will hinge on a number of factors.
One factor is, how compelling is the reading experience? This will be determined not only by Apple but all the publishers and developers creating third-party apps for the iPad.
Another big one is, what is the price of a digital subscription and how does it relate to an existing print subscription? Pricing will be key for online periodicals.
The third is whether Apple will be able to create a demand for the product. What it did with the iPod and the iPhone, will it be able to do this with the iPad, or will it be perceived as an oversized and overpriced iPhone? If anyone can do it, it’s Apple, so the chances are good, but there’s also a chance people will simply shrug their shoulders at the iPad.
And I guess another one is, if magazine and newspaper publishers think they can sell digital content just because it’s on a new device, they might be in for a rude awakening, even if that device is pretty cool. The economy is tight and people will be bombarded with those trying to sell them paid content. So I think only the most compelling and in-demand content will rise to the top.
How will online newspapers be monetized over the next few years?
To their detriment, newspapers have swung between ad-focused and paid-content models over the past few years. They might have been better off if they more carefully balanced the two models, just as they have in print for generations.
So to answer the question, in the immediate future papers are focused on paid models because they got burned with ad-based models. But over time I see no alternative to having both models work in tandem. I think both are equally viable, especially when you factor in these larger format platforms such as the iPad.
I think smaller mobile devices are different stories because of the difficulties of serving ads on tiny screens. Larger devices open up a greater opportunity for ad-based models and subscription models.
How will online magazines be monetized over the next few years?
I expect magazine publishers to also shift emphasis toward paid models as these e-readers with color screens start hitting the market. In the longer term we see magazines going down the same path as newspapers, that is monetizing their content through a combination of ad-based and paid models.
Ultimately the content and the audience determine which model makes more sense. But it’s hard for me to imagine an either-or future; I really see both working in tandem. It doesn’t mean that every publisher will need to use both models, but it means both will be viable depending on the circumstances.
How viable do you think subscription plans are for the newspaper business? Would a pay wall or a micro-payment system work better?
I think subscription plans are viable as long as the price is right and the content is right. The Wall Street Journal can get away with charging over $100 a year for a digital subscription because it caters to an upscale audience and its content is highly coveted and exclusive.
On the flip side of that, Newsday is having a lot of trouble with monetization because its price is ridiculously high and its content has been commoditized by competitors who offer a similar product for free.
To get to the specifics of paywalls and micropayments, I’d say paywalls and premium setups can work well if implemented carefully. And micropayments are great if the publisher already has a customer’s trust and their credit card number.
I think that the type of payment model matters less than the core question of whether the consumer is willing to pay, and if so, how much. Once the publisher can answer those questions, any fairly priced model should do the trick.
How closely will industry observers be watching the New York Times' plan as one of the biggest papers to experiment with paid content, and how could its success or failure impact the industry?
I think because of its heritage as a leading news organization, The Times will always be at the center of everyone’s attention. Its success or failure will have an impact on how the rest of the industry perceives the viability of paid models in general.
I also want to add the counterpoint to all that, that The Times is very different from its competitors. Realistically, whether or not it succeeds should have little bearing on the plans of big city dailies, and even more so on the hundreds of local papers considering going down the same path.
I guess in summary I’d say The Times’ every move will be scrutinized carefully, but eventually publishers will decide on the basis of the dynamics at play in their market and the audience.
We've seen the magazine industry come together to form a digital newsstand consortium. Will the industry have to present a united front in order to maintain control over pricing and control of e-content in the face of Amazon and Apple initiatives?
That seems to be the goal of the joint venture. These publishers have watched Apple take control of the digital music industry, and I think they’re trying to avoid a similar scenario in their industry. At the same time, publishers understand that Apple and Amazon, but Apple in particular, will be a key ally in selling the e-magazine concept to a skeptical and cash-strapped consumer.
It’s interesting that one of the Condé Nast titles, Wired magazine, is jumping through hoops to play nice with Apple—I’m sure that other magazines in this consortium will be doing the same.
Publishers are walking a fine line and I would use the word co-opetition to describe the scenario.
