I confess – I am a traitor to the publishing industry. My confession should send alarm bells through your ranks. You see, over the last few months I have completely stopped buying newspapers or magazines. After twelve loyal years, I am even wondering whether to renew my subscription to the Economist. Worse yet, I have almost completely lost the habit of reading on paper. There are numerous unread articles that I am keen to read in trade mags lying around my office (and sorry editor, but that includes copies of this distinguished organ) – but when I leave the house to get on a train or bus, the thought of popping one in my briefcase for the journey simply no longer enters my mind.
No, I haven’t given up reading per se. I have just found that my reading has, unwittingly, migrated almost entirely to iPhone apps. Specifically, the New York Times app (free), and the Guardian app (£2.39) after it launched in January. And I am clearly not alone. The NYT has reported three million app downloads to-date, whilst the Guardian achieved 70k downloads in its first month alone. You can add in one million downloads for the (free) Sky News app, and undisclosed downloads for the Telegraph’s free app. And more are in the pipeline, including B2C and B2B magazines.
And all this triggered by a device with a 3.5” screen. So what will happen when Apple’s iPad arrives in stores in a few months’ time with a 9.7” screen (nearly eight times larger)? I’ll come back to this question shortly.
First, I want to rid myself of this ‘traitor’ label before it sticks, by declaring that I would be more than happy to pay a monthly subscription to continue using my NYT and Guardian apps – even though I rarely bought either title in its print format. And if the Economist were to offer one too, I would snap it up in an instant. Oh, and if the price were right, ditto for my local newspaper, and several other publications besides. Are there limits to my app-ophilia? Well yes – when I tried out Conde Nast’s very well put-together GQ app, the form factor of the iPhone just didn’t cut it as a substitute for such a luscious magazine. And to avoid eyesore, I am still reading books in paper-form (or, at least for free out-of-copyright titles, through my Cool-er eReader). But if I had an iPad... but rather than dwelling here on what magazines might actually look like when rendered on iPads or tablets, I simply recommend you to check out this thoughtful and exciting video from Bonnier.
Whilst I hesitate to extrapolate from my personal experience to the population as a whole, I would stress that I’m neither a gadget-geek nor your classic early-adopter. What has struck me recently is that the convenience of accessing reading material through my phone has lead to a rapid reversal in reading habits developed over a lifetime. And now those habits are broken, I don’t see myself ever going back to print.
Having presaged a revolution, let me stick my neck out further by predicting that the iPad won’t achieve the same roaring success as the iPhone. I believe its bigger impact will be in accelerating the roll-out of touch-screen tablet PCs which will largely supplant laptops and netbooks. Why? Because by selecting iPhone OS (operating system) rather than Mac OS, the iPad is not an alternative to netbooks or laptops. As Steve Jobs actually stated at its launch, Apple intends to create a new category of device (price $629 for an iPad with 3G) which sits between a smartphone and a laptop. And giving itself a further problem, Apple is unable to (for which read, is unwilling to) incorporate Adobe Flash into the iPhone/iPad, which means that web-browsing, including most embedded videos as well as magazine digital editions, will be severely curtailed. In contrast, tablet PCs coming later this year running Windows will trigger millions of either/or purchase decisions against similarly-priced laptops and netbooks. I expect to see tablets, especially when combined with docking-keyboards, winning this war. As tablet PC numbers grow, they will become an increasingly important – and potentially the dominant - distribution channel for digital newspapers and magazines, initially via “reverse-engineered iPhone apps”.
Here are six further predictions for where this new generation of devices will push the publishing industry over the next few years, together with rationales:
1. eReaders will remain specialised devices for book-reading, with prices dropping below £99 and with volumes growing steadily. eBooks will represent 25% of unit sales/downloads by the end of 2012.
The inability of eInk displays to support video or non page-based content consigns them to the margins. However, eInk remains superior to LCD for long periods of reading (eyesore, weight, battery-life), and as prices (for both devices and eBooks) drop and wi-fi, colour and touch-screens become the norm, they will prove increasingly popular, displacing printed books. And expect the ePub open standard to win out against Kindle’s attempts to control the ebook market.
2. The distribution of content will get a lot more complicated, with digital versions required for several competing device formats and operating systems.
We are entering a period of device and OS proliferation, which means that we as publishers need to pay a lot more attention to our distribution models and competencies. We already have to deal with print, web, mobile web, digital editions, and content aggregators, but we now face a whole lot more - iPhone/iPad, Android, Symbian, Adobe AIR, Kindle, ePub... Faced with technical challenges beyond the competencies of all but the largest publishers, many will turn to third party aggregators for solutions. As Graham Duffill, founder of the Digital Publishing Company, which is looking beyond digital editions to help navigate this future, says, “it needs publishers to step forward with a shopping list of their requirements to trigger the next round of platform development and integration, because the device manufacturers are each protecting their own walled gardens.”
The proliferation in distribution will cause knock-on challenges for fulfilment and CRM systems; customers will expect to have access to content they have paid or registered for, regardless of which device or format they happen to be using. Managing and tracking this complexity hasn’t yet been adequately addressed by fulfilment systems, particularly when you take into account my next prediction...
3. Subscription models (as well as metered hybrids) will establish themselves as the norm for professionally-created digital content.
The line between amateur / user-generated content, and professionally created content, will get ever sharper – with the former remaining free, whilst the latter marches towards a freemium model with more and more content sitting behind paywalls. The introduction of new devices for consuming media is a catalyst for this shift, as it represents a chance to ‘reset’ consumer expectations of what they should get for free. This has already been successfully demonstrated by Apple’s iTunes and App stores, and no doubt they are looking for the new iBooks store to repeat the trick. It is interesting to note that the Guardian, despite its very public tiff with News Corp dismissing paywalls, has nevertheless put a price-tag on its iPhone app. Don’t be surprised to see the Guardian’s and other publishers’ apps convert into subscription services once the iPhone can properly support recurring billing. Handling cross-device subscriptions, together with metered and trial-based alternatives, will prove a real challenge.
4. Publishers will form their own ‘iTunes for magazines’ as a counter-weight to channel domination by Apple or Amazon.
Faced with the platform issues discussed above, and margin-squeeze threatened by Kindle’s 70/30 eBook revenue-share and Apple’s 30/70 App revenue-share, five of the largest US magazine publishers have recently formed a joint venture to create a common digital storefront, sharing software development costs to keep up with the changing landscape of devices and formats. Whether this initiative gains traction remains to be seen, but at the very least it serves as a tangible threat to the big boys when publishers walk into negotiations at Cupertino or Seattle around revenue sharing and access to end-customer data. We can expect to see this initiative rolling out to the UK and elsewhere, but how about a B2B collaborative equivalent..., anyone?
5. Paid-for digital versions of newspapers and B2C magazines will represent 50% of circulation by the end of 2012.
This sounds dramatic, but it will be achieved at least as much through finding new digital readers as through the migration of existing paper readers. And it will involve a move from high-priced single copy print sales to lower-priced digital subscriptions.
6. Digital display advertising will get a shot in the arm, although yields will never again match the golden days of print.
Display advertising has singularly failed on the internet, having become a devalued currency. You only have to flick open any glossy magazine to understand why high-end brands have chosen to side-step the web and to stick with print. But it is increasingly recognised that the single-minded obsession with direct response on the web is as much a function of the web’s weaknesses as of its strengths. As tablet devices proliferate, brands will have no choice but to follow their readers on to them. Given an iPad or Tablet style interface, creative magazine designers and ad agencies will come together to create beautiful content where brands will have their place – but with the added benefits of quantifiable dwell-time and touch-based direct response.
Not since the birth of the web has the future looked so divergent for newspaper and magazine publishers. Embracing the new generation of devices, and investing in making them profitable quickly, needs to be a priority for all publishers. But the development costs and risks point to collaboration with erstwhile competitors, otherwise we can expect to see these opportunities benefiting new entrants and intermediaries rather than ourselves.
