To help map out the market, Dovetail has worked with Wessenden Marketing and Demographix to create the Digital Subscriber Survey (DSS). Thirteen magazine publishers pooled subscriber data across both the print and digital editions of 231 titles to ask their readers a series of questions about their usage of print magazines, digital content and brand websites. Almost 71,000 subscribers responded, making the survey the largest of its kind in the world and providing a really detailed view of the digital content market. The survey ran from January to February 2013.
It is not a single market
The first conclusion is that the “digital content market” is not a single, coherent market at all, but is a series of micro markets moving at different speeds and in different directions. The digital map below illustrates the point, by charting the various magazine sectors covered in the survey.
The horizontal axis shows the percentage of active magazine subscribers who have an iPad. The average is 37%, demonstrating that magazine subscribers are much more digitally-enabled than the average UK population. The vertical axis charts the percentage of subscribers who are “digitally active” – defined as they have at least one digital magazine in their current magazine repertoire. Here the average across the sample is 23%. Yet what is striking is the wide spread of markets across the map.
Take two markets from the opposite edges of the chart. Men’s Lifestyle is a leading digital market – young, male, techno-savvy, served by some publishers who themselves are digitally sophisticated. It is the tablet which is driving digital reading – 83% are using a tablet to access magazine content with smartphones in second place (40%). Over to the left is Retirement which is very different demographically and which has, on the surface at least, a lot less digital activity. Yet there is actually more going on than meets the eye, but the digital activity is very website-focused using a PC rather than a tablet or smartphone to access content.
As ever it is all about understanding the customer
The survey suggests that there are three key drivers shaping customers’ behaviour regardless of market sector. These three key drivers are:
1. The extent to which customers are accepting of digital content
2. The purpose for which customers wish to use digital content
3. The degree to which customers have access to digital content.
Digital acceptance. Here, customers break down into three broad groups:
* Print-Only readers account for around three quarters of the subscribers we questioned. Most are cautious about digital magazines – a quarter of them have actually tried a digital magazine and have dropped it in disappointment. They currently have no digital magazines in their repertoire - they simply prefer print
* Digital-Only readers are in a small minority – in most sectors under 1% - and they have no print magazines in their repertoire. They still spend a significant amount of time reading magazines, but their magazine spend is almost 30% less than Print-Onlys partly because the spend per digital copy is over 10% less than the Print-Onlys. Yet this is as much to do with publisher pricing as to their own price expectations.
* The most fertile area is made up of Print+Digital readers who have at least one digital magazine in their repertoire – and almost half of them currently have only one. They make up just under a quarter of subscribers and they are voracious magazine consumers spending 1.6 times more per month than Print-Onlys and over double Digital-Onlys. They also have much higher levels of intention to renew their subscriptions, as they are far more engaged with their chosen brands.
Digital purpose is based on how and why digitally active customer are using their digital magazines. Again here too customers breakdown down into three broad groups:
* Enhancers are using the digital versions of their core print magazines to deepen their contact with the brands they know and to make magazine reading an easy, flexible, anywhere experience. They tend to have print + digital subscription bundles. They should be the most lucrative segment for publishers, but they are not currently, because publisher pricing has not been robust enough to date. The opportunity presented by Enhancers for publisher upselling is self evident.
* Experimenters are using digital editions to trial titles outside their core print repertoire. They spend as much on print magazines as Enhancers, but they are the lowest digital spenders as they tend to buy ad hoc, single issues or to take up free offers. They are prime acquisition conversion prospects.
* Migrators read the digital versions of the magazine brands that they used to read in print. They form the smallest of the three segments at just under 30% of the total, but they are the highest spenders: their monthly print spend is still significant and is only about 10% lower than the other two groups, but their digital spend is much higher – they understand digital and are prepared to pay a realistic sum of money for a digital subscription to a magazine they want. Whether they will end up migrating into a totally digital magazine repertoire is a key (but currently unanswerable) question.
Digital access is centred on what devices – because most respondents use more than one - the consumer uses to access digital magazine content. It is not all about tablets. In some markets, the desktop and laptop PC remain the main channel. In other markets, the smartphone is rapidly becoming a key access device.
Pull an understanding of the three key drivers together and different business models begin to emerge with a degree of clarity for different customer segments within markets. For example, a smartphone-using Experimenter in Mumbai will respond to a very different offer (in terms of price, frequency of purchase and content package) to a tablet-owning Enhancer in Surrey. The first is likely to be enticed by a price-discounted single digital copy offer, whereas the second will be more attracted by a premium-priced added-value print + digital subscription bundle proposition.
Digital products do not need deep discounts
Survey respondents were asked that if they could buy the digital version of a magazine as a standalone, how much would they be prepared to pay. The graph shows the price sensitivity curve, relating the digital price to the print price. What it shows is that pricing is very sensitive in a fairly tight band. Push the digital price to 10% above the print price and sales plummet, but after that the line flattens out. Cut the digital price by 15% below the print price and sales rocket, but after that there is a more gentle, straight line relationship. Price makes a real difference to sales, but the deep discounting of digital content seems to be unnecessary.
We also asked about the pricing of print+digital bundles. The pleasing conclusion seems to be that there is a grudging, but growing acceptance of the premium pricing of bundles.
The fear of cannibalisation is often overstated
The DSS shows that the modern magazine reader is under tremendous money and time pressures. Customers’ ‘magazine time’ is simply being eroded by the sheer range of competitive digital entertainment available ranging from YouTube viewing to Twitter addiction. It is these factors which have been cutting into print magazine sales more than anything else and not the advent of digital magazine content itself. The amount of print sales that are being lost by simply migrating from the print version into the digital version of the same product is actually very limited. The fear of cannibalising print sales by offering multiple print and digital content options should not overshadow the much bigger threat of simply becoming unattractive in an intensely competitive marketplace by not having a strong digital offer.
Importantly, digitally active subscribers still want print versions of their core magazines. The majority of those who have both formats are still “print first” – digital complements and adds to the print experience rather than replacing it.
The customer service challenge
What we have found in practice at Dovetail when supporting digital products- and this is reinforced by the DSS – is that customer support makes a real difference to the overall digital experience. What may seem like “back-end” issues such as ease of download, speed of download, simplicity of in-app navigation, password validation all make a real difference to the end consumer and create customer contacts which are very different to those for a print product. To quote one of our digital Customer Service team members: “I never had to explain how to read a magazine to a print subscriber but I often do with a digital subscriber”. That is both a challenge and a large hidden cost for publishers and bureaux alike.
The importance of channel management
Go back to the early 1980s and the industry was agonising over the entry of the supermarkets into magazine retailing. There were fears about cannibalisation and supermarket power. Supermarkets tended to be treated as a single channel rather than a series of quite distinct operations, locations and shopper missions. There were assumptions (most of them wrong) about how it would all work – for example, it was thought that there would just be a limited range of women’s glossies on display at the checkout only. Some publishers wanted to walk away from the supermarkets completely, which now just seems unrealistic. Ultimately, the supermarkets helped grow the overall magazine market.
We are very much at an analogous stage with digital. We cannot be totally sure where it is all going to end up - it is both an exciting opportunity and a bit of a gamble, but it is also inevitable. Yet just as supermarkets can be a peripheral or inappropriate channel for many print magazines, so it may turn out to be with digital, with some brands finding a much more stable and lucrative future by remaining anchored firmly in print. The indications are that this will be particularly true for high end niche print products.
It is all much more complicated than we originally thought, but it can be controlled with the same channel management disciplines and logic as print retail and print subscriptions, but that requires deep customer insight driving appropriate business models. It also needs clear long term strategic thinking now. For example, how much power do publishers want to hand over to an Apple Newsstand / Tesco as opposed to developing a meaningful direct-to-consumer subscription business? If I hear any publisher in a couple of years time whining on that the recent increase in Apple’s remit / commission is ‘unfair’ my politest response will be, ‘What in the world did you expect to happen?’
The DSS was conducted after a year of unprecedented change in the way customers consume magazine digital content. It has helped establish what the key drivers are to understanding customer behaviour and the basis on which to develop sustainable business models. It has even offered some tentative answers to questions around pricing and customer service.
Even in the time since the survey was conducted an ever increasing number of publishers are claiming that they are ‘channel agnostic’ to the way their customers chose to consume their content. The challenge now for these publishers is to actively manage the digital channel, for the long term, in a manner that is coherent and consistent with the traditional management of their print retail and print subscription channels. Not an easy task but a vital one.
For a copy of the full report, contact Ranj Begley at Dovetail: ranj.begley@dovetailservices.com / 01795 414510
