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It's a Perfect Storm but Don't Jump Ship Part I - 10/5/2010 -

By James G. Elliott


(Editor's note: Association Media & Publishing welcomes your responses to the following guest commentary. A blog post on blurb is the appropriate place to respond. We look forward to a lively discussion on this topic, which is of great interest to most association publishers working to create a print-digital strategy.)
Yes, it has been tough in the ad sales business, but let’s not go too far.  It has been almost two years now from the start of the meltdown of our financial systems, and clearly, the magazine industry has been in tremendous turmoil. In fact, some have used the "perfect storm” metaphor to describe our industry’s plight because not only have advertising revenues declined, but also the industry has been challenged by innovations such as mobile device applications and the continuing challenge coming from digital media fighting for the same ad dollars as print.


But the focus on magazines’ revenue troubles fails to recognize that advertising revenues in just about every medium have been down. Yes, it is true that some have been down more than others, but this has been an advertising recession—not a magazine recession. And storms end.


Over the last year, many association magazines have been examining expenses, often triggered by a decline in ad revenue. And lately, it seems the two most common cost-reduction strategies are: (1) reducing print runs by converting print subscribers to a digital-only version of the publication and (2) reducing publication frequency, which basically means printing fewer issues per year. In part one of this article, let’s consider some things to think about before moving your members to a digital-only format just to save money.


Challenges Moving from Print to Digital-Only Editions

Associations are fans of delivering up lots of information platforms to their members. As such, digital magazines are one excellent vehicle to achieve that end. However, digital editions are hardly a replacement for magazines, and here is why:


·         From a business perspective digital magazines are an unproven medium. I am not aware of a single instance where a print magazine of any size has taken its entire (or even the majority of) its subscription base and started serving them digital magazine copies, while managing to keep its advertising and circulation numbers intact. Moreover, you will be hard-pressed to find a single industry expert that has offered any reasonable model or described any market circumstance that would ameliorate the risk publishers will face in making this dramatic change in their business.


·         There is no known advertising market for digital magazines. Despite the fact that more than half of the magazines we have represented over the past five years serves some percentage of their subscribers with digital copies, we have not had a single advertiser buy only the digital copies of a magazine.


·         Association publishers already provide information in other digital formats. It might be argued that the requests for advertising in digital magazines will increase as more magazines deliver full circulations with digital copies. Perhaps, but most publishers—especially association publishers—already offer editorial products that deliver their entire print circulations in other digital formats. So, unless the advertising inventory of the existing digital products (primarily sites and newsletters) is completely sold, adding yet another digital alternative to deliver the same audience doesn’t seem to be a strategy that’s destined to motivate advertisers. (Again, we are only referring to advertising; not the desirability to also serve up digital copies of their magazines.)


·         In the majority of cases, readership of an association magazine that converts its circulation from print to digital will be low. Worse, the publisher will be forced to admit that to advertisers. Consider this: A company that is currently in the business of producing and distributing digital magazines claims (March 2010) that the open rates of digital issues of association magazines range between 20 – 33 percent of the total copies delivered. This performance is achieved largely with publications delivering a digital copy that was requested by the recipient. In an instance where digital copies are sent to a circulation that has not requested the publication digitally, one would expect open rates to be somewhat lower.


Also, note that the open rates mentioned above are not really far outside the acceptable open rates of promotional e-mail (20 percent). And promotional e-mail has the added benefit of message exclusivity, without the production/postage expense formerly associated with promotional hard mail. In other words, e-mail may be much more competitive against digital magazines than hard mail ever was against print magazines.


In addition to the open rate for the publication as a whole, it is also now possible to report on what individual pages of a digital magazine are opened, including advertising pages. This means that advertisers can ask for precise exposure counts.


Traditionally, magazines have relied on studies that captured the reported involvement a reader or subscriber had with a publication over time. For example, MRI does the best-known and most widely used measure of consumer magazine readership. In this case, the 200-plus magazines measured generally report their readership on the basis of their readers (not subscribers) reading three or four of the last four issues of the magazine. In the current MRI study, the average number of readers for all magazines that read three or four out of the last four issues is 53.9 percent.
On the B-to-B side of the publishing industry where books tend to rely more on individual subscriber studies, the scores are generally even higher. Magazines have spent decades talking about readership numbers like these—all far greater than those being typically reported for most digital issues.


Digital publications have their strategic purposes in many cases, but if your strategy isn’t sound and based on facts—rather than a mistaken understanding of what your association’s advertisers really want—then ad revenues could be negatively impacted by a move that abandons print altogether.


James G. Elliott is president of James G. Elliott Co. Inc., an independent media sales company with clients in the association, consumer, and trade worlds. Part two of this article will discuss advertising challenges related to reducing a publication’s frequency.


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