Folio: Roundtable - Magazine Publishing in a Digital-Device World
Clay Hall: CEO, Aspire Media
Michela O'Connor Abrams: President, Dwell Magazine
Don Peschke: CEO, August Home Publishing
Dan Wiesner: CEO, Wiesner Publishing
Terry Snow: CEO, World Publications
Steve Laliberte: President, iProduction
Tony Silber: Editor and Publisher, Folio:
In early January, a group of eight magazine executives got together at the Consumer Electronics Show to discuss how magazine publishers need to respond to the revolution in consumer electronics and content delivery. Talk about being in hostile territory. These executives, all of whom share the strengths and deficiencies of the legacy print-centric publishing experience, were among just a handful of print publishers in this extraordinarily vibrant world of consumer electronics.
And with 1.8 million net square feet of exhibit space, over 140,000 attendees from across the globe, and 2,700 exhibitors, the CES was overwhelming. Consumer Electronics Association CEO Gary Shapiro summed up the event this way: "The 2007 International CES succeeded beyond our expectations," he said. "It had buzz and optimism and attracted the world leaders of the content, technology and services, communications and automobile industries."
For publishers, the first industry Shapiro mentioned;content;is where they come in. Magazines own content, and can produce excellent content, in print and increasingly, online. The challenge is to figure out where they need to be in the future, when print is no longer the hub of the wheel, and how to successfully manage a business during this transition.
The roundtable was conducted over two days and was organized by Aspire Media CEO Clay Hall, who moderated the discussion.
Clay Hall: We're at the Consumer Electronics Show, surrounded by the latest in media innovation. Today Apple introduced the iPod telephone, which is an example of the whole integration of music on telephones, television on telephones, computer on television, television on computer, music, computers, video, TV all together in a single unit. Clearly, the world is moving in that direction.
Ultimately, where we're headed is to one device where you'll have everything you need. One portable, high-fidelity device that allows consumers to do everything.
Here's the big question: What does this mean for magazines? What opportunities exist for traditional magazine publishers to profitably capitalize on new technologies and changing consumer expectations? What are logical next steps for traditional magazine publishers?
Michela O'Connor Abrams: What will be interesting to watch is the adoption cycle. The Blackberry has been around for a long time, and there are still better than 50 percent of users that don't use them as a phone.
I don't see any of this as a threat. I see it as an opportunity to expand our brands and reach out to a part of the community we wouldn't have the opportunity to reach otherwise. Or, reaching that new community would be so expensive that it wouldn't make strategic sense to do it. And now, all of sudden, if it's there and if I'm smart enough to figure out the right partner, I don't know how it could hurt me.
Dan Wiesner: Absolutely. And don't you think though that you have to do it? That doing nothing is the one real threat?
Hall: And if you don't miss out on the market side, you certainly miss out on the valuation on the enterprise. On the value side already, if you're not doing digital media, you're penalized by about 30 percent today.
Steve Laliberte: Well, the implementation is more of a challenge. In the last three years we've done three mobile projects, taking various Web sites and making a reformatted version available for a mobile device. Two of them were complete disasters. There was no revenue, all expense. And the other one only worked because the mobile vendor paid a hefty amount of money to get the brand on there. Once the sponsor went away so did the project.
There's such disparity in commonality of the platform and there's no base that you can publish to reliably. So relative to this today, it's kind of a wait and see. Some of the stuff I saw at the CES Show today I thought was interesting, on a kind of a low level. There is still huge competition on underlying standards on networking and formatting digital content. They're still fighting about the format of a DVD. I saw three of them today and I thought, 'Oh my God, no wonder none of my players work.' Because every time you buy a player, it's a new format.
Wiesner: It's got to be compatible.
Laliberte: Yeah, it's an all out war out there and, to me, until that stabilizes a little bit there's no sense in going there.
Hall: To me, all the activity we're seeing here means that we as publishers need to be involved in most of these areas, though maybe not every one. You're not going to be delivering music unless you're a certain type of magazine. But you need to be in the game. I don't think the consumer is going to look at all this;the content channels represented at this show;as various formats. They're going to look at it as just content. And they're going to think that it's up to their media providers to provide the content through all these different formats, particularly if they've got one device. So they'll go to Windsurfer.com and go to Windsurfer magazine, and want to view content in digital readers like this Blackberry, not just in ink-on-paper. They'll expect to see video and expect to be able to click and transact. They'll expect to be able to put up their own photography of their own windsurfing and build their own little magazine to share with other people. All those things, I think, are going to be incumbent on all of us. We need to be multiplatform social media companies.
Terry Snow: World Publications sort of distilled it down to three things in terms of what the business is. 1) We aggregate audiences with a common interest so it doesn't really matter what the medium is. 2) We need to connect those audiences to advertisers, and 3) we create content. So at World we're not getting lost in the technology so much as trying to stay focused on the content. What's the best way? What content is missing that they're not creating on their own? If it's a community creating content, then we supplement that content, and determine how well we connect them to the advertisers. And how efficient it is and how measurable it is. If we can do all those things, then I think it works. But we just have to start with our publications.
Rethinking the Media Mix
Hall: If we were to draw an organic graph of our businesses, for most of us magazines would be in the middle and off from that would be our events and our books and other things. I suspect we won't be putting magazines in the middle in the future. They won't be the hub, they'll be another spoke, and the online component of our business will be in the middle.
O'Connor Abrams: I agree we should adopt a multiplatform approach: 'This is your community, here's your magazine, here's your Web site, here are your conferences, here's your RSS, here's your television, here's your products. And here's where you're going, if you are focused on a community and you want to know them more than anybody else does.'
Folio: If one of those offshoots is producing most of your revenue and the other ones don't even really exist yet, and you also consider what Steve said about all the technology platforms being incompatible, how do you balance? Especially considering that you have a culture that's publishing;people who know how to create content and distribute print magazines and do a decent Web site;how do you get from there to all the other stuff?
Laliberte: Markets reveal themselves. We spend a lot of time in the newsletter business, and publishers of newsletters have seen their main subscription products going down over the years. Now, half their revenues are coming from events. And audio conferences have been big. Who would have thought that audio conferences would have caught on in the newsletter market?
Hall: They're fairly low tech.
Laliberte: So for those doing Web conferences in the newsletter business, they've stumbled onto it. The telephone bridge replaced the travel and it's fairly cost effective. Also, you could very quickly take a registration and get someone into the event and then turn it around in a matter of days instead of months. Part of knowing which offshoot to pursue is having a good feel for your market and your reader.
Snow: It all comes back to that center, which is really understanding the needs of the customer/reader. Like in windsurfing, for example, there's a company called I Windsurf and;I wish we had done this;they have a service online and you can go in and find the wind at various locations. People subscribe for $65 a year or something and it's a million-dollar business.
Hall: Probably $800,000 profit.
Snow: If we had gotten our act together in time, we would have developed that and given that to our readers as part of the information they need. We're putting more emphasis on the content of our products and on the editors. It used to be salespeople ruled because they bring in all the money, and they still do, but now we're shifting dollars to the content side of the business.
Hall: We're doing the same thing. In fact, I would say we look at our editorial team as the product team. That's where they're spending more of their time than ever, in the development of new products.
Revenue Streams in an Online World
Folio: Where do you see your revenue coming from in the next five years?
Hall: Basically the same areas we're in now, magazines, books, events, online, television, but I think the two areas that are going to grow the fastest are going to be online and events. That's an anomaly because you've got one that's a 10-year-old business model and one that's a 6,000 year-old model. Consumer events have grown in part because of the impersonalized nature of online communities, but those are going to grow the most for us.
O'Connor Abrams: I agree completely. If you wanted to break down what my revenue split would be in three to five years, 50 percent will be from magazines and the other 50 from online and events and product sales.
Snow: We're still getting a lot of revenue on the print side. We're developing the Web sites very well. But I would say the biggest issue for us by far is video. It's video, it's cable TV a bit and then it's the events that are our growth areas, not just online. I agree with Clay;it's really difficult to generate a million dollars online but you go out and create an event, and all of a sudden it's a million-dollar event.
Hall: Also, growth in the future is going to be dependent on whether a business is reader revenue-driven or ad-revenue driven. Or consumer or b-to-b, for that matter. The difference between Terry's business and my business is he's got a higher percentage of ad revenue. We've got 70 percent of our magazine revenues coming from the consumer.
Snow: We're about 80-20, with 80 percent from the advertisers. It's getting more ad driven as time goes on. It feels to me like we're heading toward this free-media society, at least in our markets.
Hall: I'm pleased that we're disproportionately skewed toward reader revenue. Frankly, it's much less volatile.
'Our Future is Video'
Wiesner: We're 80 percent advertising now; with 90 percent of that being print;10 percent events, 10 percent other, but we get nothing from our readers. Basically we're getting 100 percent from our advertisers. Where I see the shift coming in the next two or three years is we'll still be doing the events, we'll still be doing the other stuff, the mix is just going to go from print advertising to online advertising. I think our future is video. You can just flip on a phone and go to CBS and review the news. ESPN's got their programs on mobile phones as well. The breakdown will probably hit 50-50 in next three to five years;print to online.
Laliberte: In the b-to-b controlled-circ world, the Web is growing. With their Web sites, they're essentially building new, free-circ publications, and ad sales are growing nicely. Granted, it's insignificant compared to the print, but they're profitable. I'm comfortable that if you take the b-to-b controlled-circ model, with an e-mail entity that links back to Web pages, the advertising model does work well.
O'Connor Abrams: Dan, to your point on video, you already see unbelievable amounts of information presented in small bits in video files and connected to text.
Snow: It's the whole combo: PDFs, video, still pictures;that kind of media is good for what we do. But I still think for looking at things like beautiful homes and beautiful furniture, fashion, it's the magazine. It's hard to beat that.
Hall: If you guys are right, then in five or seven years our competitors won't be other magazines but the Food Network and HGTV.
Folio: Are you set up to sell that stuff?
Wiesner: No. We're set up to sell this month right now.
O'Connor Abrams: The big thing is that the ad space has to evolve. I think that's hard. Your marketing is no longer a marketing department. It's a partnering and idea-generation team that comes from production, sales, and everyone working together. That is what's going to be required in this transition from print revenue to all these other platforms.
Snow: I think publishers today have to have all these capabilities, which then speaks to scale, because how do you do it if you're small? How do you have the core competency to do video, whether it's high-def or online?
Hall: Even with scale it's a challenge.
Wiesner: How do you find the skillset? Who knows how to do all those things? It's impossible. One of the things I've found to be a challenge as you're going through this transition is the people part of it. Typically in our organization we ask publishers to manage content and sell advertising and we put a Web site and an event next to them and, if they're not in charge of all three, you find all three silos competing for that content and being able to monetize it. And then in this new world, you're asking the publisher to be an expert in online, print, video content, CD content. That's very challenging, especially in the battles for who gets the resource because they all have to monetize it. How are you guys doing with that?
Hall: We deliver content in multiple platforms at the same time, some free and some paid. We push it out to as many different channels as we can at the same time.
Don Peschke: We eliminated all commissions because it created too many turf wars. We eliminated commissions and bonuses and went to straight salaries. We took the highest compensation level people were at for the past year and made it a guaranteed salary. Sales teams at first were up in arms. But over the next three issues of the magazine we set all-time records in ad sales.
Hall: Another direction we're moving to is more a la carte content, rather than pre-packaged. This is true for a lot of different areas. If you look at the music business you used to have buy 16 songs to get the two you wanted. You look at the photography business you used to have to buy a 20 or 36 roll of film to get the one or two shots you want. Now you print what you want and delete the rest. And I wonder if that's where we're heading too.
Laliberte: What we see is that it's two different customer bases. You start to say one wants a magazine subscription and they're surprised every month and that's their need. And another wants a pattern for a specific thing this time and that's all they want.
Hall: In today's world the people who are reading the magazine are reading it because they want the mastery. But once everyone has all these high-fidelity devices and can get everything at once, I think that all those distinctions will blur and the people who want the mastery will be using online technology.
'A Magazine is Just Another Device'
Laliberte: A magazine is just a device for a publisher. We aggregate all the content and mail it out because it's the easiest form. But they may want mastery and a series of learning experiences in one particular area, and can be served in a customized magazine or a continuity series.
Hall: But they're going to want to be in control.
Laliberte: All this leads to an important point: Aggregating and re-aggregating content to allow people who want control to have meaningful choices. Someone just coming into a market has this huge need for basic information. But once you're in you don't want that information anymore. You have to define the taxonomy. If you load content as you're defining and archiving it, and you're not breaking it up the way the reader wants it, you're going to have a hard time re-aggregating it and disaggregating it.
O'Connor Abrams: This gets back to why print is getting more difficult, because if you can't find a way to use that content more than once, the equation doesn't get better. It should be so easy, but part of it isn't because the content has to be tagged that way.
Wiesner: We had to start over. We had 3,000 stories and we had to reslug each one of them. We hired a $10 an hour person and worked with an editor and it took them a few months. It's all perfect now and everything coming out the door is done like that.
Laliberte: A nice side effect of this is you have to do the same thing for search-engine optimization, so you'll get better SEO if you work that taxonomy, because those are words that people are going to use to find your content.
Peschke: We hired a corporate archivist. It's one person dedicated to basically figuring out what tags go to which articles in every book. Every photo, not that just ran, but every photo we've taken, all that is part of the archive.
Does Quality Matter in User Generated Content?
Folio: How much quality should go into video offerings?
Hall: I don't want to put out anything that is amateurish, but I have no problem with user-generated content being exactly what it is and I don't think the readers expect anything different.
Peschke: We're working with Kovels and encouraging them to offer a way for consumers to submit photos of their antiques. There's not a lot of good imagery of that stuff and quality is important with those types of transactions, and now, with the high definition of cameras that everyone has, it would be beautiful generating this kind of content.
Snow: I have a problem with user-generated content. When you look at You Tube and the video of the guy skateboarding off the roof of his garage, how much value is there except for entertainment value to another 15-year-old? In order to get content to have value, it takes some kind of effort and knowledge, and that's presumably why we have companies with a lot of talented people.
Folio: Isn't this really about being a community where you consider yourself a peer with that community and not speak to them from Mt. Olympus?
Hall: In our beading magazine we have a contest where we give participants a handful of components and tell them to use them however they want, and send them back to us. We'll put them up on the Web and have a juried process. The people who participate are incredibly involved. It's not just putting up anything like You Tube.
Snow: I'm on the opposite side of that. I don't like user content. I'm going to find an expert, especially in travel. If you look at the online user comments and reviews and you've been to some of these destinations, you say to yourself, 'God, what are some of these people talking about?' They're all over the place.
Hall: But there is the wisdom of crowds. I don't look at the individual postings as much as I look at the overall rankings. We have a couple of competitors doing well that have 100 percent user-generated content in their magazines. Users ship gobs of projects to editors and editors go through and pick which ones to feature.
I'm going to suggest that we do links to all competing blogs. We need to present not only proprietary content but we've got to be aggregating the content of others.
As publishers, shouldn't that extend to our magazines themselves? Doesn't it make sense to take that approach;which is very much an online sensibility;to all the content we deliver across all our platforms? We do that on our television program. We're going to feature our own authors, but also authors from other publications, maybe even competitive publications, as well. I feel like if we don't we're going to lose our trusted voice.