By Dorion Benkoil
Magazine editors and publishers are excited about tablet devices like the iPad.
In them, they see a chance to give consumers the best that digital media can offer — and to be able to charge them for the content.
But does the profit from the apps justify the expense of building and marketing them? And even when the apps are profitable on their own, can they ever bring in enough revenue to sustain a sizable portion of the business?
Conde Nast, Meredith, Hearst and other leading magazine publishers have all been experimenting with the iPad. They are touting their successes, while acknowledging it’s too soon to tell what the ultimate business will be.
“Our tablet strategy,” said John Loughlin, executive vice president and general manager of Hearst Magazines, at the recent Ad:Tech conference in New York, “is to learn by doing.” To determine what’s sustainable, what’s a fad, and what’s “a significant new component to our business model.”
Conde’s Wired magazine in June released a $4.99 iPad app that sold 100,000 copies of that month’s issue, more than the 73,000 newsstand copies typically sold at the same price, according to WWD.
Earlier this month Conde’s fashion flagship Vogue announced the release of an app as well, adding to a growing stable of magazine apps from the publisher.
It’s easy to see why the editors are excited. After watching print subscriptions, newsstand sales and advertising drop sharply, and unable to make up the difference on the web, they now see a way to regain the ability to not only charge consumers but also make advertisers pay a premium to reach them.
Loughlin ticked off some encouraging figures: Popular Mechanics sold 54,000 single copies in its first six to seven weeks; there will be eight magazines on the Barnes & Noble Nook e-reader by the end of the month; most titles will also be on the iPhone, PC, Mac and Android devices, which compete with the iPad and iPhone. Users were using Hearst magazine apps “well beyond the issue expiration date,” which presumably gives Hearst a way to continue to reach them for more sales and advertising.
Lauren Weiner, who oversees Meredith publications’ digital and emerging media business, said at Ad:Tech that the company was working to transform itself “from a print publishing entity into a multimedia powerhouse,” and that apps were a part of that strategy.
Loughlin noted how his company was moving beyond simply putting magazines with complementary video and interactivity into apps and was instead gearing experiences for the devices themselves. He mentioned Cosmopolitan magazine’s version of the Kama Sutra which was revamped in an app called “Sex Position of the Day” and sold more than 100,000 copies for the iPad. A version has also been released for Android.
Weiner talked of popular for-pay recipe apps that lived separately from the many popular home-oriented titles Meredith publishes such as Family Circle, Better Homes and Gardens, and Ladies Home Journal.
Still, despite the froth, it’s difficult to make a case for apps as a savior for the magazine industry.
Weiner noted it can cost $75,000 to $300,000 to produce a paid app worthy of her magazines’ brands.
Even assuming a generous 50 percent margin on each app sale, that means a magazine would have to sell 30,000 to 120,000 copies at $4.99 before it breaks even (assuming they aren’t selling iPad-specific ads). That doesn’t include added costs such as reconfiguring the app for other platforms and marketing it to consumers.
And users can be notoriously fickle in buying single-issue copies. Wired‘s iPad app sales were reported to have plunged to 31,000 in July and 28,000 in August.
The market for apps is much more limited than for magazines. Consumers with iPads, other tablets and e-readers are a fraction of the media-consuming public, and those who would buy magazine apps are a fraction of those. Even if a subscription model comes to all the devices, revenues in the near- or even medium-term are not likely to match print overall.
Magazines like Wired and Popular Mechanics have a natural appeal to the technically adept who are using tablet devices. Many magazines, though, sell only in the low thousands for their apps.
“Will the tablet save the magazine industry? No,” said noted magazine and digital media designer Roger Black, who is a partner in a new e-reader platform venture called Tree Saver. “Will they get a percentage of the market? Sure.”
The paid magazine apps, which tend to range in price from $2.99 to $4.99 for single issues, also compete with free ones, like Conde Nast’s Epicurious recipe app and their one for Style.com.
Commenters in the iTunes store, meanwhile, show their ire, complaining about the pricing, and in some cases, the technology. “Boycott full price mags,” wrote one, adding, “Digital magazines are fantastic but we should be able to buy a year’s subscription for close to the price of a paper subscription.” It was a call repeated by many others.
“Would give five stars [as a rating], but paying that much for a magazine is ridiculous,” wrote a user ID’d as William Shelton on the Popular Science page, where the app, which had been $2.99, now lists for $4.99. He gave one star.
To justify the cost of producing apps, magazines have to amortize them over time. But “what happens in the year 2012 when Steve Jobs announces that, ‘We’ve upgraded,’ and your app suddenly no longer works?” Black asks.
Magazines are also competing on the iPads for attention from social networks like Twitter and Facebook; apps for TV shows; movies and music; mashup applications like Flipboard that combines social networks and media; games and more.
The technology is improving, and there will be economies of scale, as well. As Loughlin noted, this is an experimental period, when magazines are learning what they can offer and how much they can charge. Some apps will be breakout hits. A combination of web, apps, mobile and print sales may bolster magazines and give them new life and sustained profitability.
But the excitement over apps has some difficult realities to confront until that day is reached.
A former managing editor at ABCNews.com and an MBA, Dorian Benkoil has devised and executed marketing and sales strategies for MediaShift. He is SVP at Teeming Media, a strategic media consultancy focused on attracting, engaging, activating communities through digital media. He tweets at @dbenk.
This article was originally published on PBS Mediashift. J-Source and Mediashift have a content-sharing arrangement to broaden the audiences of both sites.
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