Monday, January 19, 2009

US Magazine Digital Revenues Must Change

The web continues to impact the US magazine sector with some 18 titles stopping their print presses in 2008 and now being joined only this month by Country Home, Electronic Gaming Monthly and Plenty magazines.

Advertising Age reported that Time Inc.'s digital ad revenue last year totalled an estimated $245 million, or 10% of the company's total ad revenue. The revenue achieved is greater than some their competitors such as Conde Nast, who only achieved 3%, but not as much as others such as Martha Stewart magazines, which have achieved a greater percentage of their revenues. They suggest that anyone who is generating over 8% of print is ‘ahead of the digital curve’.

If you believe that sub prime only related to housing think again. Ad pages sales and their rate sales have been recently driven by increasing circulation at the cost of subscription prices, marketing, resource and distribution costs. When the ad pages crashed the circulation was at a height that was now longer realistic and for some, the gap between cost and revenue has become a gulf.

Circulating print copies, is also now getting more expensive in the US, with Anderson News, which handles about 25% of all magazine distribution, raising a new charge of 7cents per issue.

So what do consumers want and importantly what are advertisers wanting to now pay for? Some would say that merely taking today’s print copy and slapping it onto a website isn’t cutting it for either party.

New York magazine, whose information is local generates about 20% of its ad revenue from digital but is planning to raise this to 50% within 5 years. The Economist, raised about 16% of its ad revenue from digital last year, and along with Time Inc and others such as Sports Illustrated are clearly starting to make digital inroads.
Interestingly Time Inc.'s isn't planning on living off ad revenue alone. This spring, the site will start selling downloadable games and they are releasing a 1$ iPhone application planned to push revenues higher.

Print will always have a place, and a consumer base but digital is coming and finding the the right model, content and revenue balance is the goal. It is clear that magazines like newsprint are sailing into uncharted waters and have to be open as to where the revenues will be generated moving forward.

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