Digital Issues

CHRISTINA VEIDERS

Retailers can see where the direction of the magazine category is going from next week's agenda of the American Magazine Conference, Oct. 3-5, in Chicago.

Among topics are: development of multiplatforms to deliver content to consumers using an array of digital devices and applications; the move from a print-focused model to a consumer-centric one; e-reader apps and editions, the e-reader marketplace; life after the iPad; machine generated content; the Facebook effect.

In a few short years and even months the digital revolution has propelled the publishing world into new realms that up until now have been envisioned by sci-fi creators. The introduction of Apple's iPad on April 1 is proving a game changer for its potential for new revenue streams.

Within a month of its launch, Apple hit the million unit mark in iPad sales. As of July 21, Apple reportedly sold over 3 million tablets. Such tablet devices can deliver more than static content through interactive bells and whistles (flash animation, audio, video) that offer consumers interactive content with high resolution, four-color images.

Publishers such as Condé Nast have been quick to develop digital versions of their publications tailored to the iPad. GQ was the first consumer magazine to be made available for the device. GQ magazine's application with the current issue's content sells for $2.99 and repeat buyers can get new issues for $1.99 each. The GQ app for the iPad sold 63,000 copies in the first six months on the market, according to MediaPost. Others publishers quickly followed with their own apps.

This month it's been reported that Apple is developing a digital newsstand for publishers similar to Apple's iBook store for electronic books. The electronic newsstand would sell magazine subscriptions. But the publishing world is not so quick to jump at the opportunity until it sorts out the split on subscription rates and who will control subscriber data.

Meanwhile, Richard Maggiotto, chief executive officer of San Francisco-based Zinio, a provider of digital-publishing technology and services, who will be a panelist at the upcoming AMC conference, told Folio magazine in a recent interview that “retailers now are leveraging Zinio as an extension of their cost-efficient distribution strategies.”

Target last year entered a partnership with Zinio, which offers electronic versions of magazines and books from more than 350 publishers, to host a digital magazine newsstand on Target's Web site. The electronic magazines are designed to look much like the print versions of the titles. The offering includes single editions of the current and older issues, or annual subscriptions. Zinio and Target share the revenue. At the time of the announcement, Zinio said it hopes to sell at least 1,000 new subscriptions a month during the first year of the partnership.

Consumers read the Zinio-delivered issues in a Web browser version or through an application.

Media sources report that about 60% of Zinio's magazine sales come from archival or current issue sales and 40% from subscriptions.

Two weeks after the iPad debuted, Zinio reported that its “Magazine Newsstand and Reader” was the No. 1 free news app downloaded by new iPad owners.

Digital technology offers renewal for a struggling publishing industry that has been under siege with distribution disruptions, a recession, rising costs and some dramatic drops in advertising, subscription and single-copy sales. However, digital revenue gains have a long way to go to offset such loses.

That leaves brick and mortar retailers wondering what impact digital will ultimately have on their sluggish newsstand sales and whether or not newsstand will go the way of video and photo departments.

During the first half 2010 vs. 2009, results for retail magazine sales, both audited and non-audited, fell 6.1%, according to statistics compiled by the Magazine Information Network and reported by The New Single Copy newsletter.

Supermarket sales with a 31.7% share came closest to the industry average, down 6.8%. Supercenters turned in the best results, but were still down just 1.5%. Bookstores, which have been impacted by online and e-book sales, turned in the poorest performance with a drop of 10%.

“There is no question that digital developments will change the magazine world,” John Harrington, publisher of The New Single Copy, Charlestown, R.I., told SN. “However, while publishers are using their brand names and recognition to develop applications for the iPad and other emerging technologies, these, in the end, will be different products from the printed magazines. I don't see any substantial deterioration, and maybe none, of the sales of major publications. There may eventually be fewer titles, but those that depart will not be ones with even moderate newsstand presence today.

“Perhaps more important for magazines, is what has the now two-year old recession done to consumer shopping habits. Magazines are definitely an impulse item, and could suffer if shoppers continue to stick to their shopping lists. A response, on the part of publishers and wholesalers, and retailers as well, is a more aggressive attitude towards in-store promotions. This makes good sense for supermarkets where traditional supermarket magazines also encourage purchase of many other supermarket items,” Harrington added.

William Romollino, vice president Shopper Insights, Time Warner Retail Sales & Marketing, New York, pointed to consumer behavioral shifts. “Relative to newsstand, we see our customers migrating to different channels and relative to the display space in grocery we've seen some of that display space shrink and, therefore, our products are a little less accessible to customers. In grocery, specifically, I'd say the demand has fallen off a bit largely because we just don't have the product being offered to customers at the same level as it was before the recession.”

But he noted that magazine readership levels are at record highs. Romollino's prognosis is that demand for magazines at retail will remain high. “If you think about customers being in a pinch where they might not be able to go on vacation or afford luxury goods, we see customers carving out discretionary income for magazines.”

Bill Bishop, chairman of Willard Bishop, Barrington, Ill., who also has conducted research on the magazine category, said the digital impact is “part of bigger horse race which has to do with a shift to digital in everything. Part of the answer is how well the traditional retailers respond to what is going on using new technology.”

Bishop sees technology helping retailers become more cost effective and efficient at the newsstand through expansion of scan-based trading. “One of the technologies that is moving relatively quickly is the introduction of scan-based trading, which was resisted for a long time. As people jockey for position in this horse race, technology can be used to overcome all sorts of problems. Huge objections by retailers to single-issue magazines was the fact they had a lot of labor in receiving and returns. The whole notion of scan-based trading lifts that responsibility off the retailer.”

Earlier this year Chuck Townsend, chief executive officer of Condé Nast, said at the June Retail Marketplace Conference, “The retail channel remains the cornerstone of our business.” He noted that digital channels represent positives for retailers. The mass reach of branded magazine Web sites, and the newer channels opened by the iPad, iPhone and e-reader applications provide publishers with cost-effective means of raising magazine brand awareness — and “increased awareness leads to increased sales,” which drives store traffic, he said.

“Clearly, we're not talking about anything resembling the video business,” said Harrington.

NEWSSTAND OUTLETS

Supermarkets account for a third of retail newsstand sales. It remains to be seen how new digital technology options will impact retail sales of magazines in the future.

PERCENT OF RETAIL SALES BY CHANNEL 2009

Source: Harrington Associates, 2010