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2 The Future of Newspapers and Magazines in the Digital Era www.elasticpath.com

Survey Background This online study polled 1,010 US adults over the age o 18 who had read at least one magazine or newspaper in the past month. Respondents hadto have either read the magazine(s) or newspaper(s) in print, online (i.e., using a computer or mobile web browser), or via a dedicated application (e.g.,using an iPad or iPhone app). The survey was developed to examine consumer attitudes and behaviors towards newspapers and magazines in bothprint and digital ormat.

Executive Summary Traditional media publishers continue to ace a di cult nancial outlook due to dwindling readership and advertising revenues. At the same time, newtechnologies and social media are having a major impact on consumer behavior. Increasingly, users expect to be able to access content anytime,anywhere, on devices o their choosing. As with other types o digital content such as music and games, members o Gen Y (ages 18-34) exhibit anearly-adopter pro le when it comes to the number o advanced consumer electronics they use or reading publications.

While tablets, smartphones, and eReaders open new distribution channels, publishers ace challenges in maintaining and monetizing customerrelationships that have been ragmented by countless plat orms, devices, and services. Many people show willingness to pay or digital magazine andnewspaper content, but most have not yet started doing so. Years o ad-supported ree websites and discounted subscriptions have accustomedconsumers to pay little or nothing or digital content.

In a competitive media landscape, publishers need to innovate like never be ore to reach prospects and supplement advertising revenue with userpayments. With ew bona de successes to look to or guidance, publishers must explore a variety o monetization strategies to nd combinations thatresonate with target audiences. Magazines and newspapers that gain a deep understanding o target audiences through qualitative and quantitativeresearch will stand a better chance than most o cra ting di erentiated content, solutions, and services that consumers value with both their time andtheir money.




Key FindingsPrint trumps digital or newspaper andmagazine readers.While nearly hal o US adults now read at least somedigital magazine and newspaper content, print remains thedominant ormat. Almost eight in ten US adults have read printnewspapers or magazines in the past month. O those who readprint publications, 33% spend 3 hours or more [Figure 1] perweek doing so. Unsurprisingly, older adults (55+) tend to be theheaviest consumers.

Digital ormats have yet to be consumed as much as print; still47% o adults have read publications online in the past month.Magazine and newspaper applications are on the rise; 19% o readers use them regularly (at least one hour per week). Youngerconsumers (ages 18-34), particularly men, are signi cantly more

likely than average to read digital content online and throughdedicated mobile and PC apps.

During an average week, how much time do youspend reading the following:

0% 100%

[Figure 1]

Magazines or newspapers via a dedicated application(e.g., Wired magazine iPad app)

Print magazines or newspapers

Magazines or newspapers online(e.g., using your computer or mobile web browser)

4% 5 6410 17

Base: 1,010 US adult newspaper and/or magazine readers

13% 20 35 27 5

6% 11 26 27 30

3-5 hours

Over 5 hours

Less than 1 hour

1-2 hours None






Small screen devices are increasingly usedto read content.

The phenomenal popularity o smartphones, iPads, andeReaders has led to a rapid rise in media applications and,subsequently, to an increase in reading across multiple devices.

Although about hal o magazine and newspaper consumersread on personal computers, over 10% also now read onsmartphones [Figures 3a and 3b].

As with other types o digital content such as music and games,members o Gen Y (ages 18-34) exhibit an early-adopter pro lewhen it comes to the number o advanced consumer electronicsthey use or reading publications. They are more than twice aslikely as the general population to consume newspaper andmagazine content on smartphones, tablets, and eReaders. Toreach these early technology adopters (and their even moreconnected younger siblings) publishers must go beyond simplyo ering multi-plat orm access to ully exploit the capabilities o

small screen devices and bring new experiences to readers.


0% 100%

[Figure 3a]

Which of the following devices do you regularly useto read newspapers (online or via a dedicatedapplication)?

20% 40% 60% 80%

57%Laptop or desktop computer

6%

13%Smartphone(e.g., iPhone, BlackBerry, Android)

37%None of the above

6%iPad or other tablet computer

eReader(e.g., Amazon Kindle, Barnes & Noble Nook etc.)


0% 100%

[Figure 3b]

Which of the following devices do you regularly useto read magazines (online or via a dedicatedapplication)?

20% 40% 60% 80%

49%Laptop or desktop computer

6%

11%Smartphone(e.g., iPhone, BlackBerry, Android)

45%None of the above

6%iPad or other tablet computer

eReader(e.g., Amazon Kindle, Barnes & Noble Nook etc.)




Readers spend little on digitalpublications, so ar.O those surveyed, 15% spent more than $100 in the past yearon print publications alone, with 5% paying a similar amount orcombined print and digital subscriptions [Figure 4]. Only 16%spent anything at all on digital newspapers and magazinesalone. Although subscription payment services were announcedin February by both Apple and Google, a large scale market,wherein users pay or exclusive access to digital publications,has not yet developed.

In line with their reading habits, older consumers (55+) tend tobe the biggest print spenders, but are unaccustomed to paying

or digital access. In sharp contrast, while younger consumerscontinue to buy print publications, 32% also paid to accessdigital newspapers and magazines in the past year. Havingwatched ecommerce apps become commonplace, members o Gen Y (ages 18-34) are used to buying digital content such asmovies. However, even younger consumers are reluctant to paymuch or content; most o those who bought digital publicationslast year spent under $25, with just a tiny percentage (4%)paying $100 plus.

0% 100%

[Figure 4]

Print issues and subscriptions of newspapersand magazines only


In the past year, how much did you pay fornewspapers and magazines in the following formats:

15% 16 1 7 30 5

$51-$100

Over $100

$25 or less

$26-$50 $0

Don’t remember

17

Digital or online issues and subscriptions ofnewspapers and magazines only

1 1 784 10% 5

Combined print and digital subscriptions of newspapersand magazines (e.g., single price to get both versions) 6 145% 4 64 7






Readers are open to multiple paymentmodels. Over hal o adults nd all-you-can-read subscriptions (62%)and ree-mium models (55%) appealing [Figure 6]. Althoughsubscription payment services were announced in February byboth Apple and Google, a large scale paying audience or digitalpublications has not yet developed.

The study revealed that 59% o adults are willing to acceptadditional advertising to subsidize digital publication costs.Generally the younger the consumer, the more open they are toheavy ad content; 68% o those aged 18-34 would accept moreads to gain ree access, compared to 47% o respondents 55and older.

As active digital purchasers, unsurprisingly younger adults (ages18-34) nd a multitude o payment options more appealing thanthe average reader, with two in three showing an a nity or socialshopping to receive discounts and ree access in exchange or

re errals. Pay-per-article also resonates with Gen Y readers whomay pre er to just pay or what they actually read, and not orrehashed content they can get elsewhere or ree.

0% 100%

[Figure 6]

How appealing are the following payment options fordigital or online newspapers and magazines?

Not at all appealing Unsure

Somewhat appealing

Not very appealing


Very appealing

28

Paying to rent an issue for a limited time(e.g., one day rental for a plane trip)

10% 20 419 20

Paying just for articles or features youare interested in (e.g. crossword)

21% 27 9 18 25

Buying each issue individually 14% 31 21 268

Purchasing a monthly or yearly subscriptionto a single publication 1920% 36 7 18

Paying a at monthly fee to read any magazine ornewspaper by the publisher (e.g., all-you-can-read)

1826% 36 146

Reading for free if you refer enough friends 25% 25 248 18

Reading for free if ad content is doubled 30% 16 1929 6

Getting a discount if you buy with others(e.g., bulk purchase)

17% 32 268 18

Paying for the premium version butthe standard version is free

27% 28 22158




Consumers value the reedom to read

when they want, where they want.Features o digital newspapers and magazines that consumers

nd most important include anytime anywhere access (48%),search (45%), and timely delivery (43%) [Figure 7]. While it is tooearly to tell, “all-access” digital subscription plans that deliverpublications to all plat orms (e.g., web, tablet, and smartphone),such as that announced in February by Time Inc. and SportsIllustrated , could nd avor with audiences.

0% 100%

[Figure 7]

How important are the following features of digital oronline newspapers and magazines?

Very important

UnsureNot very important

Somewhat important


2526% 36Portability(e.g., can read on my iPad or mobile phone)

37

Environmental friendliness 35% 45 19

Receive issue at same time print issue hitsthe newsstand (e.g., no delays in delivery)

43% 41 15

Can rate, review or “like” articles 18% 47 34

Can search the content 45% 41 13

Rich media such as video and sound 28% 47 24

Anytime, anywhere access 48% 36 15

Ability to share articles(e.g., post a link on Facebook, email to a friend)

42 3126%




Specialized content and back issues areworth paying or.When readers were asked what content they might be willing topay or, in-depth in ormation and expert advice (63%) and back-issue access (60%) [Figure 8] topped the list (and were oundto be particularly important to university educated and youngerreaders, ages 18-34).

Despite their willingness to view ads in exchange or ree access[Figure 6], many consumers (60%) would consider paying toview ad- ree content [Figure 8]. This sentiment resonates moststrongly with a younger demographic. Members o Gen Y showinterest in publication-related games, products, and services aswell; this demographic is signi cantly more likely than average topay or these types o ancillary o erings.

0% 100%

[Figure 8]

With regard to digital or online magazines andnewspapers, how likely are you to pay for thefollowing (if available)?

Not at all likely Unsure

Somewhat likely

Not very likely


Very likely

28

Workshops, events or educational coursesassociated with the publication

13% 253 3128

Games, products or services associatedwith the publication

17% 2329 2 29

Ability to obtain in-depth information orexpert advice on a topic of interest

26% 37 18 173

The right to re-use the content in yourown projects

2417% 31 2 25

Ability to read without ads 29% 31 2 1721

Access to back issues 1723% 37 212




Digital newspaper and magazine ads aree ective at driving purchase.Interactive ads in digital publications appear to be e ectiveat driving consideration and sales. While 18% o viewers hadtaken no action in response to an online or digital newspaperor magazine ad, 36% had entered a contest, 31% had madea purchase, and 20% had signed up or a trial [Figure 9]. Manyothers had taken steps toward a purchase decision, includingvisiting a website (55%), requesting more in ormation about aproduct or service (25%), and going to a store to view the item(32%).

With digital ormats better able to capture reader attention andcreate a more engaging experience than static print ads—atthe same time as being more measurable and micro-targeted,advertisers have shi ted their dollars away rom print. However,in a world o proprietary content and apps, it can be di cult oradvertisers to deliver a large-scale campaign.


0% 100%

[Figure 9]

Which of the following have you ever done as a resultof seeing an ad in an online or digital newspaper ormagazine?

20% 40% 60% 80%

55% Visited a website

32%Gone to a store to see a product

36%Entered a contest

Printed it out to look at later

25%Requested more information about aproduct or service

31%Made a purchase

20%Signed up for a product/service trial

18%I have never done anything as a result of seeing an ad

in an online or digital newspaper or magazine

20%Forwarded the ad to someone

12%I have never seen an online or digital newspaperor magazine ad

18%




Members o Gen Y are keen to share theirinfuence online.Social media, particularly Facebook, has changed the way weinteract with content. Most readers enjoy letting others knowabout articles they have read; two out o three (66%) regularlyshare in ormation ace-to- ace or by phone, while hal (49%)do so via email [Figure 10]. Younger adults (ages 18-34) areparticularly keen to share their infuence online; members o Gen Y are more than three times as likely as older adults (55+)to post links to articles on social networks (59% vs. 16%), writecomments (43% vs. 14%), and rate or review articles (55% vs.18%). Digital publishers who o er comprehensive social sharingand community tools, and make it easy to share, will directlybene t rom an increased audience or their content.0% 100%

[Figure 10]

How often do you do the following after reading anonline or digital magazine or newspaper article?

Sometimes Never Very often Rarely


Email someone about it

Tell someone about it face-to-faceor on the phone

Post a link to the article on Facebook,Twitter, or your personal blog or website

10% 23 2 2 46

23% 43 19 15

14% 30 21

9% 18 30 43Leave a comment for the authoron the article page

Rate or review the article 9% 25 31 34

35




Almost hal o adults nd copying andsharing without permission acceptable.

Copying and sharing digital content without permission wasound to be acceptable by 42% o adults [Figure 11], withonly slight di erences in attitudes among demographics.While younger consumers show a higher propensity to pay orpublications [Figure 4], this group is also more likely to eel it isacceptable to copy and share digital magazine and newspapercontent without permission.

The abundance o ree, ad-supported news and magazine sitesand apps has blurred the lines between copyrighted materialand that in the public domain, while social sharing tools andproperties have ueled our interest and ability to share digitalcontent with riends, amily, and colleagues.

[Figure 11]

Stronglyagree, 17%

Moderatelydisagree, 20%

Stronglydisagree, 24%

Do you agree or disagree that copying and sharingonline or digital newspaper or magazine contentwithout permission is acceptable?


Unsure,

14%

Moderatelyagree, 25%




Recommendations“The uture o journalism belongs to the bold, and the companies that

prosper will be those that fnd new and better ways to meet the needso their viewers, listeners, and readers.”

Rupert Murdoch before the US Federal Trade Commission

Numerous newspaper and magazine publishers ace a grim nancialoutlook due to dwindling subscribers and advertising revenue. Years o discounted subscriptions and ree websites have accustomed consumersto pay little or nothing or content, leading to lackluster responses to paidsubscriptions. Publishers need to innovate like never be ore to reachprospects and supplement advertising revenue with payments rom users.Below are a ew o the recommendations or action based on the results o this research:

Get intimately amiliar with prospects andcustomers.Many people, particularly younger adults, show willingness to pay or digitalmagazine and newspaper content, but most have not yet started doingso. Analog ormats ported over to the digital realm have ailed to createcustomers. A sophisticated, multidimensional understanding o targetaudiences is needed to cra t user experiences and o erings that will attractpaying customers. User research, surveys, and analytics can help identi ywho the best prospects are, what content and eatures they most value,which types o services or products they would pay or, what price pointsthey nd attractive, and when they are likely to buy.

Gaining a better understanding o how prospects value content in speci ccontexts will lead media companies to choose the right monetizationstrategies to acquire and retain customers, and help justi y investmentsin content and unctions based on their needs. The goal should not justbe to accumulate a bigger audience; publications must also oster a moreengaged audience to sustain themselves over the long haul.

Extend and synchronize access across multipleplat orms.

The appetite or digital content continues to grow as new technologiesimprove both convenience and the reading experience. Tablet reading inparticular has taken o , ueled by steadily rising iPad adoption. Magazineand newspaper publishers must nd ways o serving up content to anever-growing number o screens, ensuring the ability to synch readingacross devices. Success ul content o erings will ollow the Netfix exampleand show customers the same company through every channel or devicethey own, but also optimize or each plat orm to deliver the best possibleexperience.

With so many devices on the market, media companies must planinvestments care ully, starting with browser-based website optimization.Using the open web and HTML5 can help publishers maintain theirindependence rom Apple and Google. And those looking to createsubscriptions bundling print, web, smartphone, and tablet access will ndsites linked to developer- riendly ecommerce systems more fexible thanin-app payment systems anyway.

Still, app stores can help users discover content. With the iPad expectedto take 80% o the market this year iOS is a priority, but publishers shouldbe cautious not to overinvest in applications. Since apps cost upwards o $60,000, publishers must be certain expected bene ts will outweigh buildcosts. Any app, whether ree or paid, must o er consumers an incrediblyhigh value proposition to inspire usage; even popular apps only reachhundreds o thousands o users rather than millions. Building re-usable

content elements to eed both the mobile web and multiple apps is a smartway to go.

Not only should publishers be cautious about build costs, but they shouldalso be aware o in-app subscription terms that vary wildly in regardto customer data ownership, revenue share, and licensing restrictions.Because they di er so much, publishers should take care to examine eachservice independently.




Create a di erentiated experience that rewardsinteraction.

Most readers won’t pay or static content that rehashes what they canget elsewhere or ree. While niche consumer or B2B publications (o tenclaimed as a work expense) will nd this easier to do, every publishershould strive to di erentiate their o erings by combining authoritativein ormation, exclusivity, and community in unique ways to generate interestand compel users to pay or access. Macworld has pursued this approachwith its premium website, Macworld Insider , which provides an ad- reesite layout, back issue access, ull-content RSS eeds, a members-onlynewsletter and orum, plus live chats with editors and writers. Embeddingtools or services in content that allow it to be customized or personalized isanother way to raise engagement.

Social media, particularly Facebook, has changed the way we interactwith content. By adding social eatures such as reviews, comments,avorites, and recommendations, savvy publishers can deepen customer

relationships and turn sharing rom a liability into an important source o re errals. While it is still too early to tell i their e orts will be success ul,The

Journal Register is one newspaper company that is attempting to trans ormthe way it does business by using web-based tools to empower audiencesto help shape and participate in newsgathering.

Be fexible in your approach to monetizationmodels.For the last decade, publishers have intensely debated whether or notconsumers will pay directly or newspaper and magazine content. Whilemost consumers have yet to make a purchase, many show willingness topay or access o some type—whether by the article, through all accessplans, or or ancillary services.

With ew bona de successes to look to or guidance, publishers mustexplore a variety o monetization strategies to nd those that resonate best

with target audiences and then re ne them iteratively. To be success ulover the long haul, strategies that acilitate and reward requent usage willwin out over others (like metered billing) that penalize the most engaged

readers. Using monetization strategies in tandem can o er customers morechoice. Three o the more interesting models include:

• Free-mium/tiered subscriptions : Free-mium combines ad-supportedcontent with paid premium services. With Apple and Google bothannouncing subscription payment services in February, therehas been a renewed interest in monetizing digital content using asubscription model. Providing a layer o ree access can eventuallyentice readers into subscribing to paid services. The key is toaccommodate di erent audience segments with quality contentthey cannot get elsewhere. One company said to be doing wellwith a tiered model (registered users only, subscribers only) is TheFinancial Times , which saw no loss in visitors or ad revenue whenthey put up their pay wall last year.

• Microtransactions : Several newspapers and magazines arenow considering o ering individual articles or eatures à la carte,while some already allow paid one-day or one-week access. Byunbundling their content, publishers allow consumers to customizeand personalize in ormation to make it more valuable to them.

Another take on this model is the newspaper and magazine portal. Visitors sign up to a single micropayment system to access a wideselection o publications or content and have the fexibility o payingby the article or by the day.

• Marketplace : With this model, publishers make their content assetsavailable to a developer community to build commercial and non-commercial digital products and applications. By allowing theircontent to be used in new ways, magazines and newspapers canspeed innovation, build partnerships, and potentially monetize theircontent more easily than they could alone. The UK-based Guardian is the rst newspaper to o er a ully open API with tools or usingtheir resources on other plat orms and or integrating apps directlywithin their network.




About Elastic PathElastic Path provides the industry’s most fexible enterprise ecommerce plat orm and strategic ecommerce consulting. We help innovative enterprisessell more digital goods and services in a way that is rictionless, social, and everywhere. Major global brands such as Symantec, Time Inc, and VirginMedia rely on Elastic Path to innovate and grow. Web www.elasticpath.com | Blog www.getelastic.com | Twitter www.twitter.com/elasticpath

About the Author Amanda Dhalla is an ecommerce consultant with Elastic Path’s consulting division. A seasoned ecommerce pro essional with morethan 12 years in the eld, Amanda has hands-on experience marketing, merchandising, and managing multimillion dollar online stores.Her areas o specialization range rom market research, conversion optimization, and analytics to tra c generation tactics such as

social media, search engine optimization, and content marketing.

Contact Us To nd out how Elastic Path’s market research and ecommerce consulting services can help you succeed, please [email protected] or call 1.800.942.5282 (toll- ree within North America) or +1.604.408.8078 (outside North America).

MethodologyFrom February 18 to 22, 2011 Elastic Path So tware hired Vision Critical, an interactive research solutions company, to conduct an online survey among a sample o 1,010 US adults over the age o 18 who had read

at least one magazine or newspaper in the past month. Respondents had to have either read the magazine(s) or newspaper(s) in print, online (i.e., using a computer or mobile web browser), or via a dedicated applica-tion. The ull dataset has been statistically weighted according to the most current region, gender, age, and education Census data to ensure a representative sample. The margin o error is ±3.1%, 19 times out o 20.Discrepancies in or between totals are due to rounding.

© Copyright 2011, Elastic Path So tware Inc. All rights reserved. Elastic Path™ and the Elastic Path logo are trademarks or registered trademarks o Elastic Path So tware Inc. All other trademarks are the property o their respective owners.

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