Future of Magazines and Newspapers in Digital by Elasticpath

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

Survey BackgroundThis online study polled 1,010 US adults over the age of 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 application (e.g., using an iPad or iPhone app). The survey was developed to examine consumer attitudes and behaviors towards newspapers and magazines in both print and digital format.

Executive SummaryTraditional media publishers continue to face a difficult financial outlook due to dwindling readership and advertising revenues. At the same time, new technologies and social media are having a major impact on consumer behavior. Increasingly, users expect to be able to access content anytime, anywhere, on devices of their choosing. As with other types of digital content such as music and games, members of Gen Y (ages 18-34) exhibit an early-adopter profile when it comes to the number of advanced consumer electronics they use for reading publications.

While tablets, smartphones, and eReaders open new distribution channels, publishers face challenges in maintaining and monetizing customer relationships that have been fragmented by countless platforms, devices, and services. Many people show willingness to pay for digital magazine and newspaper content, but most have not yet started doing so. Years of ad-supported free websites and discounted subscriptions have accustomed consumers to pay little or nothing for digital content.

In a competitive media landscape, publishers need to innovate like never before to reach prospects and supplement advertising revenue with user payments. With few bona fide successes to look to for guidance, publishers must explore a variety of monetization strategies to find combinations that resonate with target audiences. Magazines and newspapers that gain a deep understanding of target audiences through qualitative and quantitative research will stand a better chance than most of crafting differentiated content, solutions, and services that consumers value with both their time and their money.


Key Findings

Print trumps digital for newspaper and magazine readers.While nearly half of US adults now read at least some digital magazine and newspaper content, print remains the dominant format. Almost eight in ten US adults have read print newspapers or magazines in the past month. Of those who read print publications, 33% spend 3 hours or more [Figure 1] per week doing so. Unsurprisingly, older adults (55+) tend to be the heaviest consumers.

Digital formats have yet to be consumed as much as print; still 47% of adults have read publications online in the past month. Magazine and newspaper applications are on the rise; 19% of readers use them regularly (at least one hour per week). Younger consumers (ages 18-34), particularly men, are significantly more likely than average to read digital content online and through dedicated mobile and PC apps.

During an average week, how much time do you spend 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


Plentiful, all too similar online content is devalued by consumers.In line with our previously discussed findings, three in four newspaper and magazine readers (76%) prefer reading print newspapers and magazines over digital versions [Figure 2]. This preference drops to two in three (67%) among younger consumers. While the majority of those surveyed appreciate the convenience of digital delivery (59%), many value print more highly. Many people (49%) indicated that they would pay more for a physical copy than the online version, and a whopping 82% believe print subscriptions should come free with digital access. Most consumers are also exhibiting signs of content fatigue, with 60% finding print and digital articles to be similar from one publication to the next.

In a competitive media landscape, newspapers and magazines clearly are facing an uphill battle to maintain and monetize customer relationships. Years of ad-supported free websites and discounted subscriptions have accustomed consumers to pay little or nothing for digital content. 0% 100%

[Figure 2]

How much do you agree or disagree with the following statements about newspapers and magazines?

Strongly disagree Unsure

Moderately agree

Moderately disagree


Strongly agree

28

43%

I would pay more for the print issue than the online or digital issue 16% 22 181133

Content seems similar from publication to publication 43 8 82417%

I should get free access to the digital or online issues if I already have a print subscription 55% 627 8 5

I only read certain sections regularly 32% 3 1444 7

I should get free access to back issues if I buy a digital subscription 3347% 8 5

The quality of the content is more important than the format 37% 440 135

I like being able to read on any device, anywhere, anytime 27% 32 10 17 14

I like being able to start reading on one device and continue reading from where I left off on another device 19% 28 16 18 18

I should be able to loan content to someone else if I buy a digital subscription 3427% 14 16 9

I like receiving new editions the minute they are published 28% 41 7167

I prefer reading print publications 33 13 5543%

7


Small screen devices are increasingly used to read content. The phenomenal popularity of smartphones, iPads, and eReaders has led to a rapid rise in media applications and, subsequently, to an increase in reading across multiple devices. Although about half of magazine and newspaper consumers read on personal computers, over 10% also now read on smartphones [Figures 3a and 3b].

As with other types of digital content such as music and games, members of Gen Y (ages 18-34) exhibit an early-adopter profile when it comes to the number of advanced consumer electronics they use for reading publications. They are more than twice as likely as the general population to consume newspaper and magazine content on smartphones, tablets, and eReaders. To reach these early technology adopters (and their even more connected younger siblings) publishers must go beyond simply offering multi-platform access to fully exploit the capabilities of small screen devices and bring new experiences to readers.


0% 100%

[Figure 3a]

Which of the following devices do you regularly use to read newspapers (online or via a dedicated application)?

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 use to read magazines (online or via a dedicated application)?

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 digital publications, so far.Of those surveyed, 15% spent more than $100 in the past year on print publications alone, with 5% paying a similar amount for combined print and digital subscriptions [Figure 4]. Only 16% spent anything at all on digital newspapers and magazines alone. Although subscription payment services were announced in February by both Apple and Google, a large scale market, wherein users pay for exclusive access to digital publications, has not yet developed.

In line with their reading habits, older consumers (55+) tend to be the biggest print spenders, but are unaccustomed to paying for digital access. In sharp contrast, while younger consumers continue to buy print publications, 32% also paid to access digital newspapers and magazines in the past year. Having watched ecommerce apps become commonplace, members of Gen Y (ages 18-34) are used to buying digital content such as movies. However, even younger consumers are reluctant to pay much for content; most of those who bought digital publications last year spent under $25, with just a tiny percentage (4%) paying $100 plus.

0% 100%

[Figure 4]

Print issues and subscriptions of newspapers and magazines only


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

15% 16 17 30 5

$51-$100

Over $100

$25 or less

$26-$50 $0

Don’t remember

17

Digital or online issues and subscriptions of newspapers and magazines only 1 1 784 10% 5

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


Better pricing is not the only way to compel purchase.Many publishers are facing a poor financial outlook due to shrinking readership and advertising revenues. At the same time, with the glut of free content available, there is little evidence of consumer demand for paid content. So what might encourage consumers to purchase digital magazines and newspapers in this post-recessionary climate?

Of those surveyed, 73% indicated that a digital publication with a lower price than the print version could compel them to buy, followed by free trials and promotions at 67% [Figure 5]. Currently, many publishers offer their digital content at a premium, penalizing those who choose it over print. For example, Wired sells 12-issue print subscriptions for just $10 but charges $3.99 for each iPad edition.

Two thirds of consumers value the ability to clip and organize digital content for later use (64%), a feature that is not always available, or well advertised. Affluent, university-educated consumers and members of Gen Y (ages 18-34) view exclusive editorial content as more of an enticement to purchase than other readers. Younger adults also find interactive content, multi-device access, and issue sharing attractive.

Please indicate whether the following features would or would not be likely to encourage you to buy online or digital newspapers or magazines

Not very likely

Very likely

0% 100%

[Figure 5]

Not at all likely Unsure

Somewhat likely


Interactive experience with video interviews,community, Q&A etc. 15% 27 25285

28% 36 16182Ability to clip and organize interesting content for later use(e.g., recipes)

Lower price than the print version 38% 35 3 1112

Free trial or promotional offer(e.g., 20% off regular price) 31% 36 18 133

Recommendations from friends, colleagues etc. 16% 33 273 21

Access to back issues included in the price 26% 35 3 19 16

Ability to share your issue or subscription witha friend or family member 2326% 33 2 16

Editorial content not available elsewhere 3117% 4 28 20

Ability to read on multiple devices (e.g., laptop, smartphone, iPad etc.) 20% 26 243 27

Personalized content based on my location, interests etc. 23% 3 1538 21


Readers are open to multiple payment models. Over half of adults find all-you-can-read subscriptions (62%) and free-mium models (55%) appealing [Figure 6]. Although subscription payment services were announced in February by both Apple and Google, a large scale paying audience for digital publications has not yet developed.

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

As active digital purchasers, unsurprisingly younger adults (ages 18-34) find a multitude of payment options more appealing than the average reader, with two in three showing an affinity for social shopping to receive discounts and free access in exchange for referrals. Pay-per-article also resonates with Gen Y readers who may prefer to just pay for what they actually read, and not for rehashed content they can get elsewhere for free.

0% 100%

[Figure 6]

How appealing are the following payment options for digital 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 or newspaper 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 but the standard version is free 27% 28 22158


Consumers value the freedom to read when they want, where they want.Features of digital newspapers and magazines that consumers find most important include anytime anywhere access (48%), search (45%), and timely delivery (43%) [Figure 7]. While it is too early to tell, “all-access” digital subscription plans that deliver publications to all platforms (e.g., web, tablet, and smartphone), such as that announced in February by Time Inc. and Sports Illustrated, could find favor with audiences.

0% 100%

[Figure 7]

How important are the following features of digital or online 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 hits the 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 are worth paying for.When readers were asked what content they might be willing to pay for, in-depth information and expert advice (63%) and back-issue access (60%) [Figure 8] topped the list (and were found to be particularly important to university educated and younger readers, ages 18-34).

Despite their willingness to view ads in exchange for free access [Figure 6], many consumers (60%) would consider paying to view ad-free content [Figure 8]. This sentiment resonates most strongly with a younger demographic. Members of Gen Y show interest in publication-related games, products, and services as well; this demographic is significantly more likely than average to pay for these types of ancillary offerings.

0% 100%

[Figure 8]

With regard to digital or online magazines and newspapers, how likely are you to pay for the following (if available)?

Not at all likely Unsure

Somewhat likely

Not very likely


Very likely

28

Workshops, events or educational courses associated with the publication 13% 253 3128

Games, products or services associated with the publication 17% 2329 2 29

Ability to obtain in-depth information or expert advice on a topic of interest 26% 37 18 173

The right to re-use the content in your own 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 are effective at driving purchase. Interactive ads in digital publications appear to be effective at driving consideration and sales. While 18% of viewers had taken no action in response to an online or digital newspaper or magazine ad, 36% had entered a contest, 31% had made a purchase, and 20% had signed up for a trial [Figure 9]. Many others had taken steps toward a purchase decision, including visiting a website (55%), requesting more information about a product or service (25%), and going to a store to view the item (32%).

With digital formats better able to capture reader attention and create a more engaging experience than static print ads—at the same time as being more measurable and micro-targeted, advertisers have shifted their dollars away from print. However, in a world of proprietary content and apps, it can be difficult for advertisers to deliver a large-scale campaign.


0% 100%

[Figure 9]

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

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 a product 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 newspaper or magazine ad

18%


Members of Gen Y are keen to share their influence online.Social media, particularly Facebook, has changed the way we interact with content. Most readers enjoy letting others know about articles they have read; two out of three (66%) regularly share information face-to-face or by phone, while half (49%) do so via email [Figure 10]. Younger adults (ages 18-34) are particularly keen to share their influence online; members of Gen Y are more than three times as likely as older adults (55+) to post links to articles on social networks (59% vs. 16%), write comments (43% vs. 14%), and rate or review articles (55% vs. 18%). Digital publishers who offer comprehensive social sharing and community tools, and make it easy to share, will directly benefit from an increased audience for their content. 0% 100%

[Figure 10]

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

Sometimes NeverVery often Rarely


Email someone about it

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

Post a link to the article on Facebook, Twitter, or your personal blog or website 10% 23 22 46

23% 43 19 15

14% 30 21

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

Rate or review the article 9% 25 31 34

35


Almost half of adults find copying and sharing without permission acceptable.

Copying and sharing digital content without permission was found to be acceptable by 42% of adults [Figure 11], with only slight differences in attitudes among demographics. While younger consumers show a higher propensity to pay for publications [Figure 4], this group is also more likely to feel it is acceptable to copy and share digital magazine and newspaper content without permission.

The abundance of free, ad-supported news and magazine sites and apps has blurred the lines between copyrighted material and that in the public domain, while social sharing tools and properties have fueled our interest and ability to share digital content with friends, family, and colleagues.

[Figure 11]

Strongly agree, 17%

Moderatelydisagree, 20%

Strongly disagree, 24%

Do you agree or disagree that copying and sharing online or digital newspaper or magazine content without permission is acceptable?


Unsure,14%

Moderately agree, 25%


Recommendations“The future of journalism belongs to the bold, and the companies that prosper will be those that find new and better ways to meet the needs of their viewers, listeners, and readers.”

Rupert Murdoch before the US Federal Trade Commission

Numerous newspaper and magazine publishers face a grim financial outlook due to dwindling subscribers and advertising revenue. Years of discounted subscriptions and free websites have accustomed consumers to pay little or nothing for content, leading to lackluster responses to paid subscriptions. Publishers need to innovate like never before to reach prospects and supplement advertising revenue with payments from users. Below are a few of the recommendations for action based on the results of this research:

Get intimately familiar with prospects and customers.Many people, particularly younger adults, show willingness to pay for digital magazine and newspaper content, but most have not yet started doing so. Analog formats ported over to the digital realm have failed to create customers. A sophisticated, multidimensional understanding of target audiences is needed to craft user experiences and offerings that will attract paying customers. User research, surveys, and analytics can help identify who the best prospects are, what content and features they most value, which types of services or products they would pay for, what price points they find attractive, and when they are likely to buy.

Gaining a better understanding of how prospects value content in specific contexts will lead media companies to choose the right monetization strategies to acquire and retain customers, and help justify investments in content and functions based on their needs. The goal should not just be to accumulate a bigger audience; publications must also foster a more engaged audience to sustain themselves over the long haul.

Extend and synchronize access across multiple platforms.The appetite for digital content continues to grow as new technologies improve both convenience and the reading experience. Tablet reading in particular has taken off, fueled by steadily rising iPad adoption. Magazine and newspaper publishers must find ways of serving up content to an ever-growing number of screens, ensuring the ability to synch reading across devices. Successful content offerings will follow the Netflix example and show customers the same company through every channel or device they own, but also optimize for each platform to deliver the best possible experience.

With so many devices on the market, media companies must plan investments carefully, starting with browser-based website optimization. Using the open web and HTML5 can help publishers maintain their independence from Apple and Google. And those looking to create subscriptions bundling print, web, smartphone, and tablet access will find sites linked to developer-friendly ecommerce systems more flexible than in-app payment systems anyway.

Still, app stores can help users discover content. With the iPad expected to take 80% of the market this year iOS is a priority, but publishers should be cautious not to overinvest in applications. Since apps cost upwards of $60,000, publishers must be certain expected benefits will outweigh build costs. Any app, whether free or paid, must offer consumers an incredibly high value proposition to inspire usage; even popular apps only reach hundreds of thousands of users rather than millions. Building re-usable content elements to feed both the mobile web and multiple apps is a smart way to go.

Not only should publishers be cautious about build costs, but they should also be aware of in-app subscription terms that vary wildly in regard to customer data ownership, revenue share, and licensing restrictions. Because they differ so much, publishers should take care to examine each service independently.


Create a differentiated experience that rewards interaction. Most readers won’t pay for static content that rehashes what they can get elsewhere for free. While niche consumer or B2B publications (often claimed as a work expense) will find this easier to do, every publisher should strive to differentiate their offerings by combining authoritative information, exclusivity, and community in unique ways to generate interest and compel users to pay for access. Macworld has pursued this approach with its premium website, Macworld Insider, which provides an ad-free site layout, back issue access, full-content RSS feeds, a members-only newsletter and forum, plus live chats with editors and writers. Embedding tools or services in content that allow it to be customized or personalized is another way to raise engagement.

Social media, particularly Facebook, has changed the way we interact with content. By adding social features such as reviews, comments, favorites, and recommendations, savvy publishers can deepen customer relationships and turn sharing from a liability into an important source of referrals. While it is still too early to tell if their efforts will be successful, The Journal Register is one newspaper company that is attempting to transform the way it does business by using web-based tools to empower audiences to help shape and participate in newsgathering.

Be flexible in your approach to monetization models. For the last decade, publishers have intensely debated whether or not consumers will pay directly for newspaper and magazine content. While most consumers have yet to make a purchase, many show willingness to pay for access of some type—whether by the article, through all access plans, or for ancillary services.

With few bona fide successes to look to for guidance, publishers must explore a variety of monetization strategies to find those that resonate best

with target audiences and then refine them iteratively. To be successful over the long haul, strategies that facilitate and reward frequent usage will win out over others (like metered billing) that penalize the most engaged readers. Using monetization strategies in tandem can offer customers more choice. Three of the more interesting models include:

• Free-mium/tiered subscriptions: Free-mium combines ad-supported content with paid premium services. With Apple and Google both announcing subscription payment services in February, there has been a renewed interest in monetizing digital content using a subscription model. Providing a layer of free access can eventually entice readers into subscribing to paid services. The key is to accommodate different audience segments with quality content they cannot get elsewhere. One company said to be doing well with a tiered model (registered users only, subscribers only) is The Financial Times, which saw no loss in visitors or ad revenue when they put up their pay wall last year.

• Microtransactions: Several newspapers and magazines are now considering offering individual articles or features à la carte, while some already allow paid one-day or one-week access. By unbundling their content, publishers allow consumers to customize and personalize information 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 wide selection of publications or content and have the flexibility of paying by the article or by the day.

• Marketplace: With this model, publishers make their content assets available to a developer community to build commercial and non-commercial digital products and applications. By allowing their content to be used in new ways, magazines and newspapers can speed innovation, build partnerships, and potentially monetize their content more easily than they could alone. The UK-based Guardian is the first newspaper to offer a fully open API with tools for using their resources on other platforms and for integrating apps directly within their network.


About Elastic Path

Elastic Path provides the industry’s most flexible enterprise ecommerce platform and strategic ecommerce consulting. We help innovative enterprises sell more digital goods and services in a way that is frictionless, social, and everywhere. Major global brands such as Symantec, Time Inc, and Virgin Media rely on Elastic Path to innovate and grow. Web www.elasticpath.com | Blog www.getelastic.com | Twitter www.twitter.com/elasticpath

About the AuthorAmanda Dhalla is an ecommerce consultant with Elastic Path’s consulting division. A seasoned ecommerce professional with more than 12 years in the field, Amanda has hands-on experience marketing, merchandising, and managing multimillion dollar online stores. Her areas of specialization range from market research, conversion optimization, and analytics to traffic generation tactics such as social media, search engine optimization, and content marketing.

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

Methodology

From February 18 to 22, 2011 Elastic Path Software hired Vision Critical, an interactive research solutions company, to conduct an online survey among a sample of 1,010 US adults over the age of 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 full dataset has been statistically weighted according to the most current region, gender, age, and education Census data to ensure a representative sample. The margin of error is ±3.1%, 19 times out of 20.

Discrepancies in or between totals are due to rounding.

© Copyright 2011, Elastic Path Software Inc. All rights reserved. Elastic Path™ and the Elastic Path logo are trademarks or registered trademarks of Elastic Path Software Inc. All other trademarks are the property of

their respective owners.

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Future of Magazines and Newspapers in Digital by Elasticpath

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