If you subscribe to any magazines, you probably have noticed that they are very, very cheap. Sure, a glossy magazine like Esquire or Popular Science will cost you about five bucks on the newsstand, but if you subscribe, you can get many big-name magazines for about a dollar an issue. That’s barely enough to pay for paper and ink, much less postage.
Why so little? Because magazines are desperate to hold on to readers. They traditionally have made most of their money from advertising. So if they have lots of readers, they’ll get tons of advertising, and everyone will be happy. That’s the traditional model, anyway.
But magazine advertising has stagnated, and magazine executives are scrambling to raise revenue in the dawning digital age. That’s why, as the article below from The Wall Street Journal explains, magazines are charging more for their digital offerings than they do for their print products. Cosmopolitan, for example, will cost you twice as much for a tablet subscription via iTunes than you would pay to get the magazine in print.
In some ways, the tablet versions are better. They have interactive graphics, video, even ads that talk to you. And you can load a couple of magazines on your tablet before going on a business trip or vacation. That’s pretty handy. As the WSJ article notes, a fair number of people are willing to pay for these magazine apps. Tablet readers are younger and better-educated than print readers, and they have higher incomes, so they’ll fork over a few extra bucks to get something new.
The simple truth is, as the Web expands and offers more and more opportunities for advertisers, the price of ad space will fall and consumers will have to pay more for media, whether it’s print, online, or even TV, for that matter. In exchange for your money, you’ll get a vastly wider selection of content. That’s the digital trade-off.
How about you? Have you ever read a magazine on a PC, laptop, smartphone or tablet? Which one? Did you pay money for it? If your favorite magazine (I’m talking to you, Cosmo girls and Sports Illustrated guys) were unavailable in print, would you read it on the tablet? Post a comment and let me know what you think.
Cosmopolitan readers can get their first year’s subscription to the print magazine for $10. But if they want the digital edition on their iPads, they will have to fork over $19.99.
That’s a pricing maneuver so bold it may make even Cosmo readers blush. In the book and newspaper industries, digital versions are typically cheaper than print ones. But some in the magazine world are going the other way, charging more for their digital versions.
Keach Hagey/The Wall Street Journal
Hearst’s David Carey with tablets.
Buffeted by declining advertising, which accounted for about 75% of their revenue historically, magazines are turning to tablet computers and digital editions to boost circulation revenue. In doing so, they are hoping to reset decades of subscription discounting so deep that a year’s supply of magazines like Esquire currently costs just $8.
“This represents an opportunity for the magazine business to become more leveraged toward consumer revenue and a little less dependent on advertising,” said David Carey, the president of Cosmo publisher Hearst Magazines, in an interview at his office at the top of New York’s Hearst Tower.
Nearby, in Hearst’s tablet-filled App Lab, John Loughlin, Hearst’s executive vice president and general manager, put it even more bluntly: “I hope that this is the demise of $6 and $7 and $8 and $9 print subscriptions,” he said.
So far, consumers don’t seem to mind the higher digital prices. Earlier this month, Hearst said it had amassed nearly 800,000 digital subscribers, short of its year-end target of a million but still the largest digital-only subscriber base in the industry. And that is despite the fact that its average digital subscription price of $19.99 annually was twice that of its average introductory print-subscription price of $10.
Hearst isn’t alone in seizing this opportunity. Bonnier Corp. magazines like Popular Science and Field & Stream cost more to subscribe to on the iPad than in print, while the Economist recently unbundled its print and digital subscriptions and bumped the price of the two together to $160 from $127.
Over the past 12 months, Condé Nast, publisher of high-end titles like Vogue and the New Yorker, also raised prices on its bundled print and digital subscription offerings, effectively making print subscribers pay more for digital versions they previously received as a free extra.
For example, the New Yorker is currently advertising a bundled print and digital subscription for $99, while print alone or digital alone costs $69. Two years ago, before the existence of the digital edition, a print subscription cost $39.
Despite the price increase, the print subscribers who chose to sign up for digital subscriptions renewed at a 25% higher rate than those who didn’t, said Condé Nast President Bob Sauerberg. So far, the company has about 500,000 digital-only subscribers and 1.5 million digital readers, including the print subscribers who log onto the tablet version of a magazine.
“We’re using this new platform and the clear demand for all access to our content as a way to redefine our subscription offerings at a higher price,” Mr. Sauerberg said. “The industry is trying to take a step forward because we’re all trying to get more money from the consumer.”
Magazine publishers’ moves echo similar steps taken by newspaper publishers to offset declining ad revenue. In the case of newspapers, however, higher circulation money has come from raising print cover prices and instituting so-called paywalls that require customers to pay for full access to newspaper websites. It generally remains cheaper to read newspapers online than in print.
That’s partly because historically, newspaper subscriptions haven’t been heavily discounted. By contrast, magazine publishers have guaranteed advertisers their titles will reach a minimum number of readers and, to fulfill that pledge, they have long cut prices sharply for promotional subscriptions. And such guarantees have reduced the magazine publishers’ ability to raise print subscription prices.
Digital pricing gives magazine companies a tool to begin training consumers to pay more for content, and some of these new prices have even made their way into print. Condé Nast has raised prices significantly on the print edition of Wired since it launched its digital edition in 2011, while Hearst has been testing new print-subscription pricing that may do away with ultracheap promotional offers. With the “influx of paid digital,” Mr. Carey said, “you could rethink that—potentially even walk away from it.”
Without big increases for print subscriptions, the magazine industry won’t be able to significantly offset ad-revenue declines. Magazine-advertising pages dropped 8.2% in 2012 and are down 32% since 2008, according to the Publishers Information Bureau. And digital subscribers remain a minority: Most of the big publishers expect only about 10% of their total circulation to be digital by around 2015, up from the low single-digit percentages today.
Not everyone is hopping on the price-increase bandwagon. The country’s biggest magazine publisher, Time Inc., whose magazines include People and Sports Illustrated, sells digital editions, print editions and print-and-digital bundles for the same price. Time Inc. executives say that because they never got into the business of discounting most of their magazines the way their competitors did—a year’s subscription to the weekly People costs more than $100, while Sports Illustrated costs $39—they believe they don’t need to raise prices now.
“Just because you can get it on the tablet doesn’t mean that you can price up,” says Time Inc. Chief Executive Laura Lang. “You actually have to have content that people get excited about…What I love about tablets is, it gives us a chance to make more relevant content, which people will value.”
The willingness of tablet owners to renew their pricier digital magazine subscriptions may change as tablets become more mass market. The average tablet reader now is younger, richer and more educated than the average magazine reader. Nearly two-thirds of them are male, and 54% of them are Millennials—or between 18 and 35—while 36% have more than $100,000 in household income, according to “The Tablet at Two,” a study of the tablet publishing landscape by Empirical Media, a digital-advisory firm.
Two-and-a-half years after Apple Inc. AAPL -0.88%created the market with the launch of the iPad, tablets have entered their “middle-adopter” phase with 70 million tablet readers in the U.S., said Jim Friedlich, the president of Empirical Media.
“As market penetration continues, the demographics of the tablet user will be largely indistinguishable from mainstream magazine and newspaper readers,” he said.
Write to Keach Hagey at firstname.lastname@example.org
A version of this article appeared January 19, 2013, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Magazines Cross The Digital Divide