The magazine media industry has historically made around 70% of their revenues through print advertising, according to FIPP’s updated edition of Paywalls: How to start your subscription strategy report. This is changing now due to declining ad revenues.
PriceWaterhouseCoopers estimates a 6.2% decline in print advertising, and a 1.6% decline in print circulation worldwide for consumer magazines from 2017 to 2022.
It also predicts a 5.8% increase in digital advertising and a 5.5% growth in digital subscriptions during the same period.
For B2B magazines, a 5.2% in decline in print advertising and a 1.5% drop in print circulation is expected. PwC estimates 9% and 13.1% growth in digital advertising, and digital subscriptions respectively, during the same period.
“Magazine mutual fund”
The changing business landscape has led magazine publishers to pursue diversified consumer facing revenue models.
Bonnier CEO Eric Zinczenko said at a conference last year that he wants Bonnier’s revenues to look like a “magazine mutual fund,” with diversified revenue spreading risk. “We want a portfolio of 33% print, 33% digital and 33% from ancillary activities,” he said.
Commonly, new revenue streams include digital subscriptions, memberships, events, ecommerce, and licensed goods.
Reader relationships are a critical element for success in these strategies.
“Our brands and broad print distribution are no longer enough. The Internet requires media companies to build personal relationships with readers,” said Troy Young, President of Hearst Magazines, in a 2019 memo to his staff.
Our ability to capture interaction data at scale, turn it to insight and leverage it broadly across our organization will define our success.Troy Young, President of Hearst Magazines
“The reader relationship strategy is about creating engagement, customer satisfaction and lifetime value with users through targeted content, products, advertising and services for individual customers,” the report suggests.
“A model for magazine media companies in transition”
Many magazine publishers own a robust reader database. They harvest reader data from a variety of sources like content registration, customer service data, ecommerce, contests, and third-party advertising, among others. This gives them a strong start towards executing a successful reader relationship strategy.
The report looks into how publishers can analyze this data to understand their readers better and use the insights gained to build profitable products or new businesses.
For example, Dennis Publishing, the publisher of motoring magazines like Auto Express, Land Rover Monthly, Evo and Octane, has built a successful business around online car sales.
According to the report, the publisher’s cumulative magazine content includes 27,000 car reviews, and 20,000 other auto product reviews by 60 journalists and editors, and 150 contributors.
The publisher’s websites include carbuyer.co.uk and BuyaCar.co.uk. The latter, a 2017 acquisition, is the UK’s leading car purchase and finance platform. It represents 21% of all online UK motoring spend.
The acquisition of BuyaCar has been a huge complement to the already robust auto magazine business with a highly engaged readership. The profitable ecosystem is a model for magazine media companies in transition.Paywalls: How to start your subscription strategy
Meredith Corporation which has 45M subscriptions across its diversified portfolio drives about USD $500M in annual retail sales for advertisers. It does so through its retail brand licensing, retail sales for advertising through affiliate marketing; and ecommerce businesses.
Hearst made $200M in merchandise sales developed through the Hearst Product Study. The publisher has been also experimenting with paid content. For example, it has placed selected content behind paywall, like Esquire’s popular political columns by Charles P. Pierce. The publisher also launched Harper’s Bazaar Bride one-year membership, which includes exclusive content, for $90.
“Glue that keeps customers engaged”
“The relationship strategy requires a deep understanding of each user through audience data, and a whole-organization transformation that requires a customer-focus discipline,” the report suggests. “The real-time data collection, analysis and targeting is the glue that keeps customers engaged with relevant information.”
Advanced analytics is now key to acquisition, activation and retention. The future of paywalls will be automated based on data-driven insights.Grzegorz Piechota, Media Researcher at the University of Oxford
The Economist uses machine learning to leverage its database of audience data and create personalized, engaging experiences online. The strategy has helped it reduce the cost of customer acquisition by 80%.
The publisher has used behavioural scoring and predictive modelling to drive a 3x increase in digital subscriptions since 2016. It has also been able to increase dwell time onsite with recommended stories for targeted readers, according to the report.
“Retain customers for a lifetime”
Analytics are a powerful tool that can help engage and keep readers onsite. It builds their loyalty and convinces them to pay for subscriptions and other products.
However, publishers “can only retain customers for a lifetime if they hold up their end of the bargain,” states the report.
Give the customer many reasons to come back on a daily and weekly basis. Delight them with surprises and help make their lives frictionless and fun. Anticipate and solve life’s niggling problems for them. Feed their passions.Paywalls: How to start your subscription strategy
“Transport them to content, advertising, shopping and entertaining places created just for them,” it adds, “made possible by data and artificial intelligence that enables personalization.”
The report provides a detailed overview of how publishers can do that backed with case studies from a variety of magazines and new publishers. These include The Economist, The Times and The Sunday Times and The New York Times, among others.
Download the report from FIPP:
Paywalls: How to start your subscription strategy