Magazines take on Amazon
Magazines attempt to win back control of their digital editions
LET it never again be said that old-media firms are slow to deal with new technology. On December 8th Condé Nast, Hearst, Meredith, News Corporation and Time Inc invested in an as-yet-unnamed venture that will create and sell digital magazines and newspapers for the new generation of e-readers that is likely to succeed Amazon’s monochrome Kindle in the next year or so. It was as if a group of explorers had announced plans to settle a country that had not yet been discovered.
Consumers can already get hold of many publications on smart-phones and e-readers. But smart-phones have small screens, and e-readers render magazines as crudely illustrated black-and-white books. They cannot reproduce magazines’ distinctive fonts or elegant graphics. Worse, they are unsuited to advertising, on which most magazines depend. In the year to June, Meredith’s publishing arm, which produces Better Homes and Gardens among dozens of other titles, made almost twice as much from advertising as it did from newsstand sales and subscriptions.
Publishers are irked at the prospect of formatting content for multiple devices with slightly different requirements—a problem that will worsen. They are even more irked at the current market leader, Amazon, which returns as little as 30% of the sale price of a digital magazine to publishers and provides less detail about customers’ reading habits than they would like. Publishers who want to go digital currently have a choice between the open internet, which generally provides revenue from advertising (but not much) and no subscriptions, and e-readers, which provide revenue from subscriptions (but not much) and no advertising.
The consortium plans to develop software that can be used to create digital publications for a wide range of devices. It will also set up a storefront similar to iTunes, Apple’s online music outlet. This will not be restricted to the consortium’s publications, nor will it be the only way to get hold of them. Condé Nast is already working with Adobe to develop software of its own for advanced e-readers. Hearst, another member of the consortium, has a start-up called Skiff. How the new venture’s efforts will mesh with these other projects is not yet certain. Yet the destination is clear, says John Squires of Time Inc, who will manage the consortium at first. His company has produced a mock-up of an edition of Sports Illustrated, complete with video and interactive ads, which provides a compelling, if hypothetical, glimpse into the future of magazines.
In important ways the consortium resembles Hulu, an outfit Mr Squires praises as “artful”. Hulu’s website streams television programmes from three of America’s four big English-language broadcasters, as well as a few pay-television shows. It has no sneezing pandas, tedious home-made tirades or any of the other detritus with which YouTube is filled. Hulu is popular with both consumers and companies, which pay stiff rates to place advertisements in its programmes (it helps that Hulu does not yet run many ads). As with the magazine consortium, media companies own equity stakes in Hulu.
This model is spreading. On the very day the publishers agreed to set up their venture, record companies launched a Hulu of sorts for music videos in America. Vevo is partly owned by Universal and Sony and licenses other content from EMI. Although it is run in conjunction with YouTube, it is intended to be a separate, cleaner world. Such is the evolving wisdom for traditional media firms that want to engage with digital technology: put some distance between your content and the dross, and make sure you have a stake in any new outfit that appears.
Full article: http://www.economist.com/businessfinance/displayStory.cfm?story_id=15065491&source=hptextfeature