Nieman Foundation at Harvard
So what is it? iTunes for magazines? Maybe Hulu for periodicals? How about Piano Media for American titles? Tivo for print?
In the hurly-burly of digital content innovation and monetization, it’s hard to figure out what things are, so we try to find apt comparisons. With the new Next Issue digital newsstand, let’s think Netflix or Pandora or Spotify as the closest cousins. Next Issue, the offspring of five prosperous parents (Time Inc., Conde Nast, Hearst, Meredith, and News Corp.), launched last night what I think will be a model-changing product for publishers.
In short, the Next Issue kiosk idea is transformative — though we’ll have to see how quickly customers take to its unknown brand.
It offers single-priced, all-you-can-eat access to top-shelf magazines, including Time Inc’s People, Fortune, Sports Illustrated, and Time; Conde Nast’s Vanity Fair, Allure, and Conde Nast Traveler; Hearst’s Esquire and Popular Mechanics; and Meredith’s Better Homes and Gardens and Fitness. Thirty-two magazines in total, at launch.
Magazine publishers long eschewed the web as largely detrimental to their business, and they participated on it unevenly and haphazardly. Without the loss of classifieds threat experienced by their newspaper cousins, they could better afford to hold back, though many titles have seen a steady decline in both circulation and advertising revenues.
So when the tablet came along, they sniffed it with great interest. In terms of size, it looked like…a magazine. Sports Illustrated demoed it first and that WonderFactory-wow-of-a-prototype has generated 1.135 million YouTube views in three years. Since then, magazine publishers have moved faster than newspaper publishers to embrace the tablet. Some have told me they expect the tablet to grab a third or more of their print subscriber bases within two to three years. Many have put all-access pay-me-once subscription models into place, making it easy to pay for print and get tablet, too.
They’ve grumbled and growled about Apple’s onerous customer data and revenue sharing, but have moved ahead, in varying degrees with Apple’s Newsstand and other sales outlets. Additionally — and here’s the big difference with the newspaper industry — they pooled their efforts in Next Issue. That company is owned by the five behemoths, and it had difficult birth pangs. At times, it has seemed that Next Issue would become a side attraction (as so many publishing industry consortia become), just dabbling in the Android slice of the tablet market (though the slice is thickening).
Behind the scenes, though, it looks like Next Issue has become a major play of magazine publishers. Though the kiosk at launch only works with Android devices, expect iPads (and then iPhones) to be on board by late summer; Next Issue is about to offer up its product for Apple approval.
Non-Android users can get a sense of the product at Next Issue’s website, though the tablet, of course, is the best way to experience it, as Next Issue CEO Morgan Guenther affirmed yesterday in an interview: “It’s all about touching product.” Guenther, a former TIVO exec, is a West Coast guy, and interestingly Next Issue seems like a bi-coastal play.
Last June, Next Issue released some beta products, all in run-up to this kiosk. “In Silicon Valley, we call it beta. In New York [where most of his owners reside within a few dozen blocks of each other], they call it ‘preview release.’ Business operations are in New York, but it’s the 40-plus product people and engineers in Palo Alto that have worked to create this Next Issue experience.
“It’s all about the USP,” says Guenther. And you can’t have a unique selling proposition, if you don’t have a compelling, ahead-of-the-crowd customer experience. While I’m Android-less, there are a number of reasons to believe that Next Issue may have gotten the new product right, or at least, righter than many of the products or consumer propositions out there.
Let me outline seven things to watch as you take a look at Next Issue:
One way to read: Sign up once — and the new site is offering relatively generous 30-day trials — and you have but one navigation to learn. While the full content from each of the magazines is present, with added video, Next Issue says customers need only learn one way of getting around. If it’s an intuitive design, that’s a huge plus, as news- and feature-hungry readers find ourselves forced to learn the navigation nuances of each of our favorite apps.
One price: Well, almost. Next Issue’s pricing seems simple enough:
The 32 launch titles are premium, not the low end of these publishers’ collections. Next up: adding more owners’ titles, and then non-owners’ magazines.
Newspapers? Well, maybe some, says Guenther. If so, think large regionals like the L.A. Times, Chicago Tribune, or Houston Chronicle, and not a proliferation of small, local paper apps. Not (yet) represented: Next Issue Media owner News Corp.’s The Daily, which as a magazine-like newspaper might fit in well here.
Revenue splits built on “engagement”: So Next Issue, for its work and investment will take a “industry standard” commission, which we can figure is in the 25-40 percent range. While Guenther won’t disclose the formula for divvying up the subscription revenues among publishers, he does say it will be built on “interaction by the consumer.” That sounds similar to what Piano has pioneered in sharing revenues by tracking actual reader usage of content. Consortia often fall apart on revenue sharing issues, so just getting an initial deal done is noteworthy.
New accommodations with Apple: Just as Netflix is newly playing with Apple and ponying up its commission cut, Next Issue looks like it will play along as well. The big reason: Next Issue owners have found, says Guenther, that most of their digital subscribers are new, non-print ones. With cannibalization of the print base less of an issue, paying a rev share to Apple becomes a less emotional cost of doing business.
Get ahead of Flipboard: It’s not a Flipboard-killer, but it’s intended to aggregate before tablet aggregators get the better of the aggregatees, as they’ve done on the web. Flipboard remains a superior browsing experience — cool, comfortable and serendipity-pleasing — and importantly offering a blend of changing content all within one interface. While Next Issue offers a single navigation, it’s not a blended product in the same sense that Flipboard is.
Down the road (how far will be the question), says Guenther, are the additions of search and personalization — and maybe, should the publishers allow it — cross-title topical bundles of health, fashion, or travel products. (Remember Mine magazine?) Should Next Issue continue innovating, combining the best of high-branded bliss with Flipboard fun, it could triumph. Flipboard, for its part, could still find a place in this adjusted ecosystem funneling some new (and younger) readers into Next Issue’s payment system, for a cut of the action.
It’s all a set-up for the print-to-tablet transition: So will a third of print magazine readers prefer the tablet sooner than later, as surveys seem to tell us? Readers love tablet magazine reading. If they transition quickly, and are paying subscribers, then the big business question is advertising.
Tablet ads continues to fetch rates (mainly for national publishers) five times or more greater than web ads. That differential may moderate, but the tablet’s immersive, customer-educating, consumer-grabbing capabilities offer major upside to advertisers and sponsors. It will take a couple to several years to reach some maturity, but the tablet ad ecosystem is developing quickly. Consider that earlier this week, we learned that both Hearst and Conde Nast will start releasing key-to-advertiser metrics on tablet usage, and that the Association of Magazine Media announced its own guidelines. The association goals: “to drive growth of advertising on tablets,” by providing data on:
1. Total consumer paid digital issues
2. The total number of tablet readers per issue
3. The total number of sessions per issue
4. The total time spent per reader per issue
5. The average number of sessions per reader per issue
In another words, just as Next Issue launches, the ad foundation is being thickly laid.
A model and a warning for the newspaper industry: In one sense, newspaper titles are very different than magazines. Other than the U.S.’s three national titles, newspapers are by nature local, appealing only to tiny slices of the national population. Yet in creating a single place to buy subscriptions, or single copies — and then potentially packages of content (“The newsonomics of 100 products a year”) — Next Issue is well ahead of the U.S. newspaper industry. Piano Media, in Slovakia and Slovenia and soon farther west, is testing the newspaper portal notion, with fledgling, if small-scale, success.
AP’s new mobile apps create a better national/local aggregation that its first-generation did, but they don’t lead to digital subs. Press+, with now more than 300 customers, has the capability to create a newspaper kiosk, but has seen little enthusiasm among its customers to do so.
One big question for Next Issue is who will notice it? It’s been a business-to-business brand largely. Consumers know how to buy magazines from magazine sites or from Apple or Amazon, but they don’t know much about Next Issue. That stealth position may be one of the reasons its publisher owners have gone forward with it.
They can hold onto, they think, their current print subscribers, transition them over to all-access over time, and use Next Issue — as it tests out new markets — to find new readers and customers.
So what is Next Issue? It is a Netflix wannabe, in the CEO’s vision. Visit, see a bunch of choices, queue ’em up, and pay a single price for unlimited usage. It’s not iTunes with individual price points. It’s more like the Pandora or Spotify pay-us-once-and-forget-about-it model. And like all digital-native companies, it will focus as much on harvesting data on its customers and their usage, knowing that intel may be a large part of the company value going forward.
That makes consumer sense. It could make a lot of consumer sense.
Let’s recall the innovative New York Times paywall model. The Times priced digital + Sunday print $60 below digital only. That meant a significant number of new Sunday subscribers (home delivery Sunday subs went up for the first time in five years), but it also meant some number of seven-day print subscribers giving up the print habit for Sunday print + digital.
In the Next Issue case, well-magazine-read consumers may do the math and find the $180 a year premium bundle (all-you-can-read, including archives, of all the magazines in the kiosk), such a good deal that they’ll drop individual magazine subs. My first math shows that if you subscribe to seven or more titles, that price point may be economical, though if you get the Next Issue pass, you’ll be passing up the print editions of the magazines, which publishers are almost throwing in these days, à la NYT.
So we can see the planning in the pricing: preserve print if you can, bring in new digital-only customers, and then upsell those into print for as little as five bucks a year more.
Aggregation. Customer ease. Pricing that psychs out consumers. We see the makings of our new print/digital/print world.
