Digital Strategies for Magazines: Capturing the Upside

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Digital Strategies for Magazines Capturing the
Upside
March 4, 2007
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Topic map
The changing marketplace Key magazine industry
implications Selected opportunities for magazine
publishers Determining a way forward Key
challenges you will likely face
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Key questions we should be asking (I)

• What is the right digital strategy?

Wrong question

• How do I need to change in order to better
  perceive, process, and react to the changes
  around me?

Right question
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Key questions we should be asking (II)
Wrong question

• What are other magazines doing?

Right question

• Who are the broad set of new and existing players
  that coulddisrupt my business?
• Which adjacent businesses could I potentially
  disrupt?

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Uncertainty is the only certaintyKey drivers

• Technology
• Processing power
• Bandwidth
• Storage

Incumbent businesses

• Customer behavior
• Adoption rates
• Information/entertainment usage
• Communication

• Infrastructure
• Broadband
• New devices
• Softwareand services

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Consumer adoption rates for new technologies
hastening
Penetration ()
Internet access
Time after launch
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Discontinuities lead to major business disruption
...Example Computer industry
Mainframes
Mini-computers
Key players

• Burroughs

• Control Data Corp

• Control Data

• DEC

• General Electric

• Data General Nova

• Honeywell

• IBM

• Honeywell-Bull

• NCR

• RCA

• Norsk Data

• UNIVAC

• Prime Computer

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... and fundamental changes in competition
Cable systems
ISPs
Telcos
Content
Wireless operators
Wireless device manufacturers
PC manufacturers
Consumer electronics manufacturers
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Traditional companies risk losing out to new
competitorsOther industry examples
Example incumbent
New competitor
Large international communication companies
VoIP
International consumer electronics companies
PC company
Telecom company
Credit card companies
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Topic map
The changing marketplace Key magazine industry
implications Selected opportunities for magazine
publishers Determining a way forward Key
challenges you will likely face
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Drivers in the magazine industry
Content is everywhere

• Expanded internet
• Search
• Mobile
• Piracy

Consumerbehaviorchanging

• From print to screen
• From offline to connected
• From mass to specialty to fragmented
• From 'one to many' to 'many to many'

New competitors

• From unrelated spaces
• With radically different business models

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Magazines are losing share of readership/viewershi
p
German example
US example
Italian example
Time spent per media
Time spent per media
Time spent per media
Hours/year
Hours/year
Hours/year
CAGR
CAGR
CAGR
3
3,194
2
0.8
3,005
2,944
2,927
-1
73
2,796
-3
2,701
4
-2
122
-4
127
119
28
17
127
-1
61
125
79
6
2
-0.5
1
2
1
4
2007
2001
2005
2006
2000
2005
Sources Veronis Suhler Stevenson, 2007
Communications Industry ForecastARD/ZDF-Langzeit
studie Massenkommunikation Audiradio Eurisko
Time Budget BCG
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US Marketing and advertising spend over time
Marketing spend by category, 19752006
2006 total spend (B)
Total ()
CAGR 19962006
(B)
100
5
460
4
1
11
PR
92
20
5
Promotions
154
33
6
Direct mktg
210
46
5
Advertising
2006 total spend (B)
Total ()
CAGR 19962006
Advertising spend by medium, 19752006
(B)
175
100
5
15
9
54
Internet
13
8
4
Magazines
20
11
5
Radio
56
32
3
Newspapers
71
40
5
Television
Source xxxx
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Advertising spend over time
Advertising Spend by Medium, 1983-2007
2007 Total Spend (B)
ofTotal
CAGR 01 07
Outdoor
7
25B
6
Internet
27
41B
10
Magazines
3
55B
13
Magazines
B
Newspapers
115B
28
1
Newspapers
Radio
3
33B
8
All print media
Television
6
160B
39
Total
5
427B
100
Sources Euromonitor, PWC
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The marketing conundrum
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Touchpoints interaction between old and
newExposing consumers to Internet increases
effectiveness of traditional advertising
TV Ad
Magazine Ad
Radio Ad
Newspaper Ad
Outdoor Ad
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Touchpoints interaction between old and
newExposing consumers to Internet increases
effectiveness of traditional advertising
Newspaper Ad
TV Ad
Outdoor Ad
Magazine Ad
Radio Ad
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Topic map
The changing marketplace Key magazine industry
implications Selected opportunities for magazine
publishers Determining a way forward Key
challenges you will likely face
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Uncertainties create significant opportunities

• Search optimization
• Vertical/needs based search
• Industry consortia search vehicle

In online search
Mobile and 'web' sites Mobile ad
retrieval Mobile screen push content Mobile
alerts Location specific/independent
In mobile content
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Vertical searchDomain-focused search site with
more relevant, trusted results from both
magazines and web
I need information to help me renovate my home
Highly relevant results are returned to the user
Productreviews
Targetedweb content
Vertical search portal
Articles on design trends
Magazine articles
Special databases
Links to retailer websites
Editorial features
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Vertical search example Tripadvisor.com
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Global mobile data services 154B opportunity
Consumer mobile data revenues by application and
by region (2010)
Revenues (M)
30,824
153,957
Others
Alerts
6,651
Games
17,593
Music
9,474
TV and video
8,009
44,296
Personalization
11,499
SMS
32,261
Latin America
Western Europe
Eastern Europe
WW Mobile Data Revenues
Middle East and Africa
China/ India
Asia-Pacific
North America
Source Ovum Wireless Multimedia Connections
and Revenues by application 2005-2010
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Mobile retrieval (I)More info on print ad or
article to access via mobile device
SMS 123
Id love to know more about that handbag
Or Im on my way to the mall right now
Type (or swipe) SMS code into phone Select
type of information (price, style, store
locations) Choose delivery method (mobile,
email, online) Information delivered directly to
reader
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2
3
4
(1) IDC Growth rate for mobile data (content)
market 200409
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Mobile retrieval (II)More info on print ad or
article to access via mobile device
Capabilities required

• Will require partnership with technology provider
• Must work with agencies and advertisers to
  develop programs and content
• need to imbed SMS codes in print ad pages
• may require dedicated staffer(s) for traffic
  control
• Must sell as a value-add, full-price service to
  advertisers

Investment required

• Reasonable spending requirements relative to ad
  revenues 200350K inyear one
• development cost 100K200K upfront
• additional content development costs 50K
• additional staff 50100K each (may need 1 to
  start)

Potential Industry/ MPA actions
Creating a common technical platform Critical
mass of magazines participating would help drive
user behaviorand adoption
Large scale opportunity achievable if critical
mass of publishers participate
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Location based servicesMobile alerts
Non location based
Location based
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Examples of location based services

• Pinpoints subscriber location by the nearest base
  station
• Provides area-specific
• Maps
• Weather
• Yellow pages
• Shop information
• Restaurants

• Pinpoints subscriber by GPS or by triangulating
  between cell towers
• Provides area specific maps, directions and
  restaurants
• Incorporates local restaurant reviews and other
  information from third parties

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Topic map
The changing marketplace Impact/implications for
the magazine industry Selected opportunities for
magazine publishers Determining a way
forward Key challenges you will likely face
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Category leadership often seized by outsiders
Top sports websites
Top cooking websites
ESPN
Yahoo! Sports
FOX Sports on MSN
MLB.com
eBay Sports
AOL Sports
CBS Sportsline
NFL Internet Network
SI.com
Turner Sports
Visitors/month (M)
Visitors/month
Note The values for Gannet and Tribune are the
sum of local news sites and not a national
portal. Source Nielsen NetRatings, December 2007
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Timing of uncertainties closely linked to
available infrastructure
Broadband penetration (2007)
3G penetration (2007)
of total households
of mobile subscribers1
1. Including WCDMA and CDMA subscribers. Source
Infocom/Teleseeq Ovum, Mobile Country Forecasts
2006-2010
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Timing of impact ExampleChange in regional ad
markets
Index (2000100)
E Europe
Asia
Global
US
W Europe
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There are a range of appropriate responses based
on timing and impact
Actively Monitor the relevant markets and
engagesenior leadership
Experiment and test through focused investments
Invest in key segments by allocate significant
capital and management time
Redesign your businessto adapt to the
rapidlychanging market
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There are a range of appropriate responses based
on timing and impact
Actively Monitor the relevant markets and
engagesenior leadership
Experiment and test through focused investments
Invest in key segments by allocate significant
capital and management time
Redesign your business to adapt to the rapidly
changing market
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Topic map
The changing marketplace Impact/implications for
the magazine industry Selected opportunities for
magazine publishers Determining a way
forward Key challenges you will likely face
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Key strategic issues ...
Illustrative

• Should the content on my website be free? Require
  registration? Or paid?
• Should my content be available to the search
  engines?
• How should I worry about potential electronic
  cannibalization?
• What should the editorial cycle be for my
  online/mobile content?
• Should I begin incorporating video?
• What new business opportunities does the Web 2.0,
  mobile and search provide?
• With whom should I partner?
• What new business models should I be pursuing?

... will change over time
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Three dimensions define organizational response
Creating agility
Perceiving change
Developingunderstanding
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Perceiving change
Developing understanding
Become part of ongoing focus of the senior
team Become significant portion of board
discussions (not an annual review) Develop
understandingthroughout organization Develop
web of externalthought leaders
Focus on projects,not organizations Take a
venture approach Develop a clear approach toRD
funding

• Look at
• Different industries
• Different competitors
• Different businesses
• Look all the time
• Focus on consumer/customer behavior

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Summary thoughts

• Change is here more change is coming and its
  direction is unknowable
• While disruptive, there is as much opportunity as
  risk
• The nature of the impact and timing will vary
  widely
• Everyone needs to be moving forward now and the
  key challenge will be cultureand organization