Mequoda magazine study

Digital Magazine Reader

Habits and Digital Magazine Publisher Case Studies

MEQUODA DIGITAL MAGAZINE MARKET STUDY

Nicholas, Coburn, Van Doren, MacArthur

Mequoda Digital Magazine Market Study of 36 For more free white papers, visit http://www.MequodaFree.com © 2014 Mequoda Group LLC For more free white papers, visit http://www.MequodaFree.com © 2014 Mequoda Group LLC

Don Nicholas Managing Partner Kim Mateus Senior Partner Aimee Graeber Senior Partner

Copyright © 2014 Mequoda Group LLC Report Authors: Don Nicholas Ed Coburn Mary Van Doren Amanda MacArthur Terms of Use All rights reserved. No part of this report may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, faxing, emailing, posting online or by any information storage and retrieval system, without written permission from the Publisher. All trademarks and brands referred to herein are the property of their respective owners. All references to Mequoda™ and the seven Mequoda Website Publishing Models™ are trademarks of the Mequoda Group, LLC. Legal Notices While all attempts have been made to verify information provided in this publication, neither the author nor the publisher assumes any responsibility for error, omissions or contrary interpretations of the subject matter contained herein. The purchaser or reader of this publication assumes responsibility for the use of these materials and information. Adherence to all applicable laws and regulations, both referral and state and local, governing professional licensing, business practices, advertising and all other aspects of doing business in the United States or any other jurisdiction, is the sole responsibility of the purchaser or reader. The author and publisher assume no responsibility or liability whatsoever on the behalf of any purchaser or reader of these materials. Any perceived slights of specific people or organizations are unintentional. For More Free White Papers: http://www.MequodaFree.com

Mequoda Team Don Nicholas CEO & Lead Consultant Ed Coburn Chief Content Officer Aimee Graeber Chief Technology Officer Laura Pittman Chief Operating Officer Amanda MacArthur Research Director Mary Van Doren Editor Norann Oleson Analytics Manager Nancy Horan Systems Director Michael Phillips Senior Information Architect Lowell Allen Senior Information Architect Ann-Marie Trebendis Operations Manager Contributing Editors: Kim Mateus Christopher Sturk Jane Zarem Peter A. Schaible Patrick Hughes Michelle L. Rodriguez Jeanne S. Jennings

Advisory Board Bayou City Network Biblical Archaeology Society BlackBelt Magazine Business & Legal Resources Center for Science in the Public Interest Dagga Boy Enterprises Ebner Publishing International EH Publishing Farm Progress Companies Natural Health Advisory Institute Magna Publications Metro Parent Publishing Group Program on Negotiation at Harvard Law School Prime Publishing Psychotherapy Networker Remonsy Investment Network Revolution Golf Sovereign Media The Successful Investor Vida y Salud Media Group Wealthpire

Mequoda Group, LLC (617) 217-2559

225 Franklin Street, 26th Floor Boston, MA 02110 www.Mequoda.com



Introduction It took 224 years for an entrepreneur to harness the printing press for generating what we now know as magazines, and create an entire new industry. And then it was another 347 years before a new technology provided the ability to significantly improve on that experience.

Today it’s become clear the tablet is the digital platform magazines have been waiting for. It’s easily portable to permit the lean-back posture associated with most magazine reading experiences, the user interface enables easy access within and between articles, and it enables web links, audio, video, embedded tools, social sharing – in general the rich media today’s users expect. While we’re still in the early days of user adoption and publisher experimentation, we’re already starting to see some success stories and some usage patterns emerge. Given the generally poor engagement metrics associated with the flip-book style digital replica magazines, it’s no wonder that many publishers are wary of “digital” magazines. But today’s magazine apps and the web editions they have inspired are a long way from those early efforts. As we’ve said before, we believe the tablet is helping to usher in resurgence in the magazine industry that is unprecedented in the last two decades – and all in just the almost five years since Apple launched the iPad. Anyone who doubts that the iPad is the most important media-related



technological innovation in all of human history should re-read that. If speed of adoption indicates affection, then consumers and the magazine industry are truly, madly, deeply in love with tablets. In Fall of 2014, we wrapped up our second annual Mequoda Digital Magazine Study. It included 1,136 participants who say they currently read or subscribe to digital magazines on a tablet. What you’ll find in the following pages may help you get to know your tablet users a little better.



iPad is the tablet of choice Apple still leads in tablet market share, and the 1,136 digital magazine readers in

our study show the same results – the Apple iPad rings in at an astounding 58%

of ownership, trailed by the Kindle and other competitive devices. However, this

is a 4% decrease from last year’s total of 62%, and that 4% went directly to

Kindle, which is up to 30% from 26% last year.

The other exciting, but also sobering, thought is that the iPad has clearly become

the savior of our industry, which many noted observers have viewed as being on

the verge of extinction over the last few years. We are glad to report that, like the



quote often attributed to Mark Twain, reports of the death of magazine

publishing have been greatly exaggerated.

The iPad and its competitor tablets are perfect for lean-back consumption of

content, in a way that computers haven’t been – and consumers are increasingly

demanding rich digital content that print obviously cannot deliver.

Also good to know, 14.5% said they plan to buy a new tablet in the next 12 months

(that’s down .6% from last year), and 30% said they were considering it. Will they

be iPads? Only time will tell.



20% read digital magazines daily Our previous 2013 study showed 13% of tablet users bought a single-copy digital

magazine or subscription in the last 30 days. Our 2014 study narrowed our

survey participants to just those who already read or subscribe and found that

20% of that group read digital magazines on their tablets every day.



We believe this kind of usage comes about because the tablet is still portable –

and being taken away from home by more people every day, just like

smartphones – and at the same time, much more readable than the smartphone

because of its larger screen.



27% of tablet users have spent $100+ on their tablets in the last 12 months We asked participants how much they’ve spent on apps, books, magazines, videos

or subscriptions in the last 12 months.

The majority, 53%, tell us they’ve spent between $1 and $99, while 27% say

they’ve spent $100+ in the last year. Eight percent say they haven’t spent

anything at all, which is down significantly from last year’s 14.4%, showing that

more people are spending money on apps.

What does all this mean for magazine publishers? Why is Mequoda focusing so

heavily on tablet apps? Consider this: PriceWaterhouseCoopers has

predicted consumer spending on digital magazines will exceed $80.2B by 2016!

Tell me you don’t want to get in on that action.

Mequoda Digital Magazine Market Study of 36 For more free white papers, visit http://www.MequodaFree.com © 2014 Mequoda Group LLC


48% have bought digital books in the past 30 days

One day we shall prevail, but like last year’s study, digital books are still the most

purchased item on tablets, followed by apps and music. A total of 21% have

purchased new digital magazines or subscriptions in the past 30 days, although

that’s not terribly surprising since subscriptions only need to be bought once.



68% of tablet owners browse the web every day In 2013, the number one daily activity for tablet owners was browsing the web at

65%. That number has stayed the same in 2014, though email moves into the

number one spot with 68%, up from 62% last year. However, when it comes to

what people do most in a month, 90% say they surf the web and 91% say they

read email.

Daily Results:



Monthly Results:

Although it might not look like much, magazine consumption is looking pretty

good. The study showed that 20% of our survey participants read magazines on

their iPads daily (up from 6% last year), and 64% of them read magazines

monthly.



26% of tablet users trust books more than their own friends & family For the second year in a row people say they trust books more than friends and

family. We also wanted to know how trustworthy tablet users consider different

sources of information to be. We assumed that friends and family would logically

come in first, but we were wrong. At the other end of the scale. people trust blogs

and social media the least.



Consumer Digital Magazine Feedback For 2014, we added a new section to the survey in order to get feedback from magazine buyers and subscribers.

Scrollable text is the #1 feature digital magazine readers want If you’ve been wondering whether your digital replica is cutting it, the jury is in – it’s not. 50.75% of digital magazine subscribers say that scrollable text is an extremely important feature. The next most important feature is clickable links to references, and third is access to back-issues. The chart below shows their weighted averages on the scale of 1-5.

Not surprisingly, the least important feature is clickable ads – although you may not want to tell your advertisers that. A more surprising find is that readers don’t



necessarily think that bundling a print subscription with the tablet subscription is that important – 61.6% said it was “not important” or “somewhat important.”

52% prefer digital magazines because it saves paper Another fascinating fact – people who read digital magazines do so because it saves paper. Have you done much “green” marketing for your digital magazine?

Slightly less, 42%, say it’s because all of their magazines are in one place.



64% would buy a print/web/app bundle over a single app subscription After finding the results of the previous answers, we can conclude that those who buy and subscribe to digital magazines don’t require or possibly even want print versions of the magazine. However, 64% would be more likely to purchase a subscription if it came in a bundle with print and web/archive access. On the other hand, 36% would not. Like most things in business, it depends on your audience.



47% think a perfect digital issue has 11-20 articles Many of the publishers we talk to — especially digitally native publishers with new magazines — want to know how long their magazine should be. According to our survey, almost half felt 11-20 articles is the sweet spot. 28% felt there should be 10 or less and 20% felt there should be 20-30.



70% of digital magazine readers say their tablet edition is most valuable Remembering that all participants of this survey currently read or subscribe to at least one digital magazine, it’s good to know these readers aren’t disappointed by the medium – in fact, they find the tablet edition the most valuable to them. The web edition and library edition (archive access) were equally of the least value to this survey group. As it turns out, people like to hold their magazines!



91% think a digital edition should cost less The unfortunate result of our next question, which is whether they think a digital edition should cost more, less or the same as a print edition, is that 91% think it should cost less, and only 1% think it should cost more. These results may support the theory that bundling sells more digital editions.

The issue of “ownership” has always plagued digital products. When it comes to physical products, consumers think that items they can collect and hold in their hands hold significant value, whereas digital files that can be erased or deleted are disposable and therefore less expensive, despite the technology that goes into creating them.



Magazine Case Studies With 20% of tablet users reading digital magazines every day, it’s instructive to take a closer look at the variety of digital magazine formats and subscription choices that are available to them today, nearly five years after the iPad blasted onto the scene. When WIRED went live with the world’s first iPad magazine – a mere six weeks after the iPad’s debut – it sold 24,000 copies in the first 24 hours. Today WIRED is still leading the pack in digital magazine innovation, at least according to Fastcolabs.com. Fastcolabs points out that print publishers are still often constrained by what it calls their “legacy paradigms,” and at the same time, digital-only publishers tend to borrow from print. Still, the website praises WIRED as first on its list of “Six iPad Magazines That Are Changing The Publishing Business,” because its layouts are “smartly reimagined for the form factor, sporting just enough interactive bells and whistles without overdoing it,” such as cross-linking related content from other issues. That’s a subjective opinion, of course, and there are so many different iterations of a digital magazine that it’s truly hard to pick the “best” or “most advanced.” But a few case studies of fundamentally different types of digital magazines – and how they try to serve the needs of all those new digital magazine readers – is instructive, if only to benchmark what looks radical to us today and, given the way things have gone up to now, will no doubt appear quaint a year from now. Digital Replica: Black Belt The most basic format for digital editions is the straight replica, in which the print magazine content is digitized on tablet pages exactly as the print edition does it. The layout, advertising and content are exactly the same as the print version, no more or less, and each page, accessed by swiping horizontally, is identical to the print original. No interactive bells or whistles are included, and pure replicas are, unsurprisingly, becoming fewer every day as publishers move forward with tablet technology to satisfy reader expectations.

What Mequoda refers to as a replica-plus thus adds some interactive elements to the replica. This format is exemplified by Mequoda client Black Belt, from Active Interest Media. Black Belt launched its digital edition in 2012, developing the



edition in-house, and when we last reviewed the app in 2013 it boasted a replica-plus format, with a seamless link back to its website. It also offered a handy, clickable advertiser index which we still haven’t seen anywhere else, though AIM President & COO Andrew Clurman told us that all of his advertisers expect it.

It also included an option to look at simple text that could even be enlarged, a simple way to make the content more reader-friendly for publishers who aren’t ready to offer a reflowed edition. There was even a seamless link to the Black Belt website available on every page. Black Belt upped its game in 2014, with that Internet access now available for advertisers, its contributing writers, and companies mentioned in articles, all of whose blogs or websites are as readily accessible as Black Belt’s own site.

Publishers creating their digital editions in-house, and those with limited resources, can readily adapt their print product to the replica or replica-plus format. However, the further the industry comes in time from the iPad debut, and the more advanced the technology becomes, the more readers demand from their digital magazines.

Meanwhile, Black Belt has a somewhat unique pricing structure, offering print subscriptions on its website and digital subscriptions only in the app. A reader can buy a one-month automatic renewal subscription or an annual subscription. There’s no bundle, and no single copies for sale without signing up for the automatic monthly renewal.

Web Magazine: I Like Crochet A far cry from simple replica versions of a print product comes from one of the new breed of digital-first publishers. I Like Crochet was launched in August by Mequoda client Prime Publishing, publisher of 17 free craft websites and 13 free cooking sites. It is the first magazine published by Prime. It’s also what we at Mequoda believe is the magazine industry’s first-ever true website magazine, along with an associated app edition for mobile reading. Unlike traditional digital magazines such as Black Belt, I Like Crochet is available not just on the iPad, but as an actual issue on the web, delivering a linear magazine experience complete with a table of contents and page-by-page navigation.



Naturally, it’s also enhanced via technology so readers can click to go directly to specific projects. And even more importantly, all content is also available in an actual library, so subscribers can search back issues for, say, afghan patterns, all with a few clicks. Access to a library is what sets it apart from most digital magazines, representing what Mequoda CEO Don Nicholas says “is out on the edge of discovery information architecture.” But it’s not just the library that’s making waves in digital magazine innovation. Because the magazine is available on the web, this library-enhanced digital edition is accessible on any device that consumers use to access the Internet, regardless of platform. And that is truly revolutionary, not only for readers, but for publishers who don’t have the vast resources required to create digital editions for every platform that different consumers use. Says Nicholas, “It’s the next generation of web magazine publishing.” Reading this next-generation digital magazine on the web is a gratifying experience. Unlike a portal, the I Like Crochet website is designed to be experienced exactly like a magazine. At a portal, the user generally arrives as the result of a question she wants answered. Once at the page her search for answers led her to, there are also related articles available by hyperlink that she may also read. But having answered her question, the portal user is usually done with the website after only a few minutes. At Mequoda we think of this as an “instructional” or “how-to” experience. But at I Like Crochet, a reader finds the issue date and a table of contents, and is invited to enjoy a linear “discovery” experience like any other magazine, in which there is a table of contents and she can navigate page by page (although without the page turning sound and graphics that make the flipbook magazines so user-unfriendly), instead of by topic, to find out what’s next. Clicking to the first item on the list gets the reader right into the issue, and from that point, all she has to do is click on the title/arrow at the bottom of the page to go forward or backward one “page.”



The reader can spend an hour or so with the I Like Crochet website magazine, just as she would with an app edition. But she can also access the pattern library to access all of the magazine’s past content via search, which makes I Like Crochet exceptional. And did you notice that we call I Like Crochet on a tablet an “app” edition?” That’s because with this brand new format, readers can access the web edition on a tablet as well as on the web, rendering the phrase “tablet edition” meaningless. Mequoda will refer to all editions that can only be read on a tablet as app editions going forward, and will use the phrase “digital magazines” when referring to the entire family of electronic magazine products. Because it’s a Mequoda client, I Like Crochet is priced according to our Best Practice of decoy or contrast pricing. The app edition costs $19.97, the website edition is $29.97 and the bundle of both is a mere $34.97. This strategy is designed to drive customers to the highest price point because it looks like a great bargain in contrast to the two lower prices. This strategy also helps drive more orders overall. PDF: LEDs Magazine LEDs Magazine, published by PennWell, is an 8X, controlled circulation information source for professionals in the LED (light-emitting diode) industry.



Subscribers download their free issues of the magazine in PDF format, including the archives, from the website, LEDsmagazine.com. Nonsubscribers can access articles and other resources on the website. Subscribers can also pay for a print subscription if they prefer, or access an app edition from the Apple Newsstand. The LEDs story is a prime example of advertising inventory maximization. First, the app edition of the magazine is old-school replica, without a single technical enhancement other than the option to view articles as a page, identical to the print version, or as text only, which is more reader-friendly. As a controlled circulation publication, of course, LEDs is reliant on advertising, and that it’s got in spades. With a website, a print/PDF edition and an app edition, the advertising inventory is abundant. What’s more, while the content is static, the ads boast plenty of technological bells and whistles. As the LEDs 2015 media kit explains: “Each issue offers unique, effective, and measurable digital advertising opportunities such as cover sponsorships, announcement sponsorships, bellybands, blow-ins, and embedded video/audio as well as traditional advertising units. “Users can click on the links in your ads, making it easier to respond to your call to action … Enhance your advertising message with unique ad positions not available in print.” Those unique ad positions include the digital bellyband, something we first spotted in Popular Science, which doesn’t seem to have sold one lately. LEDs, however, had one from Cree in the September 2014 issue. That ad is clickable, leading to a web page where the user can download spec sheets for its various products. Although this user study reports that consumers aren’t exactly in love with interactive advertising, if you’re considering getting into that game, check out a free issue of LEDs to see the future! The New Yorker When it comes to pricing strategies, The New Yorker has a most peculiar one. There are three different offers – for print, app and combined – but all three cost the same. In addition, these subscriptions are offered only in three-month



increments, which is a trend we’re seeing more lately among the big players.

The idea behind this strategy is to lower resistance to the higher prices that weekly magazines have to charge, which is understandable – though we’d love to know the reasoning and/or testing behind the “one price fits all” strategy.

Meanwhile, the magazine has long offered about a third of its content free on its website, usually selected randomly by the editorial staff. That changed late in 2014, however, as The New Yorker wrapped up a three-month period in which all of its content was free, after which a metered paywall has gone into action. The New Yorker will use the data it gathered during the free content period to determine specific guidelines for free and paid content.

This means there will have to be a change in their existing offer strategy, unless they simply decide to charge the same price for the website that they do now for the app, print and bundle.

The New Yorker is also notable in its skill at repurposing content across all of its platforms. The company recycles its magazine content across many different platforms: web, email, videos, audio, issue archives, cartoon archives, merchandise, events and apps. While repurposing content is a Mequoda Best Practice, we rarely see such a large organization able to pull it off this well, making it an interesting case study for all multiplatform publishers.

All four of these publishers have radically different digital formats and pricing strategies – demonstrating that digital publishing is still in its infancy, five years after the iPad crashed the publishing party.



Planning Your Digital Magazine

In planning to launch a digital magazine or a digital edition of your magazine, there are many factors to take into consideration. We’ve created a series of strategic planning frameworks as a tool in developing and communicating business plans within a multiplatform publishing organization. The entire suite of these strategic planning frameworks (SPFs) is beyond the scope of this study. It’s also worth noting that just like a successful multiplatform publishing business, these tools do not operate in their separate silos but are most effective when they are used in a planned, coordinated way. Nonetheless, the Multiplatform Magazine SPF can be used as a standalone tool. You may find there are additional factors specific to your publication or operation, but these will provide a basic data set for your planning and modeling.

Strategic Planning Framework: Multiplatform Magazines Frequency How many issues per year? # Editions

• Print • Web (HTML) • App

o Apple o Amazon o Google o Other

App Editions

• Software licensing cost $ • App set up and submission management cost $ • Asset creation cost $ • # Issues uploaded at launch • Production Price/Page $



• Cost per Issue Download $ Print Issue Map

• Copies printed # • Editorial pages # • Ad pages # • Index pages # • Other #

Digital Issue Map

• Editorial pages # • Ad pages # • Index pages # • Other #

Advertising

• Available inventory (pages)/ year • Fill rate % • Rate Base # • Average Yield/thousand subscribers $ • Yield per page $

Pricing Edition Pricing % of Distribution App(s) Print Web Combo Weighted average price Library of back issues – content structure By back issue Yes No By topic Yes No Email

• # of email subs • # of emails sent • Orders per 1,000 emails sent



Website

• Web page views • Orders per 1,000 page views

App Order Index % of App

Orders Remit Rates

Apple Amazon Google Other

-‐ Must total 100% Continuity revenues (typical rates)

• Conversions (45%) o App o Print o Web o Combo

• Renewals (65%)

o App o Print o Web o Combo



Turning tablet statistics into cold hard cash

More and more publishers have launched digital editions of their magazines.

When we refer to digital editions, we refer to a magazine experience with a table

of contents, defined “pages,” and a linear and finite reading experience (meaning

you can go from one page to the next, and unlike a website, there is a beginning

and an end).

This could be delivered through a magazine app (Apple is still the most widely

used, although Amazon Kindle and Google Play are also strong contenders in the

space), and in the past year, as mentioned above, we have helped launch the first

web edition of a magazine providing a linear magazine experience in a

responsive, reflowable design that will work in any browser running on a desktop

or laptop, a tablet, or a smartphone.

We distinguish these digital editions from PDFs (which are still used by some

publishers, primarily in narrow B2B niches) and the flip-book style magazines

that were very trendy in publishing five to eight years ago. Both of these formats

have poor user engagement metrics, and are decidedly not the digital editions of

today, or tomorrow.

Publishers are embracing these new digital editions because users are. And it’s

true for B2C and B2B, as well as pure paid subscription, controlled circulation, or

both. These publishers are taking advantage of digital editions to provide the

features users want and can’t get from print – video, extensive photo galleries,

audio, interactive tools, social sharing, and more. And, for those with

sponsor/advertising revenue, we’re just beginning to see what can be done with

the ability to ad rich-media native advertising content to enhance reader

engagement and results for the sponsors.

As we noted last year, having digital-only features is slowly helping publishers

change the public’s belief – resulting from the unsuccessful and ill-conceived

plans of the late 1990s and early 2000s that had publishers dumping much or all

of their content onto their websites for free – that digital content should be free,

or at least as cheap as the insanely low prices the industry has foolishly charged

for its



print products over the past few decades. The New Yorker quietly increased its

subscription price by $20 simply by bundling its fancy new digital magazine with

print.

While things are still evolving, the overall trend is clear. Multiplatform

publishing, including tablet-friendly digital editions, is the future of magazine

publishing. Whether your revenue comes primarily from selling premium content

or selling advertising and sponsorships, there are substantial and growing

revenue steams to be developed. And one thing you can be certain of, if you don’t

do that for your markets, someone else will.



Respondent Demographic Data

Gender

Age



Household Income



Education



Location



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