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Publishers see big potential for digital titles

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By Eileen Colkin Cuneo

Digital magazines may be the next big money maker for publishers, according to speakers at last week’s Digital Magazine Forum in New York. In a panel discussion, executives from Time Inc., Interactive, Summit Electronic Media and Fairchild Bridal Group shared evidence that their nascent digital magazine strategies are presenting new revenue opportunities at potentially lower costs than traditional publishing.

Jim Chrzan, publisher of Summit Electronic Media, which publishes Packaging World Magazine, said he had one goal when developing a digital magazine strategy: Stay away from existing advertisers. So Summit decided to go after its smaller, niche competitors with industry-specific readerships. In January, Summit will publish its first issue of "Healthcare Packaging," an entirely digital magazine, with a qualified subscriber base sought by niche advertisers that are unlikely to advertise in Packaging World.

Chrzan said his sales pitch to advertisers that buy hyperlinks has been so well received that he covered his costs a month before "Healthcare Packaging’s" debut. "Competitors are offering 4,000 impressions and 200 click-throughs," Chrzan said, adding that he can tell advertisers that the marketing manager from company X has clicked through to a specific page on their Web site. "We’re offering only six viewers, and the advertisers want it."

Revenue opportunities also exist on the reader side. Fairchild Bridal is having success by reformatting existing publications into digital magazines aimed at new audiences. Women’s Wear Daily, a news source for retailers and manufacturers of women’s apparel, accessories, fibers and textiles, is profitably charging 4,300 subscribers $99 for an annual subscription to its digital edition, and 300 subscribers have paid $895 for access to digital archives. "The shocking part is that there’s only a 10% overlap between print and online," said Robin Kamen, general manager of Fairchild Bridal Group Internet.

Just as positive, from the perspective of publishers, readers of digital editions seem to be attending to the advertising contained in them, according to the second annual Newsstand-Nielsen//NetRatings e-mail survey conducted this fall. "Our survey found that 17% of readers of digital magazine editions and 28% of readers of digital newspaper editions ordered from ads contained in the electronic editions," said Michele Chaboudy, CMO of Newsstand. Overall, 25% of those surveyed said they had ordered something from an ad in a digital edition.

The survey, which collected the results from 762 Newsstand users from across a mix of b-to-b and b-to-c titles, also found that media consumption habits have begun to shift among digital edition readers. While the research found that a majority of subscribers have not changed their media consumption habits at all, 40% said they had reduced their use of the title's print version (versus 23% increasing), 29% said they had reduced their use of the title's Web site (versus 11% increasing) and 12% said they had reduced their use of the title's e-mail updates (versus 18% increasing).

At a larger company such as Time Inc., bureaucracy and big-company culture make the redesigning of titles such as Time or Fortune into digital formats unlikely, but the numbers make the digital opportunity impossible to ignore, Bill Stutzman, director of the publishing giant’s entertainment group, said at the Digital Magazine Forum. He cited studies that show 40% of production costs come after a magazine is compiled. The 15% postage price increase planned for 2006 and next year’s expected 10% jump in paper costs will only make traditional publishing even more expensive, driving Time Inc. to seek new revenue in digital magazines, he said.

"Converting from print to digital is about process, not format, and our magazines are set up for print," Stutzman said. "So we’re viewing digital as an opportunity for new magazines." He cited the example of "Racing Weekly," a digital magazine for car racing enthusiasts that wouldn’t be economically viable as a print entity. "If you do it digitally you can tap into an opportunity without new launch costs," he said.

There are some magazines that are logical targets for a redesign, Stutzman said, such as Sports Illustrated on Campus, a year-old spin-off magazine reaching 70 colleges and universities. The electronic edition expands the magazine’s campus circulation opportunities, while creating a relationship between young readers and the larger Sports Illustrated brand.

Sports Illustrated is also looking at selling its swimsuit issue, its highest-selling edition every year, digitally on Amazon.com for $5.95 an issue. Not only will that reach new readers who don’t get to the newsstand, Stutzman, it will expand the "lifetime of the magazine beyond one week."

While publishers are betting on digital as the next big thing, challenges are emerging along with the technology, such as e-mail spam filters, ABC auditing and finding consistent advertiser support. So while Jim Chrzan is exuberant today, he said he could always be proven wrong. "Next year I may be standing here naked in a barrel," he said.

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