Four days before the launch of the iPad TBI Research's Rory Maher writes about the prospects for the device as a savior of the magazine industry. I've linked to, and wrote about, some of the data they have produced (here and here and here), so while I disagree with much of what this column states, it would be only fair to bring it to the attention of TNM readers.
Maher writes that the iPad can not make up for lost magazine revenue due to three factors: 1) mobile ad revenue will take years to become significant; 2) magazines need to look to subscriptions to drive profits; and 3) even if iPad sales "wildly exceed" expectations, the number of iPad users will still be low to compensate for lost revenue. It's a pessimistic picture, but is off the mark, nonetheless.
Mobile ad revenue will certainly take some time to grow to become a significant market. Growth forecasts, like all other predictions, are all over the board. In January 2008, Sterling Market Intelligence produced a study that said mobile advertising would reach $5.08 billion in North America by 2012. A few months later Heavy Reading said that mobile advertising would hit $10 billion by 2013 (from $1.4 billion in 2007).
Revenue numbers are often exaggerated, and difficult to forecast. IDC's last forecast for 2009 U.S. mobile ad revenue was $287 million -- a lot of money, but still a relatively small market.
There is no doubt that mobile ads represent a sliver of the market, and will continue to do so for a while. But where is this market going? Isn't both Google and Apple betting big time on mobile? Just as importantly, does one dollar of mobile ad revenue equal one dollar of print revenue? (The answer, of course, is no because of the different cost structures.)
The second claim, that magazine's will need to drive subscription revenue to maintain profits reveals a lack of understanding of the business model of most magazines. Only the top end of consumer magazines are able to drive profits through subscriptions -- most are actually ad driven, and the costs to maintain high rate bases often wipe out subscription revenue gained in the effort.
If, however, Maher did not mean to paint such a broad brush, and if we substitute "some top consumer magazines" for "the magazine industry" then his point is far more valid. It is safe to say that subscription based magazines are often dependent on circ revenue. But this narrows the focus of his findings considerably.
Nonetheless, I think this still misses an important point: increases in total audience numbers, reached through mobile media, may have a disproportionate impact on magazines because of the lower cost to reach and deliver to this new audience. Any look at revenue gains without looking at costs misses half the picture.
Besides, if the audience for print declines because of changes in reader habits, ignoring the change because the revenue models don't line up on a dollar to dollar basis, is self-defeating.
Point three was that sales of the iPad won't reach a level necessary to create "meaningful" revenue at most magazines. This is true, assuming tablet publishing will begin and end with the iPad.
The excitement around the iPad involves the idea that we might be entering a whole new era of publishing. Gutenberg invented movable type in 1439. By 1440 Vogue was not raking in millions.
The iPad will launch on Saturday and those expecting the waters to part are a definite minority. But most industry people are looking way ahead -- five, ten, twenty years beyond April 3, 2010. For companies like the Times and Condé Nast, the work being put into creating tablet apps is not about immediate return but about establishing their position and learning from the experience. The Times realizes that if they are the newspaper of choice for the iPad they have gained a foothold into an emerging market.
“It will allow NYTimes.com to remain a vital part of the search-driven web," NYT chairman Arthur Sulzberger said at a recent conference, "keeping our traffic numbers high and allowing us to remain an industry leader in display advertising."
Another point, that I think many are missing, is that tablets will be a huge positive for online publishing, in general -- you know, those old fashioned things we call web sites.
Too many magazines and newspapers have built their sites around the premise that their online readers want the same things their print readers to. While this is beginning to change, it is a sad fact that too many publishers pursue the same readers, and the same advertisers online -- often with the same content.
The tablet may prove to be a giant do-over for publishers. Reading a magazine on a browser, during business hours and on a desktop or notebook computer, is a search-and-find activity. That is, the reader is looking for information, quickly, and tends to skim. The iPad promises to be a leisure-time activity. Look at Apple's Guided Tours videos -- they are almost hilarious in that everyone is leaning back in the couch or in their chairs -- in other words, it promises to be just like reading print! Many publishers outdated web sites that simply feature the same long form stories found in their print editions may find a new life. More importantly, web advertising could benefit, as well. (Let's not talk about the lack of Flash on the iPad, though, OK?)
The mobile media market is currently muddy, and getting more so. The iPad will for a very short time, will become the premiere e-reader -- the device everyone develops for. But the iPad will quickly have competition.
Let's took at smart phones for lessons: the iPhone is saving no newspaper or magazine today. But eventually, especially because the Android platform is growing, the entire smartphone market will become more significant for publishers. Enough to save the magazine industry? Hardly. But is that the point? -- that one device holds all the answers?
Shouldn't publishers look at the mobile market in its entirety, realizing that the future is content on the go, whether that is in the form of smart phones, tablets, or plain-ol' online. It's all electronic publishing -- and that is where the future is. The iPad is the thunder clap that forces publishers, marketers and readers to pay attention to the tablet / e-reader as a serious alternative reading device. And starting on Saturday we can start testing this theory.
Talking New Media will be launching a landing page of all iPad reviews -- for the device itself, and for apps from newspapers, magazines, book publishers, and third party vendors. All posts will appear on the home page, but readers will be able to find them all gathered on the iPad page for easy viewing.
If your company is launching an iPad app, or if your publication is altering its web or mobile publishing efforts to take into account the tablet, send me a note.