Wednesday, January 25, 2012

Forecasting the growth of digital: declines in print won't adversely effect every publisher, but it will kill off some

For many publishing company the migration of ad dollars to digital continues to make their executives lose sleep – even the ones that are still doing relatively well.

The reason for this is that the conversation at many industry conferences is about general trends. And the general trend shows that print is in decline, while digital continues to grow.

But the problem with general trends is that, well, they are rather general.

I see two problems with current analysis being done in this area: 1) the assumption is that a decline in print will effect all publishers equally, and 2) that "digital" is a format, when it is really many formats.

When we talk of print magazines one gets a pretty good idea what these look like: standard sized publications with editorial content and ads. A decade or so ago one could have argued that print was such a diverse platform that it would be silly to talk about "print" as any one thing. But the rise of the web has significantly hurt product tabloids so much that few see this format as growing in the future.

If print was a diverse platform in the past, digital is quickly becoming more and more varied. Digital no longer means just the web, not when mobile and tablets are growing at such an incredible pace.

That's why anyone who thinks digital won't grow even faster in the future may be missing the message contained in Apple quarterly earnings blow out. Apple launched the iPhone in 2007 and now sales are continuing to grow. But it also launched the iPad in 2010 – a related product, but a different line item on its P&L. The combination of the two products, neither of which existed five years today, made their sales explode.

If Apple had mirrored the publishing industry, it would have launched one new product and then simply watched as they enjoyed incremental gains in one area.

It is easy to say that "as an industry" digital will grow 10+ percent over the next five years, while print declines by a certain percentage. But this is not how things will play out for the actual publishers experiencing this.

Let's say you are the publisher of a B2B print magazine, and you "know" that your advertisers will be spending five to ten percent less in print each of the next five years. How will this effect you?

I would say that for the number one book in the industry it won't effect them at all. Advertisers rarely cut across the board – they know that they must maintain a certain level of presence in any book they advertise in or else their ads won't be effective. More likely, an advertiser cutting back on print, especially in the B2B area, will reduce the total number of books they appear in, shifting those dollars saved by cutting the number of magazines they book to new digital products.

For some publishers, the shift to digital means a chance to grab some new dollars, while at the same time maintaining their print schedules. For others, it means going from "in the schedule" to "out".

This is why any level of decline in ad dollars devoted to print can have a devastating effect on an individual publisher.

The lesson: if your magazine is not currently the number one or two magazine in its field it is seriously vulnerable to shifts in ad dollars.

The problem with forecasting is that it rarely takes into account new technology. Most publishers see technology as an outside force that can effect their business. But in modern publishing technology is, in many ways, central to their business. Any publisher that does not also see themselves in some way as a technology company is at a major disadvantage.

This might not mean that every publishing company of any size must become a developer, but it does mean that they had better think very hard about the partners they have in this area.

As a magazine publisher I never lost a night of sleep worry about whether RR Donnelley and print technology. But if I were depending on many of the third party vendors currently creating mobile and tablet apps I might never sleep again, such is the quality of much of the products being introduced into Apple App Store and Google's Android Market.

But for those publishers with print products that are currently not the number one book in their industries, this moment is a golden opportunity. The shift to digital, though a threat, could be their chance.

Note: Right now, at this minute, inside Apple's iTunes App Store, the publications being promoted are GQ, Better Homes and Gardens, and other familiar titles. But also being promoted is Project Magazine and The Daily, new digital-only publications. Also being promoted is Newsweek, which has been on its death bed for years.