Wednesday, November 14, 2012

Debating the business objections to native tablet editions

Not a week goes by that I do not get approached by a new company or the PR firm to talk and write about their new digital publishing platform. Those three words – digital publishing platform – always get my attention as no subject is as popular or controversial on this site than that.

It is always interesting to hear what these new companies have to say, do they have any new argument as to why a publisher should use their services other than price and ease of conversion? How they are differentiating themselves from the dozens of other companies offering similar solutions.

Most of the time the sales pitch boils down to "cheap and easy" – but not always. Low or even no cost solutions generally get the attention of publishers. Easy gets the attention of over worked art directors.

But without exception, most of these vendors usually agree with me when I say that the reader experience of replicas is not optimal. Yes, they will say, but we're just not there yet when it comes to native tablet publishing platforms.

I always press them on this, what do they mean? Their answers usually boil down to costs, difficulty or time spent in producing these native tablet editions.

After hearing these arguments over and over I find that I simply don't buy it. That is, I don't buy those arguments. Nonetheless, it is impossible to ignore the huge barriers for most publishers between a highly satisfying reading experience and a profitable tablet edition.

We're Just Not There Yet

Nothing could be further from the truth. Yes, many of us would love to see Apple come up with a magazine publishing platform similar to iBooks Author. Something that is familiar, easy to use, and best of all, free!

But you can't say that there aren't viable platforms out there. Whether you are using InDesign or Quark, there are solutions that are producing beautiful tablet editions. And they aren't hard to use, either. In fact, the transition to using an InDesign plug-in solution like that from Mag+, or Quark's own App Studio is a far easier transition than that faced by art directors when they first encountered PageMaker.

Digital Publishing Platforms Are Too Expensive

It's easy to buy into this argument. But agreeing to this is like agreeing with a global warming skeptic on a cold winter day. It's all too easy until you really starting thinking about the issue.

Looking back at some P&Ls from a 70K circulation magazine where I was publisher I can see what production costs looked like, especially when combined with distribution costs. Depending on the size of the magazine, the size of the circulation, the size of the publishing company you worked for, costs per reader can be anywhere within a range of $1 to $3 per magazine published. In the case of this 70K circulation book, published at a small to medium size company – remember, big publishers get better deals from the printer – the cost ran around $1.10 per magazine published and delivered. Editorial, advertising and G&A raised this to over $2.60.

What does the typical native publishing platform cost? Well, it obviously varies, but one of the most popular platforms will cost you far less in a year than one month of the print magazine.
Left: a page from a recently released replica edition;
Right: the natively designed page from Esquire.

So the issue is not cost, it is ROI - return on investment.

That $70K magazine was generating around $6K per ad page, and was running at better than 50/50 ratio of ads to editorial. So the margin on that book was pretty incredible. But the P&L looked good because of those paid print ads.

But if you are publishing a typical tablet edition you will be reproducing those print ads free of charge. So any cost that is not offset by at least some revenue looks bad from an ROI perspective.

This is the real reason many don't go down the native tablet edition route. It is also why some like the idea of a single sponsor. With your typical platform, even getting the equivalent of one or two full page ads, that is that revenue, will justify going with a native solution. So ultimately the issue is advertising unless one can be sure they can sell enough paid subscriptions to turn the tab edition's P&L from red to black.

There is no doubt that ROI is the big reason companies like Magzter are issuing new replica edition apps every day. Their model is revenue sharing. The publisher is offered an app edition for free in exchange for giving a cut of the paid subscription to the vendor. Even when that cut, plus Apple's 30 percent cut, is factored into the scheme, there is at least something that can be called profit resulting.

But this model is not sustainable. The best way to test it is to eliminate print altogether. Once this is done then the digital edition has to support all the costs of a magazine, not just production. That 30 percent that the publisher gets will then get eaten into by editorial, advertising and G&A (general and administration for those of with little P&L experience).

Many big publishers already complain about Apple's 30 percent take. But they tend to forget that the fee is on paid subscriptions, not advertising. So if Apple were their printer they would be seeing an enormous decrease in overall costs. Again, the issue is not cost, but the lack of new revenue being generated by tablet editions – we need tablet ads, and we need them priced right.

Redesigning Pages For A Tablet Is Too Time Consuming

I'd like to point to the fact that most native tablet publishing systems are fairly easy to deal with and say that this isn't a real issue. Unfortunately, the realities ar that far too many publishing companies, especially in the area of B2B, have trimmed staff sizes so far that adding any additional work may be too big a burden.

At the last publishing company I worked at, the owner decided to fire all the art directors and make them freelancers. This went down really well with both the staff, as you can imagine.

Of course, the argument was cost. But that decision showed the naiveté of the owner, not their business skills. The fact is that production staff equals product potential. If you have the staff in place you can create new products, or extend a brand into other platform.

One argument is, though, that even when fully staffed, art directors and other production staff are too busy to add a tablet edition to their duties. Again, this is one of those arguments that sounds good at first, but falls apart upon later examination.

The same argument was used when discussing the web. Many publishing companies immediately outsourced or hired new staff to build and maintain their first websites. Art directors, my memory tells me, often would ask "when will I have time to do work on the web when I'm already so busy?"

Often their position was the one that won out – at least until those same people began to complain that they were locked out from working on the websites. Once the art director could see where they future was they wanted in the game.

I think the same dynamic is at work today. Some may complain about having to turn around and work on a tablet edition the minute they put the print magazine to bed, but there always be someone on staff who raises their hands to volunteer, knowing they have just bought themselves some career protection.

So, am I arguing for native tablet editions over replicas? Yes, from the reader's perspective, but No from the publisher's perspective. This remains too complicated an issue for a simple answer.

It is true that a low to no cost native publishing solution would be a godsend for digital publishers. But there would still be the issue of revenue.

But the arguments being made out there in the real world just aren't valid, in my opinion – or at least they show the lack of publishing experience of those on the vendor side.

One native publishing company told me frankly that they sell based on the idea that the tablet edition may not generate profits, but it was important to train their staffs, protect the integrity of their brands, and to begin developing for platform (rather than merely converting issues).

It was easy for me to agree with the vendor, but I knew that the issues of cost, revenue and ROI would still trump those arguments in the minds of some magazine publishers.