Tuesday, April 2, 2013

Using digital newsstands as test kitchen (or incubator)

Every once in a while I get a call from a colleague, or even someone out of the blue, looking for a piece of advice – usually regarding launching their first tablet editions. One recently call, though, moved from the subject to the issue of new magazine launches. My publisher friend lamented the increasing costs associated with new magazine launches. Not surprisingly, I stirred to conversation to digital-only launches.

First some background: the publisher in question had just made up his mind that any app launches would be developed in-house. It was a big decision, the publisher told, me. But after looking at all the cost comparisons he finally came to the conclusion that once he had settled on a native digital publishing solution, from a company he was sure would be around five to ten years from now, he could feel more comfortable understanding the cost side of digital launches.

Interestingly, he also told me that he felt far better about publishing solutions with actual costs than from companies trying to offer free services in exchange for revenue share deals. His reasoning was that the new launches inevitably would be all about incremental dollars, and he didn't want to fall into that trap. His goal, he told me, was to build the business the way he used to, a decade or more ago, only this time with digital products not print ones.

The other point he made was that while at first he was taken aback by some of the costs he would have to deal with, it all seemed so minor when he built a P&L for the same product, but using print. He was, I was glad to hear, following the one piece of advice so many don't want to hear, yet can not succeed without: build that P&L – no matter how painful the experience is, it is essential to being a real publishing pro.

From this point we moved on to the real issue he was interested in: new product launches. The B2B publisher was very interested in launching some new titles in tablet-only format but into new markets. My suggestion was that if he wanted to do this go ahead, but I would recommend using his current titles to launch new products instead – to use the Apple Newsstand (as well as other digital newsstands) as a test kitchen.

"Today we're going to make an app!"
This is how this would work. Take a typical B2B magazine title, it is composed of news sections, columns, major articles and assorted other features generally driven by client news (that is, press releases). Each of these sections – especially the columns and client news – could be an area to experiment with a new digital launch. For instance, a columnist that covers a topic could essentially be the new editor, or at least main contributor, to a new title based on the more sharply focused topics the columnist covers (such as legislative affairs, how-to columns, etc.).

The new launch would be able to limit editorial costs because much of the content already exists and has been paid for.

As the publisher went through an exercise with one of this magazines he realized that at least a half-dozen new titles were hidden inside his existing print magazine. At that point we started to go through some numbers: what would the costs be to launch, say, two new tablet editions off this existing title? What additional money might be available for adding content to the existing inventory? Would there be any need for more hardware, software, another art director?

At first the publisher was a little scared of the added dollars he suggested might be thrown at the launches. But after a few minutes he came up with a number. "You know, this is pretty low, especially in comparison to what I'd be prepared to allocate to a new print magazine launch. Peanuts, really."

But that is the cost side of things, I said, we really need to talk about revenue.

The publisher assumed the new tablet magazine would be available free of charge inside the Apple Newsstand. It was a natural thing to assume for a B2B publisher because most apps launched from controlled circulation magazine have chosen to launch as free digital magazines. In fact, the idea of charging is what turned off the publisher to those vendors that wanted a revenue split.

But I pressed him on the idea of charging – nothing ridiculous, say $9.99 a year, with issues at $1.99.

Here are the arguments on both sides: by being free, a new title can build up its subscriber base and then be able to eventually sell advertising; by charging a few dollars will come in that will not only offset the production costs by maybe pay for more personnel. The argument I made was that any new B2B product, in the digital world, that could not find someone to pay for it probably wasn't worth producing in the first place.

Going paid is a hard hurdle to jump for those B2B publishers who have not gotten involved in information products or events such as seminars. But the Newsstand, or Amazon.com, is not a bad place to start.

To make a long story short, we concluded the conversation by agreeing that a program of new launches would have fairly set costs; that the financial risks were fairly minimal; and that the Newsstand could serve as a test kitchen for new magazine titles, with the upside being that the publisher's portfolio of titles would grow and so would the value of his company (you can see where this might lead). I'll be watching for some of those new tablet magazine launches as the year goes by.