Outlook for Magazine Publishing in the Digital Age

October 14, 2008 — Despite the continuing migration by consumers to the Internet in search of information and entertainment, they still expect to pay much less for digital content than for printed, according to a report from PricewaterhouseCoopers “Outlook for Magazine Publishing in the Digital Age”. The PricewaterhouseCoopers report looks at how consumer behaviour is changing in relation to magazines and how magazine publishers and media buying agencies are responding to these changes.

The Consumer Perspective

The majority of consumers still prefer to read hard copies of magazines but 60% would like access to the content via the Internet too. The Internet continues to be the channel of choice for reading digital content with less than 25% wanting to read content using mobile devices or electronic paper (e-paper). (E-paper is a portable storage and display medium which looks like paper but can be repeatedly written on and re-used with information downloaded to it via a computer or mobile phone).

Willingness to buy digital content also varies with age, gender and genre. Forty-one per cent of male respondents would be prepared to pay for a subscription for content which is only available via the Internet, compared with just 29% of female respondents.

On average, respondents believe that digital content should cost less than half the price of printed magazines, and once digital alternatives to a printed magazine are available, they expect to pay a maximum of two-thirds of the cover price for hard and soft copies of the same unique magazine content. This pattern prevails regardless of nationality, age or gender.

Respondents also anticipate spending an increased amount of time accessing digital content in the next 5 years compared to reading printed matter. However, currently the main consumers most attracted to digital content appear to be those aged between 12-15 years of age, the so called “net generation”. To these young people, new media technologies are intuitively familiar, everyday components of their technology-saturated lives.

However, the increasing number of consumers buying content or goods online is still, to some extent, restricted by technical barriers. Consumer usage is directly linked to the level of broadband penetration in the countries they reside in. Where broadband penetration is high in a country, the larger the number of consumers e-retailing.

Regardless of age, gender or nationality, more than three-quarters of all respondents were unanimous in their aversion to intrusive online advertisements, in particular pop-up ads. Older respondents were willing to pay to avoid them. This has forced the advertisers to be more creative
and sophisticated with the development of less invasive forms of online advertising such as peel-away ads and content ads, which are particularly common in the North American marketplace. However, this hasn’t stopped consumers’ willingness to buy goods or services via the digital platforms of publishers whose content they access, particularly in the BRIC countries with several global publishers already having had success with online stores and direct marketing operations.

The Publishers Perspective

Of the publishers from North America and Britain who were interviewed for the report, most expect to generate as much as 20% of their revenues from digital platforms by 2012 with publishers in Europe anticipating 10% of revenues to come from this source. Smaller publishers in Britain and North America are far ahead of smaller publishers in mainland Europe in digital investment and development. As these magazine publishers evolve towards new business models, the outcome of our consumer research predicts that continued investment in skills and technology is necessary in order to be ready and able to accommodate the changing preferences of consumers.

Those magazine publishers who have responded to the digital revolution have done so by reshuffling their portfolios through acquisitions, disposals, the formation of strategic alliances or new launches to gain access to the skills they need to compete. However, there are some notable regional differences. As progress in developing digital media is being made in mainland Europe, Britain and in North America, we see Eastern European publishers continuing to build up their print portfolios, as this relatively new industry develops.

Demand for magazines is soaring in BRIC countries which have a rising number of consumers who aspire to a particular lifestyle and have the money to purchase publications which cater to this aspiration. However, the majority of respondents to the survey said that they would continue to buy a magazine even if it was only available online.

PricewaterhouseCoopers predicts the consumer magazine market to reach $95 million by 2012 with advertising once again driving the increase. Digital advertising will grow at a much faster rate than revenues derived from traditional print advertising though the pace is expected to slow slightly over the next five years. However, we believe that revenues will increase at a CAGR of 19.5% during this period, three times more than the expected rate of expenditure on any other forms of advertising is projected to grow, with the exception of video games.

The Advertising Agency Perspective

Media buying agencies are also transforming in order to capture the potential revenues in a digital world. Agencies recognise the need to integrate their media-buying functions. However, creating multi-functional teams that can offer truly multimedia solutions, rather than focusing on a single medium, entails major organisational and cultural alterations.

Like the publishers, finding the necessary people with the relevant skills base is a challenge. To combat the shortage of talent, many of the major agencies have responded via the acquisition route
snapping up interactive agencies with the necessary know-how and expertise to deliver the new packages for the digital marketplace.

Notes to Editor:

1. For more information and comments please contact Vera Totskaya, PR Senior Manager, or Anna Kogosova, PR Assistant Manager.
2. About PricewaterhouseCoopers
   
   
   “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.