People is the world's most profitable magazine. But People achieves its profitability by giving away more content to more readers than any other magazine. Yes, People is giving away print readership. How can they make money when they give away so much free? What can we learn from this about making money in online publishing?
Three million, four hundred and fifty thousand readers pay to read People magazine every week, and 40.08 million read it free every week. We’re not writing about their Internet readership. Three and a half million People readers don't want to miss an issue or an article. In Internet parlance, they are "highly engaged." They subscribe or buy People on the newsstand. In the magazine business we call them primary readers. There are another 40 million readers, about 10.8 readers per print copy as reported by MRI, who are somewhat less committed to People. These secondary readers probably don't read it cover to cover, and certainly not every issue. If you measured the unduplicated number of people who read the four issues of People in a given month, it would be an even higher number. These casual readers are a significant part of what makes the People franchise so valuable. Advertisers want to reach them.
Virtually every print property has multiple readers per copy -- some far more than others, points out the MediaPost. Most newspapers have more than two readers per copy, and lots of magazines have between three and six RPC because weeklies and monthlies have time to accumulate additional readers while they sit on waiting room tables or coffee tables for a week or a month or more. These secondary readers are likely to be highly engaged with an article, but not so frequently that they want to pay for a subscription or buy a single copy.
Print analogies are an irresistible way to think of online content strategies, But let's get them right. One false analogy that has been perpetrated on the industry is that print thrived because its readers pay for it. However, analysis shows that most print readers don't pay. In every category of content, some readers who need or want the information most, are willing to pay to get more, get it more regularly, even get it earlier. Others, not so much.
Ironically, the information some people pay for is worth more to them later if others read it. Being the first to know, and being able to say I told you so, is worth paying for, or in other cases, getting more in-depth coverage or more sophisticated interpretation is what information consumers will pay for. But in the print world, may free readers will get the same information as the paid readers, but not as often, or as certainly.
Some people have suggested News Corp. is smart to put up paywalls limiting access to its content for certain properties because great content should be purchased. Inferior content should be voted off the island. The difference between the two can be found by measuring the commitment consumers make to embrace it. By lowering the level of commitment required online, publishers have lowered their own value. However, some people will pay to receive lots of great content. Others will not. But both groups of readers are valuable to advertisers. And the Internet allows us to discriminate between those people who care enough to pay, and those who don't, with metering systems.
Murdoch may or may not "own" the idea of charging for content. But what Murdoch really owns is greater experience with the economics of paid AND free readership. After his purchase of the Wall Street Journal, Murdoch's company, News Corp., did not follow up widely speculated strategy to drop the pay wall, but kept it up on the WSJ site, meanwhile adding lots of free content to attract readers and increase the total advertising inventory. It's the Goldilocks strategy: Not too much, not too little, but just the right amount of free content. When content is paid for, the audience is more saleable because it creates a more salable "engagement." So why are publishers struggling to define the consumer engagement they deliver online? It's because their content is not directly paid for. But in the world of print, the more readers a title has per copy, the more valuable it is -- strong evidence that its content is attractive and read.
Most newspapers have two readers per copy and most magazines have two to six readers per copy, meaning that for a magazine with six readers per copy, 83% of the audience is reading it "free." The demand-and-pricing configuration of paid circulation magazines is based on charging the core audience who most values the content and wants it with regularity for access; daily, weekly or monthly, as the case may be. Some readers who are less dedicated may pay on a once in a while basis for single copies. But the majority of the audience is people who know and appreciate the title, but not as much as the core audience. They read it casually -- much like an online reader who finds an article in Google and clicks to read it.
Rupert Murdoch may bluster about putting content behind a paywall. But he's not the world's leading media mogul because he isn't subtle enough to emphasize one thing as a marketing ploy and do something more nuanced. Murdoch's News Corp., like all top media companies, is evolving to a model that extracts the most money, often in the form of subscriptions, from the most avid, or needful customers, and makes some or all of the content available to others on a more casual basis. ESPN is doing this with its subscription products too. Even Yahoo has paid content products like Rivals.com for sports fans.
It's been clear for quite some time that there are some consumers who will pay for content online. And we also know that there are more readers who will not pay, but who are valuable to advertisers. So each media franchise is going to have to experiment with where and how to implement limitations and possibly a pay wall to get the optimum revenue from readers and advertisers. A good example of the nuanced approach to this is Time magazine’s limited access to magazine content in a variety of ways.
This is exactly the right way to think. The magazine and newspaper businesses evolved over 250 years to optimize the balance between circulation and advertising revenue, developing circulation sales strategies that were economically viable. It will take a while, but online publishing will get there, too. So let's move from the "to charge or not to charge" question, on to the really interesting question of how to merchandize content and price the multiple delivery platforms that media companies will be delivering their content through.
To bundle or not to bundle, that is the question.
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