Five major publishers announced plans this week to create an industry-standard platform to present their work digitally. The idea is enticing for companies that have seen their publications bleed revenue in recent years, and while a publisher supported platform may not be a winning business model, it could have a side benefit: lobbying Apple and Amazon for better revenue sharing terms in their digital stores.
A consortium led by Time Inc., Conde Nast, the Hearst Corporation, Meredith and News Corp. hopes to create software primarily for devices that have not yet been created. They plan to sell digital versions of their publications through an online marketplace similar to the iTunes store. The venture, which has been dubbed "Hulu for magazines," has many similarities to the online video portal. Like the early days of Hulu, this consortium is still in search of a CEO — and a name. But while Hulu has focused on growing its audience and is still working on its business model, this effort is based on a belief that they can change the model for charging for magazines in the digital space. The group hopes that if it can deliver the right technology for a great digital reading experience, it can charge consumers for access to it.
There's certainly much to be desired in the way news and magazines are delivered digitally. Consumers may read much of their printed content online, but the online reading experience is often confusing and painful.
As Google's CEO Eric Schmidt, wrote this week in The Wall Street Journal:
"The current technology—in this case the distinguished newspaper you are now reading—may be relatively old, but it is a model of simplicity and speed compared with the online news experience today. I can flip through pages much faster in the physical edition of the Journal than I can on the Web. And every time I return to a site, I am treated as a stranger."
E-readers and smartphones have helped make many different types of content more accessible digitally. And already, publishers are trying to make a play for the tablet space. Sports Illustrated unveiled a digital concept last week (video below), while Conde Nast came out with a digital prototype for Wired last month.
What this all comes down to for publishers, however, is control. Magazines can update their content to be seen on different digital and mobile platforms. But publishers don't want to submit to the fees that exist on much of the current technology. By creating their own digital store, the consortium hopes to bypass what it sees as unfair revenue sharing agreements implemented by Amazon and the iTunes store.
Also, the group hopes to avoid being device specific. Currently, newspaper content purchased on the Amazon Kindle cannot be read on Sony's Reader. Meanwhile, controlling the delivery of the product means you also get the trove of user data which comes with it, which is very important to publishers. As TechCrunch puts it:
"Magazine companies may look like paper companies, with a little art direction thrown in. But at their core, magazine companies are database companies. The way they make money is by knowing who their readers are and marketing to them by where they live and who they are. For nearly every subscriber, they have a credit card number. And they have whole departments which do nothing but massage the data to figure out who to target for advertising purposes and where the profits are. I’ve seen this machine in action. The database people hold the secret levers of power inside magazine companies."
Fittingly, controlling the digital experience as an industry is currently more important to these publishers than competing with each other. But they still need to bypass two big hurdles: getting users willing to pay for digital magazines and convincing delivery companies to agree to their terms.
If the product is cool enough, consumers will pay for it. But part of making that happen involves making it easy to find. And as MediaMemo notes:
"Will Apple and Amazon, in particular, let others control the sale of digital media to their devices via Apple’s and Amazon’s storefronts? Publishing executives I’ve talked [sic] think that Apple may end up being receptive to the idea, but Amazon is clearly going to be a problem."
Amazon has been able to coerce publishers to agree to the company's terms so far. However, if enough publishers (magazine and otherwise) stand together on this issue, they might be able to convince different delivery companies to bend to their terms. James McQuivey, a media analyst at Forrester Research, tells The New York Times:
“It’s very speculative right now, but what they’re trying to do is plant a flag in the ground, and say, as e-readers evolve, don’t forget that magazines are different from books.”
Magazines publishers may not be in a strong enough position to achieve this goal, but it certainly makes sense for them to try. Apple and Amazon have a lot of power right now because they control marketplaces where consumers flock. Magazine publishers may not have the clout to completely bypass these stores, but they have some rights when it comes to negotiating terms. And in an industry as nascent as the mobile reader market, nothing is yet set in stone. A publisher led digital marketplace may not be the solution to all of their problems, but noting dissent right now could help them avoid unfavorable terms compounding on them years from now. Publihsers don't have to silently go along with whatever Apple and Amazon say. At least, not just yet.