Timely Taps, Digital Wraps, and Business Going Native

Over drinks in his apartment in NYC, Felix Dennis, Chairman of Dennis Publishing, would brag that he brought Maxim magazine to the States to make a ton of money and leave before anyone became the wiser.  For a man who claimed to have spent $100 million on booze and women, this didn’t seem to be such a remarkable claim (he also claimed to have murdered some unlikely chap, but pulled back from that claim).  That was a decade ago, but I can imagine the chairman LOL on learning that the magazine he sold to Quadrangle Capital Partners LP in 2007 for $250 million (sale included Blender and Stuff) is reported by Bloomberg to fetch bids of about $20 million.  Dennis’ main regret about Maxim was that he didn’t sell it before the lad magazine sector started to lose readers and advertisers.

Launched in 1995, Maxim enjoyed a spectacular rise with a strong assist from its unabashed emphasis on sex, babes and beer, with a little fitness thrown in.  I was in the UK at the time, heading the launch of Men’s Health, and while impressed with Maxim’s brash and noisy launch, I knew somehow that health coverage, while less sexy, would win out in the end.  On its face, Maxim still looks like a very successful magazine with a paid circulation of 2.5 million.   However, an examination of its subscription offers suggests that this is very unprofitable circulation.  This, coupled with a precipitous decline in advertising pages, might have sealed Maxim’s fate.   The lack of a robust digital strategy didn’t help.

With the advent of digital at scale, magazines at risk seem to have fewer second chances these days and fewer takers.  Newsweek’s tablet edition is looking for a buyer, but owner Barry Diller now calls the original purchase a fool’s errand.  And he got it for $1 and subscription liabilities.  That’s the same price that TV Guide was sold for in 2008.   Business Week was sold to Bloomberg in 2009 for between $2-5 million.  I should add that at this writing Jay Penske, the auto racer and publisher of Deadline Hollywood, is reported to be driving into the Newsweek interest lane.

For more than a decade, the media business has been arguing whether we are going through a sustained period of disruption or transformation.  As usual, it’s in the eye of the beholder.  I note MPA, the magazine association and where I used to hang my hat, describes its annual October 2013 conference as a place to examine these “transformational times.”  The television executive who complained during the 2008 Olympics that the networks were exchanging “analog dollars for digital dimes” was certainly talking about disruption.  With digital revenues for magazines coming in on average at 5% or so of total revenues, we might conclude that that executive was on to something.

By now, there are enough digital markers around to decorate Route 66.  When the International Data Group (IDG) announced in 2007 that it had finally crossed the Rubicon, generating as much revenue from digital as from print, that date seemed an important digital marker.  IDG has continued nicely down that well-paved, digital highway.  When the company announced recently that PC World magazine would be exiting print to focus on its digital edition and web site, there wasn’t much of a fuss.  The decision was inevitable because the magazine had lost most of its readership and its reason for existing in that form.  And now we have TechCrunch, Endgadget, Ars Technica, ZDNet and other sites that seem to fill any gap left by the closing of the print title.

The link between print and digital editions can be complicated, as Future Publishing discovered with TECH, an iPad magazine for technology enthusiasts.  This seemed like a very good idea.  I have worked with Future over the years and have enormous respect for the company.   And why not?  They were early into the computer, technology and gaming space.  They had a few stumbles in the States but recovered and seemed quite adept with their digital strategy.  They did not cling to print magazines that were no longer performing.  In fact, with TECH, they decided to launch an iPad magazine without the benefit of a print legacy.  Of course the technology space was already over-populated, but not having a print brand to build upon likely was a contributing factor for the demise of this title.   Sometimes you’re damned when you do and damned when you don’t.

We saw a lot of well-earned high-fives when Hearst announced in May that it had sold more than 1 million new, paid digital subscriptions.  That number also seems like an important industry marker.  I have commented in an earlier post that this focus on new digital customers is really a breath of fresh air and a reasoned bet on the younger and more affluent demographics of a native digital audience.

But at the end of the day, it’s all about the money.  Josh Steinberg in Digiday asks whether publishers are still too print-centric in their strategies, at the expense of future options, such as the iPad.  He writes that “Many publishers include iPad inventory for free as an extension of print packages.  For example, Hearst’s Esquire and Conde Nast’s Wired view print and the iPad as interchangeable products; you can’t advertise in the July edition of Wired’s tablet app unless you advertising in the print magazine.”

Steinberg notes that The Economist sells digital editions separately from print, but charges the same for print and iPad ads.  Print revenues are down, but iPad ad revenues are up 67% YOY.  The Atlantic’s President Scott Havens argues that “Folks are selling iPad editions as if they are similar products;  that’s not good for the industry or those brands.”  In a way, this transition to separate iPad magazine editions is likely just a matter of time and scale.  Steinberg reports that Esquire, which doesn’t sell iPad-only ad pages, has 65,000 iPad subscribers compared to 800,000 print subscribers.  The game would be different if the numbers were reversed.

It’s not entirely clear where the big revenues are to come from if consumer magazines are to reach the point where an appreciable chunk (say 30-40%) of their business is from digital.  Presumably, if and when Hearst reaches 10 million new, paid digital consumers, which could represent 25% of the total circulation file, that would be would constitute a memorable digital marker, though it would likely not be reached for a decade or so.

Some publishers, including The Atlantic and Forbes, are placing bets on what is generally called native advertising.  In another lifetime, this was called an advertorial, and generations of top editors stood at the bulwarks making sure that there would be no confusion between editorial and advertising content.  I was one of those enforcers, lined up on the holy side of the Church vs. State scrum.  Yes, the good old days.

Now, content is everywhere.  You are content, I am content, and Facebook and Twitter are media companies.  Back in the day, though tempers flared, it was relatively easy for consumers to identify ads masquerading as editorial content.  Today, not so much.  Of course, in the past, the FTC has played a role when editorial and advertising lines have become blurred, but we’re currently facing a little more than the threat from sleazy infomercials.  We are becoming inundated with content.  And some of this is by design.

Content is no longer just the handiwork of journalists and other pedigree.  While some see this trend the way Freud saw the threat of unconscious forces sweeping across Europe—the end of civilization, others see the proliferation of content as a business opportunity. IDG discovered more than a decade ago that their consumers often knew as much or more about technical developments as the paid staff.  I think that has become a pervasive truth across many of the top content verticals from cycling to knitting to running.   And the big consumer brands are not exempt from gaining this expertise in content.  Sears, one of the largest distributors of fitness equipment, also generates a lot of content about fitness.  To the list add most of the top twenty consumer brands.  Consumer brands call this activity “content marketing.”

I’ve admired the work Forbes, and especially Lewis DVorkin, Chief Product Officer, has done in bringing clarity, muscle and cover to native advertising and figuring out ways that enable “journalists and marketers, each transparently identified and clearly labeled, to publish content side-by-side in a credible news environment.”  In providing digital real estate on its site for content producers, including its own journalists, consumer brands, readers and bloggers, Forbes has gone a long way to define and embrace the rich content possibilities of our digital age with its BrandVoice offering.  In short, Forbes has created an “ethical framework” for branded content.

But this is not about the romance of content; it’s about business.  DVorkin nails the strategic issue with his prediction:  “The $10 billion digital advertising business is clearly in for disruption.”  He notes that the quarter trillion banner and rectangular ads served up quarterly have become little more than wallpaper to consumers and in the process are driving down advertising CPM.

Forbes’ strategy is to treat content as content, “meaning both editorial and brand content should rise or fall on its merits.”  Media companies are getting pretty good at building content frameworks that serve their diverse publishing platforms.  They are adding metadata or “structure” to content early in the workflow so it can be more valuable and ubiquitous downstream.  That is an essential technical development.

What Forbes is doing is more difficult in the sense that it requires a cultural and imaginative shift, asking publishers to turn structures and historical verities on their head while maintaining that ethical framework around content use.

Native advertising remains a very contentious issue but Forbes has laid down an important digital marker.

How I Ended Up on the Kindle

Amazon’s stock topped $300 a share for a short time yesterday before slipping back to $299.60.   You can be sure that this good showing was due to Apple losing the anti-trust suit over e-book pricing and not to the fact that I launched my first e-book on the Kindle.  More about that later.

I recall chatting with an Amazon executive after the Kindle was launched and asked him whether they were thinking about magazines.  He replied that “they are not yet on our radar.”  And the Kindle was decidedly not then on the radar of magazine publishers.  After all, why play in that black-and-white sandbox when the iPad offered the dream resolution for four-color magazines. 

For me, Amazon was a disruptor to be sure but also the behemoth that was putting my neighborhood bookstores out of business.  And the big guys too.  In the past during quieter times, I’ve roamed cities with bookstores serving loosely as my navigation points.  This is getting more difficult, certainly in New York.  Borders left town.  B&N is harder to find and could very well disappear too, following the Nook out the door.  But Amazon can’t be blamed for B&N’s incompetence and getting into the device game without a clear strategy.   The ruling that Apple conspired with other publishers to fix e-book prices clearly plays into Amazon’s strategy.  The price of e-books is going down.

I have written and edited more than a dozen books for a variety of publishers, including Dell, Warner, Rodale and a handful of small presses that are now out of business.  I have published hundreds of poems in a variety of journals from The Sewanee Review to something called Twig.  Most of these publications are no longer in print.  Those that survive have  outsourced much of their business operations.  Many poets and writers I know support financially various titles just to keep them going.  That Poetry magazine got something like a $100 million endowment a few years ago is the exception rather than the rule.  Most operate on a shoestring.     

Disruption in the book business started long before Amazon.  Over the last twenty years, book publishers have been taking less risks with mid-list books and requiring that authors that they do publish do much more of the work, including marketing.  At one time, I was sent on a 15-city media tour by Warner to promote a health and fitness book.  Sure it meant going to Cleveland, Detroit, and Green Bay but it was planned, paid for and generally successful.  I was talking to a book agent friend recently and he said that publishers require even well-known authors to submit detailed marketing plans with their book proposals.  This outsourcing is likely to continue.

The recent merger of Random House and Penguin is likely to exacerbate this situation as it brings the number of major book houses down to five.  The Atlantic Wire suggests that the net effect will be fewer editors editing few books; lower advances; and less diversity in subject matter.  As with Hollywood, we will likely see much more emphasis on the blockbusters.  I know from experience that it will mean fewer book agents taking queries from authors, even those with substantial publishing and media experience.  Since the business has been experiencing lower advances for authors, this means a lower cut for agents, who are already hurting because authors are going the self-publishing route.

But self-publishing is not for the faint-of-heart.  Authors have to do literally everything.  The contemporary rule-of-thumb is that for every hour you spend writing a book, you should spend another hour marketing the book.  Interesting, but this is practically impossible for most writers.  I haven’t handed out book flyers outside Grand Central Station in New York City yet, but I’ll have to think about it.

I’ve published two novels (Limey Down, The Sirens of Vulture Creek) and two volumes of poetry (Set Pieces of the Feminine, and In the Shadow of the DMZ) with Amazon, on-demand services.   You can find details about these titles at http://www.jamescmccullagh.com.  The most recent is The Archetype of the Gun, an e-book.

Ever since the Newtown school massacre, I have been thinking about the gun and gun violence in America in its broadest context.  I published a blog earlier this year (February 12, 2013) about the subject on this site.   Soon after the shootings, the conversation quickly got back to “us” vs. “them” and nothing happened.  The Senate failed to pass what most Americans considered reasonable legislation about background checks.  I suspect that nothing happened because the gun has such a powerful hold on the American imagination.  It is a Big Idea, what the Jungians would call an archetype.

In that spirit, I decided to write an epic poem—in structure--and explore in image and metaphor the psychological, religious, and mythological aspects of the gun, weaving in my military experience, my service during the Vietnam War, conversations with veterans and family members who served, and the growing examples of “militarism” at home and abroad.  This is not about guns but about “gun-running.” 

The WSJ reminded us this year in May, which is poetry month, that no one reads poetry any more.  Perhaps so, but we keep trying.  Now back to the business of books.

I decided to publish this as a Kindle e-book because the poem’s format works well on the screen size, the data sharing, and market distribution.  I like Kindle’s lending library program and other promotions.  And you can take it to the beach.  I priced the book at $3.99, which is considered the consumer sweet spot.   I’ll consider a print version if the response warrants.

Please find a link to the book, including a description and summary pages: http://ow.ly/mJkGP

Please share.

Thanks.

Flip-Flops, Kinky Boots, and Dreaming of Invention

A friend explained over lunch how his son and friends came across the idea of imbedding messages on the soles of flip flops so beach goers could leave messages behind them in the sand, perhaps including the inevitable end- of-summer lament:  “She loves me, she loves me not,” though that would require a lot of shoe leather.  The flip flop project was a modest dorm room affair until a stripper learned of the business and posted her approval on Twitter.  The rest is history and a nice uptick in cheeky sales.   Just to make sure my remarks are not apocryphal, please visit the site at www.Flipsidez.com.

I wanted to record this mix of intuition and luck before the sea comes in and wipes out the one or two-word #hashtag endearments on the remaining beaches where sand is not yet a luxury.  No word if some version of this will be used by sure-footed sky divers and sky walkers who, like their beach brethren, insist on being ephemeral and disappearing into the sunset.

If you think these observations have nothing to do with digital, you might be right or you might be wrong.  My friend had just come from a meeting in which a cross-section of publishers lamented, in spite of all the headlines and fuss, the challenges they face with digital publishing and how little impact digital revenues have on the bottom line.  After all, publishers are lucky to derive 5% of their total revenues from digital.  We are all looking for that huge digital hockey stick to appear on our Balance Sheets.

We are both survivors of the Dot Com boom and were wondering out aloud whether that kind of vapor was seeping into the marketplace again.  I don’t think so and argued over lunch that the digital sophistication in the media ranks these days is quite high, and, anyway, we got over our flirtation with banner ads a long time ago.  I suggested, however, that it might take another twenty years before digital revenues routinely represent 30-40% of total revenues of the average media business.  But who knows.   I heard the same forecast from CEOs in 1998.  I’ve yet to hear a digital prediction that has come true.

Nonetheless, the urban legends around the digital space are simply delicious.  Is it really true that you are 116 times more likely to survive a rattlesnake bite than intentionally click on a mobile banner ad?  For a thorough unpacking of dubious mobile stats, please go to www.digiday.com.

My friend remains convinced that we are experiencing a period of digital “froth,” citing some evidence that the interest in digital editions is sagging and consumers are tiring of the billion app App Store.  There was a note of nostalgia in his voice.  He mentioned an associate in the auto supply business who markets online parts for vintage Mustangs.  His business philosophy is simple:  If there a niche product he can put in a box and market via the internet, then there’s a business.  The auto guy just sold his share of the business for $17 million and promises to live happily ever after.

The psychologist James Hillman wrote that we’re probably better off having a drink with a friend than going to psychotherapy.  There was no booze at this lunch and no therapy that I noticed.  But Hillman has a point.  He also advised a generation to keep an eye on their dreams and wait for moments of invention.

I did, and as if on cue, an enterprise dream landed in my lap.  You can trace the incubation right back to the flip-flop guys.  The central dream image was of wooden toy train engines with red and yellow “noses,” that were converted for use as shoes for a particular young, fashion-conscious set.  There was a hint that a local football team was also interested, proving that fashion’s crossover appeal is a universal archetype.  The androgynous guys were strutting with purpose across my dream stage, a wonderful, uplifting set.

I have yet to ask my friend whether this dream might suggest a business.  I’m still on the digital fence, but plan to see the Tony Award-winning “Kinky Boots” that had, I understand, a similar, inauspicious beginning.  That is, once it discovered an essential truth:  the sex is in the heel.