Next Issue Media: interactive editions could up subscription revenue

Could tablets really help save media? A study sponsored by media consortium Next Issue Media says the future looks bright, at least concerning the demand for interactive products on digital devices. The study finds that the demand for interactive periodicals from both current and future subscribers could result in more than $3 billion in revenue for the media industry by 2014.
 
Next Issue Media ― backed by Conde Nast, Time Inc., News Corp, Meredith and Hearst ― is in the process of releasing an e-reader application, with the goal of streamlining the process for publishing digital magazines on e-reader devices. While we still don't know the details of Next Issue's plans, this study backs up some of their goals.

The study (pdf), conducted by Oliver Wyman, simulated a buying experience among 1,800 respondents in order to determine purchase and consumption decisions they will be making in 2011. Their plans could translate into good news for publishers.

The study suggests that, when packaged correctly, the introduction of interactive editions to subscribers and non-subscribers could boost circulation revenue growth. Here are a few interesting findings behind that conclusion:

• The study finds interactive editions could boost renewal rates and that consumers will pay just as much for the interactive edition. Among “device-owning subscribers” (subscribers who plan to own a media tablet, touchscreen smartphone and/or netbook by the end of 2011), the availability of interactive editions increased renewal rates to 64%, up from 55% in a “print-only world.” The increase was achieved without discounting the price of the print edition. 
• Print will not be obsolete, and many consumers will like print bundled with interactive versions, the study suggests. Almost a third (30%) of renewing subscribers in the study opted for a bundle of print/interactive, priced at a 33% premium to either's standalone price. About two-thirds of device-owning subscribers who choose to renew opted to keep print (either alone or as part of a bundle).
• Cross-selling could present another revenue-generating opportunity. The study found that marketing other subscription sales via recommendation engines and browsing features turned into additional sales for 17% of subscribers.
• New interactive editions could bring in non-subscribers. The study claims introducing interactive editions in a store setting triples subscription rates among device-owning non-subscribers (up to 15% from 5% in a print-only world).
• Enthusiasm for interactive periodicals was strongest among younger age cohorts, but pretty widespread across gender and age. In the simulation, subscription rates went up for all demographics when compared to the “print baseline.” All types of content also enjoyed a boost, with sports, news and entertainment leading the way.

Altogether, the study says circulation revenue could increase by more than 50% among device users, relative to today's print-only world. Since more people are expected to be device owners in the future, and more publishers are expected to offer interactive editions, the study projects “latent consumer demand” driving $2 billion in gross circulation and advertising revenues.

Furthermore, the study says new subscribers will drive $966 million in incremental circulation and advertising revenue.

When accounting for the circulation opportunity of both subscribers and non-subscribers, the study forecasts a $1.3 billion opportunity in yearly revenues by 2014, after accounting for declining print revenue.

The big catch is in executing the opportunity correctly.  The study says taking advantage of the opportunity will require “significant effort and collaboration across the ecosystem.” The study doesn't even look at other factors ― such as advertising, organizational structure and workflows, and competition from new interactive-only publishers ― but it does offer some hope in consumer demand for digital products.