Paul Wallbank – Brilliant Communications

Category: future

  • Magazines 2020

    Magazines 2020

    As hundreds queued around the world for the latest Apple iPad an Australian media tycoon told a business breakfast that newspapers were a sunset industry. Where does this leave magazines and other print media?

    The last decade for magazines has been tough, as readers drifted to largely free websites with the advertisers following. The challenge for publishers is how do they follow their markets onto the web while still making money.

    Magazines aren’t unique in this challenge – the media industries, like many others, have been affected by the rise of the web. Magazines themselves sit somewhere between the recording and newspaper industries with news stand sales and subscriptions being a bigger proportion of incom while not having the same newspaper classified income which has collapsed so dramatically in recent years.

    The Shift Online

    We’ve seen a massive shift to the web over the last decade and that movement is only accelerating as advertisers start to follow consumers and the public embraces social media and online gaming.

    PriceWaterhouseCooper’s Entertainment and Media Outlook forecasts the magazine industry to lose 1% of advertising market share – from 5 to 4% of the overall spend – over the 2010 to 14 period with all the losses going online.

    While the magazine industry looks at losing 20% of its advertising revenue to the Internet, figures are similar for newspapers, radio and free to air television with online advertising moving from 18% to 26% of the market. The advertisers are, quite rightly, following the customers.

    Following readers online is the great challenge for the magazine industry, the question is how do they do it and continue to be profitable.

    The Internet Challenge

    The greatest problem on the Internet is making money, businesses have trained web surfers to expect online products – particularly news and entertainment – for free. Even physical goods have become increasingly commoditised as deal of the day and group buying sites have used “cheap” as the main hook for buyers.

    Today’s reader and consumer expects goods they find online to be cheap and any content they discover to be free.

    That isn’t fatal for a business as the broadcast television industry has shown us you can provide free content paid for by advertisers and make a good living while there’s no shortage of merchants who’ve built empires on the fast moving consumer good model of “stack ’em high, sell ’em cheap”.

    Part of the online magazine industry’s response to the challenge of adapting to these models has been to use free labour. The rise of the Digital Sharecroppers, where writers provide content for free, has been the result.

    People have been prepared to provide content for free for all manner of reasons. The problem for publishers, and readers, is quality writing is not sustainable under this model and we’re beginning to see the end result where writers are forced to drive buses and the free content is being increasingly sourced from PR agencies, their tame blogger bunny friends or from content farms more concerned about gaming Google through SEO keywords.

    Free content also reduces the barriers to entry, which are already extremely low in online given a geek with a WordPress site or YouTube account can have a site up and running in a couple of hours for less than a hundred dollars. If content is low quality, there’s little reason for readers to have any loyalty or to stick to any one site.

    There is the other type of free content though, User Generated Content (UCG) consisting of the comments, forum posts and free articles submitted by readers. Many of these followers are fans and this is perhaps where salvation for the magazine industry lies.

    What formats can we expect

    The old magazine format isn’t going to go away, it’s just going to decline as part of the overall distribution. We’re going to see more short and long format online content complimenting the magazines along with a lot of user content in the comments and forums sections.

    We’ll also see more cross platform selling like we currently see with magazines like Better Homes and Gardens though with a much bigger online and interactive component than the present TV-magazine tie ups.

    Content though will be more important than format. The SEO driven plays and content farms are a transition effect and as both search engines and readers become more savvy,  the influence of sites like eHow and The Huffington Post drop away.

    Probably the biggest sleeper though are the electronic readers such as the iPad and Kindle, it is just possible these devices might resurrect the fortunes of the publishing industry in a similar way to the Compact Disk did for the music industry in the 1990s. Certainly Rupert Murdoch is hoping this.

    How will magazines engage with consumers in 2020?

    Successful magazines are going to find the niches where readers and advertisers will pay to be engaged and identified with key groups, demographics and markets. Adding value to readers is going to be the key to revenue on an Internet that is full of noise of movement but with increasingly fewer nuggets of wisdom.

    It’s those nuggets of wisdom, useful analysis and unique worthy content that will be what time poor and somewhat information addled consumers are going to be looking for.

    They are also going to be looking for a platform to get their views heard. So it’s going to be critical that magazines make that platform available through comments, forums, reader blogs and giving loyal and knowledgeable readers the opportunity to write for the publication.

    Engagement is going to mean allowing site visitors some ownership of the content. The more you can build conversations and contributions around content, the more likely it is that readers will come back and the more likely they are to pay for add ons and read advertisements.

    Where will the revenue come from?

    The great challenge in the Internet era is making money online. We’ve trained the market to expect news and information to be free and that genie is now out of the bottle, and despite the paywalls we try to put up, we’re going to struggle to convince readers of our value.

    As writers, journalists, editors and publishers, we’re going to have to demonstrate our worth to the people who are prepared to pay for content. Right now there aren’t many of who will pay for relevance and quality, but things may be changing as readers realise much of what they currently find on content farms is unsatisfactory.

    Subscriptions and advertising are still going to be critical while events, merchandise and other revenue streams are going to be useful revenue centres but it’s hard to see how they will contribute to the bottom line any more than they currently do. It’s also important to remember that successful staging events is an expensive task involving skills many publishers simply don’t have.

    Hyperlocal is a fascinating area for magazines. While much of the focus has been on adopting local search to the newspaper industry it could be that specialist magazines can deliver effective localised products through directories and mobile phone applications.

    For instance let’s say we have an offal magazine for those who like to offal. A Brisbane businessman visiting Adelaide feels like a plate devilled kidneys for dinner. It could be that Offal Eaters Monthly magazine has a paid app or a subscriber site that allows him to find what he wants in a strange city.

    What is the role of the publisher/editor?

    More than ever the publisher and editor are going to have to know their market intimately. At a time when audiences are going to be widely fragmented it’s going to be essential to understand what the readers want.

    User generated content provides an opportunity for publishers and their editors to understand the market and monitoring what is being said by the target audience is going to be a key role of the modern editor.

    Moderating and controlling what’s being said on the platform will also be a key role for an editor. We all know the Internet is God’s gift to opinionated idiots and the risks of defamation, piracy and other brand damaging activity on websites are very real. The editor’s job will increasingly be to filter out the lunatics while encouraging interesting discussion.

    Most people though don’t want to create content, beyond having a quick comment on a post or sometimes joining a discussion. Another important role of the editor is to balance the higher quality, paid content with user generated material to ensure the publication’s site doesn’t dissolve into just another web forum.

    Publishers too are going to be challenged by this and their task is to find the deep niches where these models can succeed then convince advertisers and subscribers that their sites are worth signing up to.

    Given the ease of launching new sites, the key to success is being the trusted leader in your segment. If your content can be easily replicated or bought from another source then the survival odds are firmly against you.

    The next nine years

    We should also keep in mind change isn’t new, broadcast television gave a death sentence to news magazines like Life or the Bulletin a generation ago, and these publications only survived because of indulgent owners.  The magazine industry met those challenges, evolved and survived albeit with great change and a few casualties.

    The same is happening now, the industry is evolving and adapting to the new mediums and the changed behaviour of advertisers and readers. It’s not pretty or easy but the rewards are going to be there for those who figure it out.

    Had we been around when Gutenberg invented the printing press we would have wondered what will happen to all the monks who up until then had spent their lives manually copying religious texts and important documents. Change came to the monks, but not in the ways they expected.

    The web only recently turned 20 and in 2020 it will still be less than thirty years since its invention.  All of us will still be learning, making mistakes and discovering where the opportunities are.

    It’s a time of challenge and the rewards for those who get it right are great. The key for magazines, like all of us, lies in understanding our markets and audiences.

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  • The rebirth of the middleman

    The rebirth of the middleman

    For many years, we believed the Internet would see the middleman’s demise. Just as it has with the newspaper and recording industries, we expected manufacturers, service providers and content creators would stop using intermediaries such as agents, brokers or retailers and move to set up their own online distribution channels.

    The new middlemen

    The rise of services like Groupon, along with booking platforms like Wotif and employment services like Seek, show just how wrong we were. What we’ve actually seen is a rise of new middlemen to replace those who have fallen away like telephone directories and record stores.

    If anything, we’ve seen even more powerful intermediaries develop like Google, Facebook, Apple and Amazon develop to replace the old gatekeepers.

    Why we need intermediaries

    Part of the reason for this is that none of us, even the biggest corporations, have all the skills to bring a product to market; retail itself is a tough business, marketing is hard work and distribution is easiest when you have economies of scale. Middlemen bring these and other skills required to get products into the marketplace.

    The danger with middlemen is they can dilute your brand. We see that with Groupon as businesses give their brand over to them with steep discounts on their products. As Esther Dyson points out at Salon, Groupon will eventually destroy many of their merchants.

    None of this is new as many brands who’ve found themselves hostage to single outlets have found. This isn’t a just a small business problem either as we see hotels and airlines try to break their dependency on travel websites whose readers mainly shop on price.

    The Internet’s price paradox

    Price is one of the big paradoxes we have on the net, we’ve largely trained customers to buy on price – or look for free – yet for the middlemen to make money, it’s essential there’s a decent profit in the chain. If a $50 product only has $10 margin to share across the supply chain, there’s not a lot in it for the various intermediaries.

    Right now, we’re seeing another paradox as the middlemen are keeping their profits while retailers and producers – such as the hairdresser, restaurants and personal trainers selling through group selling sites – are taking the pain and absorbing both cost increases and reduced income from retail price discounting.

    That’s not sustainable and it’s probably a transition effect as the technology changes distribution and marketing at the same time that the Western economies are moving from being driven by consumer debt.

    Are most of us really middlemen?

    We were wrong to predict the death of the middleman, they provide too many benefits and many of us are middlemen ourselves whether or not we’re prepared to admit. What does happen is the middleman’s role evolves as markets, technology and industries change.

    Regardless of whether we use, or are, middlemen it’s necessary to keep an eye on that evolution and make sure we aren’t caught out when the market tips and moves against us.

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  • Tipping points

    Tipping points

    We often assume change is immediate – for instance, the moment the motor car was invented, all the horse cart makers went out of business – what usually happens though is the two technologies or industries sit side by side for some time and the old industry may even continue to prosper for sometime and the new methods struggle.

    Eventually though the newer technology takes over and the older one falls away quickly, leaving slow to change incumbents with an irrelevant business model.

    Illustrating this, two fascinating posts by Michael DeGusta on his blog The Understatement tracks two major trends in the US newspaper and record industries, noting how the sectors are now at 1960 and below 1973 levels respectively.

    The record industry

    Michael’s tracking of per capita recording sales is striking both for how technology, trends and musical tastes have shaped the record industry along with the predicament it now finds itself in.

    The 1970s show how the recording industry adapted, we see sales start the decade in decline until a sharp uptick in vinyl sales happens in the late 1970s, probably driven by the heavily hyped “rock opera” and concept albums foisted on us by the likes of Pink Floyd and the Electric Light Orchestra.

    It’s interesting that during this period cassette sales largely flat lined, as digital revenues have today. As a child of that late 1970s era, we used cassette recorders – mine won in competition at a jeans shop in outer suburban Melbourne – to tape stuff off the radio and jerryrig with record players so we could create mashups of Alice Cooper and Skyhooks.

    Cassette revenues eventually grew, but the the Compact Disk quickly took the growth off the cassette tape and drove the record industry to new highs, probably as people replaced their vinyl collections with CDs that weren’t easily copied through the 1980s and much of the 90s.

    The peak of CD sales was hit in the late 1990s, which is almost certainly due to the arrival of personal computers equipped with recordable CD units. All of a sudden, we could go back to copying the music we’d already bought.

    To make things worse, the rise of the World Wide Web meant we suddenly didn’t have to go through the gatekeepers – the record stores, radio stations and magazines – to find the music we wanted.

    For a while the record industry fought back, even seeing a minor resurgence in 1999 and 2000, but then the rot sets in. The tipping point was clearly in 2001 and can probably be traced to the online streaming services, including YouTube, and the rapidly maturing peer-to-peer services.

    The only solace the record industry in its current form can hope for is to see a surge in digital sales like they saw with cassettes in the mid-1980s. It’s difficult to see how that can happen unless they can quickly strike some very favourable deals with Apple and other online distributors.

    Newspaper advertising

    Print media’s performance over the last fifty years has been one of success until 5 years ago. Despite most of us turning from newspapers to broadcast television for our news through the 1960s and 70s, revenues stood up.

    From the 1980’s there was a slow decline and in a few years early in the new millennium it even looked like the Internet wasn’t affecting revenues and the new streams from online advertising were actually increasing overall income.

    Then in 2005, the tipping point was reached as classified advertisers, particularly employment and real estate, fled to online competitors with the display buyers not far behind.

    For newspaper publishers, that their online revenues have barely grown in the last five years most be the most worrying aspect of the collapse in their income. Their online strategies simply aren’t working.

    What this means for other industries

    This “tipping point” pattern is typical when we see technological shifts. For various reasons – customer inertia, government regulations, uneven distribution of the new tools – a game changing technology usually takes time to be adopted and usually goes through a process best described by the Gartner Hype Cycle.

    New technologies and ideas rarely change industries or societies overnight, but once a technology reaches maturity and mass acceptance, the barrier eventually gives gives and people quickly move across to the new way of doing things.

    We see this in the record industry – particularly in the switch to cassettes, CDs and then collapse as the net takes over – then again in the newspaper industry.

    These two industries though are just examples, the same process is happening to many others. One good example is the phone directory business where the tipping point is happening right now as consumers and businesses move online and away from printed directories.

    That many businesses still haven’t figured out this change in consumer behaviour indicates they too are being blind sided by tipping points that could leave their ventures stranded by history.

    All of us have to understand how these changes will affect our livelihoods and trades. Are you looking at how your business is affected by the rise of the net and the end of the cheap credit?

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  • The rise of the connected consumer

    The rise of the connected consumer

    Last week in Sydney the Federal government’s Online Retail Forum, set up after the first round of big-retailer complaints about Internet shopping, was held to discuss the threats and opportunities that lie in the connected economy.

    The event’s location and timing, being held at the old Sydney Post Office the day after the Angus & Robertson book chain went into administration, was somewhat symbolic of the changes facing the retail industry.

    Australia Post itself is a good example of a business dealing with change, their traditional mail business is shrinking while the move to online commerce is driving and growing their parcels business. As traditional post offices selling stamps become less important, new opportunities open in the logistics of getting physical goods to Internet shoppers.

    The old post office itself is an example of that, as technology changed how mail is sorted and delivered the need for a big downtown building disappeared and today the mail service occupies a tiny corner of the massive building which is now a hotel and office complex.

    How post offices changed is a big lesson for commercial landlords, and our super funds that invest in them. COSBOA’s Peter Strong pointed out on the opening panel how the business model of ever increasing rents forcing out smaller retailers and replacing them with cookie cutter national chains and franchises is one that is already struggling to cater for the online consumer.

    Customer service is the opportunity missed by the big ‘bricks and mortar’ retailers, a physical store has the advantage of being able to deliver a personalised, friendly experience yet what we find when we visit a big department store or electronics ‘category killer’ superstore is service that often leaves much to be desired.

    The participants of the online retail forum’s panels covered how the online retail industry is filling the customer service void; Mike Knapp, the co-founder of Sdyney’s Shoes of Prey, explained how their consumer friendly return policies encourage sales while logistics companies like DHL, Temando and Australia Post described how tracking the delivery of Internet purchases was essential for customer confidence.

    Most importantly, much of the morning emphasised that e-commerce was only a small part of what the Internet has to offer the retail industry. The web has become a monitoring tool for both buyers and sellers as well as improving the supply chain and radically changing the marketing industry.

    Google’s Jason Pellegrino explained how many of the US electronics chain Best Buy stores now keeps floor stock for consumers to feel and touch but then places orders through the net for delivery to the buyer’s premises. Not keeping anything more than display stock dramatically improved the efficiency of Best Buy’s stores.

    Interestingly Dick Smith Electronics employs the opposite model, with their “click and collect” service customers can order online and nominate the store they want to pick up the product which gives the retailer an opportunity to cross or up sell.

    Both models illustrate how retail can adapt and take advantage of shoppers using the Internet and with some creative thinking can open up new opportunities which enhance their traditional sales models.

    The message from all the industry panellists at the retail forum was consistent; the net is giving power back to the consumer who is using it. For retailers to compete, they have to be dirt cheap or offer excellent customer service.

    What the event showed is the customer is more important than the technology – the point of going online is about improving the offer to customers be it by cheaper prices, faster delivery or better service. If the technology happens to improve our margins then that’s a pleasant benefit as well.

    Customer service is something our bigger corporations like the retail giants, banks and telcos have forgotten, it’s now turning around to bite them and that’s probably the biggest opportunity for the rest of us – to adapt technology to our business in ways that deliver a better product.

    It’s more than just having a website and online shopping cart, these changes are affecting almost every business. It’s important we all think about how our ventures are going to adapt to markets where our customers have more power than ever.

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  • The tipping point

    The tipping point

    Late last year the Internet quietly entered a new stage in its development as smart phone sales surpassed those of personal computers. This represents a fundamental shift on how society uses the web and how it will affect markets and our businesses.

    The mobile workforce

    Our staff and suppliers are going to be increasingly mobile and available. Logistic programs similar to Red Laser – which we discussed last year – coupled with recognition systems, virtual reality and always on wireless broadband are going to enable business, whether it’s a multinational trucking company or a local plumber, to have shorter supply chains and faster response times than ever before.

    Going on the cloud

    For ourselves it means increasingly we are going to be using mobile platforms like iPads and smartphones. It means we’re going into the cloud as the cost of maintaining the back end of these services are too prohibitive for many businesses.

    As we discussed a few weeks ago there are a number of risks in the cloud that we need to understand and be aware of, but as the commenters to the Smart Company column pointed out, we can’t ignore the cloud.

    The pervasive customers

    Our customers are using the cloud on their smartphones as well, A presentation by silicon valley stock analyst Mary Meeker late last week emphasised the process that’s underway. Mary’s colleague, John Doerr calls this evolution of the mobile Internet SoLoMo – Social, Local, Mobile. People are using their mobile phones to quiz social networks to find local businesses.

    This is going to challenge all businesses, particularly those who’ve resisted going onto the web until now, as we have to make sure our presence on the web is more than just a pretty web site with a token Facebook Page and Twitter account

    Fancy a bowl of noodles, need your lawn mowed or toilet repaired? Increasingly we’re going to be using the mobile web and making note of what our friends say about these services. Even those business like the trades that have got away without going online are going to find it increasingly necessary to sign up to services like Google Places.

    Change has arrived

    The time for procrastinating about how our businesses are changing is over; the changes are happening now. Our customers are looking for us online and our competitors are reaping benefits from the various mobile and cloud technologies.

    You need to be across these changes, just as telephones, cars and computers revolutionized most of our industries through the 20th Century, the mobile web is the first big change of the 21st. If you want your business to be part of the next decade, you have to start thinking about how you can use these tools.

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