Of all the speakers, Deloitte’s Rupert Lion had the most unenviable job – talking about the macro economic climate. He didn’t beat about the bush. 2012 is not looking great.
Double dip?
We shouldn’t be surprised, he said. Economists had spent the previous twelve months revising their forecasts downwards as each new set of economic figures came in. Deloitte’s recent survey of CFOs suggests that finance directors are growing ever more fearful of a double dip. “Everyone is waiting for something bad to happen,” said Rupert.
87% of CFOs apparently say this is a bad time to take on additional risk to the balance sheet, which, in plain English, means they are unlikely to sanction new product launches or any expansion into new markets. Focussing on yet more cost cutting and short term measures to boost cash flow is likely to be the order of the day. How uninspiring.
Since Q3, 2008, average earnings growth has consistently been outstripped by inflation, thereby squeezing disposable incomes hard. This squeeze is, according to Rupert, unlikely to diminish until 2013.
Advertising spend, which has a historical correlation with GDP, is unlikely to show much in the way of recovery in 2012.
It’s just as well that publishers have grown used to an absolutely dire economic outlook, or else Rupert’s words could have sent us all over the edge. Punch drunk or battle hardened, I’m not sure which, but publishers now seem better able to take a lousy economy in their stride.
This is partly because there is nothing we can do about it, so we might as well focus on those elements of our own destiny over which we do have some control.
Digital success today
Much of the rest of the day was spent discussing digital. Contrary to the experiences of some publishers, digital success is not something that has to wait until tomorrow. Some publishers are enjoying it today. Take Dennis Publishing for example, which, according to CEO James Tye, has been profitable digitally for a decade. In 2011, 45% of their ad revenue came from digital activities, and they expect 4.5% of their reader revenue to come from apps in 2012, up from zero per cent in 2010.
And how have they got to this position? By getting stuck in early and not faffing around. Do you remember Monkey? You don’t have to answer that. It was a digital edition lads mag; lots of pics and videos of girls taking their clothes off, of car crashes, sports clips, and, err … more girls. Great stuff. Anyway, continued James, on a PC, it was a “pretty crap experience” but, and this is the key thing, they were picking up invaluable insight along the way, knowledge you can only acquire by actually doing things. And it is Monkey and all the other digital miss-steps taken five years ago that underpins the more sophisticated offerings Dennis is now successfully producing for the iPad, a game changer which has stopped the digital reading experience being, well, err … crap. So, lesson number 1, get in there.
It is essential that all publishers have a strategy for digital in general, and mobile in particular. As former AOP chairman Tim Faircliff said, “digital is no longer all about static PC based consumption”. Customers now expected cross platform publishing. The Week’s Kerin O’Connor recounted some of the correspondence he had received prior to the launch of the Week’s app last November from subscribers genuinely miffed that their favourite title was not available on a platform of their choice.
James Tye predicted that, by 2014, physical newsstand sales of magazines will be half what they are now. Publishers simply have to have a plan for digital transition, which, in a lovely bit of jargon busting, Rupert defined as, “the change from finite supply through finite channels to infinite supply through infinite channels.”
Championing digital
Digital has to lead the way; no ifs, not buts. It is essential, said Tim, that “digital leads the charge for finding new revenue opportunities”. There were, he warned, still dinosaurs out there, willing digital to fail (it won’t), fussing over cannibalisation, warning that it won’t pay, yarda, yarda yarda.
CEOs don’t know it all, Tim continued. The chances are, that when it comes to digital, the younger more junior employees will know a lot more than those at the top. As long as CEOs appreciate that, it needn’t necessarily matter. Their job is to foster an environment where digital can flourish.
And appointing a Head of Digital isn’t the answer either. Firms should instead appoint a digital champion to advocate digital across the company. They should be neutral from reporting lines but be an advocate, a go-to person on all matters digital.
Digital should run across the company, not be cooped up in a silo. Well balanced project teams should be formed, said Dennis’ Kerin O’Connor, with representatives from each of the main publishing disciplines, including digital, and they should meet regularly. Yammer helps in this regard, apparently.
Part of the challenge for publishers, said James Tye, is to stop thinking like publishers. Kerin agreed; when it comes to apps, he said, this is a tech project. You’re building a bit of software, and it has to be bug free, and a manageable download size.
The digital world is a “complex eco system, changing all the time,” said James. Can you imagine, he asked, in the old print world, having to tailor your product for each retailer? Ridiculous, but that’s exactly what publishers are currently having to do with apps.
Skilling up
Publishers have got to up their skill levels and understanding of digital; part of this is, as we have already seen, about getting stuck in. Part is ensuring your company is, says Tim, “gapped up”; – setting in place processes that can identify shortfalls in expertise. The other side of that particular coin is training. “We all need to keep educating ourselves”, said Tim, “because, assumptions are a dangerous thing in the digital space; and, we’re not very good at calling out for help.” Bring in external expertise, sign your staff up for training courses, and … buy them iPads!
James Tye asked for a show of hands. How many in the room believed iPads will become significant in selling subs? 80% raised their hands. Now, how many in the room owned an iPad? 25%! So, a large number of publishing professionals, who know that iPads will be crucial to the future success of their business, have yet to get their hands on one. “I would get one if I were you,” urged James, “because there is no better way of getting to understand them than by using them.”
But what about Android tablets, what about the Kindle Fire, do publishers have to fork out for them all? Well, said Kerin, “it is all about the iPad, for now. But it won’t be in the future.” That is why Dennis makes sure it’s working with all the other platforms. Why limit where you are, asked James, be everywhere.
Don’t spend too much on app development
But, whilst no one was denying the digital future, no one was saying that making money in it was going to be easy, and that is why Dennis’ James Tye warned delegates “not to over resource apps. Writing bespoke apps is expensive, and only the top ten apps make real money.”
So, make use of what he called ‘type 1’ digital editions (page turning replicas) where appropriate. Dennis had over fifty type 1 editions out there, in addition to a much smaller number of type 2 (enhanced magazine experience) editions. In case you’re wondering, type 3 products James defined as ‘app only’, with no print component. These appear to be growing rapidly in the larger publishing companies.
Kerin O’Connor advised us to “get our building blocks right first”. Ensure your content management system was up to the task. “Get control of your content now; know where it is.” Make sure your app development integrates with your existing systems – avoid duplication of effort. And, don’t try and reinvent the wheel. If another publisher has come up with a successful app model, then “copy, copy, copy”.
Notwithstanding the need to control costs, concluded Kerin, where possible, try and design your app around solid research and an in-depth understanding of the user experience.
Jim Bilton concluded the day with a fascinating round-up of the results of the 2011 Dovetail Subscriber Service Survey, which, based on the responses of 125,000 active subscribers, is now the biggest UK survey of its kind in any industry. Dovetail MD Julian Thorne will be writing about the key findings of the survey in the March/April issue of InPublishing, so I won’t spoil it.
And finally, a confession. I was one of those people who raised my hand to say, that, yes, iPads would be a significant driver of subscription acquisition in the future, but who also kept their hand down when asked who had an iPad. I hang my head in shame. I have resolved to put that right, and on Saturday, I will be marching into the Apple store in Bluewater to purchase one. To hell with the fact that the iPad3 will no doubt launch on Monday. I have to have one now. Partly, because we are launching an iPad app of InPublishing for the next issue. Just thought I would drop that little tease in at the end.
