Electronic Acrobatics: PDF Subscriptions Bolster Revenue

Mar 01, 2002

March 2002 Issue

Ted Bahr, president and co-founder of BZ Media and publisher of start-up software development magazine SD Times, had what he thought was a great idea. He was launching his new publication and he wanted to get it out to as many readers as possible, but he wanted to keep printing and postage costs down, too. Defying the then-current print-only publishing model, Bahr offered his prospective subscribers the option of receiving their issues as Adobe Acrobat PDF files. What set Bahr's proposal apart from what other publishers were doing electronically on the Web was that readers would get the entire version of the paper—including both advertising and editorial—just as it looked when it was laid out and went to press.

Fast forward two years later and Bahr's experiment seems to be working. Today, 15 percent of his publication's 45,000 subscribers choose the PDF version of the newspaper and another ten percent choose to receive both the print and PDF versions. The best part? BPA International, the business press auditing firm, verifies every digital copy so the publication's base rate includes both hard copy and digital versions, boosting the amount he can charge subscribers. Even better, the cost to send out each electronic issue is only 3.5 cents versus 60 cents for a traditional paper-based issue, a significant cost savings for the still-growing publishing company. SD Times is only one of a small, but growing, number of publications that are taking on the electronic world and finding success. In the past six months alone, the New York Times, Popular Mechanics, trade magazine Electronic Buyers' News, and the Harvard Business Review have launched digital versions of their newspapers and magazines to augment their online and print versions. The reasons are as varied as the publishers themselves. Some companies are finding that readers don't like their Web-based versions either due to poor navigation or missing graphics and images. Others want to expand their publications nationally and internationally, but don't want the added cost of postage and printing. Still others are looking for ways to give advertisers additional visibility and boost advertising and subscription revenues. No matter what the reason, it's a trend worth watching.

"Eventually, once the bandwidth and appliances to read the publications take off, we think that consumers will embrace [electronic versions] of certain publications," says Jay McGill, a Hearst Groups vice president and publisher of Popular Mechanics, another magazine that went digital late last year. "It won't be universal—I don't think you'll see electronic fashion or shelter publications—but it will happen. And we wanted to be in the space and learn as much as we can right now."

Popular Mechanics added its PDF version with the help of qMags, a self-titled digital newsstand that acts as a portal for users who want to download a single copy or an entire yearly subscription. And qMags isn't alone. There are at least two other major electronic publication delivery vehicles, including Austin, Texas-based NewsStand Inc. and Zinio, based in Brisbane, California These companies function slightly differently than the BZ Media self-service model since they ask their readers to download publications from the sites using a pull versus a push model. Both Zinio and NewsStand, the company behind the digital version of the New York Times and the Harvard Business Review, require readers to download client software before they can download a publication.

All the News
No matter which version a publishing company uses—push versus pull—the end result is the same: expanded readership that requires little if any investment. For example, Kit Webster, NewsStand's president and chief executive officer says that aside from the soft cost of training personnel so they can send files in the right format, publishers don't pay a set-up fee or fee for uploading their content. "The publisher pays us nothing to download the paper. We get a fee from each subscriber or single issue sold," says Webster. "If they are already processing their content to go to printers, they are 95 to 99 percent there technologically," he says.

And there is an added benefit: since publishers can insert hyperlinks to Web sites and audio and video files into the PDFs, they can offer advertisers the ability to track how many customers are coming to their sites from an ad placed in a magazine or newspaper. They also give print advertisers an extra entry into their readership's mindshare since ads appear electronically exactly as they would in print. Readers benefit, too, since they can keyword search the publications and keep an archival copy of each publication without the space constraints of paper. But Scott Heekin CanedyZinio's option also gives publishers a look into their publication's pass-along rate since the service tracks every copy that's forwarded to friends and associates. On the flip-side, publishers can limit or completely disallow pass-along copies, says Kevin McCurdy, Zinio's CEO. For example, Popular Mechanics allows pass-along, but places limits on the number of such instances per issue. "QMags has a security system built in that can lock the magazine. We have set the maximum number of pass-alongs to five based on our experience with the print version," says Popular Mechanics' McGill. "Based on syndicated research, our print version is passed along to approximately six readers per copy." Today, NewsStand readers don't have the option of passing along issues or articles, although that capability is coming in later versions of the software.

Despite the initial success of the digital distribution model, one analyst says he cautions against putting too much stock into such a method. "Digital publications are like ebooks, It's an inferior experience compared to reading the real thing," says Daniel O'Brien, senior analyst with Cambridge, Massachusetts-based research firm Forrester Research. "People are used to paper-based newspapers and magazines that are browsable, portable, and sharable. Digital publications are solutions that are looking for a problem," he says.

The portability problem may be solved mid-2002 when portable Tablet PCs—based on Microsoft's Windows operating system hit the shelves. Unlike ebook readers, which are designed specifically for ebooks, Tablet PCs are designed to handle a variety of functions. And since most will come with handwriting recognition and, in the future, wireless Internet access, analysts say they may have a good shot at consumer success. "I think the Tablet PC will do better than the ebook readers because they are portable and will have a wireless connection to a host PC in the home," says Forrester's O'Brien.

O'Brien also points to another possible stumbling block: the slow adoption of broadband. Today, the digital versions of newspapers and magazines range in size from 3MB to several gigabytes. Downloading them over a traditional dial-up line can take hours or even a whole day, depending on the connection speed. Broadband pipes are much better, reducing download times to a few minutes at best, but the mass market for broadband isn't here yet, with only 18 million households signed on for broadband access at the end of 2001, according to Nielsen/NetRatings, an industry tracking company.

The broadband issue also impacts emailed versions since it takes just as long to download something via email as it does from a Web page. In fact, emailed electronic publications actually face an additional problem: incompatible email addresses. If a reader signs up for email delivery with a free email account, such as Hotmail or Yahoo!, the message will almost always bounce back since services such as these limit the amount of storage per user. Typically, free email accounts max out at 3MB. Corporate users can often run into the same problems since many email administrators block large attachments to keep the company network running smoothly. BZ Media's Bahr says he ran into both problems when SD Times launched. "You need to do a little bit of legwork in the beginning. If you get 1,000 new subscriptions…150 to 250 of them bounce," he says.

Still, in the end, the benefits may outweigh the potential problems. Take the New York Times. The publication has been available in PDF since October 23 and its already garnered 1,900 digital subscriptions and is selling an additional 50 to 100 single copies every day. While these numbers might not sound like a lot, Heekin Canedy says it's more than the company projected for the entire year. "Roughly 20 percent of those subscriptions are coming from international sites and 20 percent are from the New York market," he says. "It's exceeding all of our expectations."

SIDEBAR: Do It Yourself

Smaller publishers who don't want to commit to a contract with a digital newsstand aren't necessarily left out in the cold, says Ted Bahr, president and co-founder of BZ Media LLC of Oyster Bay, NY. Instead, they can try and do it on their own.

"Any publisher can do what we've done," says Bahr. Getting started is fairly simple, although there are a few pitfalls to watch out for. Companies looking to create their own electronic versions of their publications need only two things, Adobe Systems' Acrobat program and some type of mass mailing system.

Creating PDF files is fairly simple except for one thing: advertisements. When ads come in they are usually in various formats and resolutions. In the beginning, Bahr says he asked his advertisers to prepare their ads in PDF when they submitted them to his publication's production department, but he immediately noticed a problem. "We got a 48MB file from Microsoft and realized it was easier to do it by ourselves," he says. Today, it takes about two hours to format the entire paper including the ads for distribution.

Once the paper is formatted, BZ Media hands it off to its service provider Cable & Wireless, who manages the distribution—for a cost, of course. If a publisher doesn't want to make such an investment, there is software available that can help users set up mass mailings including shareware programs. In addition, most email programs can handle group mailings. Once a list goes beyond 500 names, though, content providers may want to consider outsourcing the mailings to their Internet service provider or managed service provider.

SIDEBAR: The Tasini Factor

If the Tasini versus The New York Times lawsuit has taught us anything it's that it's always best to be prepared.

In December 1993, the National Writer's Union, on behalf of Jonathan Tasini, a freelance writer, sued the The New York Times Co., Newsday Inc., Time Inc., LexisNexis, and University Microfilms Inc. over copyright infringement. Tasini, who is now the president of the National Writer's Union, charged the defendants with archiving his articles on online databases without remuneration—or his consent. The case went to the Supreme Court and Tasini won. The ruling sent shock waves across the Web as publishers who didn't have specific rights for online content were forced to either remove articles from their online archives or pay Tasini and other freelance writers for the additional use of their work. Work that had been sold to a third party, such as online databases, was also included in the ruling. The Times chose to take its stories down, creating an outcry from freelancers and academia that was loud and clear. Both camps say the Times decision to remove the content will keep people from accessing important information.

Today, the debate rages on, but in the meantime, content providers looking to avoid the same fate as the New York Times Co. and its co-defendants should take note. Before you consider sending out a PDF version of your newspaper or magazine, make sure you've secured such rights. "With the recent Tasini case, publishers are a little skittish about delivering digital content in its entirety," says Jay McGill, president and publisher with the Hearst Group, which publishes Popular Mechanics, among other magazines. "That's one of the reasons we make sure we own all of the rights [to a story]."

While McGill's solution sounds like an easy out, writer's groups like the NWU are cautioning their members against restrictive work-for-hire, all-rights contracts, which puts content providers between a rock and a hard place—not to mention the potential problems that artwork and photography can create. In another recent court case—National Geographic versus Greenberg—the Supreme Court ruled that the magazine had infringed on the photographer's rights by including his work on a CD-ROM.

While there's no easy answer, publishers can avoid problems by asking contributors for online rights and offering to pay them for the additional usage—a fee that falls between five and fifteen percent of the base payment.

If the rights issue can't be worked out, it could make it impossible for content providers to create digital versions of content because, unfortunately, unlike a Web site or an online database, electronic versions of a publication can't succeed without all of its content. —KJB