Monday Note

Do encapsulated digital editions make sense? Is the notion of having a “news container”, similar to a newspaper or magazine, a relic of the past or is it still associated with quality journalism? In an era of instant information, is it worth proposing a self-contained, stop-motion shot of the news cycle?

For some, the reflexive answer involves market research, readers samplings and the like. I don’t think so. I’d rather abide by one of Steve Jobs’ sayings:

“It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”

He was only referring to electronic devices and the software that powers them, all being complicated indeed. But great news products have yet to be invented, and developing them can be quite involved, too: they combine interface design, contents structures and… technology (the latter’s importance being largely underestimated by legacy medias).

First of all, a matter of definition. By “encapsulated edition” I mean a decisive evolution away from the Zinio-like PDF replica of the paper product. Some publications have added XML layers that considerably improve the reading experience and allow numerous features — creating files, sharing on social medias. But very few are willing to get rid of the PDF’s bulkiness (for more on the subject, read a recent Monday Note Tear down this PDF). For “PDF-shovel” editions, the result is unsatisfactory: broadsheet newspapers that are six times larger than an iPad screen, 80-pages magazines loaded with ads that you must painstakingly leaf through.

Certainly not the right template for the future.

On the other hand, BloombergBusinessweek+ looks like a good start. I’m a long time reader of BusinessWeek magazine (when it belonged to McGraw Hill, before Bloomberg bought for a few million dollars). Then, last March, Bloomberg launched the weekly’s digital edition. I was curious to see how the switch to digital would look like.

Today, after a few dozens issues, let’s see what makes “BBW+” a great digital encapsulated product.

#1:  Investment in Design. BBW+ obviously gives design a great deal of thought, both in terms of graphics and structure.

Today’s web is plagued by cheap design. Many sites, especially in the tech field, use stock photographs or copyright-free Flickr pics ad nauseam, quickly messed with by some enslaved intern. No such thing is allowed in an app. And BBW invested a lot in graphic design for both print and the digital products. The short video introducing every issue usually features the editor, Josh Tyrangiel, and the creative director, Richard Turley, or Robert Vargas, the art director, as they explain their cover story choices for the two versions of the magazine. (See examples in Coverjunkie, a good graphic design blog). No stock photos in BBW+: most pictures are produced on spec, and it screams. As for infographics, they are redesigned for the digital version.
Granted, Bloomberg LLP is a huge money machine that made its fortune in financial services; an art direction splurge for its magazine is small token for this $7 billion revenue company. Still, they made the decision. As for the app itself, it is one of the slickest of the market. Easy to navigate, read, etc.

#2:  Making Choices. You can have a good newsroom, if there is no leadership, decisiveness in coverage assignments, if every subjects gets the same treatment, if a weak editor-in-chief tries to please everyone, you’ll end up with a dull product. BBW+ is mostly about cover stories sliced into well angled articles.

#3: Connecting to the outside. BBW+ is not an app insulated from the rest of the Bloomberg news machine, or from the web. The mothership is about deep financial data (read this story in Wall Street & Technology magazine); therefore, each article in the magazine is tied to a great deal of background. In the same way, all forms or social sharing are available.

#4: Pricing right. The digital version of Bloomberg BusinessWeek made another decisive choice: lowering the price and hoping for volume while taking a full advantage of Apple in-app purchase system: $2.99 for one month and auto-renewal (see below).

The low pricing has to be considered in the context of American magazines that still make most of their living from advertising. In the physical world, a home-delivered subscription of BusinessWeek costs $40 for one year ($0.80 per copy), $70 for two years ($0.70 per copy). At the equivalent of $0.74 per copy, the BBW+ digital version falls between the two. From a reader’s perspective the print and the digital versions cost the same. Actually, the worst deal for a single copy purchase of BBW is on Zinio: $4.99 a copy and $46.99 per year:

Compared to the app, it is seven times the price per copy and ten dollars more for a yearly subscription. For this, you get a crude PDF, not even an XML layer for a better reading, no extra graphics or pictures; you are left zooming in and out for 110 pages. Clearly, Bloomberg doesn’t believe in Zinio (me neither).

Advertising-wise, the BBW+ app weight nothing. For this September 26th issue, the print edition had 22 full pages ads, plus a 12-pages advertising section while the iPad version contains one lonely ad. Bear in mind that a magazine such as Bloomberg BusinessWeek makes at least twice more money in advertising than in circulation revenue.

In 2010, BBW made $57 million in circulation revenue (90% from subscriptions); in the meantime, its gross advertising revenue (i.e. before heavy discounts) amounted to $172 million, according to data compiled by the Association of Magazine Media. If we apply an estimated 50% rate card rebate, this is still $86 million net advertising revenue, and about $140 million altogether. Divided by a circulation of 900,000, this yields about $150 per copy and about $40 per reader (assuming about four readers per copy) per year.

How much does the app brings? Well, at $3 per month, $36 per year, minus Apple’s 30% cut, that leaves an ARPU of $24 per reader per year.
The $16 differential implies two things.
For one, the app needs to carry more advertising. Hosting a significant volume of ads without killing the design shouldn’t be a problem. Most likely, Bloomberg wants first to built an audience before loading the e-zine with ads.
Then, there is the Apple commission which impacts the model. My personal bet is that Apple’s cut will be down to a more reasonable 20% within a couple years as it will yield to  competitive pressure — especially from the Android ecosystem that will cost about 10% to publishers.
Some suggest another alternative: switching to a web-app system, as The Financial Times just did. But the current BBW+ application seems way too sophisticated to be built on HTML5 — at least for the time being.
As it is, content, form and business model, the Bloomberg BusinessWeek “Plus” experience shows that an encapsulated digital edition of a magazine can fly — even though patience and deep pockets are required.

—frederic.filloux@mondaynote.com

Be Sociable, Share!

• 

Related columns:

1. Infrastructure — Oil price vs. Moore’s Law TweetThe Internet runs on a simple equation: bandwidth and computer power are growing exponentially as their price keeps falling. Which is fine, since the demand is also surging the same way. There is one glitch though. More Internet traffic means more data centers across the globe and more electricity to power and to cool millions [...]...
2. Why newspapers must raise their price TweetFor quite a while, I’ve been advocating a newspapers price hike. My take: the news market is undergoing an irreversible split. On one side, digital distribution (on web, mobile and tablets) will thrive through higher volumes and deeper penetration; revenue is not easy to squeeze out of digital subscribers and advertisers but, as some consolation, [...]...