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By Alicia Orr Suman

This publisher is selling magazine subscriptions through an Internet model that seems to be working—even though it's not a 'free for all'

With rare exception, magazines and newspapers have struggled with the concept of charging for their online content ever since publishers started doing business on the Internet more than a decade ago. An underlying problem existed in that it had been taken for granted by most consumers that the heart and soul of the "information superhighway" was the idea that Web content should be free and available to all. Thus, the whole idea of charging for editorial content online has been a difficult threshold for most publishers to cross.

Of course, publishers want to charge for what they feel is valuable information: their editorial product. But only a few have done it with success. The two most-talked about paid-online-content publishers, Consumer Reports and The Wall Street Journal, to many seemed to be the anomalies.

In the spring of 2003 when Time Inc., the largest magazine publisher in the United States, began a program that would cut off free access to most of its magazines' editorial content in cyberspace, many wondered if it would signal a watershed moment in publishing.

Time Inc.'s primary goal with its "walled" online content strategy is to get more people to pay for subscriptions to its magazines, says Ned Desmond, president of Time Interactive, which is responsible for Time Inc.'s online content, business and technology plans. "Internally, we call it 'the curtain' because there is a barrier beyond which you cannot pass without being a subscriber or purchaser," Desmond explains.

Although each magazine puts a different amount of content in front of its "curtain," access behind this set point is pretty much the same across the board:

* Print subscribers can log in using their issue label or personal information.

* Single-copy buyers can use a code word printed in the magazine to gain access to paid content for the shelf-life of that particular issue. This adds to the pool of subscription prospects Time Inc. can attempt to convert. The magazines promote online exclusives to entice single-copy buyers to visit their Web sites.

* AOL members get unlimited access as part of their AOL membership benefits.

All others must purchase a print subscription to view the special online content created just for paying customers.

Desmond says the company studied many business models for online paid editorial content but recognized that the most common approach of people paying "a la carte" for access to articles online "does not suit our business well. We need to generate subscriptions to our magazines. That business is far more valuable than the much smaller business of selling individual articles."

Using the walled content strategy, Desmond says, "We wanted to see how much more effective we could make the Web as a source of subscriptions." Titles involved in the program include: People, Entertainment Weekly, Real Simple, InStyle, Coastal Living, Cooking Light, Fortune, Business 2.0, Southern Living, Sunset, Southern Accents, Parenting, SI Kids, Teen People, Time and Time for Kids.

Web Economics

Time Interactive's online business model for its editorial content has more closely integrated the company's Web channel into its overall circulation strategy, says Desmond. Regarding the process of coming up with this new concept, he recalls, "We said to ourselves, let's no longer look at the Web as a stand-alone business, judged mainly by its success in generating advertising revenue. Let's look at the overall contribution to the business—advertising plus its contribution to the economics of the print circulation business."

Commenting on the Time Interactive program, circulation consultant Elaine Tyson, president of Tyson Associates, Ridgefield, Conn., says, "This is a well-thought-out model. It is certainly different from what others are doing," by charging on a per-article basis. While Tyson believes most consumers still go to Web sites expecting content to be free, she states that publishers should be "experimenting with ways to generate money from content."

The online paid market is in fact growing, according to the Online Publishers Association's (OPA) Online Paid Content U.S. Market Spending Report, signaling that Time Interactive may be on track with its thinking in testing new online strategies. OPA's study, which was conducted with comScore Networks, shows a steady two-year trend of growth in the United States from $670 million in consumer spending in 2001 to $1.56 billion in 2003. Online content spending rose 18.8 percent from 2002 to 2003.

To Time Inc., Desmond sees the online publishing world as "another source of subscriptions. We're not abandoning direct mail, certainly. At most titles, the Web is not a huge source yet, although we have had some breakthroughs."

At Fortune, for example, Desmond says the online paid content program has been "very successful. The Web site is on par with direct mail as a source."

Collecting e-mails from single-copy buyers who access the paid-content sections of the sites is another important strategy. Some titles do better than others, and Desmond describes the process of working out the best approach as a combination of creating the optimal Web site experience and getting the consumer marketing offers tuned just right. The process can take many months. But even now, just midway through Time Interactive's implementation program, Time Inc. is seeing a three- and four-fold increase in net subscription orders at the most successful sites, and an overall increase in net subscription orders of about 35 percent in the space of approximately 18 months.

"When you look at the advertising revenue from the sites, you're usually talking about a break-even business," says Desmond. But when you take the circulation revenue into account, he says, "The sites represent a 30-percent margin business."

Consultant Tyson notes that if Time Inc. can generate more subscriptions online, it will be to its advantage from a cost standpoint. "It's always beneficial for publishers to reduce the number of new subscriptions sold through expensive sources such as direct mail," Tyson says. For large companies with multiple products, she adds, "the savings could be substantial over time."

Trading Eyeballs for Advertising

Although the "curtain" has depressed overall traffic to its sites, Time Inc. has made up for some of those eyeballs from the deal with sister company, AOL. Basically, AOL members get free access to Time Inc.'s now-restricted magazine Web sites as part of their membership fees; Time Inc. can try to convert these additional visitors to paid subscribers to the print publications.

"AOL wanted two things from us: the advertising inventory on our sites and exclusive access to [walled-off content on] our sites for AOL members," explains Desmond, noting AOL was willing to expand that access to subscribers and single-copy buyers. "We liked the deal because it gave us stability on the revenue side (the flat payment AOL offered us) and an opportunity to learn from using the restricted access required by the deal to sell more subs."

"We were able to offer them conventional, risk-free [subscription] offers with good effect."

Desmond would not disclose how much AOL pays Time Inc. for the advertising rights deal, or how many new subscribers Time Inc. has gained as a result of the exposure to AOL's membership base of more than 23 million U.S. customers.

The Offers: Getting to 'Yes'

So far, the results from the paid content program show it to have been successful overall, Desmond says. Among the publisher's biggest success stories is one for Fortune. "We're seeing renewals around 70 percent from [online subscribers who signed up on] short-term subscriptions," he states.

Desmond explains: "I think the offer structure is very important to the success of the model. It is a short-term subscription, and so it is easier for people to say 'yes' to getting started on paying for something."

Additional keys to making the Web channel work as a direct selling source at Fortune, for example, are a small out-of-pocket [for the consumer] and a credit-card payment offer, Desmond asserts. (He adds that not all of the paid online-content offers are credit card-based, however; there are many types of offers, including risk-free and bill-me.)

When you look at some of Time Inc.'s largest circulation titles, including People and its flagship publication, TIME, one-year subscription prices can appear high simply because they are weekly publications. When competitors offer 12 issues for only $12, Time Inc. must make its prices look attractive on these more expensive titles by providing prospects with low-cost trial options that allow for impulse buys.

"Price is a sensitive factor on the first contract," says Desmond, "but we see very high renewals—70 percent or better—on a second, longer contract."

For example, there's little to stand in the way of saying "yes" to TIME's current offer online: "Get 12 issues for only $4.95." This offer appears on the bottom of Web pages when a TIME.com visitor attempts to access premium content on the site—such as an article that is "beyond the curtain."

An additional plus for subscribing online: Readers get instant access to the article archive including the premium article they wanted to read a second ago.

Of course, to make economic sense for the publisher, the offer also features an automatic renewal clause mentioned below the heading "Offer Terms," which will "AUTHORIZE Time to charge your credit/debit card at the price above now and in time to renew your Time subscription, without interruption, before the start of each new term at the guaranteed low rate then in effect," unless the subscriber cancels.

Desmond points out that each magazine's offer and terms are different. On the Real Simple site, for example, is a more standard offer; visitors are greeted with a subscription pop-up when they hit the site, not when they try to access premium editorial: "Subscribe now and save over 49% ..." The one-year offer currently features a free guide called "Getting Organized" that is given to new subscribers who pay for the 12 issues at $1.99 per issue with a credit card or debit card, instead of choosing the bill-me option. This offer is similar to the deal currently being promoted via direct mail, too.

Furthermore, AOL subscribers are treated to a somewhat different set of offers on some of the magazines' sites—including Real Simple's. This AOL-specific offer begins:

"[AOL Screen name],
Try an issue of Real Simple FREE!"

Inside a box, the 12 issues for $23.95 offer is more fully detailed: "Your 1-issue trial is truly risk-free ..." An e-form is supplied for subscribers to complete, and pricing assumes they will use the same method of payment used to pay for the AOL account.

Real Simple has a successful site when it comes to generating subscriptions, says Desmond, explaining that, "the reason its offer structure emphasizes risk-free is that the site itself has very little content." Originally built only to promote the magazine, the Real Simple site will be relaunched in February, offering visitors an experience that better represents the magazine, and that Desmond hopes will produce even more subscribers.

Selling online content by subscription seems to be an increasingly popular model for publishers, though TIME magazine does offer per-article pricing if a visitor wants to download a single article that's only in the online archive.

The recent OPA study shows subscriptions continued to be the dominant pricing model for online, paid content in 2003, as monthly subscriptions rose from 44 percent to well over 49 percent. Monthly subscriptions actually surpassed annual terms, indicating a lower barrier to entry may, in fact, be key to driving payment for online content.

At Time Interactive, Desmond says, "We know that [online-generated print subscribers] renew very well after the first, short-term contract. What we don't know much about is how they renew on their third contract." On this point, he says, it's too early in the renewal cycles to tell. "I'd guess we're a year or so away from knowing more."

Web Sites Require Creative Expertise

Creating this type of online product requires a balance of editorial and marketing know-how. "That was a shift for the company," Desmond admits. "Previously, the Web side [of the magazines] was run mainly under the direction of the sales and marketing teams directed to generate advertising revenue. Today the consumer marketers are a much stronger force in the equation."

From a creative point of view, he explains, the change has meant looking much harder at what will attract an audience instead of simply what will generate heavy traffic (typically from distribution partners like Netscape and CNN) and burn a great deal of inventory. "We know we have to carefully craft what is going to go on each Web site and also what goes behind the curtain. It requires much more editorial expertise—and a true partnership between editorial and marketing—to decide what will go where," says Desmond.

Given this new type of working environment, Desmond says, "Creatively, we can excel online. We've learned that with People.com, for example."

Desmond explains that People is the world's most successful weekly magazine, and People.com, its Web site, uses a blend of magazine editorial and made-for-Internet content. The Web site has its own dedicated editor and the People marketing team ensure the site gets special attention, together creating unique combinations of content designed to work the kind of information-driven sales magic Desmond described. For instance, if you visit the Web site, you can read breaking celebrity news, view celebrity photos, read stories of intrigue, and browse gossip columns and horoscopes.

If you click that you're interested in receiving your daily and weekly horoscope via e-mail, you'll immediately be directed to a "subscribe or connect" page where you'll be asked to either key in your subscriber or issue label information to continue—or go ahead and subscribe today. The professionals at People know the kinds of information their readers are willing to pay for, and hook these features to subscription appeals.

In designing Web sites with walled-off content, Desmond says he's found some interesting efficiencies between the titles that he can draw on for support and information. "We built a database called The Kitchen Assistant, compiled from all of our magazines' recipes, because we realized we not only have recipes in Cooking Light but also in Sunset, Southern Living, Southern Accents, Real Simple, Coastal Living and Parenting," says Desmond. "That's something that's been really useful to us in furnishing the sites with content."

As an example of how the online editorial of Time Interactive works as an engine to generate subscriptions for Time Inc.'s magazines, Desmond points to the way Cooking Light magazine uses its Web site to get people to sign up for trial subscriptions. Says Desmond, "Lots of people go to the Web site wanting recipes, but we don't necessarily give them recipes. We may give them lots of rich, 'featurey' editorial, such as '10 Easy Steps to Preparing a Fabulous Holiday Dinner.' But, if they want the recipes for that dinner, they've got to click and move beyond the curtain."

Desmond says if there's one thing he's learned about online publishing, it's, "sure, you give them a taste here and there, but subscribers will pay when they want the full product."

The Future of Paid

While not all of Time Inc.'s magazine titles have moved away from the practice of distributing free content online, Desmond says the company now knows, "what's in our magazines is valuable. As a rule, it makes no sense to give it away online."

The current challenge for the publishing industry, he says, is "to tell consumers they should pay for great services and content, not hide behind the early religion on the Web that everything should be free." Paid online-content models, like that of The Wall Street Journal, "look better and better to me all the time," says Desmond. What [the Journal has figured out], he says, is that the advantage of the Internet should be more content and more immediacy—not free stuff.

Of greatest interest to Time Interactive moving forward is looking for things that really strike a chord with consumers. Says Desmond, "The most interesting dimension is how to create hits with consumers ... things they will want to come back for again and again."

Alicia Orr Suman is a freelance writer covering the direct marketing and catalog industries. Contact her at aorrsuman@aol.com.

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