The Internet is being Netflixified. In the seven years since it began streaming movies and TV shows in the U.S., Netflix has transformed online viewing. At the end of 2013, it had more than 44.4-million subscribers in 41 countries, including an estimated three million in Canada. It accounts for roughly one-third of all traffic on the Internet during prime-time evening hours.
But it has also had a sizable influence on other media industries. From magazines to books and music, the Netflix model is spreading like a spider virus, with companies bundling masses of content for a low monthly fee in an all-you-can-eat format, and packaging them with sifting tools and algorithms to help customers find what strikes their fancy.
There is Next Issue, the so-called Netflix of magazines, which crossed the border into Canada last fall.
It offers owners of iPads and Android tablets a package of more than 130 well-known publications. The startup Oyster wants to be known as the Netflix of books. Epic!, a Netflix of kids books, launched in late January with more than 2,000 volumes from respected publishers, including Simon & Schuster and Canada’s own Kids Can Press.
There is even a Netflix of newspapers, PressReader, that bundles thousands of dailies from around the world. The customizable online music services Slacker, Rdio, Pandora, iTunes Radio and others now bring in more than $1-billion in annual revenue.
All of which points to a fascinating shift under way. Once upon a time, the Internet seemed poised to permanently atomize the experience of consuming content. TV shows, movies, music, articles – each was available for the individual plucking, if you knew where to look and what you wanted. Cable TV and its massive channel bundle were headed for the dustbin of history. Magazine and newspaper subscriptions were being disrupted out of existence.
But disruption isn’t a linear process, and consumers are showing signs of being overwhelmed by the amount of available content. They want someone else to do the hard slog of curating. They don’t want to hunt and gather; they just want to eat.
That is helping to ignite the new services, which are backed by some of the most powerful content companies on the planet. The normally cutthroat competitors Hearst, Condé Nast, Meredith, News Corp. and Time Inc. came together to develop Next Issue. In part, the move was a defensive play against Apple’s increasing control of content. But the companies also recognized that, in the fight for consumers’ time and attention, a bundle of magazines is far more appealing than a single title.
Rogers Media joined the venture last fall, making a handful of its magazines, such as Maclean’s and Chatelaine, available to both Canadian and U.S. subscribers.
“Almost all the value in media has come from bundling,” notes Ken Whyte, a former editor of Maclean’s, who now heads up Next Issue Canada. “We’ve gone from the age of the bundle that we knew – which was a newspaper, a magazine, a record album – to the age of a megabundle, a bundle of bundles.”
For consumers, he says, the appeal is clear: “If you had to pay for every magazine in Next Issue, or every movie or every viewing on Netflix, it would be cumbersome, and probably also an impediment to enjoyment because you’d be conscious of making a transaction every single time.”
The CEO of Epic! says that his $9.99-a-month service provides a walled garden that is safer for children than other options. “One important part of this is content curation,” says Suren Markosian. “Instead of going and trying to find pieces of content all over the Internet – which may be of questionable quality – we guarantee the content is high-quality. And that the content is appropriate for kids. You would not want your kids to be on Oyster, which is designed for adults.”
With about 80 books on Epic!, including such popular titles as Canada 123 and the Governor-General’s Award-winning Virginia Wolf, the president of Kids Can Press believes the service is a good way to promote her authors. “It’s a great discoverability feature,” says Lisa Lyons. As well, “There is no denying children are spending more time on screens, and we want to be there, because we want to encourage them to read.”
Still, the jury is out on whether the new economics will help or hurt those actually producing the content. Over the past couple of years, musicians have waged a high-profile battle against services such as Pandora, Rdio and Spotify, with photos of their infinitesimal royalty cheques posted to social-media sites. (Last summer, musician David Lowery claimed Pandora paid him less than $17 in songwriting royalties for playing his tune Low more than one million times; meanwhile, he earned almost $1,400 for 18,797 spins on terrestrial radio.)
Lyons sees Epic! as more of a toe-touch into the future for Kids Can and her authors than a cash machine for the present. “This is market research as much as anything.”
Oyster, however, hopes to make a measurable difference to authors’ bottom lines, telling the e-book distributor Smashwords that its authors would be paid 60 per cent of a book’s retail list price – the same rate the publishers earn when they sell through Apple or Barnes & Noble – “whenever an Oyster subscriber reads more than 10 per cent of your book, starting from the beginning of the book forward.”
The economics of Next Issue seem even more promising. Whyte notes that the average annual revenue for each subscriber, normally in the range of $50 for readers of traditional print magazines, is about $150 for Next Issue customers. “Your revenue per customer is roughly three times what it is in the print space – and you don’t have printing, production, and distribution charges weighing you down.”
That revenue is shared on a pro-rated basis with individual publishers, calculated according to the percentage of time readers spend with each title. And while the money is divided among more pockets – Whyte says the average Next Issue user has 24 titles in their library, and they’re downloading about 10 magazines a month – publishers have traditionally made their margins on advertising: Whyte maintains that it doesn’t matter whether a copy is distributed digitally or in print.
Still, the publishers are looking to Next Issue to grow their bottom line, not cannibalize its existing business. “One big question is whether these are new readers, younger ones, or print readers transitioning,” says Ken Doctor, a San Francisco-based media analyst. “Each publisher gets far less on a multiple sub than a direct one, so they want to keep that direct relationship, within their covers.”
But for publishers, a digital subscription provides one major advantage over print: While you’re reading those magazines, they’re reading you. Whyte says he gets information every two hours from the Next Issue app. “You have so much data, for instance on how an average reader responds to Chatelaine: what they like, what they don’t like. You know exactly where they quit reading it, exactly what part of the magazine they jumped to. If you’re an editor – all of my career, I’ve been crying out for this kind of information.”
And just as Netflix mines its viewer data to refine its suggestion engines and inform the development of original programming, Whyte says Next Issue’s data is helping publishers develop their existing digital products. It may also lead to the development of new magazines.
In the meantime, the bundling phenomenon will likely increase. Whyte notes that the new CEO of Rogers, Guy Laurence, is the former head of telecom company Vodafone U.K., which bundles Spotify and the Sky Sports Mobile service with some wireless plans. “Just like in the early days of cable – you just bought the cable connection, and then in order to increase demand they started laying on the content channels – there seems to be an exploration of ways to heighten the value of wireless subscriptions by layering on content in this subscription form,” says Whyte.
“Where it’s going to get really interesting is when we figure out how to bundle up the megabundles, so you can be a subscriber to a package of Next Issue, Netflix or Hulu, and Newspaper Direct at a discounted price, or as part of your cable or wireless subscription.”
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