• by Jack Loechner , Staff Writer, August 24, 2010

According to projections from a comprehensive assessment of consumer demand for interactive periodicals by Oliver Wyman for Next Issue Media, the potential for $3 billion in revenue for the U.S. magazine and newspaper industry by 2014 suggests that, after accounting for potential cannibalization of some print subscriptions, the industry could realize $1.3 billion in incremental revenue.

An "interactive periodical" as defined by Next Media is one that uses video to create multimedia content, reflows text to optimize layout and navigation, uses interactive features to engage the user in new ways, adds enhanced content for a print-plus experience, and allows readers to personalize according to their interests.

The in-depth Future Marketplace Simulation platform to quantify expected demand, surveyed 1,800 U.S. consumers, across nearly 230 periodical titles, and documented trends in the marketplace including the emergence of color, touchscreen portable devices that enable an immersive eReading experience and growing comfort by consumers in accessing and paying for digital content.

The study demonstrated the likely formats and features of emerging interactive periodicals and simulated actual purchase / consumption decisions that consumers will be making by the 2011 holiday season and beyond.

Highlights include:

•  Consumers will pay for true interactive periodicals; consumers do not require discounts, but rather will pay similar prices for interactive subscriptions as for current print subscriptions
• Print/interactive bundles are attractive. Combining the comple­mentary value propositions of the two formats justifies a higher price than either print or interactive editions alone
• For current subscribers, the power of print remains strong; many subscribers stay with some form of print, either print only or in addition to interactive editions
•  For new subscribers, the value of quality interactive content is compelling; new customers are willing to pay the same prices as existing print subscribers for subscriptions to interactive editions and to some degree print/interactive bundles
•  Innovative offer designs and customer relationships that will be enabled by this new interactive periodical category, such as automatic renewal billing and "Netflix-like" flexible subscription models, can further drive industry revenues
•  Interest in interactive publications spans magazine and newspaper categories
• The demand for interactive publications spans gender and age groups

The report says that subscribers value their existing relationships with magazine and newspaper brands and indicates that interactive publications are a powerful way to extend these relationships. The simulation indicates four sources of circulation revenue growth from the introduction of interactive editions to subscribers.

Among device-owning subscribers, the availability of interactive editions at the point of renewal, at the same price as today's print editions, drives a 9 point increase in the overall subscription renewal rate, from today's 55% industry average to 64%.

Additional benefits accruing from the inclusion of the interactive format:

• Enables effective cross-selling via recommendation engines and browsing features; 17% of current subscribers make additional purchases
•  Permits automatic renewals to eliminate the traditional "bill-me later" model and greatly reduce churn, from an average of 45% today to 25%
• Triples uptake rates among device-owning non-subscribers, from 5% to 15%

Morgan Guenther, president and CEO, Next Issue Media, says "... this study confirms... (an) industry-wide opportunity... increasing overall circulation revenue while driving brand value among both existing and new customers."

And Martin Kon, head of the global media and entertainment practice at Oliver Wyman, concludes that "... (the study) shows... consumer enthusiasm for interactive periodicals that offer enhanced features, personalization, multimedia content... "

For more about the study findings and access to the complete PDF whitepaper with additional charts and graphs, please visit here.