Conventional wisdom says you will only chase readers away if you try to charge for content.
But that didn't stop Time Warner: The multimedia giant began charging for content on 14 of its magazines' sites this year.
Now only print subscribers, AOL subscribers and single-copy buyers can see much of the content that used to be free to everyone.
While traffic is down at some of Time Warner's magazine sites since they began charging for content, it's holding steady at others. Meanwhile, Web-based subscriptions for a few Time Warner magazines have skyrocketed, said Ned Desmond, Time Inc. executive editor.
"There are some magazines that are actually doing more [print subscription sales] online today than they are in direct mail," said Desmond. "That's terrific."
Restricting access has worked out well partly because many of the magazines are charging a pittance for subscriptions: Fortune and Business 2.0, for instance, charge just $9.99 a year to subscribers who sign up online.
And traffic hasn't been hurt at many of the sites because they're putting only part of their content behind the subscriber wall: Fortune walls off special lists like the Fortune 500 and some current stories, and Sports Illustrated restricts access to current magazine content and some online-only content. There's still a lot of free stuff.
The synergy with AOL works well: The magazines add meaty editorial to AOL, and AOL sells the magazines' Web advertising and directs its potent fire hose of traffic to their sites.
But the strategy is deeper than just traffic and ad impressions. More important is the cheap use of the Net (vs. expensive direct mail) to get new print magazine subscribers -- and retain old ones.
Josh Quittner, Biz 2.0 editor in chief, is one of the converted on the AOL firewall. He told me he was "not at all" a believer in going behind the curtain, thinking it might work for a month and then dry up.
"I was so wrong it isn't even funny," he said. "People are more than happy to pay for our magazine. It blew me away, and the quality of our [feedback] e-mails has really improved, too."
Quittner said traffic is down just 15 percent since the curtain came down, and print subscriptions are up at least 300 percent online.
But he still sees room for tweaks. They're considering a possible online-only subscription for people who don't want dead-tree pubs on their doorstep -- and for overseas readers who have no way to read the pay content at Business 2.0 because they can't get a print subscription or subscribe to AOL from outside the U.S.
I talked to Time Inc.'s Desmond about the goals and strategies behind the curtain. This is an edited transcript of that discussion.
OJR: Tell me about your background at Time Warner.
Ned Desmond: I was with Time magazine for 12 years, and I was a correspondent, mainly in Asia. I left Time Inc. and was with a little startup called InfoSeek for a year, then I went and wrote at Fortune for a year. I left and joined Disney/Go.com for a year and a half, then left and started what was then eCompany Now magazine that became Business 2.0 magazine. Then at the start of this year, I came over to what's called Time Inc. Interactive, a little centralized group at Time Inc. that's responsible for many of the biggest Web sites and Web strategy at Time Inc.
"This is not the end of the road, for sure. It's just another installment in everyone's attempt to figure out how to put these pieces together."
OJR: And the idea of the group is to plot the strategy for the magazine Web sites?
ND: We plot the strategy and we also help execute on the strategy. With the approval of the magazines themselves, we operate the Web sites, we set their strategy, we manage the AOL deal, all of these things. They're a dedicated staff at the Web sites, and we work with them on a day-to-day basis.
OJR: Tell me about the goals of your program when you decided to make AOL membership and print subscriptions a requirement to get some content on the sites.
ND: It's not rocket science. Basically, the free content, ad-supported model didn't look that attractive to us after having worked on it for a few years. We were looking for ways to improve the return to the business from these Web sites.
One of the things we did for a lot of the sites was what we call "dropping the curtain," which amounts to making the sites available only to subscribers and newsstand buyers, and we also make it available to AOL as part of our deal with AOL.
[Ad] sales is still an important part of this, and we sell the inventory on our sites, but it's not the center of things the way it used to be. The sales story in some respects is better than it was. Instead of having a lot of undifferentiated traffic, we now know the traffic to the sites are more concentrated among people who actually have a real engagement with the magazine -- as opposed to people who just click on a link somewhere on a portal and come to the site.
To answer the question that inevitably comes up -- does this take your traffic down? The answer is yes. Isn't that a bad thing? Well, not necessarily because the folks that are on the site are ones that reflect the subscriber base of the magazine -- as opposed to the vast, undifferentiated sea of people who show up at your site if your strategy is traffic at any cost.
OJR: So you decided to pull down the curtain. Did you talk individually with each site's editor or publisher, or was it left to them, to some extent?
ND: It depends on which site you're talking about. Some are governed by an AOL deal that we have in place. It's kind of complicated, but the most relevant thing to say is, we had to explain the strategy, and there were some sites that more or less had to go along with it whether they liked it or not. But they all have ended up liking it because it's been very good for them.
There are others who had a choice; they could have done any number of things. Some of them are not behind the curtain, and some of them are partially behind the curtain, and some of them are almost completely behind the curtain -- depending upon what they wanted to do.
With Time and Fortune, for instance, they don't have to do anything if they don't want to. Sports Illustrated doesn't have to do anything if it doesn't want to. Cooking Light, People, Entertainment Weekly were part of the core agreement with AOL, so they wound up behind the curtain in the first wave. Fortune, Business 2.0, and a few other sites -- we haven't said anything about it yet publicly -- are all behind or going behind the curtain because they've seen the impact on the business at the other sites and they like what they've seen.
OJR: So Time and Fortune and SI didn't have to do it because of their size, or why?
ND: In general, you could say they are all concerned about strengthening their business online. And the attention to the consumer-marketing side of the business, getting more [print] subscribers online is a priority for most titles, but not every title. There are some titles in the family that are so strong in that regard, that it's not a big deal. Then there are some titles that have other priorities.
For instance, SI placed the magazine content that's on its site behind the curtain on its own, but the rest of the site is free because they're trying to compete with ESPN.com. They're running a big 24/7 news operation with scores and all the rest. If they want to play in that arena, they can't afford to drop the curtain, it doesn't make sense. They have a completely different strategy.
Time Inc. gives a lot of autonomy to each of our businesses. For the most part, they make their own decisions about these things.
OJR: Quittner said something to me like, "They let us fly by the seat of our pants."
ND: Yeah, I used to run that magazine [Business 2.0], so it's true. ...Business 2.0 has turned out to be the most dramatic success story. In that case, the insight came last fall. Our Web site was very strong, and offers a lot for readers, especially for people who want to do research, teach themselves something about business and technology.
So we did a survey asking people how many came to the site regularly, and if they subscribed. And we saw that there was a big gap there. There were a lot of regular people who were big fans but did not subscribe to the magazine. That was a clue to us. This is Business 2.0 -- younger readers, very Web-savvy, very habituated to doing their reading and thinking online. It may just be that the print magazine isn't necessary for them. Or it even might be less than necessary; it might be a kind of annoyance.
What we realized was that the site was really valuable, and if we told folks that they needed to subscribe in order to get to the site, it really had a big impact.
OJR: Can you talk about traffic numbers of some sites that have been behind the curtain?
ND: I can tell you in general that if you simply drop the curtain in a literal, complete way -- only subscribers and AOL members and newsstand buyers who go to the site -- then you're looking at at least a 50 percent drop in traffic. That would actually be manageable for the most part, because our [advertising] sell-throughs are not that high anyway -- for most of the sites, though, there are always exceptions.
To the extent that we really believe in our message, losing a lot of traffic isn't that big of a deal anyway. You're bound to lose some. The AOL deal fits really nicely for us. It allows us to do programming to a huge audience, so we do a lot of customized programming inside AOL that helps with that volume quite a bit. For most of the titles, that volume is higher than they saw in the old [pre-AOL] days. So we're having a little bit of having our cake and eating it too in the AOL context.
OJR: So what you might be losing by closing it off to the general public online, you're gaining with your huge audience on AOL?
ND: From a consumer-marketing standpoint, there are two radically different approaches. One is about making it a closed club that greatly reduces the volume of exposure you have to get potential subscribers. That makes them nervous. But if you say, on the other hand, that they can show off the brand in content inside AOL on a free basis to AOL members and get a lot of volume that way, it's a kind of safety blanket, in a sense.
The volume of subscribers that come from a free environment like that -- even if it's not truly free -- that's something they're familiar with. They know what kind of response rate they can get from that.
What's interesting is if you take out the AOL component, the curtain dynamic was generating as many subscriptions -- or more, in some cases significantly more -- than the old high-volume, high-traffic model did.
OJR: You're generating more subscriptions because you're making more things require a subscription. Do you think that might tail off over time?
ND: I'm not sure, that's a good question. We talk about that a lot, there are different points of view. If it tails off, what's interesting, what will not tail off for sure, is the retention. For the first time that I know of, we're actually able to talk to someone about renewing their subscription if it's lapsed when they're right there trying to do something with us [online].
If you're dipping back into People.com because you want to see the latest dirt on J. Lo or something, and your subscription has expired, we're able to give you a message saying, "Hey, we'd love to show you this story, but you're expired. Would you like to renew?" We can renew them right then and there, and they can be on the site in a few seconds.
We have tens of thousands of instances where that scenario I've described has come up. And we're seeing a net response rate that's very high, in the high single digits. From a consumer-marketing perspective, that's pretty terrific.
We have a million registrations across the 14 titles. They're not all unique. It's a cookie-based registration system, so some people register in more than one browser.
OJR: Does that number include AOL people?
ND: That's totally separate. AOL people don't need to register; they just sail right through the site if they go there. But we're approaching a million unique registrations. But as that number grows, we're going to see more and more instances of the opportunity to renew people online when they come and can't do what they want to do on the site. That's pretty cool, and something that's a completely new source of business for us. A totally new category.
We've been experimenting with some short time-frame subs, less than a year. You know, subscribe for six issues. If you look at Fortune.com, you'll see that there's a very short-term subscription that you have to buy to get access to the site. It's credit card. Renewal on that has been unbelievable.
The interesting question was, will people renew then, when their three months was up. The renewal rate there has been very gratifying, completely surprised the consumer marketers. They thought this would be one-offs that would be hard to renew, but they've been great. It's been way north of 50 percent. Really exceptional.
OJR: How do you weigh the revenues from print subscriptions with the loss of ad money from having smaller audiences?
ND: There's really no comparison in terms of the value to the business. Assuming in a theoretical world you were 100 percent sold through [on ads], which isn't true, nobody was even close. You might lose, order of magnitude, 3 or 4 million dollars. But some pretty significant wins on the consumer-marketing front more than makes up for that, even if you look at it on a year-by-year basis. If you look at it in terms of the whole benefit to the economics of the folks running the circulation for these big magazines, it's really valuable.
OJR: It's a cheaper way to get people to subscribe.
ND: It's very targeted; it beats the hell out of direct mail when it's working well. There are some magazines that are actually doing more [print subscription sales] online today than they are in direct mail. That's terrific. I'm not sure if all of the titles will follow the same path. It has a lot to do with the demographic and whether the readers of a particular title are online very much. Some are better than others.
It's funny. You'd think that mass market women's magazines like Cooking Light wouldn't be as strong, but even with its very simple Web site today (which will soon be improving quite a bit) it gets something like 60 percent of its print subscribers to the site on a regular basis. The reason for that is they have a really useful site. They have a recipe finder and they've got "Supper Clubs" where readers go to each other's houses to cook supper. Go figure.
OJR: How will you gauge your efforts on the 14 sites behind the curtain?
ND: We look at how many people are registering for each of the titles, we will look at how often people return. We'll look at how many people are signing up as subscribers. We'll look at how often they're renewing. The kinds of things you expect to look at from a subscriber/reader standpoint.
Ad revenue is important, and traffic is important, but they're not the leading indicators of whether we're being successful or not. In the past, we've tended to look at each site as little stand-alone businesses, as if they were spin-offs of the mother ship. Now we're looking at them as more like a little engine that helps certain parts of the mother ship's business. In other words, how can they contribute to what is the much bigger dynamic of the business. When they help in [ad] sales, for some of our titles, they're really valuable as a way to improve on a big ad buy. It's become a must-have part of the conversation in any large ad deal for a big, mass-market magazine.
We've started looking at the P&L's [profits and losses] of our Web sites differently. It's no longer cost plus ad revenues equals loss or profit.
OJR: Does that take a mindset change for people at the sites, to think of themselves as part of the whole business?
ND: It does take a change. It actually resulted in instances where the staff of a site had to move back on to the floor where the magazine is produced. They had to get to know each other and learn to work together much more closely on a daily basis, instead of being this stand-alone entity.
OJR: What about people who want to read the content but don't want to get the print magazine? Are you considering an online-only option?
ND: We talk about that all the time. I don't think that it would apply to many of our sites. It would only apply to the sites that have a cutting-edge, Web-smart audience. I wouldn't rule it out. You might see something along those lines at Business 2.0 or some other sites within a year.
OJR: Looking at the numbers at Nielsen//NetRatings for some of your magazine sites, they look like they really go up and down. People.com, for instance, goes from 3.7 million unique users in February to 2.9 million in March to 5.1 million in April to 3.5 million in May.
ND: On the face of it, I'd explain that by saying we do specials on AOL periodically that draw huge audiences. For the Oscars, for instance, People did this monster package for AOL.
It's true that this approach has led to more spikes in our traffic pattern. We tend to put together special packages for AOL to drive traffic through. Then when we're between acts, it tends to fall off to quite a low level.
OJR: What would make you change your mind and go back to being free and open on some of these sites?
ND: If somebody could show me that the net effect on paid circulation of the magazines was either neutral or beneficial, and that the ad dollars were there to make it profitable, then yeah. This is not the end of the road, for sure. It's just another installment in everyone's attempt to figure out how to put these pieces together.
In five or 10 years, I'm sure the story will be quite different, and probably a lot better. Who knows what these sites will look like in the future. Maybe they still are limited to subscribers, and the CPM is much higher because the subscribers are a very well defined group that we can describe accurately to advertisers. Or maybe there's some sort of dramatic shift back in another direction, and we need all the [ad impressions] we can get because advertisers are kicking the doors down. Anything is possible.