Earlier this year, Time Inc. CEO Ann Moore tasked her lieutenant John Squires with figuring out how to put the digital “genie back in the bottle”. Here’s part of his answer: A Hulu for magazines.
Squires has spent the past few months convincing other publishers to join a new joint venture aimed at a market that doesn’t really exist yet — magazine-like publications to be delivered via e-readers like Amazon’s Kindle and Apple’s rumored tablet.
The idea: The new company, which will operate independently from the publishers that invest in it, will create a digital storefront where consumers can purchase and manage their subscriptions that can be delivered to any device. The pitch: Control a direct relationship with consumers, while gaining leverage with heavyweights like Apple (AAPL) and Amazon (AMZN).
Industry executives briefed on Squires’ plan say it has been well received by Time Inc.’s peers, and that several major publishers, including Hearst and Conde Nast, are expected to sign on for the JV, which isn’t scheduled to debut until 2010. No comment from Hearst, Conde Nast or Time Inc., a unit of Time Warner (TWX).
Many of the venture’s big details have yet to be hammered down. At one point, for instance, Time Inc. had explored the idea of including newspapers in the new company’s offering, sources say. The JV may also want to include a non-content partner as an investor, as Hulu did with Providence Equity, and Vevo, the “Hulu for music” JV that Universal Music is creating with Google’s YouTube (GOOG), plans to do. That approach is supposed to appease antitrust regulators’ worries about a group of content companies banding together.
But the rough outlines of Squires’ plan are attractive enough to publishers, who are hopeful that mobile devices like the Kindle will create a new market for them. And if that market does show up, they want to make sure they’re the ones in charge of sales and distribution. That’s been a huge problem for the music industry, whose digital sales are essentially controlled by Apple. And it’s already cropped up as point of contention with Amazon, which currently handles sales for all content delivered via its Kindle reader.
Other selling points for the JV: The ability to set standards for mobile content, and the ability to integrate advertising into the publications. One thing the company isn’t supposed to do: Create an e-reader itself.
The takeaway, via a Time Inc. presentation that has circulated among publishers: “our destiny with readers, advertisers and distributors … in our hands.”
Of course there are plenty of hurdles facing the joint venture, starting with the fact that media joint ventures have a checkered record at best (though Hearst and Conde, for instance, have already partnered on Comag, a wholesale distribution company). But there are bigger problems for Squires and company. For instance:
- They’ll have to convince consumers that already have billing relationships with Amazon, Apple and other vendors to sign up with yet another service.
- They’ll have to convince device makers to play along with the strategy, which runs counter to many of their own plans. Both Amazon and Apple, for instance, have intentionally created closed systems that give them control of both devices and distribution.
- They’ll have to create content that consumers will want to buy. The new product can’t simply be a digital version of the magazines they’re already printing: That’s already available on the Web, and consumers have shown almost no interest in paying for it, and advertisers haven’t fully embraced it either.
So what exactly will the JV be selling? That’s probably the most difficult question for the publisher to answer, made even more difficult because they don’t know what capabilities the e-readers of the future will boast. Apple for instance, refuses to even acknowledge to Time Inc. executives that it plans to produce a tablet device, let alone provide them with specs.
But publishers feel they’ve got nothing to lose by trying. “We know that traditional magazines are going away, and that magazines on the Web don’t work,” says a publishing executive working on the plan. “But this gives us a chance to serve the reader who will pay for content, and provide advertising that really works. Can you think of a better idea?”