Magazine Subscription Companies – Gobbled by the Net?

If you are a magazine lover, the Internet is about to drastically change your reading habits. The largest magazine subscription companies like Zinio and Zoot aren’t just being gobbled up by online magazines juggernauts like Amazon (which owns Kindle), Apple (iPad) or Google (Google Play) but also in many cases by traditional publishers themselves.

Publishers are not only acquiring these digital companies but also ramping up their own digital products, suggesting a future where print and digital blend into one seamless product.

One important question remains: Who will be left to read all these magazines? In the wake of this change, will any of them even matter? Read on to find out more.

Zinio – The Early Front Runner in the Magazine Publishing Marketspace:

In 2006, Zinio launched itself on the magazine publishing industry as a sort of “digital newsstand” that allowed users to read magazines anywhere, on any digital device. As a small startup, it was funded by what many considered to be a wacky idea—that subscribers would pay for content they could easily pirate and download for free. To stand out from these competition, Zinio quickly signed up popular titles and publishers like Conde Nast, Hearst Digital Media and Time Inc., all of which wanted to start making some headway into the world of digital magazines.

Zinio quickly grew to more than a million subscribers and by 2010, the company had picked up a half dozen new publishers including Disney and their house magazine, Vanity Fair. By 2012, Zinio was doing $100 million in revenue. Yet despite its early success, the digital newsstand model wasn’t a sure thing. In fact, the business model of selling digital content at full price was increasingly threatened by an alternative one: free content available online for free.

By 2008-2009, if you'd wanted to read The New York Times Magazine on your tablet you could get it for free with an iTunes account (via Zinio) or from any other digital device but at full price (via Apple). Publishers like The New York Times were facing this fight to the death with competing companies like Kindle, iBooks and Nook.

But in 2009, even as Zinio was facing a near-death experience, the company made another decision that would make it stand out in the print industry. It signed two major deals that would radically redefine the future of its business model—the first was an agreement with Hearst Corp. to make all of their magazines available for digital purchase through Zinio while the second was a new deal with Time Inc. to sell their magazine content in the form of full online versions at $2.99 for one full year (rather than $6) —i.e. cheaper and more like magazines.

The reasons behind these decisions would soon become clear—tellingly, both deals were made on the same day (Dec. 4, 2009). Within nine months of this move, Zinio had signed up more than three million subscribers.

In 2010, even as other subscription companies like Zinio were getting gobbled up by Amazon or others, Zoot Media BV was launched as a sister company of Zinio that was connected to Zaino Media BV—a Netherlands-based print and digital publisher where Zoot’s founder had worked for several years before striking out on his own. Today, the company is co-owned by Time Inc. and Zaino Media BV and works in partnership with Zaino, to bring the digital magazine experience to users.

Today—Zinio’s revenue is reportedly $30 million but it managed this via a lot of ups and downs and a lack of sustained growth. The company has been hit by major layoffs during the past few years, including 19 in 2011, 14 in 2010, 11 in 2009 and 9 at the beginning of 2008. The company is down from more than 100 employees to about 25 today.

“We have been completely unable to grow or even maintain the number of subscribers we have had for some time now,” says Nick Barber, CEO and founder of Zinio told the Guardian .

Conclusion:

Zinio’s business model has evolved from its earlier days but what hasn’t changed is the fact that the company is still independent and struggling—struggling to become a real contender in the digital world. The company also hasn’t diversified its products, so it remains solely dependent on magazines for revenue. Key to their success will be whether they can make it big with Google and Apple. If not, Zinio may be gobbled up by one of its own competitors.

Zoot Media BV, however, has already been swallowed up by Time Inc., which acquired the company for $100 million in 2011 (or $7 per subscriber).