While the Internet is proving to be one of the most lucrative technologies ever to affect the adult industry, this (r)evolutionary step away from physical print has meant new challenges for our fundamental media format: the magazine. That old standby, the porn rag, possibly the first mass-commercialized disseminator of smut, is repeatedly outmaneuvered by technology - the moving image having sounded the first death knell. "Dirty magazines" survived the convenience and availability of video, but advancements in Internet technology make the VCR innovation pale by comparison. Should print publishers be running scared?
Advertising Looks Different on the Net
Two years ago, Micro Publishing News sponsored a seminar, which included a panel called "Print vs. the Web: Finding the Ideal Balance." MPN editor and publisher Jim Cavuoto moderated. "Balance" was this session's key idea: the thrust was "how we're going to make money in this new publishing medium of the 21st century," according to Cavuoto. (Ironically, Micro Publishing News merged in May 2001 with sister Cygnus publication Digital Imaging Magazine [www.digitalimagingmag.com]).
At the seminar, Cavuoto asked, "In terms of the economics of print versus Web publishing, what would be recommended for existing print publishers who are currently getting up to 95 percent of their overall revenue from print-based publishing?"
The panel and the audience sifted this question through the historical rollout of publications on the Web, where the first question publishers ask is, "Should we put our current issue on the Web?" Subscribers and newsstand customers won't pay for the magazine if the issue's on the Web. "Maybe we should put up the last month's issue. They've already paid for that, and we'll give it to them free, or will give it to nonsubscribers." These prospects quickly made it clear that just throwing a magazine up on a site is not the key to being profitable.
"The adult print market is even more challenged by the Web than mainstream publishing," says Alan MacDonell, editorial director for Hustler magazine (www.hustler.com). "You go on the Web, you can find anything you'd want to see for free. There's free stuff on there, there's free illegal stuff on there, there's free stuff on there we can't even allude to in a magazine, and it's easy to find. First time I ever got on the Internet, not trained, anything like that, within 45 minutes - actually it was less than that - and I wasn't even trying to find anything - there was Traci Lords, when she was 16 or 17.
"We've got to put up a product that makes people pay... you've got to give them more than they can get for free," MacDonell says.
Perhaps the best model available is the traditional one, which is, of course, advertising. But Web and print advertising are two very different animals when it comes to circulation. As Allbusiness.com's "Understanding Web Advertising" article points out, "Web advertising may look a lot like print ads... but there are some crucial differences."
"While all advertising is about putting a message in front of an audience, magazines and newspapers sell circulation - the distribution of a specific number of copies of your ad. Generally, print publications charge according to the number of copies they distribute. But circulation does not affect the number of ads that they publish in each edition.
"Web advertisers buy a portion of the audience itself. If someone pays to show an ad 10 times on a Website, that's precisely how many times it will appear. It doesn't matter how many people look at the site.... If a site has room to sell one million ad 'impressions,' and it sells 100,000 of those to a single advertiser, then 90 percent of the site's audience won't see that particular ad. In print, however, everyone who saw the content would see the ad."
Or, as TownOnline (www.townonline.com), the self-described "Eastern Massachusetts hometown connection," explains, "The most obvious way to compare online and print advertising is in cost per thousands (CPM). On the Web, CPM represents the cost of exposures to your advertisement. In print, CPM represents cost per thousand readers of the publication."
According to Allbusiness.com, for the Web "this changes the rules of advertising. One ad in a big circulation magazine is more expensive and more powerful than the same ad in a smaller magazine. On the Web, though, a bigger audience doesn't necessarily affect the value of a particular unit of advertising. An ad impression is an ad impression, no matter how big the site from which it is served.... Big sites can't necessarily charge more for ads, they just have more ads to sell. Small advertisers may be able to buy ads on the biggest Websites. [And] smaller, highly targeted sites are able to charge higher rates.... "
Both TownOnline and Allbusiness.com compare Web advertising more closely to direct marketing than the traditional publication/periodical model. But confining traditional periodical-model advertising intake and output to the print format is probably not a solution.
Physical circulation ain't exactly basking in a bright future, according to statistics gathered by Content Intelligence, which provides research to print and digital publishers. It conducted a Web-based study of a total of more than 1,400 respondents, of whom some 1,200 were regular newspaper readers. The five-part study finds, "... while newspaper usage appears to be relatively stable today, the Web represents a real threat as it grabs more of the average American's available time."
Translation to a forecast for magazines is loose, but certainly applicable. "Overall newspaper edition readership is clearly affected by audience frequency of Internet access, as those exhibiting the highest access rates display the lowest newspaper edition readership.
"By this survey's time and involvement measures (daily usage and time spent with the media), newspapers seem to have already lost the attention war with the Web. Focusing on what we believe is a key metric - daily usage - we found that only 36 percent of our audience said they read a newspaper daily while 83 percent reported that they use the Internet at least once or more daily," Content Intelligence reports.
At the Print vs. Web seminar, Steve Taylor, executive vice president of The Boston Globe (www.boston.com/globe), said, "Like many other papers, we're challenged in print circulation. [But] we have one of the largest growths in readership that we've had in 20 years, due to our online usage. Certainly, the one is cannibalizing the other, to a degree; but the sum of the two is far greater than the degree of cannibalization.
"That's beginning to translate itself into meaningful advertising revenue... I don't have any doubt that there's going to be real ad revenue on the Web. The issue, as has been the case throughout media for years, is going to be market share. At the turn of the century, there were 13 newspapers in Boston, and we're in a strong position, now, among the few left standing. We don't know whether that will be the case on the Web in the years to come, but we certainly hope so."
Michael McPherson of design firm Corey McPherson Nash (www.cmndesign.com) added, "I think the main rule about the fear that many media, not just newspapers, have about cannibalizing their other channels is that if you don't cannibalize yourself, someone else will cannibalize you. So I think that it's not a well-placed fear."
Businesspeople who essay advertising in both Web and print formats concur on these points: know the market, narrow the market, and advertise surgically, not sweepingly. Cavuoto invoked the questions everyone in publishing should ask when breaking down an advertising budget: "Where should we spend our budget? How much of it should be in print? How much of it should be online? Should we look at strategies of trying to do both jointly? Should we give any preference to print publications that are also on the Web, and if so, how would we use their Web and their print versions together?"
Add to this mix the recent news that magazine circulation rules have changed. A July 15 AP business article by Seth Sutel notes the Audit Bureau of Circulations gave final approval to a sweeping overhaul of magazine circulation rules. "The group also passed guidelines defining electronic sales of newspapers, allowing publishers to create and sell new, electronic editions of their publications and still have them count as paid circulation," Sutel reports.
"The revision to the magazine rules," the article continues, "the most far-reaching for that industry since the Audit Bureau was formed in 1914, was passed initially in March . At the heart of the rule changes was the abolition of the '50 percent' rule, which stated that no copy could be counted as paid circulation that was sold at less than half the basic price.
"Now, copies sold at any price can be counted as paid circulation, but with greater disclosures of how much money is actually being charged for subscriptions. Advertisers want to see that information to gauge the level of reader interest in a particular magazine.
"Publishers have been seeking greater flexibility in how they discount and promote magazine subscriptions to combat a steady erosion in circulation as other media like cable TV and the Internet compete for readers' attention. With the ability to price magazines more cheaply, publishers will now be able to try new ways of attracting readers," Sutel says.
Caution is directed at the publishers, not at the advertisers. Or as Taylor observed, "I think that publishers need to understand their advertiser's business before they can understand, then, how to approach their own business, when it comes to the revenue stream to be expected from those advertisers."
Subscriptions: A Working Model for the Web?
Unlike most conventional content sites, Penthouse.com does not rely on advertising as its main form of revenue. Rather, the Website focuses on developing a successful subscription model that generates substantial revenue and satisfies user needs. While other publications introduced Websites with free content and services, Penthouse.com requires payment in the form of an online subscription.
"It was a pay site from day one," says Gerard Van der Leun, director of Penthouse.com and vice president of Internet ventures for General Media International. "And it was in the red for about five hours," he laughs.
"They imported everything in the archives that the paperwork was good on over to the Website. We didn't have a site that mapped to the magazine until I came along - Penthouse, at that time, had been around for almost 30 years, so the library of images was huge. You know, it wasn't just the photographs that were ultimately published in the magazine; it was the whole shoot. We probably had 1.4 million slides."
In 1999, Micro Publishing News's Cavuoto asked his panelists, "Does everyone on the panel here agree that the model of subscription-based model or fee-based revenue for Web publishing is a losing one? Is there anyone who thinks there that might be another point of view on that?"
Van der Leun's story is contradiction enough, but designer McPherson also noted, "Well, I just paid $30 to Consumer Reports for a subscription, but I can't think of anyone else I would pay that kind of money to. It was only because I wanted to buy a vacuum cleaner, and I figure for the $30 it was a good investment." The Boston Globe's Taylor added, "I think possibly we're asking the question the wrong way. The short answer is, I don't think the subscription model for Websites, as we know them today , is likely to be successful soon for very many."
Perhaps the missing element was adult content. "Looking at a year's worth of numbers, we keep people for 120 days, on average: huge," Van der Leun says. "We also convert at 2.1 percent. We had an offer for a while on the site that was interesting: it was $9.99 for three days, nonrecurring. What we found is about 19 to 20 percent of the people who bought this three-day membership came back within the same 30-day period and bought another. So they actually paid more for six total days than they would have paid getting a monthly - but that's how they chose to do it."
Another argument for the Web subscription route is that online advertising hasn't reached the sophistication that typifies the Internet. Several current articles on the Web Developer's Journal (www.webdevelopersjournal.com) address the fact of this inferiority ("Commercial Overkill"; "Banner Ads Aren't Worth It"), citing statistics and comparative research. Prominent observations regarding banners question whether they work at all, and the haphazard nature of Internet campaigns goes under fire.
With regard to specificity in advertising - finding a target audience and staying well within it - Taylor says: "I'm a sailor. I'm interested in sailing magazines, and, for me, the ads in the sailing magazines are a substantial fraction of the content that I'm interested in. So I think it really depends upon the type of value that a given user is getting and whether a Website is offering that value, whether it be in the right kind of advertising, the right kind of content, the right kind of mix. Those are variables that will depend on different users' points of view."
Ultimately, the money-making issues for publishing on the Web aren't any different from the issues for publishing in print, in that publishers are still in the business of getting customers in front of advertisers.
Tomato, Tomato - or Apples and Oranges?
It's important to understand that both Web and print publishing fill unique niches, and each have strengths and weaknesses that the other does not. "[The mediums], almost, are for different audiences," says Alison Raleigh, east coast PR director for Playboy magazine (www.playboy.com).
Magazines suffer from rising paper and printing costs, competition from more timely information mediums, loss of advertising dollars in a fragmented media landscape, and the shortcomings of lead time and low-tech outputting (machinery breaking down, shipping, materials getting lost, etc.). However, as Bill Farley, director of communications at Playboy, says, "The something tangible about being able to pick up a magazine, turn to page one, put it down and go get a sandwich, and come back to it" is still attractive to consumers.
Alan MacDonell notes, "I don't foresee a time when Hustler would cease publication. Just the [computer] screen - it's not as good, even, as a TV screen, it's still not. The printing at Hustler's really good; we get our color separations done in Switzerland, we have really high-quality reproduction. And you just don't get that kind of visual from a computer screen - no matter how big your screen is. Plus, you can move [a magazine] around - there's all kinds of logistical things you can do with a magazine that you can't do with a computer screen."
Statistics from a November 2000 Medical Group Management Association (www.mgma.com) study isolate other differences: Users of Web content spend less than one minute reading a page of text; 79 percent do not read online - they only scan; they want fresh information updated regularly; are less engaged by Web pages that mimic normal printed pages; and can become nauseated (literally!) from scrolling through screens of text.
An audience member in the Print vs. Web seminar said, "Personally, I think I do retain less from the Web, because I don't like staring at a computer monitor. I'm staring at a monitor all day; then I go home, and I don't want to watch TV. I don't want to stare at any monitor."
MacDonell goes further. "I don't think there's any kind of connection [between magazine circulation and a Web presence]. I'm not convinced everything's become so Web-centric. Not everybody has a computer. Also, people who work on computers, they get home, the last thing they want to do is look at a computer. The Web, I think, is overrated. And it seems like the current state of the stock market would reflect that. Aside from shopping and jerking off, I mean, what's it worth? There's so much crap on it. You have no way of verifying [a lot of the information] you get."
These schisms were also discussed in the 1999 seminar: the Web's inferiority in the graphics department, the fact that people want "something tangible," as Playboy's Farley said, to look at, something to flip through. "You can have all the digital archives you want," an audience member said, "but you can't just go up to a shelf and pull it out and open it up and look at it; that's never going to go away."
Seminar panelist Chris Klaehn of design firm Corey McPherson Nash addressed these issues. "The medium has to develop to present the information, but also, we, as users, have to develop to consume the information," he said. "[My firm is a] big fan of Jacob Nielsen, who's a usability guru - he did a report [circa 1997] that said people read 25 percent slower and retain 25 percent less when reading online. I think the more people use the Web, the more they get used to it. I can tell in myself, as a user, we're getting used to consuming larger amounts of information online and printing it out less and less. I think we will evolve, along with the medium."
The Content Intelligence study suggests this hasn't been the case, however. "The report notes that those with the most years of Internet experience rely on newspapers less, a trend that shows a decline in use roughly proportional to increasing Web experience." However, "while these Web users can find their way to the Website of the newspaper they usually read, they don't visit that site very often, visiting it far less frequently than they read the paper edition. Those visiting least often tended to be female and under 25, not good news for newspaper publishers."
In terms of advertising revenue, Cavuoto noted, "Obviously, Web-based publishing has certain inherent advantages, in terms of being able to quantify response, of being able to provide demographic information." There's little doubt that the Web, done right, effects superior database management far more efficiently and much more quickly.
"The print trade publishing business, for years, has been driven by 'reader service' or bingo leads that come in from an advertisement from the reader," he added, "through the magazine, and then go back to the advertiser. Is there potential for the merging of print-based reader service versus Web-based direct response?"
The Globe's Taylor replied, "There are certain kinds of advertisers for whom the print product is nearly perfect. The people they want to reach are there each and every day, reliably. [These advertisers] buy an ad and things happen for them. Similarly, we did research on some of our 'help wanted' advertisers, which is one of our most threatened categories in print; it's also our fastest-growing category online. Both products are working. We found more than 75 companies who are advertising on boston.com that had never advertised for employees any other way, except on the Internet, since their company was founded."
So the effective divvying up of ad placement depends on variables of audience, timing, and content in the age of print and Web publishing.
Immediacy of information dissemination is the primary strength of the Internet. Farley illustrates it with this story: "In the [September] Playboy, there's a pictorial of a girl, a stripper who was kicked off her track team down in Orange County. She's back on the track team - she was going to sue, so they put her back on. But when that story first broke in the general news, because it was so timely, the Website was able to move on it right away. Playboy.com contacted her, did a photo shoot, put her pictures up, wrote a story about her, and that was months ago. Because of the long lead time for the print magazine, if they're seeing the pictures, meeting the girl and seeing if the story is viable, [the story's] already dead.
"But then the magazine decided to do a pictorial. So there is crossover. We post both magazine to Web, and Web to magazine," Farley says.
Another strength unique to the Web is the "low cost of entry," as identified by McPherson. "If I buy five books from a publisher, I get the same discount that Amazon.com gets, and suddenly I can say I'm Amazon.com II or something, and I'm in the same business that they are, and I'm a direct company. Now there's an obvious difference in scale here, but it's amazing how low the cost is." Trying to start a publication is a proposition of lots of money in backing. Not so on the Net.
One of the pitfalls of this very positive difference, however, is the issue of quality control, of value, on the Web. Anyone can throw anything up, and they do. "I think what those of us in the traditional publishing business need to learn is that high-quality content, going from editors who package it beautifully and disseminate it to wide audiences, that's valuable, and [there] you have good linear growth potential," Taylor said. "The higher the quality, perhaps the steeper the line, but if you can capture this sense of inner activity, whether it be point-to-point, `a la e-mail, or telephones before conference calls, or whether it's true groupware, in some fashion, you have a chance of achieving much steeper growth. If the value proposition is there, then eventually subscription may be there as well."
The perspective of Penthouse.com's Van der Leun is particularly informative here. "If you apply analysis to the macro numbers - the actual universe of potential [adult content subscription] customers is fairly small.
"There's going be a big shakeout in the online porn industry this year," he predicts. "There are a lot of people who are going to go to the wall even if they're pretending they're not. A lot of quiet conversations I had at Internext this year - I mean, if you looked around at summer Internext, it was, what, 20 percent smaller than last year? There were people who weren't there who were 'saving it all for the big January show' blah blah - well, we'll see. Also, the 'unstoppable' Webmaster programs are hitting walls; they're trying to get off of this sort of Ponzi scheme they've built up over the years - very hard to do.
"Smaller Webmasters are living off the larger fish, and they're seeing their numbers go down, so they're gonna dive to the bottom; there's going to be a race to the bottom in content where these people who don't really know how to run small feeder sites end up A: giving surfers so much hardcore they're done before they get to the pay site; and B: throwing things up on the homepage that will give them big legal problems. They're thinking, 'I don't care, I'm putting my money in the Bahamas and I'm outta here' - this is not a formula for long-term success. [At Penthouse], we have to think in five-year terms; also, we're a big American corporation, we don't do offshore stuff, we're run according to American corporate law - that's just who we are.
"What the whole industry has to understand is it's not ever going to be 1999 again," Van der Leun adds. "There are not that many home runs out there. You're going to have to work for your money. The surfers are smarter, the whole landscape changes. David Ogilvie, the ad man, is quoted as saying, 'Gentlemen, the customer is not an idiot; the customer is your wife.' It's not everywhere, but in this industry there's a particular brand of contempt for the users. What that really means to me, what I think that's masking, is these guys have contempt for themselves and what they're doing in the business. That is the way they feel and they mask it by saying, 'Well, there's this bunch of jackoffs out there, they're stupid, they're going to give me money.' Then you really don't have a business. You're in for the 'cut, rape, and pillage,' and I hope you have an offshore bank account. And I hope your passport is in order. You might make a million dollars this year - more power to you; but I'm going to be making 12, 15, 18 million dollars this year, next year, year after that, year after that. It's like any other business. If you're not here to have fun, respect your customers, and make money - and if all those things aren't there - then what are you doing here?
"It's not a sprint, it's a marathon."
Branding: Publishing's Next Evolutionary Step
Penthouse.com was founded in 1988 by Kathy Keeton, the late wife of Penthouse publisher and editor-in-chief Bob Guccione.
"The company's involvement with Internet-related things goes back to the late '80s, actually - sort of in the Stone Age, the 300BAUD-modem age," Van der Leun jokes. "It definitely goes back to 1200BAUD modems... Basically, Kathy Keeton, who was one of the most amazing women I've ever run into in publishing, she was very interested in the future, very committed to technology. When I had a CompuServe account in '87 or '88, I remember seeing a live chat with Kathy Keeton, something to do with Omni. They had like an Omni forum on there. That's not an 'early adopter'; that's one of the vanguard, one of the foremothers of the Internet.
"She also went forward with things like Penthouse BBSes, so when the Web came along, the company had a very, very strong champion for the Web. The actual Website went up in 1995.
"The good thing was that the magazine operated as a reminder of the Website, and the Website operated as a reminder of the magazine."
This kind of integral thinking is the crucial step in making both mediums work together to promote a brand. Branding is the driving business acumen of today's most successful capitalists.
Playboy's Farley notes, "[There's] a lot of crossover, obviously [between the site and the magazine], particularly in terms of the images: Playmates, celebrities. But the Website does have a great deal of independence, content that really has nothing directly to do with the magazine." The important part, he emphasizes, is that it's the same brand.
Farley's east coast colleague Raleigh adds, "We definitely have a lot of cross-promotion between the two; in fact, recently, we combined the online sales and marketing teams with the print sales and marketing team. They're both extensions to the Playboy brand, and now we sell them together. Our Website helps us sell subscriptions, and it drives the magazine as the magazine drives the Website. We promote both."
An interesting sidebar in the integrating of media to promote a brand comes from Paul Tharp's Aug. 2001 New York Post story, "Hef's Bunnywood Deal": "Playboy has signed a deal to produce major motion pictures based on stories from its nearly half-century of celebrated fiction. The flicks will be in the budget range of $25 million each, with the first due next year and based on a sexy but safe box-office bet: A Night At the Playboy Mansion.
"'There's an enormous treasure trove of material in decades of Playboys,'" Tharp quotes Farley as saying. "Playboy [has] two pictures scheduled with its movie-making partner, Larry Kasanoff's Threshold Entertainment... sexy comedies [carrying] a PG-13 or possibly an R rating." The article also says that "Playboy paid $80 million for three hardcore channels of Califa Entertainment Group which show explicit sex movies in 36 million pay-per-view homes." This outward-bound acquisition of new media channels constitutes the building of a brand empire. [see "$92 Million Playboy, Vivid Deal Looks to VOD Future," Oct. 2001 - Ed.]
A June 11 New York Times article by Alex Kuczynski titled "Merging the Media: Magazine for Teenagers Benefits in Publishing-Internet Marriage," notes that cross-promotion between Teen People and America Online is "a good example of how the Internet and the print magazine world can work in tandem."
Anne Zehren, publisher of Teen People, said "that 65 percent of the visitors to TeenPeople.com come through the magazine's corporate cousin AOL, part of the AOL/Time Warner m�nage that also includes Teen People," Kuczynski reports. Zehren describes the relationship as "pretty much mutual back-rubbing."
The article quotes Zehren: "From a business standpoint, we have had a lot of great results with them. We give them authoritative content, and we act as a consultancy for them. And they give us great opportunities to sell subscriptions and promote the magazine."
The Teen People staff met with America Online to discuss marketing strategy. In one promotion this February, AOL users who signed up for a subscription to Teen People's print version got a free celebrity issue of the magazine with a cover featuring the pop band 'N Sync not available to the public at large, says the story.
Other promotions include an option to download celebrity voices to announce the arrival of new mail, and a free ticket giveaway for the Six Flags Great Adventure parks. "These days, most magazines are scrambling for new ways to bolster circulation in the face of declining newsstand sales, increases in periodical postal rates and the collapse of the sweepstakes houses last year," Kuczynski writes.
Said Taylor at the Print vs. Web seminar, "We at the Globe and at boston.com try as hard as we can not to think about 'print vs. Web'; We try to think about print and the Web, or some kind of collaboration, or anything but 'versus,' if we can." He explained that his office's m.o. involves "a lot of additional work in extending the franchise that the paper has."
Licensing content on the Web was one of the first movements in brand identification. "Well, we have content, and it might be useful in other places, so we'll license it to other Web publishers." This led to content aggregators, sites that allowed users to select from different sources and create their own pages, personalized views. Content syndication is another branding tool. Mostly, managing content, for both the Internet and a magazine, and building a database, is the most effective measure a company can take in terms of branding, for reasons of legal protection and making money.
Van der Leun agrees. "We don't sell our content to any other site. We not only hold onto it, we spend lots of money on lawyers trying to keep people from stealing it. It's not as if you can go to 100 different sites or 1,000 different sites or even four different sites and see Penthouse pictures. You can only see them on this one site."
An audience member at the Print vs. Web seminar said, "When you combine a unique set of content into a unique ex- perience, at this location, now you have something that customers are willing to pay for." And that's the formula for branding.