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Benchmarks for Success: Database
Publishers Move to Grow Online Revenues |
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11 April 2005 |
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New research from Shore affiliate Russell Perkins on
database subscription pricing benchmarks reveals that
we've passed the point at which print publications can be
considered primary sources for the clients of database
publishers. The print subscription revenues from these
publications are sagging while online revenues are surging
ahead. This parallels the general movement in the content
industry towards having to recognize revenues from online
content as the primary driver for their businesses.
Building revenues and margins in an online environment can
be tricky and is oftentimes not the high-margin mass
business to which print-derived publishers have become
accustomed. Those wanting to maintain high margins in their
publishing businesses are going to have to tailor their
marketing plans for much more focused efforts. |
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It's lovely
weather out in Scottsdale, Arizona as people arrive for this
year's
Buying and Selling eContent Conference, gentle breezes and
desert air lulling one easily into a sense of well being. The
motto of the
Camelback Inn where the conference is held is "Where time
stands still." There is a definite timelessness to the rugged
landscape and peaceful surroundings that reminds one that we
sometimes need major benchmarks to remind us how things have
actually changed over time. Was it only five years ago that
VerticalNet CEO Mark Walsh was proclaiming that the era of
print publications was dead at the dais of this same conference
- even as the stock price of his B2B publishing portal was
melting down with his every word during the "bubble" burst? The
remnants of the year 2000's "profitable in a year's time" ideas
for content companies have largely disappeared, but that's not
to say that the optimism of those earlier players in online
content was mistaken: no, they were perhaps just a wee bit off
in their timing.
Time has not stood still for the content industry, as
quantified in "Database
Subscription Pricing Benchmarks," our latest research from
Shore affiliate
Russell Perkins.
Looking at pricing and models from 350 subscription database
products offered by 85 different publishers, the report reveals
that their online revenues have more than doubled since 2000,
while revenues from print products offered by these database
publishers have declined nearly 18 percent. In spite of the
zeal of some online enthusiasts print has remained a remarkably
resilient media, increasingly embraced not only by
long-established publishers but as well by content producers
from electronic media and marketeers from consumer goods
companies. Yet it's clear that in 2005 we have passed a true
tipping point: print is no longer the central focus for much of
the content industry today. As Russell's report points out,
print for the users of database publisher products is now the
handy backup reference, the tool that's there when the network
is down or you just know how to get to information efficiently
in that medium.
Some publishers understand this trend and its implication
for legacy revenues and have worked aggressively to focus their
revenue models on building an online product that will thrive
well into the future. But a remarkable number of publishers
fail to get the picture, finding themselves struggling to adapt
to an environment in which online business not only drives
subscription renewals for a core print product but become the
core product itself. Here are a few thoughts about what
publishers must confront with sober thoughts and clear eyes
when looking at their businesses move through time:
- High margins for subscription publications are driven
by online revenues. Many publishers remain insistent on
maintaining traditional margins on their "old world" content
products. This is not a bad thing if those margins are used
as fuel to drive innovation in presenting content to users
and putting in place back-end improvements that can help them
to transition to electronic-first advertising and production
principles. But Russell's research indicates that in spite of
pressure on pricing database publishers are commanding
significant premiums for their online publications over print
outlets. Everyone wants to have nice bonuses and a
comfortable retirement, but the money in subscriptions is
moving to those publishers that can produce high-value
content services highly tuned to online user needs as their
primary revenue vehicle, with print a useful adjunct. For
publishers more tied to text publications the lessons to be
learned from database publishers should be studied carefully.
- Looking for new markets for new products to drive up
margins is not an option for most. It's a "bull market"
for new content companies, with scrappy entrepreneurs pushing
to come up with marketable content in new markets and venues
neglected or ignored by traditional publishers. But few
established publishers can afford to make such radical bets
on their future without risking major upheavals or margin
declines. Instead, as suggested by
Patricia Joseph's latest report, finding diamonds in the
rough of their existing databases, infrastructure and in
alternative markets for existing content products may be the
best way out of the margin dilemma for many publishers. The
efficiencies required to produce content effectively in this
online era seem to be a mindset problem as much as anything
else these days, with some die-hard publishers still
resembling rumbling old steel mills churning out product with
low efficiency while new online "micro-mills" focus in on
producing highly effective content tailored to just-in-time
content needs.
- Consider how you position your enterprise subscription
packages. An early workshop at the conference here in
Scottdale emphasized the traditional arts of negotiating
pricing based on per-seat or per-user subscription models.
This has long been a rubbing point for institutions, who
prefer blanket pricing that does not reflect the specific
number of users. But as Russell's research points out with
fewer centralized purchasers of content there's a devolving
of purchasing towards individuals and business units more
able to measure the direct impact of content purchases on
revenues and costs. "Big kill" subscription contracts are not
going away, but it's becoming more important for publishers
servicing enterprises to build margins through services
highly tailored to the needs of specific groups within the
enterprise who understand their value propositions more
clearly than central purchasers - and who are empowered
increasingly to make key purchases. Distribution agreements
with aggregators that assumed mass usage would be the key to
enterprise revenues may have to be questioned carefully as
the aggregators themselves must more to more focused
strategies.
Time doesn't stand still, of course - we just wish that it
would at times when things are very comfortable and pleasant.
Publishers who wish to keep moving in time are thriving,
according to Russell's research, so there's all the motivation
that one could ask for to do so. I'm looking forward to
enjoying the desert air and the stillness of a place that
changes so little over time, but for the most part I'll be
focusing on the words of content industry leaders at this
conference who must face the fast-moving hands of time upon our
return.
-
John Blossom
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