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Segment definition
The Swiss consumer magazines publishing market comprises spending by advertisers on consumer print magazines, magazine websites and magazine mobile sites, including applications for smart devices. Consumer magazine publishing also reflects spending by readers on purchases of magazines via subscriptions or at retail outlets and kiosks, as well as paid online and mobile subscriptions for portable devices. Magazines published under contract, known as customer magazines or custom publishing, are also included in the print advertising component.
Figures do not include licencing or other ancillary revenues. Trade magazines are not included.
Business innovation
The structural change within the publishing industry is unstoppable and ongoing. Due to changes in consumer behaviour, the “paper” medium faces tremendous difficulties encouraging customers to buy consumer magazines. However, the difficulties associated with some products translate into opportunities for other products. Chances are emerging in digital channels, practically the only realm where innovation is taking place. Similar to prior years, digital content is a must-have in the industry.
Publishers need to find a suitable way to deliver their content. A huge portion of the advertising spend is allocated to Facebook and Google. On these two platforms users can access news, socialise with their friends and be entertained. Consumer magazines also have a presence on those platforms in order to deepen the relationship with their audiences. Notable, however, is that the social platforms tend to keep consumer data inside their platforms and thereby remain in control of the user relationship. Hence, publishers are facing difficulties in building and maintaining their brands inside the platform. What’s more, the publishers are sharing the advertising revenues with those platforms. Overall, there is lack of control in terms of advertisement placement and revenues – a situation that is of great concern to publishers.
Additionally, Facebook reworked their newsfeed in early 2018 and, combined with previous changes in the algorithms, this has forced publishers to adjust their strategies in order to ensure that their content continues to appear in front of customers. Naturally, digital business moves faster than any bricks-and-mortar business, publishing included. Therefore, publishers have to react now and assess how exactly they can work together with Facebook. The near duopoly in advertising commanded by Facebook and Google requires publishers to work with them.
For Switzerland, we expect this development to be of relevance. Granted, publishers are trying their best to position themselves alongside Google and Facebook. But we also note that a number of new video blogs are cropping up out of nowhere. Traditional consumer magazines are trying to expand their product offering via online video blogs, for instance “Schweizer Familie”, which has launched two regularly broadcasted video blogs. Instagram accounts and other blog sites are also becoming increasingly popular. In addition, we have observed an increase in the various subscription types and combinations offered to customers, ranging from access to single online articles or issues, to flat-rate packages that include access to magazine titles as well.
“Publishers are currently testing various online access and payment models, including the use of a paywall that restricts access to further articles after reaching the limit of free articles.”
This technology provides opportunities to collect and analyse user behaviour and subsequently adjust individually the usage of the paywall. Current paywall models include designated articles, whereas future dynamic paywall models are planned to understand more about user behaviour in terms of category and point in time of the accessed articles. In addition, registration models for unlocking content enable enhanced customer insight that can be used for ad targeting. The one-size-fits-all paywall model has become a thing of the past.
The Swiss consumer magazine market
Market overview
The consumer magazines market consists of two major revenue streams: advertising, which is accountable for 60%, and circulation, which generates 40% of total revenues. Each revenue stream can be divided into print and digital. Between the two, print clearly outweighs digital with 94% of the whole, leaving digital with only 6%. By way of illustration: out of almost CHF 800 million in overall revenues, only CHF 50 million comes from digital activities, with print contributing the remaining CHF 750 million.
Print circulation
Currently, publishing is faced with structural change. As a result, companies need to find ways to navigate successfully in this turbulent market. Publishing companies will attempt to sustain their revenues or at least cushion the decrease by transitioning from a core publishing business to a multi-revenue-stream business. Their current business models need to be reconsidered in order to create novel solutions and product offerings for the existing customer base and potential new customers.
The vast supply of digital news has resulted in a steady decrease in readership for traditional print magazines. Readers today have endless opportunities to access and consume news. Hobbyists can engage in communities, write blogs, share tips, photos and stories on social media. And because consumers can freely choose which content provider they want to use, traditional print magazines have to justify their price tag. New entrants to the market are complicating the situation and heightening the competition. In general it can be stated that social media have clearly undermined the importance of print magazines.
Consequently, publishers need to be creative in order to enhance the customer experience and provide benefit to the reader. Within the frequently trustful and continuously nurtured customer relationship lies significant potential for the publishing industry.
“The current relationship to the individual customer needs to be better capitalized by offering tailor-made products and services to the readers and automatic renewal of subscriptions.”
Digital circulation
The editorial clout of Swiss consumer magazines is rather limited compared to magazines from other countries, thus it is economically unfeasible to sustain daily-updated digital news platforms for monthly or weekly consumer magazines. As a result, new alternative products are emerging such as izzymag, which has been capturing the attention of the young audience since late 2017. In the consumer magazines sector as well as for newspapers, it is of utmost importance to continuously generate a surprise element for the reader in order to pique interest.
An example: Beobachter and Mobiliar have launched a cooperative venture in the field of digital legal advice. The editorial department of Beobachter has accumulated a vast know-how in the legal and life-consulting areas over the years. This knowledge base has now been compiled and documented digitally. Customers of Beobachter can access the information digitally or obtain personal consulting via phone or e-mail – the service is included in the subscription price.
Digital and print advertising
This approach to awakening interest can be applied to the use of digital advertisement as well. Today’s technology and customer data enables advertisers to target certain demographic or other groups defined by specific behavioural patterns. For instance, a placer can choose to advertise to all female readers between ages 20-35. Another example would be to advertise according to the recent Internet searches of the individual. This is highly productive. Companies can choose to spend their limited marketing budgets for specific advertisements only, thereby enabling them to directly measure the impact of such investments. However, this concept assumes that companies know their customers.
Despite the fact that digital advertising has experienced robust growth in the past 3 years, its overall contribution compared to that of print is relatively low. Digital advertising accounted for 9% of the total advertising spend and was therefore not sufficient to compensate for the decline in print advertising (this past year -11.7%).
In 2017, the competitive landscape remained relatively stable. Like in the previous year, the biggest and most widely known player is Ringier Axel Springer with its portfolio of 30 titles (ca. 880 issues per year) and workforce of over 550 employees. The portfolio includes magazines that have become household names over the years, e.g. “Bilanz”, “Glückspost” and “Beobachter”. Tamedia follows closely in second place on the market. The company has its own corral of blue-ribbon fillies, among them “Schweizer Familie”, “Annabelle” and “Fémina”. Next in line is NZZ Group, which reaches a significant number of readers with its main title “NZZ Folio”.
Principal drivers
Shift to digital
The revenue shares over the past five years indicate a clear decline in print circulation and the corresponding advertising. At the same time, digital advertising and circulation recorded revenue gains but the amount remains marginal in comparison to the print sector. It is highly advisable for magazine publishers to stay flexible and recognise digitalisation as an opportunity rather than a threat.
Monetisation in digital circulation
Monetisation is still a key issue for magazine publishers as customers are reluctant to pay for online magazines in view of the plenitude of free content. To establish digital advertising and circulation as a reliable revenue stream, market players need to look for new income models and ways to convince the consumer to pay for quality content.
“Good content needs to have a price tag. Offering solely free content is not sustainable in the long-term”
User behaviour of Millennials
The way people consume news and magazines has changed since the introduction of the Internet and the wide availability of smart mobile devices. The Millennials are only the first of many generations to grow up with the fast-paced Internet as a constant companion. Of late, that type of content is mostly consumed on social media, a venue that older generations could never have imagined in their younger years. Changes in consumer behaviour are inevitable and companies will have no other choice than to meet the new demands if they want to survive in a changing media landscape.
Market growth
The trend within the consumer magazine industry is apparent and cannot be stopped. We foresee in both advertising revenues and circulation a CAGR over the next five years of -4.5% and -4.3%, respectively. The negative trend in print can be partially compensated by the growth in digital. Nevertheless, the basis for digital revenues is still significantly smaller than that for print revenues. Therefore, the industry’s overall development will continue to depend on the print sector, whereas the downtrend in latter got its start already several years ago, not only in Switzerland, but also worldwide. Publishers are facing the question of how to retain their customer base by attracting younger people who are willing to pay for a print product or a digital offering.
Emerging technologies open up significant opportunities for publishers to provide a unique offering and to capitalise on the customer relationship. The individual online behaviour of users can be tracked and applied in the form of personalised advertisements along with the deployment of a dynamic paywall in order to monetise the customer relationship. Therefore, we expect a CAGR for digital circulation of 5.3% over the next 5 years, whereas digital advertising is projected to grow by 7.2%. Publishers are focusing their energy on growing digital circulation and advertising. The overall outcome, however, will most likely be subpar.
Comparison to Western Europe
The general trends in Switzerland and Western Europe are comparable. Both markets show negative growth rates of varying intensity. In the past two years, Western Europe suffered significant declines of roughly EUR 1 billion each year, with 2017 being the worse of the two. Switzerland’s decline has been less accentuated: the latest year-on-year decrease was -7.1%. It is expected that both markets will start to recover from this significant slump, with the compound annual growth rate for Switzerland at -4.4% and -3.0% for Western Europe.
Despite the fact that EU’s General Data Protection Regulation (GDPR) came into force in May 2018, we expect the decline in the Western Europe market to stabilise at a growth rate -3% over the next five years. An important factor behind of this decline is the anticipated decrease in digital advertising, an approach inherently limited due to the GDPR (given that programmatic advertising relies on customer consent). We assume that the more stringent customer consent rules will force publishers to adjust their business models.
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Contact us
Bogdan Sutter
Director Advisory, Strategy and Digital Change Expert, Bern, PwC Switzerland
Tel: +41 58 792 77 51
