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Why ESPN The Magazine Is Going To Four Cents

We were shocked when we saw the promotion. ESPN The Magazine offering its two million current subscribers a chance to get a full year of the magazine and its ESPN.com pay site, Insider, for $1 total. For those scoring at home, that’s less than 4 cents an issue and Insider, which on its own costs $40, for free.

We sat down with ESPN The Magazine’s general manager Gary Hoenig to discuss the strategy behind this move.

Darren: What are you trying to do with this promotion?

Hoenig: What we’re trying to do is get people to experiment with our paid Web site, Insider, which magazine subscribers are entitled to but they’re not signing up for at the numbers we had hoped for in the past. So what we’re doing is giving them an opportunity for a year to experience both the magazine and the Web site for only $1 and obviously we hope to get them back to a decent price for the two of them.

Courtesy: ESPN The Magazine

Darren: If magazine subscribers always got Insider, what’s the difference with this?

Hoenig: When people get a chance to actually experience what they get, they evaluate the experience differently. So it’s not the same as trying to woo them in with content. You are actually trying to keep them with good content and I think that media professionals in general, magazine people in specific, are used to doing that with early offers to get them in. Now keep in mind, not that many people took us up on this, enough to make it a success but not the vast majority of people who are subscribers to ESPN The Magazine. Keep in mind too that we’re going to tell them very shortly that this offer is about to end and won’t be back. So this is just an opportunity to get people to register for the Web site and get people to experience what it’s like and try to get some generated interest in what’s a brand new Web site.

Darren: How long is the promotion on for?

Hoenig: The offer started around the end of July in three different stages -– an e-mail, a cover wrap and a mailing. It will end no later than the middle of October.

Darren: What type of math did you have to do to make this offer?

Hoenig: I’m pretty confident the rubber meets the road a year from now and I’ll be happy to come back then and tell you how it went. But the projections we have, which are pretty conservative, is that Insider even at $40 does tremendously well in terms of retention and we think that at the $26 price, which is lower than Insider right now, but the price for the magazine, we think we’ll do really well. I’m not saying we’ll be 100 percent, but we’ll do well enough.

Darren: As part of the offer, subscribers have to give their credit card and then it is debited on an auto-renew program for the following year.

Hoenig: You can dwell on the credit card thing, but we’re actually looking for a variety of ways to make it easy for people to pay. The opportunity here is to change the decision making process from opt-in to opt-out and that’s something that everybody in every industry would like to do. People in the retail industry do it all the time by getting you to become logged in as soon as you come in so that the decision to buy becomes easier. You get plenty of opportunities to charge your credit card, or whatever payment plan you wind up using, to say you don’t want it anymore. There’s no catch involved. It’s not something that people aren’t used to. But instead of saying, “I like this. Am I willing to fill out a credit card form or any other kind of form to get it?” You are now saying, “Do I not like this enough to say no,” and that’s a very different decision.

Darren: Is this leading at all to one day having the magazine entirely online?

Hoenig: If you’re an Insider, you get the magazine. If you are a magazine subscriber, you can become an Insider, but you need to sign up. Now if you do sign up, you’ll find a digital version of the magazine online. It’s there right now. We have not made a big deal out of it. We have not said, “Do you only want the digital magazine instead of the printed magazine?” That’s because up to now we’ve had no problem sustaining our rate base or sustaining our subscription. I would maintain that the problem the industry has is not a circulation problem and not a reader problem, it’s an advertising problem. So we don’t have a problem keeping readers and we don’t need to say, “Will you switch to a digital subscription so we can save some money on the printed copies?” We’re not seeing any lack of demand for what we do in print.

Darren: Will the $1 offer help keep people who might consider leaving the magazine?

Hoenig: This is really not about retention of magazine subscribers. This is really about an aggressive attempt to get people to experience the Insider especially in the way we just upgraded it. We wanted them to experience it. We wanted them to get to know it so that within a year they’re saying to themselves “Wow, this is really worth more than $1.” Obviously were hoping they think it’s worth a lot more than $1.

Darren: Advertising seems to be down about 20 percent across the board. Obviously the economy plays into that.

Hoenig: The volume of content over the last 10 years has increased geometrically. I can’t tell you that the amount of money people are spending on advertising has increased at the same pace. So if you look at their problem, it’s “What do I spend my money on and what’s the most effective?” And there are just so many things to choose from now that they’re confused and hoping for some more value from what you give them.

Darren: What’s the state of business for ESPN The Magazine and the magazine business overall?

Hoenig: In terms of what we’ve seen in performance, it has been a tough year, I’m not going to deny it. I think we’re close to the average there, but I would say that in our fourth quarter, which ends at the end of September and going into the first quarter of our fiscal year, which is in the Fall, things are starting to look a little bit better. I’m pretty sure that the bottom has been reached. I’ve had some conversations with other people in the industry who share that experience. Obviously we’ll need to wait and see, but right now it looks like the bottom has been reached and we’re starting to turn the corner.

Darren: What does the future hold for the print business in general?

Hoenig: Nobody has talked more about the death of print than people in print. What worries me about that is that we’re not really examining all of the tools in our industry to figure out how to get out of this mess. We need to figure out a way to get some more money from the consumer. But I think that’s been a problem all along – the overdependence on advertising is a real crutch for media and this is an opportunity for us to actually get to the consumer and say, “Hey, what are you willing to pay for?” I don’t think it’s a time to give up and say, “No we have to give everything away for free.” I think the road to free is just the road to the bottom. I do think that it’s true that you reduce the cost of media when you don’t involve trucks and presses and ink and so on, but that doesn’t mean that people won’t want printed magazines at some volume and it doesn’t mean your costs go to zero. It costs money to produce good media and people need to pay for a product that they want. It’s not something that they could just ask for for free.

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