How Next Issue can rescue magazine publishing

Yesterday I posted a review of the news aggregator News360, which I like as a product but fear for as a business. I feel this way about a lot of content aggregation plays.

Zite, for example, was acquired by CNN, otherwise who knows where it'd be. And then there's the heavy-hitter, Flipboard: can $60 million in funding make this business work? If not, it's overpriced for acquisition.

But there is one professional content aggregator that is not just a great product, but a nice business, born of cooperation between rivals. It's also possibly the only way magazines are going to work in an electronic format. The company, and product: Next Issue.

We covered the company's launch of its iPad app yesterday. I have since loaded the app and signed up for a trial. I have this to say about Next Issue: it is awesome. One signup, a sneakily reasonable monthly fee, and all of the sudden I'm reading magazines on my iPad that I've known and loved over the years, but don't subscribe to anymore: Esquire, Car & Driver, Vanity Fair. Fantastic. The fee also gives me access to the digital edition of Wired, which is otherwise an additional cost on top of the print version that I'm already paying for (no way, Wired). And then there are the other pubs that I have a passing interest in but would probably never subscribe to nor even buy single issues of: Popular Mechanics, Parents, etc.

It's the single fee with its all-you-can-eat plan that makes this service addictive. By the numbers, it's a poor deal compared to the cost of buying, say, five print magazine subscriptions. Compared to the overpriced digital editions it makes more sense. But most importantly, once you're in to Next Issue, adding new titles is "free." It's like Hulu, Netflix, and Spotify. It encourages browsing and content snacking, something that's not possible, without paying, on a la carte content services.

The economics of Next Issue are radically different from what the magazine industry is used to, either in print or digital. Next Issue takes a portion of users' subscription fees -- somewhere in the 70 percent ballpark -- and divvies it up among the magazines that users read.

For example, if you're on the $9.99 a month plan (access to 39 monthly publications), and you read Wired and Bon Appetit, and spend twice as much time reading Wired, then Wired will get twice as much of the (approximately) $7 earmarked from your plan for commission than Bon Appetit would, or $4.67 if I did my algebra right.

Read more magazines, and each magazine's portion of the commission goes down. On the other hand, each magazine should make more money, since more people will explore publications they otherwise wouldn't.

CEO Morgan Guenther thinks his company's plan will lead to magazines getting new readers. He also thinks he will increase how much the most devoted magazine-reading households are spending on magazine content by up to six times. He says the average household spend on magazines is $50; his calculation is that he can move households spending less into spending either $120 or $180 a year (for the unlimited plan, which includes weeklies like the New Yorker).

"It's increasing the size of the pie," he says.

The Next Issue plan, currently, is all about getting customers to pay for content, which I believe they will, simply because the product is so compelling.

But the magazine business has a second revenue stream: advertising. That's why print magazines are so cheap and their digital versions are so expensive: ads subsidize print but there isn't enough advertising support in digital to allow publishers to give away their digital versions. "There hasn't been a media buy in digital magazines yet," Guenther says, "because we're not at scale."

Over time, Guenther says, Next Issue can layer in advertising, in a new way. He thinks that advertisers will buy campaigns from Next Issue itself, not the magazines. This is because Next Issue will have deep knowledge about its readers and will be able to sell powerful brand campaigns that cross publications. For example, an automotive advertiser could easily reach geeky car nuts by targeting people who read Car and Driver plus Wired, and send them different ads compared to more luxury-focused readers (Car and Driver plus Conde Nast Traveler plus Golf Digest).

Guenther told me that Next Issue will be adding publications to the system over time, but I think it's possible that magazines put out independently or by small publishers may end up squeezed out of this system.

That's because Next Issue is owned by a partnership of five giant publishers: Conde Nast, Hearst, Meredith, News Corp., and Time Inc. They're cooperating to bring their creaky old business models into the modern world. Before a similar venture gave us Hulu, I wouldn't have thought that this kind of joint operation was possible, but here it is: probably the smartest way to bring print publications to digital devices.

Next Issue isn't only a smart business, it's a very solid product that delivers quality content. If you have an iPad or Android tablet, I strongly recommend signing up for the free one-month trial.