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Conde Nast launches new subscriber service with Amazon

By Jennifer Saba

NEW YORK (Reuters) - Magazine publisher Conde Nast announced a major partnership with Amazon.com Inc on Tuesday in which the Internet retailer will handle print and digital subscriptions for glossy publications such as Vogue, Wired and Vanity Fair.

Conde Nast is the first magazine publisher to collaborate with Amazon on this type of service, a move that will simplify and eventually save money on its subscription process and give it access to a huge new customer base. Currently, subscriptions involve direct mail and stacks of magazine insert cards.

Amazon will allow consumers to purchase, manage and renew their subscriptions for seven of its top titles under a new "all access" plan that gives them both print and digital editions of select magazines using their Amazon accounts.

For the time being, readers can still subscribe using the old paper-based method, but the idea is that Amazon will eventually handle all Conde Nast's magazine subscriptions if the arrangement is successful.

For Amazon, it marks a new step into handling content, following forays into film and lending books. It gives the online retailer a chance to offer subscriptions to its more than 200 million customers and cross-sell goods to Conde Nast subscribers with the easy 'one-click' purchasing system.

"It's part of the Amazon initiative to improve its overall content portfolio," said R.J. Hottovy, an analyst at Morningstar. "It's a matter of getting more people to Amazon. It entices them to make more purchases elsewhere on Amazon, which should have some revenue and margin improvement opportunities."

But it is just one piece of Amazon's ever-growing business, and likely not the lynchpin of any grand new strategy.

"It's a pretty small agreement in the grand scheme of things for Amazon," said Aaron Kessler at Raymond James. "But it's definitely a positive if Amazon can become the backbone for more digital subscriptions."

Analysts said it would make sense for Amazon to target other publishers' subscription services, but the company declined to give details about its plans.

An obvious target would The Washington Post, which Amazon Chief Executive Jeff Bezos bought for $250 million earlier this month.

THE PLAN

Conde Nast will offer readers a combined $6 introductory rate for six months of both the online and print versions of one of the following magazines: Vogue, Glamour, Bon Appetit, Lucky, Golf Digest, Vanity Fair and Wired.

It plans to add its other 11 consumer titles, including the New Yorker, later in the year.

Readers can still subscribe the old way through Conde Nast, and can also subscribe online through existing partner Apple Inc.

The digital subscriptions will be made available on several mobile platforms, including the Kindle Fire, Apple's iPad and Google Inc's Android tablets and phones.

It will introduce Conde Nast to new readers through Amazon's massive customer base.

"We are using the partnership with Amazon to make purchasing and renewing subscriptions as easy as humanly possible," Bob Sauerberg, president of Conde Nast, said in an interview last Wednesday.

"We want to go from selling print subscriptions to selling access to all our content," he added, referring to the introductory offer that allows readers to get online and print subscriptions bundled together for individual titles.

Currently, online readers count for only about 4 percent of Conde Nast's total circulation of about 18.5 million copies, according to the Alliance for Audited Media. That suggests the glossy magazine as a physical object is not likely to disappear any time soon.

"Magazines have real deep value in both formats," said Russ Grandinetti, vice president of Kindle Content at Amazon. "A lot of consumers want to keep one foot in both camps."

STRIKING DEALS

Sauerberg and Grandinetti started to talk about a potential partnership over breakfast during the magazine trade organization MPA's annual conference last year.

"For years we have worked hard at trying to make buying anything really easy," Grandinetti said. "Even though people really love magazines, I would not say they love the process of maintaining their subscription."

Increasing digital copies is a key part of the magazine's industry future success as more people choose to read on smartphones and tablets, while advertisers are placing more dollars toward digital displays at the expense of print.

At the same time, mobile device makers have a huge appetite for media content, including magazines, newspapers and TV shows to spur people to buy tablets and smartphones.

Bezos' move to buy The Washington Post ignited speculation that he would transform the paper into a streaming news service delivered to tablets, computers and phones. Grandinetti would not comment on any plans involving the Post, adding that the paper is solely under Bezos' ownership.

Even as tech companies court publishers, media companies have had an uneasy relationship with Silicon Valley since watching the music industry dwindle as people flocked to buy songs on iTunes for much less than the price of a CD.

For example, Time Inc, a division of Time Warner Inc, the largest magazine publisher in the United States, was one of the last holdouts to join Apple's newsstand. The standoff was because the world's largest technology company did not want to share subscriber data with the publisher of Sports Illustrated and People.

Subscriber information is critical to magazine publishers, who use it to give advertisers a better picture about their readers.

Conde Nast is usually one of the first to wade into the water with innovations. For instance, it was the first to offer subscriptions through Apple's newsstand with the New Yorker.

"We really try and connect with the tech companies on the West Coast," Sauerberg said. "We know what we're good at and they know what they are good at."

In the agreement with Amazon, Sauerberg said Amazon is providing the same consumer data Conde Nast would get when a reader subscribes directly through the company.

Amazon is taking a cut of the subscription revenue, although both companies declined to provide details. In other arrangements, Amazon typically takes 30 percent.

(Reporting by Jennifer Saba and Liana Baker in New York, Bill Rigby in Seattle; Edited by Ronald Grover, Ken Wills and Andre Grenon)

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