US Digital Magazine Circulation Tops 80M While AAM Continues to Underreport Digital Versus Print Sales

Are digital sales really flat? It all depends how you count universal pricing sales.

One sales team I know has a gong in their quarter of the office. Every time someone makes a sale, they hit the gong and everyone goes wild. Throughout the day, the gang is hyped and excited and at the end of the day, they carry the salesperson with the most gongs on their shoulders to the downstairs bar. That last part might be a bit of an exaggeration, but everybody likes to be the hero at the office – hustling their butt off and making gains.

Imagine their disappointment if the model changed where their efforts weren’t counted in the event that they upsold a client.

For example, if they’re selling mattresses for $1,000 each, but 60% of the time, could upsell a customer on a two-for-$1500 sale. In most cases, the salesperson would be rewarded. They’d get the gong and the tally next to their name would go up.

In most circles, that’s how it works, but in publishing, you’d be way off. Because when magazines sell print+digital packages, they have to pick one or the other when they report to AAM. According to AAM, only one subscription can be claimed per magazine. “If access to print & digital is included, the publisher can count [the] sub as either print or digital,” a representative from their Twitter account told us.

So is the underreporting of digital magazines sales the fault of publishers themselves, or should AAM’s audit be modified to accommodate universal pricing and packaging?

We think it’s time to accommodate. We ran some estimates based on our 2014 Digital Magazine Market Study and determined the number to be more like 80 million active digital magazine readers and subscribers, which is a lot more than the 11.6 million AAM reported for the first half of 2014 (still waiting on the late 2014 numbers).

Here’s how we got to the 80 million circulation estimate:

• As of the 2013 census, there were 242 million adults in the United States
• In January 2014, PEW reported 87% of US adults have Internet access
• Mequoda’s study found that 20% of our US adult sample size of 1136 reported currently reading or subscribing to digital magazines on a tablet
• Those 20% of US adults reported having an average of 1.9 active magazines on their tablet
• This brings total digital magazine circulation to 80 million

How universal pricing is reflected in magazine circulation audits

How do you sell your digital magazines? Do you sell them separate from your print magazine? Do you offer a package where subscribers can get both?

The industry has been saying in the media recently that those types of combo packages (which tend to be the majority of sales) aren’t being counted as digital edition sales. That AAM only counts a digital subscription as a digital-only subscription, so it’s possible they’ve been dramatically understating our digital success. Because, when someone buys a combo offer, it’s only being counted as print.

But as you’ve just learned that’s not entirely true. It’s up to the publisher to decide if the subscription is counted as print or digital, but not both.

Logically, it makes sense. If you count both, it will look like you have double the number of subscribers. But if a publisher is sending out fifty print editions and fifty digital editions, doesn’t that equal a total of 100 editions in circulation?

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When you think about how the Economist, New Yorker and all the Time Inc. magazine offers are using universal pricing, it could mean that none of those are being counted as digital. And we know how successful those offers are, and we know what the split is because it’s what our clients use to sell their magazines.

If you look at one of our clients, the split look like this:

• 10% take the tablet edition
• 10% take the print edition
• 20% take the web edition
• 60% take the combo

Typically, the pricing also looks like this:

• $19.97 for the tablet edition
• $24.97 for the print edition
• $29.97 for the web edition
• $34.97 for the combo

In all of our experience with publishers who use universal pricing, the package that 60% of subscribers overwhelmingly choose, is not being counted equally.

And unfortunately, the publishers who are forcing customers to choose digital or print, and offer no other option, are not the publishers who have been successful in digital publishing. Digital magazine adoption rates for places like Hearst are poor because they make people choose, and subscribers want to have their cake and eat it too.

Not exactly a digital edition data heist

So the digital magazine adoption rates we’ve been seeing in the news – can we really use them as a basis for success?

Tom Standage, deputy editor of The Economist, told Neiman Lab, “If you look at our digital-only numbers as proportion of our overall circulation, it doesn’t look very big, because those are only the digital-only numbers. The real important number is what proportion of the subscriber base is paying for digital in some form. Because many of them are paying for print as well. So we don’t have this print or digital split and it makes us look like we’re doing less well than we are.”

But who’s to blame, The Economist? The media does love to look at how print numbers fall, while failing to note the increase in digital sales.

In terms of other things you might not know, we looked in to the fine print of AAMs audit about combination sales when two different magazines are sold as a combo. They’re both counted into circulation as long as the promotions don’t state that one or the other is free. This applies to both single sales and subscription sales. The second magazine must cost at least a cent more. However, if you give one edition away for free to print subscribers, you can’t count it into your paid digital circulation at all.

In that case, before their current offer, The Economist was charging $90 for digital, $130 for print and $130 for combo. Time Inc. was charging one price for print plus digital. So according to those rules, it makes sense that the digital edition isn’t counted into paid circulation, because it’s considered free.

But that’s not why digital subscriptions aren’t being counted for publishers who use a tiered pricing structure. According to AAM, “Any combination sub is going to only count a consumer once as the bottom line number is unduplicated.”

You also can’t count new digital subscribers if you close your print magazine and convert all subscribers to digital unless they individually confirm to opt into a digital edition. That’s just a nice-to-know.

When a publisher submits their numbers, AAM asks them to submit print only, digital only, print and digital (unduplicated) and total numbers. That “unduplicated” point is the wall that publishers hit when reporting.

So from what we can tell, AAM seems to understand universal pricing just fine, they just don’t see two subscriptions as, well, two subscriptions. They see one subscriber. We agree to disagree. And now publishers face the challenge of whether to lose print numbers and add digital numbers, or take the uptick in print subscribers while neglecting their digital growth. Not a fair challenge, if you ask us.

So is AAM causing trouble, or are publishers just choosing print over digital?

Update:
We appreciate that we have heard from a couple of representatives of the AAM to make sure we understand a few points.  As AAM’s Executive Vice President Neal Lulofs says in his comment below:

“Standards are set by the board of directors, which consists of publishers, advertisers and agencies. So the rules for print/digital combination sales noted above were set by all parties involved in the buying and selling of magazine media (not the auditors). If an AAM member believes it’s time to revisit the rule, I would recommend they raise it with their board representation.”

In addition we heard from Rachael Battista, a Communications Specialist with AAM, who said:

“AAM isn’t a measurement or market research company. Our audits are conducted to independently verify how ​and where copies of magazines – whether in print or in digital form – are distributed for advertising purposes.”

AAM is doing exactly as Ms. Battista describes.  The problem is the current rules, which they are using as their audit standard, do not adequately reflect adequate nuance and the digital circulation is substantially discounted as a result.  So, either all parties need to explicitly acknowledge limitations of the AAM audit data, or as Mr. Lulofs notes, it’s time to revisit the rule.

What do you think?  Does the limitation of the current reporting cause hurt your ability to sell ads in your digital editions?