American Society of Magazine Editors

Retail Marketplace Workshop: Magazine Models for Print on Demand

By Karlene Lukovitz, IPDA Daily Publishing & Retail News

In a workshop at Retail Marketplace 2013, executives from Ingram Content Group (ICG) presented new models designed to enable magazine publishers to leverage print-on-demand to create new revenue opportunities.

The Background
Book publishers have been employing ICG’s print-on-demand (POD) services –called Lightning Source or LSI — since 1997. The company currently has POD relationships with 25,000 book publishers (ranging from “the big six” to small, nontraditional publishers), and actively carries more than 10 million POD titles ready for order, according to the company’s VP and general manager, Dan Sheehan.

LSI prints 2 million books per month (with a 24-hour turnaround time) across eight facilities in the U.S. and European and Latin American countries, and handles the logistics to make clients’ content available through a network of approximately 38,000 partner channels (online retailers, bookstores and other physical retailers, libraries and institutions). Last year, LSI shipped 149 million units (including 7.7 million direct-to-consumer shipments, spanning 178 countries).

Through CoreSource, its digital products warehouse, ICG also distributes digital products/ebooks (33 million last year) for retailer and publisher clients.

ICG defines itself as a distribution solution for “helping content reach its destination,” rather than as a printer, Sheehan said.

ICG also owns Ingram Periodicals, which distributes more than 4,000 magazine titles, and there is potential to leverage IP’s resources in some of ICG’s proposed magazine models, according to Sheehan.

Potential New Models for Magazine Publishers
Noting the significant sales growth seen in bookazines and other premium-priced products that largely employ existing content, ICG is offering options designed to enable magazine publishers to use any/all available content (recent or archival) to offer POD/print and digital-format products cost-effectively with minimal investment/financial risk, said Sheehan.

The newly available magazine-specific options are feasible because of new, more cost-effective run-of-book color-printing technology now in place at ICG partner-printers, he explained. (Previously, due to the economics, color printing for POD was limited to book covers.) In addition, ICG acquired epack, a technology that automates the steps/processes between printing and binding, he said.

ICG’s core premise: Since POD print (and digital) products are created and fulfilled to match supply with demand (one-offs based on prepaid consumer orders or publisher-determined small numbers of copies)–and the publisher’s cost and profit margin are predetermined–POD capabilities minimize waste copies/costs, while enabling sales to new (including global) markets/customers. ICG also believes there is potential for employing POD in traditional retail channels.

ICG has not signed any magazine publisher clients yet, but it’s working with publishers on solutions customized to their needs, as well as doing beta tests with some publishers on one model, Sheehan reported.

Sheehan and Kelly Gallagher, VP content acquisition, North America for ICG, summarized three main magazine models being explored.

One model (the one being beta-tested by some magazine publishers for bookazine/premium-content offerings in particular), is to offer a product with an assigned ISBN number through online retailers in ICG’s partner network (or other channels). The product lives virtually in the company’s wholesale channel until a domestic or international consumer discovers and orders/pays for it. The copy is then printed, shipped and delivered by ICG/LSI (which acquires the money from the retailer minus the retailer’s commission and then sends on the publisher’s remit).

A potential variation on that model is for a publisher to test the demand for a repackaged or customized content product (such as a year-end “best of” compilation from a magazine brand) in a digital format, and/or perhaps a small print run.

In both cases, there is minimal capital investment, outside of the editorial costs/time involved in creating the repackaged product from existing core content, Gallagher noted. And according to Sheehan, Barnes & Noble is on board with offering bookazines or other premium magazine products on B&

A third potential model is positioned as a potential alternative for replenishment of bookazines/specials on the traditional newsstand.

Rather than print up to three times more copies than may ultimately be sold, a publisher might be able to reduce the initial print run and use the POD option toward the end of an on-sale period to produce more copies for retail replenishment purposes, as needed, Sheehan suggested. Working with ICG and select retailers, a publisher might develop an algorithm that would trigger printing of replenishment copies and, in retail accounts serviced by Ingram Periodicals (such as Barnes & Noble), distribution of those copies to retail outlets.

Because the per-unit POD printing cost will be higher than the per-unit offset printing cost, this model would have to be carefully managed, Sheehan pointed out. (As a rule, POD cost is priced on a unit of one, whether one or 50 or some other number of copies are actually printed–although a discounted price could apply in a case in which a publisher wants to do a relatively large print run, said Gallagher.)

Rough P&L Model
While stressing that these are rough numbers, Gallagher said that ICG expects a publisher to realize about a 15% margin on each copy sold via ecommerce.

Assuming a $15 price to the consumer (ICG suggests cover price should likely be somewhat higher than the newsstand cover price, to avoid cannibalization of physical retail sales), the wholesale price would be roughly $8.25, and the print cost would be roughly $4.11 (based on a 200-page product). The publisher’s remit would be about $2.64 per copy (the publisher is not responsible for freight/shipping costs).

While the publisher’s remit in the traditional newsstand model is 30%, ICG argues that a 15% remit or margin, with minimal financial risk, is worth exploring as a means of making sales to new markets/consumers–creating a new revenue source out of content that might otherwise sit unleveraged.

However, Sheehan and Gallagher acknowledged that, while the color printing POD capabilities will improve over time (and the cost will come down), the quality is not yet up to top-grade offset printing. Therefore, publishers of high-end, premium-priced products would in some cases need to determine whether the quality of the printed product will sufficiently live up to consumer expectations in relation to the price.