Magazine Subscriptions, Renewals, and Digital Content

I was looking up a story from Time magazine on their website and was stunned to find it there.

Why? Because my latest copy had just arrived.

So I got to thinking about how costly something like that would be. I did some googling about and found out that Time spends around $5M/year on their website. Since they have around 3M subscribers and sell another 1M copies on the news stand (the highest in the industry for the US) that means they're spending around $1/reader. Which seems a lot to me. My magazine renewal last time was for $22.50 or something, so 5% of my subscription is going to the website.

But does the website lost subscribers? I popped over to SSRN and found:

We examine how offering digital content affects demand for print magazines. Using a searchable website archive, we measure the digital content offered by a sample of US consumer magazines from 1996-2001. We find strong evidence that digital content cannibalizes print sales. On average, a magazine’s print circulation declines about three percent when it offers a website. However, the effect varies with the type of digital content offered. Offering digital access to the entire contents of the current print magazine reduces print sales by about nine percent. We find no evidence that digital content complements print magazines. These results are robust to including controls for unobserved magazine, category, and time effects, as well as controls for the impact of contemporaneous price changes and other factors.

Ok, 3M subscribers * $20/each * 3% is close enough to $2M to not make any difference.

So, let's net this out: Time spends $5M on their website and it costs them $2M in re-subscription fees. Plus the actual cost to capture a new subscriber to replace the lost ones is probably on the order of $50 or $75, so the cost of replacing the lost subscribers is another $50M!

So, Time, thanks for the website, but was it really worth $55M? This year?