Ovum says publishers face a digital dilemma as consumer habits change

London, 14th July 2015 – According to a new forecast by global analyst firm Ovum, the revenue generated each year by digital consumer publishing – the electronic versions of books, magazines, and newspapers – will grow to US$74bn in 2019, up from US$41bn in 2015 which is a compound annual growth (CAGR) rate of 13%. This is despite a fall in the annual consumer publishing print revenues of almost US$30bn in the same time frame.

Changing consumer reading habits are behind this trend with consumers moving away from print newspapers, magazines, and books and toward reading a combination of content they have paid for and free or low-cost content from independent content producers like bloggers and self-published authors.

Charlotte Miller, research analyst in Ovum’s Digital Media practice, says: “Consumers aren’t as willing to pay for content as they were in the past. It’s no wonder consumers aren’t keen on paywalls when they can access an almost endless stream of great content for free.”

However, print revenues will remain the bulk of the consumer publishing industry over the next five years with almost 75% of revenues coming from print in 2020, down from 86% in 2015. Print revenues are falling so opportunities for growth in this sector are low but competition in the digital landscape is fierce and previously tested business models don’t always work. Meanwhile, the barriers to entry are high for print publishing despite there being millions of consumers who are willing to pay for it. This is causing a dilemma for publishers who need to grow digital revenues but cannot afford to weaken their print products.

According to Miller, “Publishers should not be quick to write off their legacy models, while print revenue is falling, the digital landscape is highly competitive and revenues are not yet large enough to be sustainable.”

In the digital space, consumers are less willing to pay due to the abundant amount of free content on offer and, in order to maximize digital revenues, some publishers are already experimenting with alternative business models including the use of “all-you-can-read” subscription models and the use of microtransactions to sell by the chapter or article. These are still niche models, though. Netherlands-based Blendle is showing the potential of the microtransaction model, however, it is doing so in a non-English language market where the competition from free content is not so fierce.

Given increasing consumption of content on social media, publishers will do well to partner with social platforms in order to extend their reach. “What is key is that publishers understand that consumers are now in control of where they view content and publishers need to meet their expectations in order to succeed,” concludes Miller.