Why Almost Nobody Wants to Pay for the 'Netflix of Magazines'

A new startup enters the languishing market for all-you-can-eat subscription services for digital magazines
Photographer: Krisztian Bocsi/Bloomberg

Millions of people are more than willing to pay for steady access to streaming content. Netflix counts 50 million subscribers to its online video library, and Spotify has 12.5 million listeners ponying up a monthly fee for a massive buffet of music. For magazines, however, the idea of paying a flat fee for unlimited access hasn't caught on.

The idea of banding together into a Netflix of magazines isn't untested, just unpopular. Several major magazine publishers joined forces in 2011 to launch Next Issue Media, a company that charges $15 per month for access to about 140 magazines, or $10 for a more limited selection. Even under the most optimistic assessment, the project has so far only been a decent proof of concept. “No one has heard of us,” acknowledges Morgan Guenther, the company’s chief executive officer. He puts the number of subscribers at "well into the hundreds of thousands."

But maybe 2015 will be different. Next Issue just raised $50 million from private equity firm KKR and is preparing for its first big marketing push. "It's the last great white space in streaming media,” says Guenther. “Everyone else has made the jump.” And starting today, there will be a second player vying for the virtual magazine market. Magzter, a startup that offers a newsstand of digital apps, is launching a competing service on Jan. 19 that offers access to 2,000 magazines—including Maxim, ESPN the Magazine, and Fast Company—although not to any of the 25 most popular magazines at U.S. newsstands.

Magzter, which will cost $10 per month, thinks it can gain traction where Next Issue hasn't by offering a larger selection of more obscure titles and by selling subscriptions internationally. Girish Ramdas, CEO of the company, says he's been trying to persuade publishers to participate in a Netflix-like service for several years. Most magazine executives have been wary about undercutting their ability to draw subscribers to their own apps, even though there are only three titles, Game Informer, Shape, and Star, with more than 200,000 app-based subscribers. 

Things changed last year, Ramdas says, because of the success of subscription services in other areas. “The economics of selling your own single copies are always better,” he says. “But the user adoption for that is much lower.” Of the 5,000 magazine publishers using Magzter's app as a way to sell standalone issues, only 2,000 have agreed to take part in the all-access subscription service. 

The dream of drawing readers to single-title magazine apps that mimic the print experience is fading. When the iPad was released in 2010, whiz-bang mobile applications were supposed to be the savior of the magazine industry. While the use of magazine apps did increase and remains on the rise, app subscribers make up less than 4 percent of overall magazine circulation, and the growth rate has started slowing over the past 18 months.


Subscription services such as Next Issue and Magzter offer one tangible advantage over individual magazine apps: Readers can go to a single destination, rather than downloading multiple apps and maintaining many subscriptions. But many of the downsides of standalone magazine apps are mirrored in the all-you-can-read experience. Readers must frequently wait to download articles, and many features seem hastily adapted from print rather than designed for a screen. There are also limited options for sharing or discussing content on social media because the entire experience exists behind a paywall.

Next Issue wants to avoid sharing its commissions with Apple, so it doesn’t offer subscriptions through its iOS app. Apple's rules mean that Next Issue can't even tell users to visit the website to pay for subscriptions. Instead, the company relies on would-be subscribers to figure it out on their own. Next Issue claims that friction hasn't been a barrier to drawing subscribers, but one industry executive complained recently that the user experience on the app was holding back an otherwise attractive business model. 

Netflix-like subscriptions for reading material are still in their early days. In addition to the magazine experiments, there are several similar services for books run by Amazon.com and startups Oyster and Scribd. In all these cases, it's not clear that anyone but the most voracious readers will save money by signing up for an unlimited multimagazine subscription. For about three-quarters of Next Issue’s $180 annual fee, a reader could get separate digital subscriptions to The New Yorker ($60), Bloomberg Businessweek ($30), Rolling Stone ($20), and National Geographic ($20). The average Next Issue user spends about two hours per week engaged with the app, so it’s fair to ask whether people need much more than that. 

An alternative approach being pursued by Magzter and Zinio, another online newsstand, is to offer subscriptions to a few magazines for $5 a month. (Magzter offers five; Zinio offers three and charges extra for some titles.) Guenther of Next Media dismisses this approach, arguing that Netflix and Spotify have shown that people want access to everything, rather than picking what content to buy. If a Netflix for magazines ever does catch on, it would preserve one consistent aspect of the magazine industry: relying on readers to subscribe to far more material than they have time to read.  

Before it's here, it's on the Bloomberg Terminal. LEARN MORE